10-Q: MSG Sports Q2 Revenue Jumps 13% Amid Media Rights Adjustments

Madison Square Garden Sports Corp. reported a 13% revenue increase for the quarter ended December 31, 2025, driven by more home games and new NBA national media rights, despite reduced local media fees.

Summary

• Revenues for the three months ended December 31, 2025, increased by 13% to $403.4 million, up from $357.8 million in the prior year period.
• Operating income for the three months ended December 31, 2025, rose by 67% to $22.2 million, compared to $13.3 million in the prior year period.
• Net income for the three months ended December 31, 2025, was $8.2 million, a significant improvement from $1.1 million in the prior year period.
• For the six months ended December 31, 2025, revenues increased by 8% to $442.9 million, from $411.1 million in the prior year period.
• The company reported an operating loss of $5.2 million for the six months ended December 31, 2025, a decrease from an operating income of $5.0 million in the prior year period.
• Net loss for the six months ended December 31, 2025, improved to $0.6 million, compared to a net loss of $6.4 million in the prior year period.
• Cash and cash equivalents decreased to $81.3 million as of December 31, 2025, from $144.6 million as of June 30, 2025.
• Net cash used in operating activities for the six months ended December 31, 2025, was $52.5 million, a significant shift from $35.6 million provided in the prior year period.
• Local media rights agreements for the Knicks and Rangers were amended on June 27, 2025, resulting in a 28% reduction for the Knicks and an 18% reduction for the Rangers, with the elimination of annual rights fee escalators and a new expiration date of the 2028-29 season.
• MSG Networks issued penny warrants to the company, exercisable for 19.9% of its equity interests, concurrent with the media rights amendments.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging period marked by strong revenue growth in certain areas, offset by significant negative operating cash flow and a six-month operating loss, alongside a notable reduction in local media rights fees.

Positives

• Overall revenue growth of 13% for the three months and 8% for the six months ended December 31, 2025.
• Significant increase in operating income (67%) and net income for the three-month period ended December 31, 2025.
• Improved net loss for the six-month period, narrowing from $6.4 million to $0.6 million.
• Increased pre/regular season ticket-related revenues due to a combined four additional home games for the Knicks and Rangers and higher average per-game revenue.
• Higher revenues from league distributions, primarily driven by new NBA national media rights agreements for the 2025-26 season.
• Growth in suite revenues, sponsorship and signage revenues, and food, beverage, and merchandise sales, including a positive impact from new Rangers jersey launches.
• No impairment identified for goodwill or indefinite-lived intangible assets during the annual impairment tests performed in the first quarter of fiscal year 2026.

Negatives

• Significant decrease in local media rights fees revenue due to amendments to agreements with MSG Networks, including a 28% reduction for the Knicks and an 18% reduction for the Rangers, and the elimination of annual rights fee escalators.
• Operating income for the six months ended December 31, 2025, turned into a loss of $5.2 million, compared to an income of $5.0 million in the prior year period.
• Substantial net cash used in operating activities ($52.5 million) for the six months ended December 31, 2025, compared to cash provided ($35.6 million) in the prior year period.
• Cash and cash equivalents decreased by $63.3 million from June 30, 2025, to December 31, 2025.
• Increased team personnel compensation primarily due to changes in the Knicks and Rangers rosters.
• Higher provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax.
• Increased interest expense for both the three months ($623k increase) and six months ($159k increase) ended December 31, 2025.

Risks

• The level of revenues depends in part on the popularity and competitiveness of the sports teams.
• Costs associated with player injuries, waivers, or contract terminations of players, coaches, and other team personnel.
• Changes in professional sports teams compensation, including the impact of signing free agents and executing trades, subject to league salary caps and the impact of luxury tax.
• General economic conditions, especially in the New York City metropolitan area, including any economic downturn, recession, financial instability, impact from Government shutdowns or inflation.
• The demand for sponsorship arrangements and for advertising.
• Competition from other teams and other sports and entertainment options.
• Changes in laws, NBA or NHL rules, regulations, guidelines, bulletins, directives, policies and agreements, including collective bargaining agreements, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights.
• Developments affecting the regional sports network industry, including the effects of such developments on MSG Networks Inc.'s solvency and its ability to perform its obligations under its local media rights agreements.
• A default by subsidiaries under their respective credit facilities.
• Any NBA, NHL or other work stoppage.
• Any economic, political or other actions, such as boycotts, protests, work stoppages or campaigns by labor organizations.
• The performance by affiliates of their obligations under various agreements with the Company.
• Seasonal fluctuations and other variation in operating results and cash flow from period to period.
• The level of expenses, including corporate expenses.
• The acquisition or disposition of assets or businesses and/or the impact of, and the ability to successfully pursue acquisitions or other strategic transactions.
• The ability to successfully integrate acquisitions or new businesses into operations and the operating and financial performance of strategic acquisitions and investments.
• A pandemic or another public health emergency and the ability to effectively manage the impacts, including labor market disruptions.
• Activities or other developments that discourage or may discourage congregation at prominent places of public assembly, including Madison Square Garden Arena.
• The impact of governmental regulations or laws, changes in how those regulations and laws are interpreted and the continued benefit of certain tax exemptions or tax deductions and the ability to maintain necessary permits or licenses.
• Operational, business, reputational, litigation and other risk if there is a security incident resulting in loss, disclosure or misappropriation of stored personal information or other breaches of information security or if third party facilities, systems and/or software relied upon are interrupted or unavailable.
• The impact of any government plans to redesign New York City's Pennsylvania Station.
• Changes in international trade policies and practices, including tariffs, and the economic impacts, volatility and uncertainty resulting therefrom.
• Business, economic, reputational and other risks associated with, and the outcome of, litigation and other proceedings.
• Financial community and rating agency perceptions of the business, operations, financial condition and the industry.
• