Madison Square Garden Sports Corp. - Quarter Report: 2022 March (Form 10-Q)

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, 2022


			☐			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 Identification No.)

Two Penn Plaza

New York

10121

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (212) 465-4111

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	MSGS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Number of shares of common stock outstanding as of April 29, 2022:


Class A Common Stock par value $0.01 per share	—	19,696,838
Class B Common Stock par value $0.01 per share	—	4,529,517

Table of Contents

MADISON SQUARE GARDEN SPORTS CORP.

INDEX TO FORM 10-Q


			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of March 31, 202 2 (unaudited) and June 30, 2021			1

Consolidated Statements of Operations for the three and nine months ended March 31, 2022 and 2021 (unaudited)			3

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2022 and 2021 (unaudited)			4

Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021 (unaudited)			5

Consolidated Statements of Equity for the three and nine months ended March 31, 2022 and 2021 (unaudited)			6

Notes to Consolidated Financial Statements (unaudited)			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27

Item 3. Quantitative and Qualitative Disclosures About Market Risk			38

Item 4. Controls and Procedures			39

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			40



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40



Item 6. Exhibits			41

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	March 31, 2022		June 30, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	49,176	$	64,902
Restricted cash	979		7,134

Accounts receivable, net of allowance for doubtful accounts of $0 and $0 as of March 31, 2022 and June 30, 2021, respectively	92,694		74,197

Net related party receivables	51,391		6,420
Prepaid expenses	21,696		16,724

Other current assets	48,133		15,869
Total current assets	264,069		185,246

Property and equipment, net of accumulated depreciation and amortization of $45,869 and $42,673 as of March 31, 2022 and June 30, 2021, respectively	33,490		35,716
Right-of-use lease assets	689,580		703,521
Amortizable intangible assets, net	900		1,695
Indefinite-lived intangible assets	112,144		112,144
Goodwill	226,955		226,955
Deferred income tax assets, net	—		15,943
Other assets	36,635		28,719
Total assets	$	1,363,773	$	1,309,939


See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands, except per share data)


	March 31, 2022		June 30, 2021
	(Unaudited)
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	3,324	$	2,226
Net related party payables	31,812		17,089
Debt	30,000		30,000

Accrued liabilities:
Employee related costs	129,949		90,269
League-related accruals	87,008		39,276
Other accrued liabilities	26,929		16,442
Operating lease liabilities, current	43,412		41,951

Deferred revenue	102,053		131,025
Total current liabilities	454,487		368,278

Long-term debt	285,000		355,000
Operating lease liabilities, noncurrent	703,718		691,152
Defined benefit obligations	6,106		6,283
Other employee related costs	45,119		57,740
Deferred tax liabilities, net	15,030		—
Deferred revenue, noncurrent	31,180		31,603
Other liabilities	999		1,749
Total liabilities	1,541,639		1,511,805
Commitments and contingencies (see Note 10)
Madison Square Garden Sports Corp. Stockholders’ Equity:
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,697 and 19,587 shares outstanding as of March 31, 2022 and June 30, 2021, respectively	204		204
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of March 31, 2022 and June 30, 2021	45		45
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of March 31, 2022 and June 30, 2021	—		—
Additional paid-in capital	12,862		23,102
Treasury stock, at cost, 751 and 861 shares as of March 31, 2022 and June 30, 2021, respectively	(128,026)		(146,734)
Accumulated deficit	(62,887)		(78,898)
Accumulated other comprehensive loss	(1,960)		(2,027)
Total Madison Square Garden Sports Corp. stockholders’ equity	(179,762)		(204,308)
Nonredeemable noncontrolling interests	1,896		2,442
Total equity	(177,866)		(201,866)
Total liabilities and equity	$	1,363,773	$	1,309,939

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Revenues (a)	$	337,774	$	183,010	$	646,149	$	268,819

Operating expenses:
Direct operating expenses (b)	206,273		126,510		407,698		182,957
Selling, general and administrative expenses (c)	68,902		46,803		172,230		138,708
Depreciation and amortization	1,206		1,573		3,847		4,840
Operating income (loss)	61,393		8,124		62,374		(57,686)
Other income (expense):
Interest income	52		9		145		9
Interest expense	(2,470)		(2,939)		(9,158)		(7,415)
Miscellaneous expense, net	(63)		(46)		(190)		(236)
	(2,481)		(2,976)		(9,203)		(7,642)
Income (loss) from operations before income taxes	58,912		5,148		53,171		(65,328)
Income tax (expense) benefit	(34,993)		(53)		(30,939)		275
Net income (loss)	23,919		5,095		22,232		(65,053)
Less: Net loss attributable to nonredeemable noncontrolling interests	(584)		(373)		(1,711)		(1,479)
Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders	$	24,503	$	5,468	$	23,943	$	(63,574)

Basic earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders	$	1.01	$	0.23	$	0.99	$	(2.64)
Diluted earnings (loss) per common share attributable to Madison Square Garden Sports Corp.’s stockholders	$	1.00	$	0.22	$	0.98	$	(2.64)
Weighted-average number of common shares outstanding:
Basic	24,275		24,156		24,235		24,120
Diluted	24,394		24,344		24,377		24,120

_________________

(a)Includes revenues from related parties of $75,851 and $80,322 for the three months ended March 31, 2022 and 2021, respectively, and $153,229 and $103,752 for the nine months ended March 31, 2022 and 2021, respectively.

(b)Includes net charges from related parties of $40,796 and $24,855 for the three months ended March 31, 2022 and 2021, respectively, and $80,828 and $28,119 for the nine months ended March 31, 2022 and 2021, respectively.

(c)Includes net charges from related parties of $20,493 and $14,957 for the three months ended March 31, 2022 and 2021, respectively, and $51,620 and $39,214 for the nine months ended March 31, 2022 and 2021, respectively.

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Net income (loss)	$	23,919	$	5,095	$	22,232	$	(65,053)
Other comprehensive income, before income taxes:
Pension plans:
Amounts reclassified from accumulated other comprehensive loss:
Amortization of actuarial loss included in net periodic benefit cost	33		57		99		77



Other comprehensive income, before income taxes	33		57		99		77
Income tax expense related to items of other comprehensive income	(10)		—		(32)		—
Other comprehensive income, net of income taxes	23		57		67		77
Comprehensive income (loss)	23,942		5,152		22,299		(64,976)
Less: Comprehensive loss attributable to nonredeemable noncontrolling interests	(584)		(373)		(1,711)		(1,479)
Comprehensive income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders	$	24,526	$	5,525	$	24,010	$	(63,497)

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Nine Months Ended
	March 31,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	22,232	$	(65,053)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	3,847		4,840

Provision for (benefit from) deferred income taxes	30,939		(275)
Share-based compensation expense	19,178		26,193



Recovery of doubtful accounts	—		(175)
Other non-cash adjustments	1,547		806
Change in assets and liabilities:
Accounts receivable, net	(18,497)		(74,940)
Net related party receivables	(44,142)		(4,913)
Prepaid expenses and other assets	(43,620)		(14,823)
Accounts payable	1,086		(747)
Net related party payables	8,535		2,748
Accrued and other liabilities	84,548		19,700

Deferred revenue	(29,388)		33,156
Operating lease right-of-use assets and lease liabilities	27,968		19,116
Net cash provided by (used in) operating activities	64,233		(54,367)
Cash flows from investing activities:
Capital expenditures	(886)		(437)
Other investing activities	(250)		—









Net cash used in investing activities	(1,136)		(437)


Cash flows from financing activities:


Taxes paid in lieu of shares issued for equity-based compensation	(12,142)		(13,891)
Proceeds from share issuance	—		808



Proceeds from revolving credit facilities	—		30,000
Proceeds from NHL advance	—		30,000
Repayment of revolving credit facility	(70,000)		—

Payment of contingent consideration	—		(200)
Payments for financing costs	(2,836)		(4,562)
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 beginning of period	72,036		90,673
Cash, cash equivalents and restricted cash at end of period	$	50,155	$	78,024
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	$	73	$	38

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(in thousands)



	Three Months Ended March 31, 2022
	Common Stock Issued		Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Madison Square Garden Sports Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity
Balance as of December 31, 2021	$	249	$	6,460	$	(129,426)	$	(87,390)	$	(1,983)	$	(212,090)	$	2,480	$	(209,610)
Net income (loss)	—		—		—		24,503		—		24,503		(584)		23,919
Other comprehensive income	—		—		—		—		23		23		—		23
Comprehensive income (loss)	—		—		—		—		—		24,526		(584)		23,942
Share-based compensation	—		6,973		—		—		—		6,973		—		6,973

Common stock issued under stock incentive plans	—		(571)		1,400		—		—		829		—		829







Balance as of March 31, 2022	$	249	$	12,862	$	(128,026)	$	(62,887)	$	(1,960)	$	(179,762)	$	1,896	$	(177,866)

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
(in thousands)

	Three Months Ended March 31, 2021
	Common Stock Issued		Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Madison Square Garden Sports Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity
Balance as of December 31, 2020	$	249	$	15,432	$	(147,585)	$	(133,986)	$	(2,119)	$	(268,009)	$	2,881	$	(265,128)
Net income (loss)	—		—		—		5,468		—		5,468		(373)		5,095
Other comprehensive income	—		—		—		—		57		57		—		57
Comprehensive income (loss)	—		—		—		—		—		5,525		(373)		5,152
Share-based compensation	—		3,867		—		—		—		3,867		—		3,867

Common stock issued under stock incentive plans	—		(43)		851		—		—		808		—		808

Adjustments to noncontrolling interests	—		71		—		—		—		71		(71)		—





Balance as of March 31, 2021	$	249	$	19,327	$	(146,734)	$	(128,518)	$	(2,062)	$	(257,738)	$	2,437	$	(255,301)

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
(in thousands)

	Nine Months Ended March 31, 2022
	Common Stock Issued		Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Madison Square Garden Sports Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity
Balance as of June 30, 2021	$	249	$	23,102	$	(146,734)	$	(78,898)	$	(2,027)	$	(204,308)	$	2,442	$	(201,866)
Net income (loss)	—		—		—		23,943		—		23,943		(1,711)		22,232
Other comprehensive income	—		—		—		—		67		67		—		67
Comprehensive income (loss)	—		—		—		—		—		24,010		(1,711)		22,299
Share-based compensation	—		19,178		—		—		—		19,178		—		19,178
Tax withholding associated with shares issued for equity-based compensation	—		(18,306)		—		—		—		(18,306)		—		(18,306)
Common stock issued under stock incentive plans	—		(9,947)		18,708		(7,932)		—		829		—		829

Adjustments to noncontrolling interests	—		(1,165)		—		—		—		(1,165)		1,165		—




Balance as of March 31, 2022	$	249	$	12,862	$	(128,026)	$	(62,887)	$	(1,960)	$	(179,762)	$	1,896	$	(177,866)

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)
(in thousands)

	Nine Months Ended March 31, 2021
	Common Stock Issued		Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Madison Square Garden Sports Corp. Stockholders’ Equity		Non - redeemable Noncontrolling Interests		Total Equity
Balance as of June 30, 2020	$	249	$	5,940	$	(167,431)	$	(43,605)	$	(2,139)	$	(206,986)	$	3,551	$	(203,435)
Net loss	—		—		—		(63,574)		—		(63,574)		(1,479)		(65,053)
Other comprehensive income	—		—		—		—		77		77		—		77
Comprehensive loss	—		—		—		—		—		(63,497)		(1,479)		(64,976)
Share-based compensation	—		26,193		—		—		—		26,193		—		26,193
Tax withholding associated with shares issued for equity-based compensation	—		(11,023)		—		(2,868)		—		(13,891)		—		(13,891)
Common stock issued under stock incentive plans	—		(1,418)		20,697		(18,471)		—		808		—		808

Adjustments to noncontrolling interests	—		(365)		—		—		—		(365)		365		—





Balance as of March 31, 2021	$	249	$	19,327	$	(146,734)	$	(128,518)	$	(2,062)	$	(257,738)	$	2,437	$	(255,301)

See accompanying notes to consolidated financial statements.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

All amounts included in the following Notes to Consolidated Financial Statements are presented in thousands, except per share data or as otherwise noted.

