Madison Square Garden Sports Corp. (MSGS) 2026 Q4 法說會逐字稿

Good morning. Thank you for standing by, and welcome to the Madison Square Garden Sports Corp., fiscal 2026 fourth-quarter and year-end earnings conference call. (Operator Instructions)

I would now like to turn the call over to Ari Danes, Investor Relations. Ari, please go ahead.

Thank you. Good morning, and welcome to MSG Sports' fiscal 2026 fourth quarter and year-end earnings conference call. Our Chief Operating Officer, Jamaal Lesane, will begin this morning’s call with a discussion on the company’s strategy and operations, as well as an update on the company’s proposed spin-off of its Rangers business. This will be followed by a review of our financial results with Paul DiCicco, 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.

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

Thank you, Ari, and good morning, everyone. I am pleased to be here with you all today following a fiscal year that culminated with the Knicks winning an NBA championship.

Before I dive further into the Knicks season, I would like to take a moment to discuss an important plan that we announced since we last spoke in February. Potential spin-off of our Rangers business from our Knicks business. This transaction would create two distinct publicly traded companies, enabling shareholders to more clearly evaluate each company’s assets and growth prospects. It would also provide both with enhanced strategic and financial flexibility. In May, we confidentially filed a Form 10 registration statement with the SEC regarding the proposed spin-off. We anticipate publicly filing an updated Form 10 registration statement this week and currently expect to complete the spin-off by the end of October, subject to various conditions, including board approval.

We will continue to keep you updated on our progress. Now let’s discuss our operations in more detail. For fiscal 2026, MSG Sports generated full-year revenues of approximately $1.2 billion, an adjusted operating income of nearly $59 million. These results reflect robust consumer and corporate demand throughout the regular season, and of course, the impact of the Knicks championship run.

The Knicks playoff run took over New York City, from electric crowds in-arena for home games, to watch parties at various locations throughout the city, to unique activations from our marketing partners, all culminating with the championship parade attended by millions of fans. With this unprecedented momentum, we achieved a number of operational milestones during the postseason. To share a few highlights, on the ticketing front, the Knicks set new league-wide records with the highest per-game gate revenues in NBA history on multiple occasions during the playoffs.

With respect to merchandise, within the first 24 hours of clinching the NBA title, the Knicks generated its highest ever single day of merchandise sales, with this robust demand continuing in the weeks that have followed. We added over 2.2 million net new social media followers this past year, bringing the Knicks and Rangers combined following to nearly 22 million by the end of June. This interest wasn’t just limited to New York. Nationwide, the championship series became the most-watched NBA Finals in 28 years.

While fan enthusiasm reached new highs during the playoffs, the demand for both the Knicks and Rangers was evident throughout the regular seasons, which we expect to carry forward in fiscal 2027. In terms of ticketing, we saw higher per-game revenue year over year during the 2025 to 2026 regular seasons.

Looking ahead to the upcoming season, we are off to a strong start with season ticket renewals, and we expect our combined season ticket renewal rate to once again reach levels above 90%. I would note that consistent with our past practice, we made the decision to not raise season ticket prices for the Rangers as the team did not qualify for the playoffs, but we did raise season ticket prices for the Knicks.

This past fiscal year, we also celebrated the Rangers centennial season, which will culminate with the Rangers’ 100th anniversary capstone game at the Garden in November against the Montreal Canadiens. That game will also mark the 100th anniversary of the date of the Rangers’ first-ever game, also against the Montreal franchise. In addition, we continued unique merchandise collaborations with brands such as Kiss and New York or Nowhere for both the Knicks and Rangers.

These initiatives helped drive robust year-over-year growth in merchandise per cap spending at the arena for fiscal 2026 as compared to the prior year. We also saw fan enthusiasm throughout the fiscal year translate into higher food and beverage per cap spending year over year at the arena.

In terms of marketing partnerships, fiscal 2026 was highlighted by a number of significant new sales and renewals. We signed new multi-year partnerships with PwC and Polymarket and reached multi-year renewals with Lexus, Anheuser-Busch and Infosys. In our premium hospitality business, we also saw strong new sales and renewal activity for Suites at The Garden, which included a number of Lexus-level suites that were renovated at the start of the fiscal year. Building on this successful initiative, several more suites are in the process of being renovated, which we expect to drive incremental revenue for our business in fiscal 2027.

