Madison Square Garden Sports Corp. (NYSE:MSGS) Q4 2025 Earnings Call Transcript

Madison Square Garden Sports Corp. (NYSE:MSGS) Q4 2025 Earnings Call Transcript August 12, 2025

Madison Square Garden Sports Corp. beats earnings expectations. Reported EPS is $-0.07, expectations were $-0.37.

Operator: Good morning. Thank you for standing by, and welcome to the Madison Square Garden Sports Corp. Fiscal 2025 Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Ari Danes, Investor Relations. Please go ahead.

Ari Danes: Thank you. Good morning, and welcome to MSG Sports Fiscal 2025 Fourth Quarter and Year-End Earnings Conference Call. Our Chief Operating Officer, Jamaal Lesane, will begin this morning’s call with an update on the company’s strategy and operations. This will be followed by a review of our financial results with Victoria Mink, our EVP, Chief Financial Officer and Treasurer. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today’s earnings release, it is available in the Investors section of our corporate website. Please take note of the following. Today’s discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Please refer to the company’s filings with the SEC for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On Pages 4 and 5 of today’s earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure. And with that, I’ll now turn the call over to Jamaal.

Jamaal T. Lesane: Thank you, Ari, and good morning, everyone. Today, MSG Sports reported fiscal 2025 full year results with revenues of more than $1 billion and adjusted operating income of $38 million. Driven by sustained consumer and corporate demand for the Knicks and Rangers, we saw increases in key in-game revenue categories, including ticketing, sponsorship and suites. This year’s results also reflect the partial year impact of our recently amended local media rights agreements with MSG Networks, as well as our investment in our teams. And as we look ahead, with the company’s marquee assets and strong business fundamentals, we believe we are well positioned to drive long-term value for our shareholders. Now let’s discuss our operations in more detail.

The Knicks capped off their season with a run to the Eastern Conference finals, which generated the highest per game gate revenues in team history. Since then, the team has welcomed Two-time NBA Coach of the Year, Mike Brown. On the hockey side, the Rangers have also had a productive off-season, including naming Two-time Stanley Cup winner, Mike Sullivan as Head Coach. We are looking forward to the ’25, ’26 seasons for both teams. Supporting the Knicks and Rangers along the way has been their loyal fans. This past regular season, both combined average ticket yield and average paid attendance were up, which helped drive growth in ticketing revenue. And for the upcoming 2025, ’26 seasons, the average combined season ticket renewal rate is currently at approximately 90%.

I would note that while we made the decision to not raise season ticket prices for the Rangers as the team did not qualify for the playoffs, we did raise season ticket prices for the Knicks. In addition, we will continue to optimize pricing and mix of individual and group sales to maximize revenues in the year ahead. Fan enthusiasm also translated into higher food and beverage per cap spending at the arena for fiscal ’25 as compared to the prior year. In terms of merchandise, while in arena per cap spending was up modestly in fiscal ’25, overall merchandise revenues, including online sales did not reach last year’s levels, which had included the positive impact of two New Jersey launches for the Rangers as compared to none in the current year.

That said, we introduced several unique offerings this past season that resonated with fans, including exclusive merchandise drops with existing partners such as New York or Nowhere and Siegelman Stable. In fact, with the team’s post-season performance, in-arena single game Knicks merchandise sales hit new highs during the Eastern Conference finals. Beyond the arena, the thrill of the Knicks playoff run could be felt across the city where we hosted a number of special programs for our fans. That included numerous watch parties at various locations, including The Garden and Radio City Music Hall, as well as outdoor venues such as Central Park and the Fan Plaza outside the arena. Throughout the playoffs, we also continued our efforts to deliver compelling content on social media, which helped drive over 775,000 net new followers across the Knicks and Rangers throughout the year.

The team’s combined following was almost 20 million as of the end of fiscal ’25. This year, we are gearing up for the Rangers 100th anniversary season and have special offerings and initiatives planned throughout the season to celebrate the team’s centennial year. This is one way we will continue to forge stronger connections with our fans in the year ahead. Turning to media rights. As a reminder, the NBA’s new national media deals with Disney, NBCUniversal and Amazon begin this upcoming season and will be reflected in our fiscal ’26 results. The NHL also recently announced a new 12-year agreement with Rogers Communications for the league’s Canadian national media rights, which will start with the ’26, ’27 season. In addition, at the end of June, our local media rights partner, MSG Networks, completed a restructuring of its credit facilities.

As part of that restructuring, the Knicks and Rangers amended their respective local media rights agreements, which reflects ongoing changes across the RSN landscape. Those amendments included 28% and 18% reductions in annual rights fees payable to the Knicks and Rangers, respectively, effective January 1, 2025, along with an elimination of annual rights fee escalators. They also include a shortening of the contract expirations to the end of the 2028, ’29 seasons. Turning to marketing partnerships. This past year, we welcomed several new marketing partners. That included Abu Dhabi’s Department of Culture and Tourism and its Experience Abu Dhabi brand as the official patch partner of the Knicks, as well as Lenovo and its subsidiary, Motorola.

In addition, we reached multiyear renewals with Verizon, Pepsi and Benjamin Moore. As we look to fiscal ’26, we believe we are well positioned to drive growth in this area of our business. In terms of our premium hospitality business, we saw another year of record suite revenues in fiscal ’25. We benefited from the expanded event level club space as well as a number of event and Lexus-level suites that were renovated ahead of the seasons. On the heels of this successful initiative, several more suites are in the process of being renovated, which we believe will again drive incremental revenue for our business in fiscal ’26. So in summary, we are pleased with how our business has performed this past fiscal year. And with recently announced franchise transactions at record level valuations across the professional sports landscape, we remain as confident as ever in the value of owning two iconic sports franchises.

With that, I’ll now turn the call over to Victoria.

Victoria M. Mink: Thank you, Jamaal, and good morning, everyone. For fiscal ’25, we generated total revenues of $1.04 billion and adjusted operating income of $38.2 million. Our results for the fiscal ’25 fourth quarter reflected strong consumer and corporate demand for our teams as they completed their ’24/’25 regular seasons, followed by an extended playoff appearance from the Knicks. Our results also reflected a combined one fewer Knicks and Rangers regular season home game and six fewer playoff home games in our fourth quarter as compared to the prior year period. As a result, total revenues for the quarter were $204 million as compared to $227.3 million in the prior year period. Event-related revenues of $140.3 million, which mainly consists of ticket, food, beverage and merchandise revenues, inclusive of the playoffs, decreased 8% year-over-year.

Suites, sponsorship and signage revenues, also inclusive of the playoffs, were $31.9 million, a decrease of 8% year-over-year. In addition, national and local media rights fees of $27.8 million decreased 2%, which included the impact of our amended local media rights agreements with MSG Networks. Adjusted operating income decreased $73.3 million to an adjusted operating loss of $16.8 million, primarily due to higher direct operating expenses and to a lesser extent, the decrease in revenues. AOI for our fiscal ’25 fourth quarter includes $2.1 million of noncash arena operating lease costs as compared to $2.4 million in the prior year period. The increase in direct operating expenses primarily reflected higher net provisions for certain team personnel transactions, higher team personnel compensation and corresponding luxury tax as well as higher revenue sharing expenses net of escrow.

These increases were partially offset by lower playoff-related expenses as well as other cost decreases. As we look ahead, we believe our business is poised to deliver revenue growth across all in arena categories in fiscal ’26. In addition, our results will reflect the impact of the NBA’s new national media rights deals, a full year of our amended local media rights agreements as well as our continued investment in our teams. Turning to our balance sheet. At the end of the quarter, our cash balance was approximately $145 million, and our debt balance was $291 million. This was comprised of $267 million under the Knicks senior secured revolving credit facility and $24 million advanced from the NHL. So in summary, we are pleased with the strong demand we continue to see for our teams and remain confident in our ability to drive long-term value for our shareholders.

I will now turn the call back over to Ari.

Ari Danes: Operator, can we now open the line for questions?

Q&A Session

Operator: [Operator Instructions] Your first question today comes from the line of Brandon Ross from LightShed Partners.

Brandon A Ross: Two for me. First, with the rework of the MSG Networks media rights, just wanted to see if that will mean anything for capital returns going forward? And then secondly, you alluded in the prepared, but last week, the Bears sold a minority stake, I think, at an $8-plus billion valuation and your closest comp, the Lakers sold for $10 billion. And wondering if that now it makes sense for MSGS to look to sell some small minority stakes in the Knicks or the Rangers.