Note 1. Description of Business and Basis of Presentation

Description of Business

Madison Square Garden Sports Corp. (together with its subsidiaries (collectively, “we,” “us,” “our,” “MSG Sports,” or the “Company”) owns and operates a portfolio of assets featuring some of the most recognized teams in all of sports, including the New York Knickerbockers (“Knicks”) of the National Basketball Association (“NBA”) and the New York Rangers (“Rangers”) of the National Hockey League (“NHL”). Both the Knicks and the Rangers play their home games in Madison Square Garden Arena (“The Garden”). The Company’s other professional sports franchises include two development league teams — the Hartford Wolf Pack of the American Hockey League (“AHL”) and the Westchester Knicks of the NBA G League (“NBAGL”). These professional sports franchises are collectively referred to herein as the “sports teams.” In addition, the Company owns Knicks Gaming, an esports franchise that competes in the NBA 2K League, as well as a controlling interest in Counter Logic Gaming (“CLG”), a North American esports organization. The Company also operates two professional sports team performance centers — the Madison Square Garden Training Center in Greenburgh, NY and the CLG Performance Center in Los Angeles, CA. CLG and Knicks Gaming are collectively referred to herein as the “esports teams,” and together with the sports teams, the “teams.”

The Company operates and reports financial information in one segment. The Company’s decision to organize as one operating segment and report in one segment is based upon its internal organizational structure; the manner in which its operations are managed; the criteria used by the Company’s Executive Chairman, its Chief Operating Decision Maker (“CODM”), to evaluate segment performance. The Company’s CODM reviews total company operating results to assess overall performance and allocate resources.

The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“MSG Networks”). All the outstanding common stock of the Company was distributed to MSG Networks shareholders (the “MSGS Distribution”) on September 30, 2015.

On April 17, 2020 (the “MSGE Distribution Date”), the Company distributed all of the outstanding common stock of Madison Square Garden Entertainment Corp. (formerly MSG Entertainment Spinco, Inc. and referred to herein as “MSG Entertainment”) to its stockholders (the “MSGE Distribution”). MSG Entertainment owns, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment. In the MSGE Distribution, (a) each holder of the Company’s Class A common stock received one share of MSG Entertainment Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock held of record as of the close of business, New York City time, on April 13, 2020 (the “Record Date”), and (b) each holder of the Company’s Class B common stock received one share of MSG Entertainment Class B common stock, par value $0.01 per share, for every share of the Registrant’s Class B common stock held of record as of the close of business, New York City time, on the Record Date.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements (referred to as the “Financial Statements” herein) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and Article 10 of Regulation S-X of the SEC for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 (“fiscal year 2021”). The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. 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. The dependence of MSG Sports on revenues from its NBA and NHL sports teams generally means it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year. However, on March 11 and 12, 2020, the NBA and NHL, respectively, suspended their 2019-20 seasons due to COVID-19. In July and August 2020, the NBA and NHL, respectively, resumed their seasons. As a result, the Company recognized certain revenues that otherwise would have been recognized during the third and fourth quarter of fiscal year 2020 during the first quarter of fiscal year 2021.

Reclassifications

Certain reclassifications have been made in order to conform to the current period’s presentation and relate to the separation of League-related accruals, which was previously reported in Other accrued liabilities in the consolidated balance sheet as of June 30, 2021.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Impact of COVID-19

COVID-19 disruptions have materially impacted the Company’s operations and operating results, with the Company recognizing materially less revenues, or in some cases no revenues, across a number of areas during fiscal years 2020 and 2021. The Company’s operations and operating results were also impacted by temporary declines in attendance in fiscal year 2022, due to ongoing reduced tourism levels as well as an increase in cases during certain months of the fiscal year due to a COVID-19 variant.

In March 2020, the NBA and NHL suspended their 2019-20 seasons due to COVID-19. As a result of the suspension of the 2019-20 NBA and NHL seasons and subsequent resumption of play in July and August 2020, respectively, during the first quarter of fiscal year 2021, the Company recognized certain revenues that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020.

In addition, the start of the 2020-21 NBA and NHL regular seasons were delayed, and the Knicks and the Rangers played fewer games, with the NBA playing a 72-game regular season schedule and the NHL playing a 56-game regular season schedule. These compare to traditional 82-game regular season schedules for both the NBA and NHL.

On December 16, 2020, and January 14, 2021, respectively, the Knicks and the Rangers resumed playing their homes games at The Garden as part of their 2020-21 seasons. However, fans were initially prohibited from attending games due to government-mandated assembly restrictions. Effective February 23, 2021, New York venues with at least a 10,000-person capacity were permitted to operate at 10% capacity, and the Knicks and the Rangers began playing games at The Garden with a limited number of fans in attendance on February 23 and 26, respectively.

Effective May 19, 2021, event venues such as The Garden were permitted to host guests at full capacity, subject to certain restrictions, including, for example, restrictions for unvaccinated guests. As a result, the Knicks played three home playoff games with ticket sales of approximately 15,000-16,500 per game during the fiscal year ended June 30, 2021.

These disruptions materially impacted the Company’s revenues across a number of areas, including, ticket sales; the Company’s share of suite licenses; sponsorships; signage and in-venue advertising at The Garden; local media rights fees; and food, beverage and merchandise sales.

In connection with the MSGE Distribution, we entered into the Arena License Agreements with MSG Entertainment. The Garden was not available for use between April 17, 2020 (the date of the MSGE Distribution) and the start of the NBA and NHL 2020-21 seasons in December 2020 and January 2021, respectively, due to the government-mandated suspension of events in response to COVID-19, and was available at reduced capacity through May 2021. As a result, the Company was not required to pay license fees to MSG Entertainment under the Arena License Agreements until games resumed at The Garden, and the Company paid substantially reduced fees while attendance was limited. Effective July 1, 2021, the Company began paying license fees to MSG Entertainment under the Arena License Agreements in their full contractual amounts.

During fiscal year 2021, as a result of COVID-19, the Company implemented cost-reduction measures that included workforce reductions and limits on discretionary spending. In addition, as a result of the disruptions caused by COVID-19, certain operating expenses were reduced, including, in addition to the reduced payments to MSG Entertainment under the Arena License Agreements described above, (i) NBA league assessments and day-of-game expenses for Knicks and Rangers games, and (ii) league revenue sharing, net of escrow and team personnel expense. These expense reductions did not fully offset revenue losses.

As a result of New York City regulations effective August 17, 2021, indoor entertainment venues such as The Garden were permitted to host guests at full capacity, subject to certain restrictions, including that all guests 12 years of age and older show proof of at least one dose of a COVID-19 vaccine. Following updated New York City regulations, effective January 29, 2022, all guests five years of age and older and all employees were required to provide proof that they have received either two doses of a two-shot COVID-19 vaccination, or one dose of a single-shot vaccine. Children under age five could attend events with a vaccinated adult, but children ages two to four were required to wear a mask while inside venues such as The Garden. Effective March 7, 2022, New York City lifted all COVID-19 vaccination requirements pertaining to guests in attendance at indoor entertainment venues, followed by a lifting of vaccination requirements applicable to professional athletes competing in such venues effective March 24, 2022. Also, in April 2022, New York State terminated the last of its mandatory COVID-19 rules for indoor venues. As a result, there are no capacity restrictions or vaccination requirements applicable to fan attendance at games at The Garden as of the date of this filing.

The Knicks and the Rangers each completed their full 82-game regular season schedules for the 2021-22 season in April 2022 and the Rangers are currently competing in the playoffs. Fan attendance during the regular season was impacted by the COVID-19 pandemic including the emergence of certain variants and ongoing reduced tourism levels.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

It is unclear to what extent COVID-19 concerns, including with respect to new variants, could result in renewed governmental and league restrictions on attendance or otherwise impact attendance of games at The Garden. The Company’s business is also particularly sensitive to discretionary business and consumer spending. A pandemic such as COVID-19 could impede economic activity in impacted regions or globally over the long-term, causing a global recession and leading to a further decline in discretionary spending on sporting events and other leisure activities, including declines in domestic and international tourism, which could result in long-term effects on the Company’s business.

Note 2. Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of Madison Square Garden Sports Corp. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In addition, the consolidated financial statements of the Company include the accounts from CLG, in which the Company has a controlling voting interest. The Company’s consolidation criteria are based on authoritative accounting guidance for voting interest, controlling interest or variable interest entities. CLG is consolidated with the equity owned by other shareholders shown as nonredeemable noncontrolling interests in the accompanying consolidated balance sheets, and the other shareholders’ portion of net earnings (loss) and other comprehensive income (loss) shown as net income (loss) or comprehensive income (loss) attributable to nonredeemable noncontrolling interests in the accompanying consolidated statements of operations and consolidated statements of comprehensive income (loss), respectively.

Use of Estimates

The preparation of the accompanying Financial Statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, other current assets, goodwill, intangible assets, other long-lived assets, deferred tax valuation allowance, and other liabilities. In addition, estimates are used in revenue recognition, revenue sharing expense (net of escrow), luxury tax expense, income tax expense, performance and share-based compensation, depreciation and amortization, litigation matters and other matters, as well as in the valuation of contingent consideration and noncontrolling interests resulting from business combination transactions. Management believes its use of estimates in the Financial Statements to be reasonable.

Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and, as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s financial statements in future periods.

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU eliminates certain exceptions to the general approach in Accounting Standards Codification (“ASC”) Topic 740 and includes methods of simplification to the existing guidance. The Company adopted this standard as of the beginning of fiscal year 2022, and the adoption did not have a material impact on its consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Note 3. Revenue Recognition

Contracts with Customers

All revenue recognized in the consolidated statements of operations is considered to be revenue from contracts with customers. For the three and nine months ended March 31, 2022 and 2021, the Company did not have any material impairment losses on receivables or contract assets arising from contracts with customers.

Disaggregation of Revenue

The following table disaggregates the Company’s revenues by type of goods or services in accordance with the required entity-wide disclosure requirements set forth in ASC Subtopic 280-10-50-38 to 40 and the disaggregation of revenue required disclosures in accordance with ASC Subtopic 606-10-50-5 for the three and nine months ended March 31, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Event-related (a)	$	119,728	$	4,552	$	232,672	$	4,552
Media rights (b)	124,803		139,963		243,697		212,458
Sponsorship, signage and suite licenses	76,715		25,391		138,419		32,336
League distributions and other	16,528		13,104		31,361		19,473
Total revenues from contracts with customers	$	337,774	$	183,010	$	646,149	$	268,819

_________________

(a)Consists of (i) ticket sales and other ticket-related revenues, and (ii) food, beverage and merchandise sales at The Garden.

(b)Consists of (i) local media rights fees, (ii) revenue from the distribution through league-wide national and international television contracts, and (iii) other local radio rights fees.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

The timing of revenue recognition, billings and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheet. The following table provides information about contract balances from the Company’s contracts with customers as of March 31, 2022 and June 30, 2021.


	March 31,		June 30,
	2022		2021
Receivables from contracts with customers, net (a)	$	66,547	$	30,834
Contract assets, current (b)	42,779		9,604
Deferred revenue, including non-current portion (c), (d)	133,233		162,628

_________________

(a)Receivables from contracts with customers, net, which are reported in Accounts receivable, net and Net related party receivables in the Company’s accompanying consolidated balance sheets, represent the Company’s unconditional rights to consideration under its contracts with customers. As of March 31, 2022 and June 30, 2021, the Company’s receivables reported above included $9,344 and $213, respectively, related to various related parties associated with contracts with customers. See Note 15 for further details on related party arrangements. Receivables from contracts with customers, net, excludes amounts recorded in Accounts receivable, net, associated with amounts due from the NBA and NHL related to escrow and player compensation recoveries and luxury tax payments. As of March 31, 2022, the Company had receivable balances related to escrow and player compensation recoveries of $23,790 and $7,511, recorded in Accounts receivable, net and Other assets, respectively. As of June 30, 2021, the Company had receivable balances related to escrow and player compensation recoveries of $36,525 and $10,700, recorded in Accounts receivable, net and Other assets, respectively.

(b)Contract assets, current, which are reported as Other current assets in the Company’s accompanying consolidated balance sheets, primarily relate to the Company’s rights to consideration for goods or services transferred to the customer, for which the Company does not have an unconditional right to bill as of the reporting date. Contract assets are transferred to accounts receivable once the Company’s right to consideration becomes unconditional. The Company had contract asset balances related to local media rights of $21,238 and $0 as of March 31, 2022 and June 30, 2021, respectively. See Note 15 for further details on these related party arrangements.

(c)Deferred revenue, including non-current portion primarily relates to the Company’s receipt of consideration from customers or billing customers in advance of the Company’s transfer of goods or services to those customers. Deferred revenue is reduced and the related revenue is recognized once the underlying goods or services are transferred to a customer. The non-current portion of deferred revenue primarily consists of a $30,000 receipt from the NBA in December 2020 of league distributions in advance of the Company’s recognition. The Company’s deferred revenue related to local media rights was $0 and $260 as of March 31, 2022 and June 30, 2021, respectively. See Note 15 for further details on these related party arrangements.

(d)Revenue recognized for the nine months ended March 31, 2022 relating to the deferred revenue balance as of June 30, 2021 was $111,580.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Transaction Price Allocated to the Remaining Performance Obligations

The following table depicts the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2022 and is based on current projections. In developing the estimated revenue, the Company applies the allowable practical expedient and does not disclose information about remaining performance obligations that have original expected durations of one year or less. Additionally, the Company has elected to exclude variable consideration from its disclosure related to the remaining performance obligations under its local media rights arrangements, league-wide national and international television contracts, and certain other arrangements with variable consideration.


Fiscal Year 2022 (remainder)	$	25,311
Fiscal Year 2023	115,040
Fiscal Year 2024	95,512
Fiscal Year 2025	59,451
Fiscal Year 2026	41,455
Thereafter	41,026
	$	377,795

Note 4. Computation of Earnings (Loss) per Common Share

The following table presents a reconciliation of weighted-average shares used in the calculations of basic and diluted earnings (loss) per common share attributable to the Company’s stockholders (“EPS”) and the number of shares excluded from diluted earnings (loss) per common share, as they were anti-dilutive.



	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2022	2021	2022	2021
Weighted-average shares (denominator):
Weighted-average shares for basic EPS	24,275	24,156	24,235	24,120
Dilutive effect of shares issuable under share-based compensation plans	119	188	142	—
Weighted-average shares for diluted EPS	24,394	24,344	24,377	24,120
Weighted-average shares excluded from diluted earnings (loss) per share	—	—	—	331

Note 5. Team Personnel Transactions

Direct operating and selling, general and administrative expenses in the accompanying consolidated statements of operations include net provisions for transactions relating to the Company’s teams for waiver/contract termination costs, player trades and season-ending injuries (“Team personnel transactions”). Team personnel transactions were net provisions of $304 (net of insurance recovery of $656), and $3,305 for the three months ended March 31, 2022 and 2021, respectively, and net provisions of $729 (net of insurance recovery of $656), and $17,003 for the nine months ended March 31, 2022 and 2021, respectively.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Note 6. Cash, Cash Equivalents and Restricted Cash

The following table provides a summary of the amounts recorded as cash, cash equivalents and restricted cash.


	As of
	March 31, 2022		June 30, 2021		March 31, 2021		June 30, 2020
Captions on the consolidated balance sheets:
Cash and cash equivalents	$	49,176	$	64,902	$	69,128	$	77,852
Restricted cash (a)	979		7,134		8,896		12,821
Cash, cash equivalents and restricted cash on the consolidated statements of cash flows	$	50,155	$	72,036	$	78,024	$	90,673

_________________

(a)Restricted cash as of March 31, 2022 and June 30, 2020 primarily included cash deposited in an escrow account (see Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for more information). For all other periods, restricted cash relates to the Company’s revolving credit facilities (see Note 11 for more information).

Note 7. Leases

The Company’s leases primarily consist of the lease of the Company’s principal executive offices under the Sublease Agreement with MSG Entertainment (the “Sublease Agreement”) and the lease of CLG Performance Center. In addition, the Company accounts for the rights of use of The Garden pursuant to the Arena License Agreements as leases under the ASC Topic 842, Leases. See Note 8 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for more information regarding the Company’s accounting policies associated with its leases.

In November 2021, MSG Entertainment entered into a new lease for principal executive offices at Two Pennsylvania Plaza in New York (the “New MSGE Lease Agreement”). In accordance with the terms of the Sublease Agreement and the New MSGE Lease Agreement, the lease term of the Sublease Agreement was extended until October 31, 2024. The Company has accounted for this extension as a lease remeasurement and remeasured the right-of-use asset and operating lease liability utilizing the Company’s incremental borrowing rate as of the date of remeasurement. As a result of the remeasurement, non-cash additions to the right-of-use asset and operating lease liability of $1,244 were recorded during the nine months ended March 31, 2022.

In accordance with the terms of the Sublease Agreement, the Company has committed to enter into a new sublease agreement with MSG Entertainment for a lease term equivalent to the New MSGE Lease Agreement term, which ends January 31, 2046. In addition, in connection with the New MSGE Lease Agreement, the Company has entered into a commitment whereby if the New MSGE Lease Agreement were terminated under certain circumstances, the Company would be required to enter into a new lease for executive offices in Two Pennsylvania Plaza directly with the landlord, with a consistent lease term through January 31, 2046. As the Company has not yet entered into a new sublease for or taken possession of the new executive office space at Two Pennsylvania Plaza, no additional right-of-use assets or operating lease liabilities have been recorded as of March 31, 2022 related to the commitments discussed above.

In connection with the MSGE Distribution, the Company entered into the Arena License Agreements with MSG Entertainment that end on June 30, 2055 and allow the Knicks and the Rangers to continue to play their home games at The Garden. The Arena License Agreements provide for fixed payments to be made from inception through June 30, 2055 in 12 equal installments during each year of the contractual term. Absent the reduced payments due to the government-mandated suspension of events at The Garden in response to COVID-19 described below, the stated license fee for the first full contract year ended June 30, 2021 would have been approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees are 103% of the license fees for the immediately preceding contract year.

The Garden was not available for use between April 17, 2020 and the start of the NBA and NHL 2020-21 seasons in December 2020 and January 2021, respectively, due to the government-mandated suspension of events in response to COVID-19, and as a result the Company was not required to pay license fees to MSG Entertainment under the Arena License Agreements.

During the three and nine months ended March 31, 2022 and 2021, the Company recognized operating lease costs associated with the Arena License Agreements with respect to games played at The Garden.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

As of March 31, 2022, the Company’s existing operating leases, which are recorded in the accompanying financial statements, have remaining lease terms ranging from 5 months to 33 years. In certain instances, leases include options to renew, with varying option terms. The exercise of lease renewals, if available under the lease options, is generally at the Company’s discretion and is considered in the Company’s assessment of the respective lease term. The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.

The following table summarizes the ROU assets and lease liabilities recorded on the Company’s accompanying consolidated balance sheets as of March 31, 2022 and June 30, 2021:


	Line Item in the Company’s Consolidated Balance Sheet	March 31, 2022		June 30, 2021
Right-of-use assets:
Operating leases	Right-of-use lease assets	$	689,580	$	703,521
Lease liabilities:
Operating leases, current (a)	Operating lease liabilities, current	$	43,412	$	41,951
Operating leases, noncurrent (a)	Operating lease liabilities, noncurrent	703,718		691,152
Total lease liabilities		$	747,130	$	733,103

_________________

(a)As of March 31, 2022, Operating lease liabilities, current and Operating lease liabilities, noncurrent included balances of $42,713 and $703,269, respectively, that are payable to MSG Entertainment. As of June 30, 2021, Operating lease liabilities, current and Operating lease liabilities, noncurrent included balances of $41,541 and $690,792, respectively, that are payable to MSG Entertainment.

The following table summarizes the activity recorded within the Company’s accompanying consolidated statements of operations for the three and nine months ended March 31, 2022 and 2021:


	Line Item in the Company’s Consolidated Statement of Operations	Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021
Operating lease cost	Direct operating expenses	$	29,737	$	20,454	$	59,004	$	22,852
Operating lease cost	Selling, general and administrative expenses	613		611		1,837		1,833
Short-term lease cost	Direct operating expenses	42		35		119		86

Total lease cost		$	30,392	$	21,100	$	60,960	$	24,771

Supplemental Information

For the nine months ended March 31, 2022 and 2021, cash paid for amounts included in the measurement of lease liabilities was $32,580 and $2,717, respectively.

The weighted average remaining lease term for operating leases recorded on the accompanying consolidated balance sheet as of March 31, 2022 was 32.9 years. The weighted average discount rate was 7.13% as of March 31, 2022 and represented the Company’s estimated incremental borrowing rate, assuming a secured borrowing, based on the remaining lease term at the time of either (i) adoption of the standard or (ii) the period in which the lease term expectation commenced or was modified.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Maturities of operating lease liabilities as of March 31, 2022 are as follows:


Fiscal Year 2022 (remainder)	$	10,964
Fiscal Year 2023	45,341
Fiscal Year 2024	45,361
Fiscal Year 2025	44,900
Fiscal Year 2026	45,374
Thereafter	2,113,312
Total lease payments	2,305,252
Less imputed interest	(1,558,122)
Total lease liabilities	$	747,130

Note 8. Goodwill and Intangible Assets

During the first quarter of fiscal year 2022, the Company performed its annual impairment test of goodwill and determined that there were no impairments identified as of the impairment test date. The carrying amount of goodwill as of March 31, 2022 and June 30, 2021 is $226,955.

The Company’s indefinite-lived intangible assets as of March 31, 2022 and June 30, 2021 are as follows:




Sports franchises	$	111,064
Photographic related rights	1,080
	$	112,144

During the first quarter of fiscal year 2022, the Company performed its annual impairment test of identifiable indefinite-lived intangible assets and determined that there were no impairments identified as of the impairment test date.

The Company’s intangible assets subject to amortization are as follows:


March 31, 2022	Gross		Accumulated Amortization		Net
Trade names	$	2,300	$	(2,147)	$	153
Non-compete agreements	2,400		(2,240)		160
Other intangibles	1,200		(613)		587
	$	5,900	$	(5,000)	$	900


June 30, 2021	Gross		Accumulated Amortization		Net
Trade names	$	2,300	$	(1,802)	$	498
Non-compete agreements	2,400		(1,880)		520
Other intangibles	1,200		(523)		677
	$	5,900	$	(4,205)	$	1,695

For the three months ended March 31, 2022 and 2021, amortization expense of intangible assets was $265 and $265, respectively. For the nine months ended March 31, 2022 and 2021, amortization expense of intangible assets was $795 and $795, respectively.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Note 9. Fair Value Measurements

The following table presents the Company’s assets that are measured at fair value on a recurring basis, which include cash equivalents:


	Fair Value Hierarchy	March 31, 2022		June 30, 2021
Assets:

Money market account	I	$	14,003	$	33,820
Time deposits	I	34,017		5,000


Total assets measured at fair value		$	48,020	$	38,820

Assets listed above are classified within Level I of the fair value hierarchy as they are valued using observable inputs that reflect quoted prices for identical assets in active markets. The carrying amount of the Company’s money market account and time deposits approximate fair value due to their short-term maturities.

The carrying value and fair value of the Company’s financial instruments reported in the accompanying consolidated balance sheets are as follows:


	March 31, 2022				June 30, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value





Liabilities
Debt, current (a)	$	30,000	$	30,000	$	30,000	$	30,000
Long-term debt (b)	$	285,000	$	285,000	$	355,000	$	355,000

_________________

(a)The Company’s debt, current is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. The fair value of the Company’s debt, current is the same as its carrying amount as the debt bears interest at current market conditions. See Note 11 for further details.

(b)The Company’s long-term debt is classified within Level II of the fair value hierarchy as it is valued using quoted indices of similar securities for which the inputs are readily observable. The fair value of the Company’s long-term debt is the same as its carrying amount as the debt bears interest at a variable rate indexed to current market conditions. See Note 11 for further details.

Note 10. Commitments and Contingencies

Commitments

As more fully described in Note 12 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, the Company’s commitments consist primarily of the Company’s obligations under employment agreements that the Company has with its professional sports teams’ personnel that are generally guaranteed regardless of employee injury or termination. In addition, see Note 7 for more information on the contractual obligations related to future lease payments. The Company did not have any material changes in its contractual obligations, including off-balance sheet commitments, since the end of fiscal year 2021 other than the lease commitments discussed in Note 7 and activities in the ordinary course of business.

Legal Matters

The Company is a defendant in various lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance), management does not believe that resolution of these lawsuits will have a material adverse effect on the Company.

Note 11. Debt

Knicks Revolving Credit Facility

On September 30, 2016, New York Knicks, LLC (“Knicks LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “2016 Knicks Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $200,000 with a term of five years (the “2016 Knicks Revolving Credit Facility”) to fund working capital needs and for general corporate purposes. The 2016 Knicks Revolving Credit Facility would have matured and any unused commitments thereunder would have expired on September 30, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

On November 6, 2020, the Company amended and restated the 2016 Knicks Credit Agreement in its entirety (the “2020 Knicks Credit Agreement”). On December 14, 2021, Knicks LLC entered into Amendment No. 2 to the 2020 Knicks Credit Agreement, which amended and restated the 2020 Knicks Credit Agreement (the “2021 Knicks Credit Agreement”).

The 2021 Knicks Credit Agreement provides for a senior secured revolving credit facility of up to $275,000 (the “2021 Knicks Revolving Credit Facility”) to fund working capital needs and for general corporate purposes. The maturity date of the 2021 Knicks Credit Agreement is December 14, 2026. Amounts borrowed may be distributed to the Company except during an event of default.

All borrowings under the 2021 Knicks Revolving Credit Facility are subject to the satisfaction of certain customary conditions. Borrowings under the 2021 Knicks Credit Agreement bear interest at a floating rate, which at the option of Knicks LLC may be either (i) a base rate plus a margin ranging from 0.250% to 0.500% per annum or (ii) term Secured Overnight Financing Rate (“SOFR”) plus a credit spread adjustment of 0.100% per annum plus a margin ranging from 1.250% to 1.500% per annum depending on the credit rating applicable to the NBA’s league-wide credit facility. Knicks LLC is required to pay a commitment fee ranging from 0.250% to 0.300% per annum in respect of the average daily unused commitments under the 2021 Knicks Revolving Credit Facility. The outstanding balance under the 2021 Knicks Revolving Credit Facility was $220,000 as of March 31, 2022, which was recorded as Long-term debt in the accompanying consolidated balance sheet. The interest rate on the 2021 Knicks Revolving Credit Facility as of March 31, 2022 was 1.65%. During the nine months ended March 31, 2022 the Company made interest payments of $2,418 in respect of the 2021 Knicks Revolving Credit Facility (including in respect of obligations under the 2020 Knicks Credit Agreement prior to the amendment and restatement thereof).

All obligations under the 2021 Knicks Revolving Credit Facility are secured by a first lien security interest in certain of Knicks LLC’s assets, including, but not limited to, (i) the Knicks LLC’s membership rights in the NBA, (ii) revenues to be paid to the Knicks LLC by the NBA pursuant to certain U.S. national broadcast agreements, and (iii) revenues to be paid to Knicks LLC pursuant to local media contracts.

Subject to customary notice and minimum amount conditions, Knicks LLC may voluntarily prepay outstanding loans under the 2021 Knicks Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to SOFR-based loans). Knicks LLC is required to make mandatory prepayments in certain circumstances, including without limitation if the maximum available amount under the 2021 Knicks Revolving Credit Facility is greater than 350% of qualified revenues.

In addition to the financial covenant described above, the 2021 Knicks Credit Agreement and related security agreements contain certain customary representations and warranties, affirmative covenants and events of default. The 2021 Knicks Revolving Credit Facility contains certain restrictions on the ability of Knicks LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the 2021 Knicks Revolving Credit Facility, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the 2021 Knicks Revolving Credit Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any Knicks LLC’s collateral.

The 2021 Knicks Revolving Credit Facility requires Knicks LLC to comply with a debt service ratio of at least 1.5:1.0 over a trailing four quarter period. As of March 31, 2022, Knicks LLC was in compliance with this financial covenant.

Knicks Holdings Credit Facility

On November 6, 2020, Knicks Holdings, LLC, an indirect, wholly-owned subsidiary of the Company and the direct parent of Knicks LLC (“Knicks Holdings”), entered into a credit agreement with a syndicate of lenders (the “2020 Knicks Holdings Credit Agreement”). The 2020 Knicks Holdings Credit Agreement provided for a revolving credit facility of up to $75,000 (the “2020 Knicks Holdings Revolving Credit Facility”) to fund working capital needs and for general corporate purposes. On December 14, 2021, the Company terminated the 2020 Knicks Holdings Revolving Credit Facility in its entirety.

Rangers Revolving Credit Facility

On January 25, 2017, New York Rangers, LLC (“Rangers LLC”), a wholly owned subsidiary of the Company, entered into a credit agreement (the “2017 Rangers Credit Agreement”) with a syndicate of lenders providing for a senior secured revolving credit facility of up to $150,000 with a term of five years (the “2017 Rangers Revolving Credit Facility”) to fund working capital needs and for general corporate purposes. The 2017 Rangers Revolving Credit Facility would have matured and any unused commitments thereunder would have expired on January 25, 2022.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

On November 6, 2020, the Company amended and restated the 2017 Rangers Credit Agreement in its entirety (the “2020 Rangers Credit Agreement”). On December 14, 2021, Rangers LLC entered into Amendment No. 3 to the 2020 Rangers Credit Agreement, which amended and restated the 2020 Rangers Credit Agreement (the “2021 Rangers Credit Agreement”).

The 2021 Rangers Credit Agreement provides for a senior secured revolving credit facility of up to $250,000 (the “2021 Rangers Revolving Credit Facility”) to fund working capital needs and for general corporate purposes. The maturity date of the 2021 Rangers Credit Agreement is December 14, 2026. Amounts borrowed may be distributed to the Company except during an event of default.

All borrowings under the 2021 Rangers Revolving Credit Facility are subject to the satisfaction of certain customary conditions. Borrowings under the 2021 Rangers Revolving Credit Facility bear interest at a floating rate, which at the option of Rangers LLC may be either (i) a base rate plus a margin ranging from 0.500% to 1.000% per annum or (ii) term SOFR plus a credit spread adjustment of 0.100% per annum plus a margin ranging from 1.500% to 2.000% per annum depending on the credit rating applicable to the NHL’s league-wide credit facility. Rangers LLC is required to pay a commitment fee ranging from 0.375% to 0.625% per annum in respect of the average daily unused commitments under the 2021 Rangers Revolving Credit Facility. During the nine months ended March 31, 2022, the Company made principal repayments of $70,000 and the outstanding balance under the 2021 Rangers Revolving Credit Facility was $65,000 as of March 31, 2022, which was recorded as Long-term debt in the accompanying consolidated balance sheet. The interest rate on the 2021 Rangers Revolving Credit Facility as of March 31, 2022 was 2.15%. During the nine months ended March 31, 2022 the Company made interest payments of $1,816 in respect of the 2021 Rangers Revolving Credit Facility (including in respect of obligations under the 2020 Rangers Credit Agreement prior to the amendment and restatement thereof). In addition, on April 27, 2022, the Company made an additional principal repayment of $15,000 under the 2021 Rangers Revolving Credit Facility.

All obligations under the 2021 Rangers Revolving Credit Facility are, subject to the 2021 Rangers NHL Advance Agreement (as defined below), secured by a first lien security interest in certain of Rangers LLC’s assets, including, but not limited to, (i) Rangers LLC’s membership rights in the NHL, (ii) revenues to be paid to Rangers LLC by the NHL pursuant to certain U.S. and Canadian national broadcast agreements, and (iii) revenues to be paid to Rangers LLC pursuant to local media contracts.

Subject to customary notice and minimum amount conditions, Rangers LLC may voluntarily prepay outstanding loans under the 2021 Rangers Revolving Credit Facility at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to SOFR-based loans). Rangers LLC is required to make mandatory prepayments in certain circumstances, including without limitation if qualified revenues are less than 17% of the maximum available amount under the 2021 Rangers Revolving Credit Facility.