As we look ahead to the upcoming seasons, the Rangers have had a productive summer, including acquiring forward Pavel Dorofeyev and defenseman Marcus Pettersson and Sean Durzi. We look forward to the Rangers’ 2026 to ’27 regular season campaign getting underway this fall. The Knicks will begin with a special banner-raising celebration in October to tip off the season as defending champions.

In summary, we are proud to have seen the Knicks deliver this year’s championship for our fans, partners, employees and shareholders. As we pursue a spin-off of our Rangers business, we remain confident in our ability to drive long-term shareholder value. I’d now like to introduce Paul DiCicco, our new EVP, Chief Financial Officer and Treasurer. Paul is a seasoned executive with 30 years of experience in a range of global finance roles.

His proven track record of strategic financial leadership is an asset to our company, and we are pleased to have him on board. With that, I’ll now turn the call over to Paul.

Thank you, Jamaal, and good morning, everyone. I’m pleased to join you here today in my new role at MSG Sports during such an exciting time for the company. For fiscal 2026, we generated total revenues of $1.15 billion and adjusted operating income of $58.7 million.

Results for the fiscal fourth quarter reflect the same number of regular season and playoff home games as compared to the prior year period. That includes the completion of the 2025-’26 regular season, followed by the Knicks’ playoff run to the finals, which compared to reaching the Eastern Conference finals in fiscal 2025. For the fiscal 2026 fourth quarter, total revenues were $278.7 million as compared to $204 million in the prior year period. Event-related revenues of $200.7 million, which mainly consist of ticket, food, beverage and merchandise revenues, inclusive of playoffs, increased 43% year over year.

Suites, sponsorship and signage revenues, also inclusive of the playoffs, were $39.1 million, an increase of 23% year over year. National and local media rights fees of $27.7 million were essentially unchanged year over year. This primarily reflected our amended local telecaster rights agreement with MSG Networks, as well as a decrease in the number of games exclusively available to MSG Networks during the current year as compared to the prior year. These decreases were offset by higher national media rights fees due to the NBA’s new national media rights deals.

Adjusted operating income was $39.6 million as compared to adjusted operating loss of $16.8 million in the prior year quarter, which reflected the increases in revenues partially offset by higher SG&A and direct operating expenses. The increase in costs primarily reflects higher playoff-related expenses.

I would note that SG&A also reflects, to a lesser extent, $2.9 million in expenses related to the proposed spin-off transaction. This overall increase in cost was partially offset by a decrease in net provisions for certain team personnel transactions recognized in the prior year quarter. As we look ahead, we believe our business is poised to deliver revenue growth across all in-arena categories in fiscal 2027.

In addition, we expect our results to also reflect our continued investment in our teams as well as higher revenue sharing expense. I would also add the NHL’s new collective bargaining agreement takes effect in the 2026-2027 season. As a result, we will have one more regular season home game and one fewer preseason home game for the Rangers in fiscal 2027. Turning to our balance sheet.

At the end of the quarter, our cash balance was approximately $164.5 million, and our debt balance was $258.5 million. This was comprised of $242 million under the Knicks Senior Secured Revolving Credit Facility and $16.5 million advanced from the NHL. In summary, we remain pleased with the demand we are seeing for our teams as we also pursue the potential separation of our businesses, which we are confident will position us well to drive long-term value for our shareholders. I will now turn the call back over to Ari.

Operator, can we now open up the call for questions?

(Operator Instructions) David Karnovsky, JP Morgan.

Hi, thank you, and let me be the first to say congrats on the Knicks championship. Regarding the New York Rangers spinoff, can you speak a bit more to the rationale here? Should investors read this as a willingness to sell minority stakes in the teams? Then relatedly, with the pending tax law change, why enter the spin if it now creates a tax challenge across two public companies? Thank you.

Good morning, David, and thank you for those congratulations. With respect to your first question, we believe that our proposed spinoff, as I mentioned earlier, would enable shareholders to more clearly evaluate each company’s assets and growth prospects. As it relates to a minority stake sale or the potential for a minority stake sale on either team, our position hasn’t changed from what we’ve articulated on previous calls.