Victoria M. Mink: Brandon, thanks for the questions. I think I’ll start. I’ll take the capital returns and then maybe pass it over to Jamaal on the second part of your question. So first, let me start by saying that we believe our liquidity position is strong. We ended the fiscal year with approximately $145 million in cash on hand. I would note that we have a number of scheduled payments in the first quarter, including payroll and luxury tax. So that will all be reflected in our cash balance at September 30. But in addition to our cash on hand, we have the Knicks and Rangers revolving credit facilities in place with $250 million in borrowing capacity currently available on the ranges revolver. So we believe we have substantial financial flexibility.

In terms of capital allocation, our long-term priorities remain the same. The first is to maintain appropriate liquidity to fund our operations and invest in our core business. And second, we want to make sure we have a strong balance sheet. And third, we plan to be opportunistic about other uses of our cash. Yes. So right now, we do have greater clarity. We make our near-term capital allocation decisions with the amendments to our local media rights agreements being completed. But we would will add a return of capital program in the future.

Jamaal T. Lesane: I can respond to your question. As I mentioned earlier, we remain as confident as ever in the value of our teams. But the short answer is we don’t have anything to report. You mentioned the two recent transactions, but it’s not just those two. There have been several other recent transactions, both [ rumored ] early stage, recently finalized that demonstrate that these are scarce, valuable assets. And in the case of MSG Sports, we don’t think that, that value is appropriately reflected in our current stock price. We just don’t, so we would never rule out the possibility of a minority stake sale. But as I said, we also have nothing to report at this time.

Operator: Your next question comes from the line of Peter Supino from Wolfe Research.

Peter Lawler Supino: A question about the NBA’s current looking for a national RSN possibility, one that might include several different or mini teams, we’re wondering if you’d be open to participating in something like this once you deal with MSG Networks expires? Or how else do you see the RSN business evolving over the long term?

Jamaal T. Lesane: Thanks for that question. Media rights are certainly a complex ecosystem. And while we aren’t going to comment on hypotheticals, we continue to monitor the changes, and those changes are impacting both national and local rights. With respect to national rights, the NBA’s new national media deals are scheduled to begin this upcoming season. And then on the hockey side, the NHL’s Canadian media deals run through the ’25, ’26 season and the sort of recently announced the new 12-year agreement starting thereafter. And then their U.S. national media deals run through the ’27, ’28 season. And then there are the local rights, which includes regional sports networks and the RSN industry just continues to evolve. With that said, we continue to believe that local media coverage is a valuable part of our ecosystem in that RSNs drive enhanced fan engagement through content that is tailored for local markets.

And in our case, we are a rights holder for two marquee sports franchises. So from that standpoint, we will continue to monitor the changes but from that position as a rights holder for two marquee sports franchises.

Peter Lawler Supino: All right. And then a second question, if I may. There are some scheduled changes to the tax deductibility of compensation for 2027. Could you help us think about that for earnings purposes question?

Victoria M. Mink: Yes. Peter, so we’re assessing the impact of these changes in tax regulations and just to be clear for our company, those changes would become effective for our year ended June 30, 2028. So at this time, we just have nothing further to share on that front.

Operator: Our next question comes from the line of David Joyce from Seaport Research Partners.

David Carl Joyce: A little bit more on the rights front, please. Can you remind us of the net financial impact of the national deal versus the local deal in terms of the cadence of how the NBA revenues would be reflecting throughout the year? And what is changing in the availability of games on either of those platforms. And then if you could also delve in more to the impact of the Knicks playoff game from a financial perspective?

Victoria M. Mink: Sure. David, Yes. So taking a step back, as you know, all NBA teams share equally in national media rights fees. And at the league level, players received about 50% and of elite wide revenues, including from the national media rights fees. And so starting with the upcoming season, the NBA will see a step-up in the average annual value for its national media rights. As well as increased escalators thereafter. So in turn, we will see an increase in our national media rights revenue. Now fiscal ’26 will also reflect the full run rate impact of lower local media rights fees or about a $24 million decrease in our contractual fees year-over-year. However, even taking into account local — lower local media rights, we still expect an increase in our overall media rights revenue in fiscal ’26.

And I would note, right, that our local rights agreements include thresholds around the number of live games telecast to be exclusively provided to MSG networks such as the minimum number of total regular season gains. So if certain of those thresholds aren’t met as a result of the new NBA national deals, our local rights agreements would provide for a further reduction in our local media rights fees.