In addition to the financial covenant described above, the 2021 Rangers Credit Agreement and related security agreements contain certain customary representations and warranties, affirmative covenants and events of default. The 2021 Rangers Revolving Credit Facility contains certain restrictions on the ability of Rangers LLC to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the 2021 Rangers Revolving Credit Facility, including the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating liens on certain assets; (iii) making restricted payments during the continuance of an event of default under the 2021 Rangers Revolving Credit Facility; (iv) engaging in sale and leaseback transactions; (v) merging or consolidating; and (vi) taking certain actions that would invalidate the secured lenders’ liens on any of Rangers LLC’s assets securing the obligations under the 2021 Rangers Revolving Credit Facility.

The 2021 Rangers Revolving Credit Facility requires Rangers LLC to comply with a debt service ratio of at least 1.5:1.0 over a trailing four quarter period. As of March 31, 2022, Rangers LLC was in compliance with this financial covenant.

2021 Rangers NHL Advance Agreement

On March 19, 2021, Rangers LLC, Rangers Holdings, LLC and MSG NYR Holdings LLC entered into an advance agreement with the NHL (the “2021 Rangers NHL Advance Agreement”) pursuant to which the NHL advanced $30,000 to Rangers LLC. The advance is to be utilized solely and exclusively to pay for Rangers LLC operating expenses.

All obligations under the 2021 Rangers NHL Advance Agreement are senior to and shall have priority over all secured and other indebtedness of Rangers LLC, Rangers Holdings, LLC and MSG NYR Holdings LLC. All borrowings under the 2021 Rangers NHL Advance Agreement were made on a non-revolving basis and bear interest at 3.00% per annum, ending on the date any such advances are fully repaid. Advances received under the 2021 Rangers NHL Advance Agreement are payable upon demand by the NHL. It is expected that the advanced amount will be set off against funds that would otherwise be paid, distributed or transferred by the NHL to Rangers LLC. The outstanding balance under the 2021 Rangers NHL Advance Agreement was $30,000 as of March 31, 2022 and was recorded as Debt in the accompanying consolidated balance sheet. During the nine months ended March 31, 2022 the Company made interest payments of $675.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Deferred Financing Costs

The following table summarizes deferred financing costs, net of amortization, related to the Company’s credit facilities as reported on the accompanying consolidated balance sheet:


	March 31, 2022 (a)		June 30, 2021
Other current assets	$	1,145	$	1,759
Other assets	4,240		2,345

—————

(a) In connection with the 2021 Knicks Revolving Credit Facility and 2021 Rangers Revolving Credit Facility, the Company incurred $2,836 in deferred financing costs during the nine months ended March 31, 2022.

Note 12. Benefit Plans

Defined Benefit Pension Plans

Prior to the MSGE Distribution, the Company sponsored various defined benefit pension plans and a contributory welfare plan. As of the MSGE Distribution Date, the Company and MSG Entertainment entered into an employee matters agreement (the “Employee Matters Agreement”) which determined each company’s obligations after the MSGE Distribution with regard to historical liabilities under the Company’s former pension and postretirement plans. See Note 14 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for more information with regard to the liabilities retained by the Company from certain plans, which were transferred to the MSG Sports, LLC Excess Cash Balance Plan and MSG Sports, LLC Excess Retirement Plan, which the Company established in connection with the MSGE Distribution and are collectively referred to the “MSGS Pension Plans.”

The following table presents components of net periodic benefit cost for the MSGS Pension Plans included in the accompanying consolidated statements of operations for the three and nine months ended March 31, 2022 and 2021. Net periodic benefit cost is reported in Miscellaneous expense, net.




	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021

Interest cost (credit)	$	31	$	(11)	$	93	$	109

Recognized actuarial loss	33		57		99		77


Net periodic benefit cost	$	64	$	46	$	192	$	186

Defined Contribution Plans

Prior to the MSGE Distribution, the Company sponsored The Madison Square Garden 401(k) Savings Plan (the “401(k) Plan”), which is a multiple employer plan and the MSG S&E, LLC Excess Savings Plan (collectively referred to as the “Savings Plans”). As a result of the MSGE Distribution, the Savings Plans were transferred to MSG Entertainment. However, MSG Sports employees continue to participate in the 401(k) Plan. In addition, pursuant to the Employee Matters Agreement the Company established the MSG Sports LLC Excess Savings Plan to provide non-qualified retirement benefits to eligible MSG Sports employees. See Note 14 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for more information with regard to the liabilities retained by the Company.

Expenses related to the Savings Plans that are included in the accompanying consolidated statements of operations were $1,238 and $3,076 for the three and nine months ended March 31, 2022, respectively, and $426 and $1,530 for the three and nine months ended March 31, 2021, respectively.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Note 13. Share-based Compensation

See Note 15 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for more information regarding the Company’s 2015 Employee Stock Plan (the “Employee Stock Plan”) and its 2015 Stock Plan for Non-Employee Directors.

Share-based compensation expense was recognized in the consolidated statements of operations as a component of selling, general and administrative expenses. Share-based compensation expense was $6,973 and $19,178 for the three and nine months ended March 31, 2022, respectively, and $3,867 and $26,193 for the three and nine months ended March 31, 2021, respectively. There were no costs related to share-based compensation that were capitalized for the three and nine months ended March 31, 2022 and 2021, respectively.

As a result of an agreement to settle an action (the “Settlement”) filed by a purported stockholder of the Company derivatively on behalf of the Company against certain directors of the Company who are members of the Dolan family and against the directors of the Company who were members of the Compensation Committee, Mr. Dolan voluntarily relinquished a one-time equity award granted by the Company in October 2018 pursuant to his 2018 employment agreement, and the related award agreements were canceled. The one-time equity award included: 32 target performance stock units and three grants of stock options to purchase an aggregate of 449 shares of Class A Common Stock, which were to vest over a 4-year period. The Settlement became effective October 8, 2020 and therefore, upon cancellation, the Company recorded previously unrecognized share-based compensation expense of approximately $7,400 related to this award during the nine months ended March 31, 2021.

Restricted Stock Units Award Activity

The following table summarizes activity related to the Company’s restricted stock units and performance restricted stock units, collectively referred to as “RSUs,” held by the Company and MSG Entertainment employees, for the nine months ended March 31, 2022:


	Number of		Weighted-Average Fair Value Per Share at Date of Grant (a)
	Nonperformance Based Vesting RSUs	Performance Based Vesting RSUs
Unvested award balance, June 30, 2021	264	220	$	234.39
Granted	63	44	$	160.22
Vested	(140)	(85)	$	254.96
Forfeited / Cancelled	—	(2)	$	173.94
Unvested award balance, March 31, 2022	187	177	$	200.10

_____________________

(a)Weighted-average fair value per share at date of grant does not reflect any adjustments to awards granted prior to the MSGE Distribution.

The fair value of RSUs that vested during the nine months ended March 31, 2022 was $40,490. Upon delivery, RSUs granted under the Employee Stock Plan were net share-settled to cover the required statutory tax withholding obligations. To fulfill the Company’s and MSG Entertainment’s employees’ required statutory tax withholding obligations for the applicable income and other employment taxes, 105 of these RSUs, with an aggregate value of $18,945, inclusive of $6,803 related to MSG Entertainment employees (who vested in the Company’s RSUs), were retained by the Company and the taxes paid are reflected as a financing activity in the accompanying consolidated statement of cash flows for the nine months ended March 31, 2022.

The fair value of RSUs that vested during the nine months ended March 31, 2021 was $36,099. The weighted-average fair value per share at grant date of RSUs granted during the nine months ended March 31, 2021 was $162.22.

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Stock Options Award Activity

The following table summarizes activity related to the Company’s stock options for the nine months ended March 31, 2022:


	Number of Time Vesting Options	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value

Balance as of June 30, 2021	94	$	145.78
Granted	—	$	—
Cancelled	—	$	—
Balance as of March 31, 2022	94	$	145.78	5.71	$	3,151
Exercisable as of March 31, 2022	94	$	145.78	5.71	$	3,151

Note 14. Stock Repurchase Program

On September 11, 2015, the Company’s board of directors authorized the repurchase of up to $525,000 of the Company’s Class A Common Stock once the shares of the Company’s Class A Common Stock began “regular way” trading on October 1, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors.

During the nine months ended March 31, 2022 and 2021, the Company did not engage in any share repurchase activities under its share repurchase program. As of March 31, 2022, the Company had $259,639 of availability remaining under its stock repurchase authorization.

Note 15. Related Party Transactions

On July 9, 2021, MSG Networks merged with a subsidiary of MSG Entertainment and became a wholly-owned subsidiary of MSG Entertainment (the “MSGE-MSGN Merger”). Accordingly, agreements between the Company and MSG Networks are now effectively agreements with MSG Entertainment on a consolidated basis.

As of March 31, 2022, members of the Dolan family including trusts for members of the Dolan family (collectively, the “Dolan Family Group”), for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, collectively beneficially own 100% of the Company’s outstanding Class B Common Stock and own approximately 3.1% of the Company’s outstanding Class A Common Stock. Such shares of the Company’s Class A Common Stock and Class B Common Stock, collectively, represent approximately 70.6% of the aggregate voting power of the Company’s outstanding common stock. Members of the Dolan family are also the controlling stockholders of MSG Entertainment and AMC Networks Inc. (“AMC Networks”). Members of the Dolan family were the direct controlling stockholders of MSG Networks prior to the MSGE-MSGN Merger and indirectly control MSG Networks through MSG Entertainment’s ownership of MSG Networks.

The Company is party to the following agreements and/or arrangements with MSG Entertainment and MSG Networks, as applicable:

•Arena License Agreements entered into in April 2020 pursuant to which MSG Entertainment (i) provides the right to use The Garden for games of the Knicks and the Rangers for a 35-year term in exchange for arena license fees, (ii) shares revenues collected for suite licenses, (iii) operates and manages the sale of the sports teams merchandise at The Garden for a commission, (iv) operates and manages the sales of food and beverage concessions in exchange for 50% of net profits from the sales and catering services during Knicks and Rangers home games, (v) provides day of game services that were historically provided prior to the MSGE Distribution, and (vi) provides other general services within The Garden;

•Media rights agreements that the Company and MSG Networks entered into in July 2015 with stated terms of 20 years, providing MSG Networks with local telecast rights for Knicks and Rangers games in exchange for media rights fees;

•Sponsorship sales and service representation agreements entered into in April 2020 pursuant to which MSG Entertainment has the exclusive right and obligation to sell the Company’s sponsorships for an initial stated term of 10 years for a commission. In addition, under this agreement, the Company is charged by MSG Entertainment for sales and service staff and overhead associated with the sales of sponsorship assets;

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

•Team sponsorship allocation agreement with MSG Entertainment, pursuant to which teams continue receiving an allocation of sponsorship and signage revenues associated with the sponsorship agreements that existed at the MSGE Distribution Date;

•Transition Services Agreement (the “TSA”) pursuant to which the Company (i) receives certain services from MSG Entertainment, such as information technology, accounts payable, payroll, human resources, and other corporate functions, as well as the executive support services, in exchange for service fees and (ii) provides certain services to MSG Entertainment, such as certain communications, legal and ticketing services (including the provision of certain legal services the Company provided to MSG Networks prior to the MSGE-MSGN Merger), in exchange for service fees;

•Sublease agreement, pursuant to which the Company leases office space from MSG Entertainment;

•Group ticket sales representation agreement, pursuant to which MSG Entertainment appointed the Company as its sales and service representative to sell group ticket packages related to MSG Entertainment events in exchange for a commission;

•Single night rental commission agreement, pursuant to which the Company may, from time to time, sell (or make referrals for sales of) licenses for the use of suites at The Garden for individual MSG Entertainment events in exchange for a commission and reimbursement for sales and service staff and overhead associated with the ticket sales on behalf of MSG Entertainment;

•Aircraft sharing agreements pursuant to which MSG Entertainment has agreed from time to time to make its aircraft and aircraft it leases from other related parties available to the Company for lease on a “time sharing” basis;

•Other agreements with MSG Entertainment entered into in connection with the MSGE Distribution, including a distribution agreement, a tax disaffiliation agreement, an employee matters agreement, a trademark license agreement and certain other arrangements; and

•Other agreements with MSG Networks entered into in connection with the MSGS Distribution, including a distribution agreement, a tax disaffiliation agreement, an employee matters agreement and certain other arrangements.