We continue to be confident in the value of our teams. We’re as confident as ever in that respect, and there continue to be reported transactions in the marketplace that demonstrate that value and scarcity of these assets. As I said before, we would never rule out the possibility of a minority stake sale, but we don’t have anything further to report at this time in that regard. The takeaway here, David, is that this transaction will provide both companies with enhanced strategic and financial flexibility.

Thanks, David. I’ll take the second part of your question. As we discussed earlier, just now, we believe the proposed spin will create long-term value for our shareholders, and we’re certainly mindful of the implications that the tax laws would have at each company after the separation.

Look, with that being said, as Jamaal Lesane just said, the proposed spinoff does provide both companies with strategic and financial flexibility, such as enhancing each company’s ability to access funding for liquidity, particularly as we take into account the implications for our business from these tax law changes.

Cameron Manson-Perrone, Morgan Stanley.

Thanks. Morning, too. If I could first on local media rights, there is a range of evolving approaches across leagues and teams right now between traditional RSN distribution, full DTC, as we are seeing with the Braves, leagues trying to centrally manage and package rights.

Jamaal, what is your latest thinking about those various options and what makes sense from your perspective for the MSGS teams over time, and are there any league-specific factors we should consider that might make the approach different for the Knicks relative to the Rangers? Or are you thinking about both teams and local rights from a similar lens? Then I have a follow-up.

Sure. Thanks for that, Cameron, and great to meet you. As you mentioned, there is a lot going on. But with respect to the Knicks and the Rangers local distribution, we have a great partner in MSG Networks, and our agreements with them run through the 2029 seasons.

One of the things that makes them a great partner is that they help us stay connected with our local fans, which is of paramount importance to us. We are also supportive of what they have been doing on the distribution front, including their new partnership with The Zone, which is a premier streaming platform. With that, we are not going to speculate on league plans. We believe in the value of local media coverage.

We believe in the value of content that’s tailored for local markets, and as such, we remain confident in our position as a rights holder for these two marquee sports franchises.

Great. Appreciate that. A follow-up was just on the question about the future potential tax obligations. Any help quantifying that incremental tax impact for each team when those changes take effect? I guess assuming current payrolls remain unchanged at each team.

Sure, Cameron, I’ll take that one. It’s nice to meet you as well. Look, we continue to assess the impact of these tax law changes on our business, but just a quick reminder, these become effective for our fiscal year-end, June 30, 2028. With that in mind, excluding the impact of the proposed spinoff, we currently estimate these changes result in approximately $60 million in additional income tax expense for that fiscal year.

That’s fiscal year 2028. If the proposed spinoff is completed, the combined income tax expense across the two companies will certainly be higher. I do think it’s important to note, though, as you kind of alluded to, the final impact will largely depend on the team rosters at that point in time.

David Joyce, Seaport Research Partners.

Thank you. Well, that was an exciting quarter. Can you help us understand some more of the financial impacts on the revenues, expenses, and AOI from that championship run? Subsequent to the win, there was talk about not encroaching the next apron. Could you please also give us some operating expense outlook for the next fiscal year, including on the player comp? Thanks.

Sure. David, I’ll take those questions and work through those for you. The championship run resulted in a significant incremental business for our companies, evidenced in our results today. To give a little bit more context, I’ll touch on a few areas, and I’ll start with tickets. Playoff tickets are priced at a premium to the regular season games, with increases each round.

As Jamal noted earlier, the Knicks set new NBA records for the per-game gate revenues. Our per-cap spending on F&B and merchandise during the playoffs is typically higher than regular season averages, but it was a notable acceleration during the championship series. What was interesting is we hosted nine playoff games in this past quarter at the Garden, which is the same number of games as the prior year when the Knicks advanced to the Eastern Conference finals.

Just to compare those results, related playoff revenues for the year’s fourth quarter were $182 million as compared to $115.2 million in the prior year period. That’s roughly $20.2 million in average per game revenues, including the benefits of robust non-game day merchandise sales.

On the flip side, there are additional costs in connection with being in the playoffs. We saw approximately $11.2 million on average per game related to direct operating expense as well as marketing and administrative costs. One quick point I want to make, I won’t get into all the specifics, but I know the last quarter there were increasing expenses for playoffs associated with making the finals and winning the championship.