Jamaal T. Lesane: And then I will happily talk about the playoffs. I mean, my gosh, what a thrill ride that was for this entire city, I mean, wow. And what a run like that does it results in several benefits to our business. From a ticketing standpoint, a playoff run usually increases demand across all of our offerings, whether it’s season ticket renewals, sales to new members, or individual and group ticket sales. As I mentioned earlier, our average combined renewal rate for season ticket packages is already approximately 90%, and that reflects Knicks season ticket price increases given the team’s strong performance. From a fan engagement standpoint, it also drives new fans. I mentioned the 775,000 net new social media followers that we added in fiscal ’25.

Of those new followers, almost half were added during that playoff front. And then that increased demand also extends to the corporate side of our business, which allows us to sell more premium hospitality and more marketing partnerships. So we are already seeing the momentum from the playoffs carry forward as we approach next season. I’ll let Victoria talk about the financial impact in a little bit more detail.

Victoria M. Mink: Sure. Let me provide a little bit more color here. So the playoffs result in significant incremental business for our company, depending on the length of the playoff run, as you can see in our results today. So in general, playoff tickets are priced at a premium to regular season games and increase each route. And as noted earlier, the Knicks’ Eastern Conference finals run generated the highest per game gate in team history, and food and beverage and merchandise per cap spending typically runs above regular season averages. So this past quarter, we hosted nine playoff games at the Garden as compared to 15 last year. As a result, our playoff-related revenues for the fourth quarter were $115.2 million as compared to $128 million in the prior year period.

This translates to about $12.8 million in average or game revenues. In addition, there were approximately $5.8 million in average per game direct operating expenses as well as we incur some additional marketing and administrative costs in connection with the overall playoff participation. But as Jamaal mentioned, we expect to see the positive impact of the playoffs this past season across our entire business in fiscal ’26.

Operator: Your final question today comes from the line of Joseph Stauff from Susquehanna.

Joseph Robert Stauff: Wondering if you could talk about your OpEx outlook in the upcoming season, in particular, how to think about team comp and other relevant inputs? And then for my second question, kind of given the success of the season last year, Jamaal, you had mentioned a number of the sponsorship, renewals and relationships that you have, what’s the right way to think about sponsorship growth in the upcoming season, please?

Victoria M. Mink: So regarding operating expenses. So while we’re not providing specific guidance, we expect our results for fiscal ’26 to reflect those higher team operating expenses. And that’s going to include higher team personnel compensation and luxury tax with the next current roster above the threshold. Now as you may know, the NBA salary cap increased from $140.6 million to $154.6 million for the ’25/’26 season. And the NHL salary cap increased from $88 million to $95.5 million. In addition, the NBA luxury tax threshold for the ’25, ’26 season, it increased to $187.9 million which is up from $170.8 million this past season, which is measured by the roster at the end of the season. But I’d also remind you that in fiscal ’25, our results included expenses for certain team personnel transactions. So we would also expect that to impact our year-over-year comparison in fiscal ’26.

Jamaal T. Lesane: Joe, thanks for the question. We’re seeing good momentum in marketing partnerships, and that’s following a year of growth in fiscal ’25. Just to look back once more on fiscal ’25. I mentioned the multiyear extensions with Verizon and Benjamin Moore and the new multiyear deal with Lenovo and its subsidiary Motorola, and the partnership with Abu Dhabi’s Department of Culture and Tourism and Experienced Abu Dhabi becoming a global marketing partner and the official patch partner of the Knicks. So as we sit here today and coming off that extended Knicks playoff run, which, as we discussed earlier, will allow us to sell more marketing partnerships and to capitalize on a number of opportunities including renewals and premium available inventory. So when you take all that and as we look ahead to fiscal ’26, while as Victoria mentioned, we are not providing specific guidance we believe we are well positioned to drive another year of growth in fiscal ’26.

Joseph Robert Stauff: If I can have a quick follow-up, like prior to the season or right before the season, is there a way to think about how much of those larger sponsor deals are locked in? One would think most of it, but I was just curious to think about what that actual percentage is.

Victoria M. Mink: Yes, sure. As a follow-up there. I mean, we have a number of multiyear deals and this is how we like to position ourselves with our marketing partners is to always have sort of a continuing pipeline of partners under contract and then new partnership opportunities that we can pursue.

Operator: And that concludes our question-and-answer session. I will now turn the call back over to Ari Danes for closing remarks.

Ari Danes: Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.