In addition, the Company shares certain executive support costs, including office space, executive assistants, security and transportation costs for: (i) the Company’s Executive Chairman with MSG Entertainment; and (ii) the Company’s Vice Chairman with AMC Networks and MSG Entertainment. The Company also previously shared such costs for the Company’s President and Chief Executive Officer with MSG Entertainment through March 31, 2022. Additionally, the Company, MSG Entertainment, and AMC Networks allocate the costs of certain personal aircraft and helicopter use by their shared executives.

From time to time the Company has entered into, and is expected to continue to enter into, arrangements with 605, LLC. Kristin A. Dolan, a former director of the Company and spouse of James L. Dolan, the Company’s Executive Chairman and a director, is the founder and Chief Executive Officer of 605, LLC. James L. Dolan and Kristin A. Dolan own 50% of 605, LLC. 605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries in the ordinary course of business.

Revenues and Operating Expenses

The following table summarizes the composition and amounts of the transactions with the Company’s affiliates. These amounts are reflected in revenues and operating expenses in the accompanying consolidated statements of operations for the three and nine months ended March 31, 2022 and 2021:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Revenues	$	75,851	$	80,322	$	153,229	$	103,752
Operating expenses:

Corporate general and administrative expenses, net	$	10,225	$	9,281	$	31,579	$	29,162
Costs associated with the Sponsorship sales and service representation agreements	8,389		5,449		16,857		10,184
Costs associated with the Arena License Agreements	42,196		24,843		83,212		27,697
Other operating expenses, net	479		239		800		290

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MADISON SQUARE GARDEN SPORTS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

Revenues

Revenues from related parties primarily consist of local media rights recognized from the licensing of team-related programming under the media rights agreements covering the Knicks and the Rangers, which provide MSG Networks with exclusive media rights to team games in their local markets.

Corporate general and administrative expenses, net

Corporate general and administrative expenses, net reflects net charges of $9,473 and $29,347 from MSG Entertainment pursuant to the TSA for certain business functions that were previously performed by internal resources for the three and nine months ended March 31, 2022, respectively, and $8,822 and $27,771 for the three and nine months ended March 31, 2021, respectively. These services include information technology, accounting, accounts payable, payroll, tax, legal, human resources, insurance and risk management, investor relations, corporate communications, benefit plan administration and reporting, and internal audit. In addition, Corporate general and administrative expenses, net reflects rent expense associated with the lease of office space from MSG Entertainment of $752 and $2,232 for the three and nine months ended March 31, 2022, respectively, and $678 and $2,047 for the three and nine months ended March 31, 2021, respectively. See Note 7 for more information regarding the lease of office space from MSG Entertainment. Corporate general and administrative expenses, net for the three and nine months ended March 31, 2021 also reflects charges from the Company to MSG Networks for the period prior to the MSGE-MSGN Merger pursuant to a services agreement between the Company and MSG Networks.

Costs associated with the Sponsorship sales and service representation agreements

Pursuant to the Sponsorship sales and service representation agreements, MSG Entertainment charges the Company sales commission fees and sponsorship fulfillment costs, as well as costs of MSG Entertainment sales and service staff and overhead associated with the sales of sponsorship assets.

Costs associated with the Arena License Agreements

For the three and nine months ended March 31, 2022, costs associated with the Arena License Agreements include $29,425 and $58,422, respectively, recorded as operating lease cost. For the three and nine months ended March 31, 2021, costs associated with the Arena License Agreements include $20,357 and $22,567, respectively, recorded as operating lease cost. See Note 7 for more information regarding Arena License Agreements.

Note 16. Income Taxes

In general, the Company is required to use an estimated annual effective tax rate to measure the tax benefit or expense recognized in an interim period. 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. The estimated annual effective tax rate is revised on a quarterly basis.

Income tax expense for the three and nine months ended March 31, 2022 of $34,993 and $30,939, respectively, reflect an effective tax rate of 59% and 58%.

Income tax expense for the three months ended March 31, 2021 of $53 differs from income tax expense derived from applying the statutory federal rate of 21% to pretax income primarily due to tax benefit of $4,295 related to a decrease in the valuation allowance, partially offset by state income tax expense of $1,507 and tax expense of $561 resulting from nondeductible officers’ compensation.

Income tax benefit for the nine months ended March 31, 2021 of $275 differs from income tax benefit derived from applying the statutory federal rate of 21% to the pretax loss primarily due to tax expense of $13,168 related to an increase in the valuation allowance, tax expense of $1,954 resulting from nondeductible officers’ compensation, and tax expense of $1,558 resulting from the acceleration of share-based compensation expense in connection with the cancellation of certain awards, partially offset by state income tax benefit of $4,754.

The Company was notified in April 2020 that the City of New York was commencing an audit of the state income tax returns for the fiscal years ended June 30, 2016 and 2017. The Company does not expect the examination, when finalized, to result in material changes.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Sports Corp. and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “MSG Sports,” or the “Company”) including the impact of COVID-19 on our future operations. Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:

•the duration and severity of the COVID-19 pandemic and our ability to effectively manage the impacts, including the availability of The Garden with no or limited fans, league decisions regarding play and other matters, the cancellation of games, the impact of restrictions imposed by New York State, New York City, or otherwise, reduced tourism, and general hesitancy among the public to engage in public activities due to COVID-19;

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

•costs associated with player injuries, waivers or contract terminations of players and other team personnel;

•changes in professional sports teams’ compensation, including the impact of signing free agents and trades, subject to league salary caps and the impact of luxury tax;

•general economic conditions, especially in the New York City metropolitan area;

•the demand for sponsorship arrangements and for advertising;

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

•changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues’ respective collective bargaining agreements with their players’ associations, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other regulations under which we operate;

•any NBA, NHL or other work stoppage in addition to those related to COVID-19 impacts;

•any economic, political or other actions, such as boycotts, protests, work stoppages or campaigns by labor organizations;

•seasonal fluctuations and other variation in our operating results and cash flow from period to period;

•the level of our expenses, including our corporate expenses;

•business, reputational and litigation risk if there is a security incident resulting in loss, disclosure or misappropriation of stored personal information or other breaches of our information security;

•activities or other developments that discourage or may discourage congregation at prominent places of public assembly, including The Garden where the home games of the Knicks and the Rangers are played;

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

•the evolution of the esports industry and its potential impact on our esports businesses;

•the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions;

•our ability to successfully integrate acquisitions or new businesses into our operations;

•the operating and financial performance of our strategic acquisitions and investments, including those we may not control;

•the impact of governmental regulations or laws, including changes in how those regulations and laws are interpreted and the continued benefit of certain tax exemptions (including for The Garden) and the ability for us and MSG Entertainment to maintain necessary permits or licenses;

•the impact of any government plans to redesign New York City’s Pennsylvania Station;

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•business, economic, reputational and other risks associated with, and the outcome of, litigation and other proceedings;

•financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;

•our ownership of professional sports franchises in the NBA and NHL and certain related transfer restrictions on our common stock;

•the tax-free treatment of the MSGS Distribution and the MSGE Distribution;

•the performance by MSG Entertainment and its subsidiaries of its obligations under various agreements with the Company related to the MSGE Distribution and ongoing commercial arrangements; and

•the factors described under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.

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All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.

Introduction

This MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s unaudited financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, to help provide an understanding of our financial condition, changes in financial condition and results of operations. Unless the context otherwise requires, all references to “we,” “us,” “our,” “MSG Sports,” or the “Company” refer collectively to Madison Square Garden Sports Corp., a holding company, and its direct and indirect subsidiaries through which substantially all of our operations are conducted.

On April 17, 2020, the Company distributed all of the outstanding common stock of MSG Entertainment to its stockholders. MSG Entertainment owns, directly or indirectly, the entertainment business previously owned and operated by the Company through its MSG Entertainment business segment and the sports booking business previously owned and operated by the Company through its MSG Sports business segment. In the MSGE Distribution, (a) each holder of the Company’s Class A common stock, received one share of MSG Entertainment Class A common stock, par value $0.01 per share, for every share of the Company’s Class A common stock held of record as of the close of business, New York City time, on the Record Date, and (b) each holder of the Company’s Class B common stock, received one share of MSG Entertainment Class B common stock, par value $0.01 per share, for every share of the Registrant’s Class B common stock held of record as of the close of business, New York City time, on the Record Date.

After giving effect to the MSGE Distribution, the Company operates and reports financial information in one segment.

Factors Affecting Results of Operations

Impact of COVID-19 on Our Business

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This MD&A is organized as follows:

Results of Operations. This section provides an analysis of our unaudited results of operations for the three and nine months ended March 31, 2022 compared to the three and nine months ended March 31, 2021.

Liquidity and Capital Resources. This section focuses primarily on (i) the liquidity and capital resources of the Company, (ii) an analysis of the Company’s cash flows for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021, and (iii) certain contractual obligations.

Seasonality of Our Business. This section discusses the seasonal performance of our business.

Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section discusses accounting pronouncements that have been adopted by the Company as well as the results of the Company’s annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of fiscal year 2022. This section should be read together with our critical accounting policies, which are discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recently Issued Accounting Pronouncements and Critical Accounting Policies — Critical Accounting Policies” and in the notes to the consolidated financial statements of the Company included therein.