Just to close out on the thread of where we think about that goes, we expect to increase enthusiasm from our fans and partners to create tailwinds across every aspect of our business for fiscal 2027, like tickets, sponsorship suites, as well as food and beverage and merchandise sales. To focus on the second part of your question, really around operating expenses, I’m not going to provide specific guidance, but we do expect our results for 2027 to reflect higher team compensation and luxury tax.

As you know, the NBA salary cap increased $10.4 million for the 2026-2027 season, while the NHL cap increased $8.5 million. In addition to that, the NBA luxury tax threshold for 2026-2027 season increased $12.5 million to approximately $200.4 million. It’s an important reminder that this is measured based on the roster at the end of the season.

The other area I mentioned earlier, we also anticipate increased revenue share expense in fiscal 2027. Really twofold. One is this reflects our current expectations for ongoing revenue growth, excluding the impact of playoffs. In addition, it’ll partly be due to the impact of the new NHL CBA that goes into effect for the upcoming season. That new CBA slightly changed the calculation for rev share and is expected to result in higher revenue sharing expense for the Rangers.

Operator, we’ll take the next caller.

Joe Stauff, Susquehanna.

Thank you. Good morning. I just wanted to maybe follow up on David’s previous question in a little bit more detail. Can I ask, on the sponsorship outlook this coming season, what it looks like, especially considering the Knicks win, and what that does for you in terms of both pricing and any added inventory, and how we think about that number in particular for fiscal 2027?

Thanks, Joe. I’m glad you touched on that. Just looking back just a little bit. We saw overwhelming demand from our partners during the championship run, and that included not just the obvious presence in our arenas for those exhilarating home games, but it also included the opportunity for them to activate at our viewing parties around the city, and then even on the road, where we hosted a number of partners in Cleveland for the Eastern Conference finals and in San Antonio for the NBA Finals, all culminating with our giving many of our partners a presence during the championship parade celebration.

All of that had two effects. One, that valuable time spent enhances our relationship with our partners, and it improves the value proposition moving forward. Two, we saw sponsorship revenues more than double year over year during the postseason.

Looking ahead, not only do we expect to see the run rate benefit from our fiscal 2026 deals in the year ahead, but the Knicks win should actually enable us to sell more sponsorships. In short, Joe, while we’re not providing specific guidance, as we look to fiscal 2027, we’re seeing great momentum and believe that we are well-positioned to drive another year of growth.

Operator, we’ll take one final caller.

Tyler DiMatteo, BTIG. Your line is open.

Hi, and good morning. Thank you for taking the questions. I have two here. I wanted to start on the NHL side of things. I guess, how should we think about the new Rogers deal kicking in this season and the potential financial impact on that? Along with that, I guess, do you have any early thoughts on the potential new U.S. NHL deal and the renewal of it following the existing deal that concludes next year?

Thanks, Tyler. I’ll take that one. Tyler, to answer the first part of your question, the NHL begins a new 12-year media rights agreement with Rogers Communications this upcoming season, and the NHL will see a step-up in average annual value for its Canadian media rights with annual escalators thereafter. We’ll see an increase in our share of those media rights fees.

To piggyback into the second part of your question, in terms of the NHL US deals, the current agreements run through the 2027-2028 season, and we continue to believe in the value of live professional sports content. We expect the NHL will maximize that opportunity.

Okay, great. Secondarily here, I guess, do you have any early thoughts or how do you think about the potential financial impact of domestic expansion for the NBA or NHL? I guess what that could mean for your business and the contribution?

Sure. I will not comment on the NBA, NHL strategy and whether that occurs or not. But if an expansion does occur, as it has in the past, if an expansion were to occur, any potential expansion fees in the NBA would be divided equally among the 30 existing NBA teams, and vice versa, any potential expansion fees in the NHL would be divided among the existing 32 NHL teams.

From a league distributions perspective, including revenue from the national media rights agreements, those would be divided pro rata amongst the increased number of teams following any potential expansion.

There are no further questions at this time. I will now turn the call back to Ari for closing remarks.

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

This concludes today’s call. Thank you for attending. You may now disconnect.