Madison Square Garden Sports Corp. (MSGS) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
While the company reported strong revenue growth and an increase in adjusted operating income, the reversal of the timing benefit and the decline in media rights fees are concerns. The debt level remains significant, though refinancing improved terms. The Q&A highlighted uncertainties regarding future capital returns and tax impacts. Positive aspects include strong sponsorship growth and suite demand. Given the market cap of $4.54 billion, these mixed signals suggest a neutral stock price movement over the next two weeks.
Key Financial Performance
Total Revenue $403.4 million, a 12.7% increase year-over-year from $357.8 million. This increase was driven by more home games at the Garden and increases across every key revenue category on a per-game basis.
Event-Related Revenues $167.2 million, a 20% increase year-over-year. This growth was attributed to higher ticket, food, beverage, and merchandise revenue.
Suites and Sponsorship Revenues $98.5 million, a 24% increase year-over-year. This was due to strong new sales, renewal activity for suites, and incremental revenue from renovated Lexus level suites.
National and Local Media Rights Fees $122.3 million, a 4% decrease year-over-year. The decline was primarily due to amended local media rights agreements with MSG Networks, partially offset by higher national media rights fees from the NBA's new national media rights deals.
Adjusted Operating Income (AOI) $29.7 million, an increase of $9.4 million year-over-year. This was primarily due to increased revenues, partially offset by higher direct operating expenses, including team personnel compensation and luxury tax.
Cash Balance Approximately $81 million at the end of the quarter. No year-over-year comparison or reasons for change were provided.
Debt Balance $291 million, comprised of $267 million under the Knicks senior secured revolving credit facility and $24 million advanced from the NHL. No year-over-year comparison or reasons for change were provided.
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Operating Highlights
New Merchandise: Introduced Centennial Jersey and Winter Classic Jersey for Rangers' 100th anniversary. Also launched new merchandise for Knicks and Rangers, including exclusive retail offerings with brands like Kith and New York or Nowhere.
Global Expansion: Knicks played two preseason games in Abu Dhabi, building on their partnership with Abu Dhabi's Department of Culture and Tourism.
Revenue Growth: Generated $403 million in revenue, a 12.7% increase from the prior year. Per game revenues across ticketing, suites, sponsorship, food, beverage, and merchandise increased year-over-year.
Marketing Partnerships: Signed new multiyear partnerships with PwC and Polymarket, and renewed agreements with Anheuser Busch and Infosys. Rangers partnered with Game 7 as their first-ever jersey patch partner.
Premium Hospitality: Strong new sales and renewals for suites at Madison Square Garden, with incremental revenue from renovated Lexus level suites.
Media Rights Adjustments: Amended local media rights agreements with MSG Networks, reducing annual rights fees for Knicks and Rangers by 28% and 18%, respectively, effective January 2025. National media rights fees increased due to NBA's new deals with Disney, NBCUniversal, and Amazon.
Financial Strategy: Refinanced Knicks and Rangers senior secured revolving credit facilities, improving borrowing rates and extending maturity to November 2030. Increased Knicks facility capacity by $150 million to $425 million.
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Risk or Challenges
Amended Local Media Rights Agreements: The amendments to the Knicks and Rangers local media rights agreements with MSG Networks include a 28% and 18% reduction in annual rights fees payable to the Knicks and Rangers respectively, effective January 1, 2025. This reduction in fees and the elimination of annual rights fee escalators could negatively impact revenue streams.
National and Local Media Rights Fees: A 4% year-over-year decrease in national and local media rights fees was reported, primarily due to the amended local media rights agreements. This decline could affect overall financial performance.
Higher Direct Operating Expenses: Increased direct operating expenses were noted, including higher team personnel compensation, luxury tax, and revenue sharing expenses. These rising costs could pressure profitability.
Timing Benefit of Games: The fiscal second quarter benefited from hosting more games compared to the prior year. However, this timing benefit will reverse in the second half of the fiscal year, potentially impacting future financial results.
Debt Levels: The company has a debt balance of $291 million, including $267 million under the Knicks senior secured revolving credit facility. While refinancing improved borrowing rates and extended maturity, the debt level remains a financial obligation.
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Guidance & Outlook
Revenue Growth: The company expects growth across marketing partnerships and premium hospitality in fiscal '26, supported by strong new sales and renewal activity for suites at the Garden and incremental revenue from recently renovated Lexus level suites.
Media Rights Revenue: The NBA's new national media deals with Disney, NBCUniversal, and Amazon, which began this season, are expected to positively impact results. However, amended local media rights agreements with MSG Networks will result in a 28% and 18% reduction in annual rights fees payable to the Knicks and Rangers, respectively, effective January 1, 2025.