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Results of Operations

Comparison of the three and nine months ended March 31, 2022 versus the three and nine months ended March 31, 2021

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


	Three Months Ended								Nine Months Ended
	March 31,				Change (a)				March 31,				Change (a)
	2022		2021		$		%		2022		2021		$		%
Revenues	$	337,774	$	183,010	$	154,764	85	%	$	646,149	$	268,819	$	377,330	NM
Direct operating expenses	206,273		126,510		79,763		63	%	407,698		182,957		224,741		NM
Selling, general and administrative expenses	68,902		46,803		22,099		47	%	172,230		138,708		33,522		24	%
Depreciation and amortization	1,206		1,573		(367)		(23)	%	3,847		4,840		(993)		(21)	%
Operating income (loss)	61,393		8,124		53,269		NM		62,374		(57,686)		120,060		NM
Other expense:
Interest expense, net	(2,418)		(2,930)		512		17	%	(9,013)		(7,406)		(1,607)		(22)	%
Miscellaneous expense, net	(63)		(46)		(17)		(37)	%	(190)		(236)		46		19	%
Income (loss) from operations before income taxes	58,912		5,148		53,764		NM		53,171		(65,328)		118,499		NM
Income tax (expense) benefit	(34,993)		(53)		(34,940)		NM		(30,939)		275		(31,214)		NM
Net income (loss)	23,919		5,095		18,824		NM		22,232		(65,053)		87,285		NM
Less: Net loss attributable to nonredeemable noncontrolling interests	(584)		(373)		(211)		(57)	%	(1,711)		(1,479)		(232)		(16)	%


Net income (loss) attributable to Madison Square Garden Sports Corp.’s stockholders	$	24,503	$	5,468	$	19,035	NM		$	23,943	$	(63,574)	$	87,517	NM

_________________

NM – Percentage is not meaningful

(a)Operating results in the prior year period were materially impacted by the COVID-19 pandemic. Please see “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” for more information.

Revenues

Revenues increased $154,764, or 85%, to $337,774 for the three months ended March 31, 2022 as compared to the prior year period. Revenues increased $377,330 to $646,149 for the nine months ended March 31, 2022 as compared to the prior year period. The net increases were attributable to the following:


	Three		Nine
	Months		Months
Increase in pre/regular season ticket-related revenues	$	105,780	$	210,264
Increase in suite license fee revenues	38,554		73,167
Increase in sponsorship and signage revenues	12,770		32,916
Increase in pre/regular season food, beverage and merchandise sales	9,700		18,527
(Decrease) increase in local media rights fees	(9,510)		39,597
(Decrease) increase in revenues from league distributions	(3,024)		551
Other net increases	494		2,308
	$	154,764	$	377,330

The increases in pre/regular season ticket-related revenues for the three and nine months ended March 31, 2022 were a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year periods. In the prior year periods, the Knicks and the Rangers played games at The Garden with no fans in attendance until February 23 and 26, 2021, respectively, and after that, played games with attendance restricted to 10% capacity.

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The increases in suite license fee revenues for the three and nine months ended March 31, 2022 were a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year periods, as discussed above. In the prior year periods, for Knicks and Rangers games played with a limited number of fans in attendance, access to suites was sold by way of individual tickets, thus minimal suite license fee revenue was recognized for the three and nine months ended March 31, 2021.

The increases in sponsorship and signage revenues for the three and nine months ended March 31, 2022 were a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year periods, as discussed above. In addition, the increase for the nine months ended March 31, 2022 was also due to the delayed start of the 2020-21 NBA and NHL regular seasons in the prior year period.

The increases in pre/regular season food, beverage and merchandise sales for the three and nine months ended March 31, 2022 were a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year periods, as discussed above.

The decrease in local media rights fees for the three months ended March 31, 2022 was primarily due to the compressed timing of the NBA and NHL 2020-21 seasons resulting in revenue being recognized over a shorter time frame in the prior fiscal year, partially offset by the impact of the shortened NBA and NHL 2020-21 regular season schedules in the prior year period, as well as contractual rate increases. The increase in local media rights fees for the nine months ended March 31, 2022 was primarily due to the delayed start of the 2020-21 NBA and NHL regular seasons and the impact of the shortened NBA and NHL 2020-21 regular season schedules in the prior year period, as well as contractual rate increases. In addition, the increase for the nine months ended March 31, 2022 was slightly offset by the recognition of local media rights fees in the prior year period associated with the Rangers’ participation in the Stanley Cup Qualifiers.

The decrease in revenues from league distributions for the three months ended March 31, 2022 was primarily due to the compressed timing of the NBA and NHL 2020-2021 seasons resulting in revenue being recognized over a shorter time frame in the prior fiscal year, partially offset by increased NBA and NHL national media rights fees and higher other league distributions in the current year period. The increase in revenues from league distributions for the nine months ended March 31, 2022 was primarily due to (i) higher NBA and NHL national media rights fees and other league distributions as a result of the delayed start of the 2020-21 NBA and NHL regular seasons in the prior year period and (ii) increased NBA and NHL national media rights fees and other league distributions in the current year period. In addition, the increase for the nine months ended March 31, 2022 was partially offset by the recognition of the remainder of national media rights fees related to the 2019-20 NBA and NHL seasons during the first quarter of fiscal year 2021 that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020. After suspending the 2019-20 seasons in March 2020 due to the COVID-19 pandemic, the NHL and NBA subsequently restarted their seasons which were completed in September and October 2020, respectively.

Direct operating expenses

Direct operating expenses increased $79,763, or 63%, to $206,273 for the three months ended March 31, 2022 as compared to the prior year period. Direct operating expenses increased $224,741 to $407,698 for the nine months ended March 31, 2022 as compared to the prior year period. The net increases were attributable to the following:


	Three		Nine
	Months		Months
Increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax	$	58,244	$	70,211
Increase in other team operating expenses not discussed elsewhere in this table	11,121		46,874
Increase in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden	9,084		35,854
Increases in pre/regular season expense associated with food, beverage and merchandise sales	3,790		8,276
Increase in team personnel compensation	525		78,210
Decrease in net provisions for certain team personnel transactions	(3,001)		(14,684)

	$	79,763	$	224,741

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Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax were as follows:


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2022		2021		Increase		2022		2021		Increase
Net provisions for league revenue sharing expense (net of escrow) and NBA luxury tax	$	26,471	$	(31,773)	$	58,244	$	47,748	$	(22,463)	$	70,211

The increases in net provisions for league revenue sharing expense (net of escrow) and NBA luxury tax for the three and nine months ended March 31, 2022 were primarily due to higher provisions for league revenue sharing expense (net of escrow) of $61,787 and $78,019, respectively, as a result of higher escrow recoveries and lower revenue sharing expense in the prior year periods, which reflected the impact of the COVID-19 pandemic, partially offset by higher estimated recoveries of NBA luxury tax in the current year periods. In addition, the increase in league revenue sharing expense (net of escrow) for the nine months ended March 31, 2022 was partially offset by adjustments to revenue sharing expense for the 2019-20 NBA and NHL seasons in the prior year period. Based on the completion of the 2019-20 NBA and NHL seasons during the three months ended September 30, 2020, the Company recognized a portion of revenue sharing expense (net of escrow) related to those seasons during that period that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020.

The Knicks were not a luxury tax payer for the 2020-21 season and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams. The Knicks’ roster as of March 31, 2022 would not result in the team being a luxury tax payer for the 2021-22 season.

The actual amounts for the 2021-22 seasons may vary significantly from the recorded provisions based on actual operating results for each league and all teams within each league for the season and other factors.

The increases in other team operating expenses not discussed elsewhere in this table for the three and nine months ended March 31, 2022 were a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year periods, as discussed above, and the delayed start of the 2020-21 NBA and NHL regular seasons in the prior year periods. Other team operating expenses not discussed elsewhere in this table primarily consists of league assessments and expenses associated with day-to-day operations, including variable day-of-event costs incurred at The Garden, team travel and player insurance.

The increases in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden for the three and nine months ended March 31, 2022 were primarily a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year periods, as discussed above. In addition, the increase in operating lease costs associated with the Knicks and the Rangers playing home games at The Garden for the nine months ended March 31, 2022 was also due to the delayed start of the 2020-21 NBA and NHL regular seasons in the prior year period.

The increases in pre/regular season expense associated with food, beverage and merchandise sales for the three and nine months ended March 31, 2022 were a result of the elimination of government-mandated assembly restrictions at The Garden that were in place during the prior year periods, as discussed above.

The increase in team personnel compensation for the nine months ended March 31, 2022 was primarily due to the net impact of the delayed start and shortened 2020-21 NBA and NHL regular seasons in the prior year period and higher player compensation in the current year period. This increase in team personnel compensation for the nine months ended March 31, 2022 was partially offset by the recognition of player compensation expense during the prior year period that otherwise would have been recognized during the third and fourth quarters of fiscal year 2020 as a result of the NBA completing the 2019-20 season in October 2020.

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Net provisions (credits) for certain team personnel transactions were as follows:


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2022		2021		Increase (Decrease)		2022		2021		Increase (Decrease)
Waivers/contract terminations	$	65	$	3,305	$	(3,240)	$	723	$	14,420	$	(13,697)
Player trades	(1,066)		—		(1,066)		(1,066)		2,583		(3,649)
Season-ending player injuries (a)	1,305		—		1,305		2,662		—		2,662
Net provisions for certain team personnel transactions	$	304	$	3,305	$	(3,001)	$	2,319	$	17,003	$	(14,684)

——————————

(a) Net of insurance recovery of $656 for the three and nine months ended March 31, 2022.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2022 increased $22,099, or 47%, to $68,902 as compared to the prior year period. Selling, general and administrative expenses for the nine months ended March 31, 2022 increased $33,522, or 24%, to $172,230 as compared to the prior year period. For the three and nine months ended March 31, 2022 the increases were primarily due to higher (i) employee compensation and related benefits (including separation-related costs), (ii) marketing costs, (iii) commissions related to the Company’s sponsorship sales and service representation agreements with MSG Entertainment, and (iv) costs related to the Company’s TSA with MSG Entertainment.

Depreciation and amortization

Depreciation and amortization for the three months ended March 31, 2022 decreased $367, or 23%, to $1,206 as compared to the prior year period. Depreciation and amortization for the nine months ended March 31, 2022 decreased $993, or 21%, to $3,847 as compared to the prior year period.

Operating income (loss)

Operating income for the three months ended March 31, 2022 increased $53,269 to $61,393 as compared to the prior year period. For the nine months ended March 31, 2022, operating income of $62,374 improved $120,060 as compared to the period year period. For the three and nine months ended March 31, 2022 the improvements to operating income were primarily due to increases in revenues, partially offset by higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses.

Interest expense, net

Net interest expense for the three months ended March 31, 2022 decreased $512, or 17%, to $2,418 as compared to the prior year period. Net interest expense for the nine months ended March 31, 2022 increased $1,607, or 22%, to $9,013 as compared to the prior year period. The decrease in net expense for the three months ended March 31, 2022 was primarily a result of principal repayments made under the Rangers revolving credit facility during the current year period. The increase in net interest expense for the nine months ended March 31, 2022 was primarily driven by (i) commitment fees on unused commitments as a result of principal repayments made under the Rangers revolving credit facility during the current year period, (ii) interest expense related to the advances received in March 2021 under the 2021 Rangers NHL Advance Agreement, and (iii) acceleration of certain previously incurred financing costs when the Company terminated the 2020 Knicks Holdings Revolving Credit Facility in its entirety during December 2021.

Income taxes

See Note 16 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s income taxes.

Adjusted operating income (loss)

The Company evaluates performance based on several factors, of which the key financial measure is operating income (loss) excluding (i) deferred rent expense under the Arena License Agreements with MSG Entertainment, (ii) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (iii) share-based compensation expense or benefit, (iv) restructuring charges or credits, (v) gains or losses on sales or dispositions of businesses, and (vi) the impact of purchase accounting adjustments related to business acquisitions, which is referred to as adjusted operating income (loss), a non-

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GAAP measure.

