Madison Square Garden Sports Corp. 2026 Q4 Earnings Call

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 2025-2026 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-'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.