Team Performance and Events: The Knicks and Rangers are expected to maintain strong performance, with the Knicks building on last year's playoff momentum and the Rangers celebrating their Centennial season. Upcoming events include the Rangers' 100th anniversary Capstone game in November and participation of players in the 2026 Olympic Winter Games and NBA All-Star game.
Financial Position: The company refinanced the Knicks and Rangers senior secured revolving credit facilities, improving borrowing rates and extending maturity to November 2030. This reflects confidence in the long-term outlook for the teams and leagues.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Given your current cash and debt balances, can you update us on how you're thinking about any potential capital returns?
A:The company considers all variables when allocating capital. Their long-term priorities include maintaining liquidity for operations, ensuring a strong balance sheet, and being opportunistic with cash flow. Recent refinancing improved borrowing rates and extended maturity terms. They increased the Knicks' borrowing capacity by $150 million. A return of capital program is not ruled out for the future.
Q:Can you comment if a minority interest sale remains a potential option?
A:The company has no news on a minority interest sale but remains confident in the value of their teams. They acknowledge recent market transactions as confirmation of their teams' value, which they believe is not reflected in their stock price. While not ruling out a minority stake sale, there is nothing to report currently.
Q:How are you thinking about the potential impact of the upcoming changes to the tax deductibility of compensation set to begin in 2027?
A:The company is assessing the impact of tax regulation changes, which will affect them starting the year ending June 30, 2028. They have no further details to share at this time.
Q:Could you provide an updated outlook on the evolving RSN and local media rights landscape?
A:The RSN industry is evolving, but the company believes in the value of local media coverage, especially in large markets like New York. They have a strong partnership with MSG Networks, with agreements running through the 2028-2029 seasons. They remain confident in their position as a rights holder for marquee sports franchises and will monitor industry changes.
Q:Will the Rangers' performance on the ice impact financials going forward?
A:The company reported strong business results, including growth in ticketing, sponsorship, and hospitality. Playoff runs provide incremental home games and influence season ticket pricing. They are focused on making the season successful and celebrating milestones like the Rangers' 100th anniversary.
Q:Can you provide an update on opportunities for sponsorship growth and further suite upgrades?
A:The company is seeing positive momentum in marketing partnerships and premium hospitality. They have secured new deals and renewals, including partnerships with Anheuser-Busch, Infosys, PwC, Polymarket, and Game 7. Suite renovations have been completed, resulting in strong demand and incremental revenue opportunities.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers or lacked detail on the following: 1) The potential impact of upcoming tax regulation changes, stating only that they are assessing the situation without further details. 2) The possibility of a minority interest sale, where they acknowledged the value of their teams but provided no concrete updates or plans.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Abu Dhabi
Anheuser Busch
Busch Infosys
CFO Jamaal
Capstone game
Centennial Jersey
Centennial collection
Centennial jersey
Centennial season
Classic
Kith
Knicks credit
New
Ranger Centennial
Winter
agreement MSG
benefit
category
fee NBA
game addition
game increase
history
mix
month
patch partner
playoff run
refinancings
result Knicks
revenue game
season Knicks
season addition
suite sponsorship
summary
theme night
MSGS Transcript
Madison Square Garden Sports Corp. (MSGS) Q2 2026 Earnings Call Transcript
Unknown2-5
While the company reported strong revenue growth and an increase in adjusted operating income, the reversal of the timing benefit and the decline in media rights fees are concerns. The debt level remains significant, though refinancing improved terms. The Q&A highlighted uncertainties regarding future capital returns and tax impacts. Positive aspects include strong sponsorship growth and suite demand. Given the market cap of $4.54 billion, these mixed signals suggest a neutral stock price movement over the next two weeks.
Madison Square Garden Sports Corp. (MSGS) Q4 2025 Earnings Conference Call Transcript
Unknown8-12
The earnings call reveals a decrease in total revenue, event-related revenues, and media rights fees, leading to a significant operating loss. The Q&A section highlights management's lack of commitment to capital returns and unclear responses to strategic questions. Despite a strong cash position, the negative financial results and uncertain guidance, particularly in media rights and operating expenses, suggest a negative market reaction. The market cap indicates moderate sensitivity to these factors, resulting in a predicted stock price movement of -2% to -8%.
Earnings call transcript: Madison Square Garden Sports Q2 2025 misses EPS
Unknown2-4
The earnings call reveals a mixed outlook: strong revenue growth, especially in sponsorship and event-related areas, but a decrease in operating income due to higher expenses. The company's cash position is strong, but there are uncertainties regarding local media rights revenue and potential minority stake sales. The Q&A section highlights management's evasiveness on key issues, which may concern investors. Given the market cap of $4.5 billion, the stock is likely to remain stable, resulting in a neutral prediction for the next two weeks.
Madison Square Garden Sports Corp. (MSGS) Q4 2024 Earnings Call Transcript
Neutral8-13
MSGS Report
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