Management believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the Company’s business without regard to the settlement of an obligation that is not expected to be made in cash. In addition, management believes that given the length of the Arena License Agreements and resulting magnitude of the difference in deferred rent expense and the cash rent payments, the exclusion of deferred rent expense provides investors with a clearer picture of the Company's operating performance.

The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of the Company. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company’s performance. The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of its business performance and evaluates management’s effectiveness with specific reference to these indicators.

Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).

The following are the reconciliations of operating income (loss) to adjusted operating income (loss) for the three and nine months ended March 31, 2022 as compared to the prior year period:


	Three Months Ended							Nine Months Ended
	March 31,				Change			March 31,				Change
	2022		2021		$		%	2022		2021		$		%
Operating income (loss)	$	61,393	$	8,124	$	53,269	NM	$	62,374	$	(57,686)	$	120,060	NM
Deferred rent	11,882		16,478					23,590		18,280
Depreciation and amortization	1,206		1,573					3,847		4,840
Share-based compensation	6,973		3,867					19,178		26,193
Restructuring charges	—		—					—		1,644

Adjusted operating income (loss)	$	81,454	$	30,042	$	51,412	NM	$	108,989	$	(6,729)	$	115,718	NM

For the three months ended March 31, 2022, adjusted operating income increased $51,412 to $81,454 as compared to the prior year period. For the nine months ended March 31, 2022, adjusted operating income of $108,989 improved $115,718 as compared to the prior year period. For the three and nine months ended March 31, 2022 the improvements were primarily due to increases in revenues partially offset by higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses.

Liquidity and Capital Resources

Overview

Our operations and operating results have been materially impacted by the COVID-19 pandemic and government and league actions taken in response. For more information about the impacts and risks to the Company as a result of COVID-19, see “— Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” and “Item 1A. Risk Factors — Sports Business Risks — Our Operations and Operating Results Have Been, and May Continue to be, Materially Impacted by the COVID-19 Pandemic and Government and League Actions Taken in Response” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. In addition, see also Note 1 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for further information.

Our primary sources of liquidity are cash and cash equivalents and available borrowing capacity under our credit facilities as well as cash flow from our operations. On December 14, 2021, the Company amended and extended the 2020 Knicks Credit Agreement and the 2020 Rangers Credit Agreement. In addition, in March 2021, the NHL advanced the Company $30,000, which the league made available to each team following the completion of the NHL’s approximately $1,000,000 private placement in January 2021, pursuant to the 2021 Rangers NHL Advance Agreement. See Note 11 to the consolidated financial statements included in “Part I - Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of the 2021 Knicks Credit Agreement, 2021 Rangers Credit Agreement, and 2021 Rangers NHL Advance Agreement.

Our principal uses of cash include the operation of our businesses, working capital-related items, the repayment of outstanding debt, and potential repurchases of shares of the Company’s Class A Common Stock.

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As of March 31, 2022, we had approximately $49,200 in Cash and cash equivalents. In addition, as of March 31, 2022, the Company’s deferred revenue obligations were approximately $79,753, net of billed, but not yet collected deferred revenue. The current portion of this balance is primarily comprised of obligations in connection with tickets. In addition, the Company's deferred revenue obligations included $30,000 from the NBA, which the league provided to each team following the completion of the NBA’s $900,000 private placement in December 2020.

We regularly monitor and assess our ability to meet our net funding and investing requirements. The decisions of the Company as to the use of its available liquidity will be based upon the ongoing review of the funding needs of the business, management’s view of a favorable allocation of cash resources, and the timing of cash flow generation. To the extent the Company desires to access alternative sources of funding through the capital and credit markets, restrictions imposed by the NBA and NHL and challenging U.S. and global economic and market conditions could adversely impact its ability to do so at that time.

We believe we have sufficient liquidity, including approximately $49,200 in Cash and cash equivalents as of March 31, 2022, along with $240,000 of additional available borrowing capacity under existing credit facilities, to fund our operations and satisfy any obligations, including with respect to the return or application of deferred revenue for the foreseeable future. In addition, on April 27, 2022, the Company made an additional principal repayment of $15,000 under the 2021 Rangers Revolving Credit Facility using cash on hand.

Financing Agreements and Stock Repurchases

See Note 11 and Note 14 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s debt obligations and various financing agreements, and the Company’s stock repurchases, respectively.

Contractual Obligations

See Note 7 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions of the Company’s contractual obligations related to future lease payments. The Company did not have any material changes in its contractual obligations, including off-balance sheet commitments, since the end of fiscal year 2021 other than the lease commitments discussed in Note 7 and activities in the ordinary course of business.

Cash Flow Discussion

The following table summarizes the Company’s cash flow activities for the nine months ended March 31, 2022 and 2021:


	Nine Months Ended March 31,
	2022		2021
Net income (loss)	$	22,232	$	(65,053)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities	55,511		31,389
Subtotal	77,743		(33,664)
Changes in working capital assets and liabilities	(13,510)		(20,703)
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)

Operating Activities

Net cash provided by operating activities for the nine months ended March 31, 2022 was $64,233 as compared to net cash used in operating activities in the prior year period of $54,367. This was primarily due to the increase in net income in the current year period, adjusted for non-cash items and, to a lesser extent, changes in working capital assets and liabilities driven by the COVID-19 pandemic in the prior year period.

Investing Activities

Net cash used in investing activities for the nine months ended March 31, 2022 increased by $699 to $1,136 as compared to the prior year period primarily due to higher capital expenditures and other investing activities in the current year period as compared to prior year period.

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Financing Activities

Net cash used in financing activities for the nine months ended March 31, 2022 was $84,978 as compared to net cash provided by financing activities in the prior year period of $42,155. This was due to (i) partial principal repayments on the 2021 Rangers Credit Agreement in the current year period, (ii) proceeds from the 2021 Rangers NHL Advance Agreement in the prior year period as compared to none in the current year period, and (iii) additional borrowings in the prior year period under the amended and extended 2021 Knicks Credit Agreement and 2021 Rangers Credit Agreement (prior to the amendment and restatement thereof) as compared to no borrowings in the current year period.

Seasonality of Our Business

The Company’s dependence on revenues from its NBA and NHL sports teams generally means that it earns a disproportionate share of its revenues in the second and third quarters of the Company’s fiscal year. On March 11 and 12, 2020, respectively, the NBA and NHL suspended their 2019-20 seasons due to COVID-19. In July and August 2020, the NBA and NHL, respectively, resumed their seasons and the NHL and NBA subsequently completed their seasons in September and October 2020, respectively. As a result, during the first quarter of fiscal year 2021 the Company recognized certain revenues that otherwise would have typically been recognized during the third and fourth quarter of fiscal year 2020.

Recently Issued Accounting Pronouncements and Critical Accounting Policies

Recently Issued Accounting Pronouncements

See Note 2 to the consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussion of recently issued accounting pronouncements.

Critical Accounting Policies

The following discussion has been included to provide the results of our annual impairment testing of goodwill and identifiable indefinite-lived intangible assets performed during the first quarter of fiscal year 2022. There have been no material changes to the Company’s critical accounting policies from those set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Goodwill

The carrying amount of goodwill as of March 31, 2022 is $226,955. Goodwill is tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level, which is the same as or one level below the operating segment level. The Company has one operating and reportable segment, and one reporting unit for goodwill impairment testing purposes.

The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of the fair value of the Company’s reporting units are primarily determined using discounted cash flows and comparable market transactions. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. The amount of an impairment loss is measured as the amount by which a reporting unit’s carrying value exceeds its fair value determined in step one, not to exceed the carrying amount of goodwill.

The Company elected to perform the qualitative assessment of impairment for the Company’s reporting unit for the fiscal year 2022 impairment test. These assessments considered factors such as:

•macroeconomic conditions;

•industry and market considerations;

•market capitalization;

•cost factors;

•overall financial performance of the reporting unit;

•other relevant company-specific factors such as changes in management, strategy or customers; and

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•relevant reporting unit specific events such as changes in the carrying amount of net assets.

The Company performed its most recent annual impairment test of goodwill during the first quarter of fiscal year 2022, and there was no impairment of goodwill. Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

Identifiable Indefinite-Lived Intangible Assets

Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes in circumstances. The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the Company’s consolidated balance sheet as of March 31, 2022:


Sports franchises	$	111,064
Photographic related rights	1,080
	$	112,144

The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform a qualitative assessment of impairment for the indefinite-lived intangible assets. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair value of the intangible asset. Examples of such events and circumstances include:

•cost factors;

•financial performance;

•legal, regulatory, contractual, business or other factors;

•other relevant company-specific factors such as changes in management, strategy or customers;

•industry and market considerations; and

•macroeconomic conditions.

The Company performed its most recent annual impairment test of identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2022, and there were no impairments identified. Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the indefinite-lived intangible assets was less than their carrying amount.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Except for the broad effects of COVID-19 as a result of its negative impact on the global economy and major financial markets, there were no material changes to the disclosures regarding market risks in connection with our interest rate risk exposure. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021. In addition, see Item 2, “— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Results of Operations — Impact of COVID-19 on Our Business” of this Quarterly Report on Form 10-Q for discussions of disruptions caused by COVID-19.

Potential interest rate risk exposure:

We have potential interest rate risk exposure related to outstanding borrowings incurred under our credit facilities. Changes in interest rates may increase interest expense payments with respect to any borrowings incurred under the credit facilities.

Borrowings under our credit facilities incur interest, depending on our election, at a floating rate based upon SOFR plus a credit spread adjustment, the U.S. Federal Funds Rate or the U.S. Prime Rate, plus, in each case, a fixed spread. If appropriate, we may seek to reduce such exposure through the use of interest rate swaps or similar instruments. As of March 31, 2022, we had a total of $285 million borrowings outstanding under our credit facilities. The effect of a hypothetical 100 basis point increase in floating interest rates prevailing as of March 31, 2022 and continuing for a full year would increase interest expense by approximately $2.9 million.

Item 4. Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2022 the Company’s disclosure controls and procedures were effective.

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The Company is a defendant in various lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these lawsuits will have a material adverse effect on the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

As of March 31, 2022, the Company had approximately $260 million remaining under the $525 million Class A Common Stock share repurchase program authorized by the Company’s board of directors on September 11, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations, with the timing and amount of purchases depending on market conditions and other factors. The Company has been funding and expects to continue to fund stock repurchases through a combination of cash on hand and cash generated by operations. During the three months ended March 31, 2022, the Company did not engage in any share repurchase activity under its share repurchase program.

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Item 6. Exhibits

(a)Index to Exhibits


EXHIBIT NO.						DESCRIPTION
10.1						Employment Agreement dated March 17, 2022, between Madison Square Garden Sports Corp. and Jamaal Lesane. †
31.1						Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following materials from Madison Square Garden Sports Corp. Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity, and (vi) Notes to Consolidated Financial Statements.






104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Inline XBRL and contained in Exhibit 101.

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† This exhibit is a management contract or a compensatory plan or arrangement.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 5th day of May 2022.


Madison Square Garden Sports Corp.

By:	/S/ VICTORIA M. MINK
	Name:	Victoria M. Mink
	Title:	Executive Vice President, Chief Financial Officer and Treasurer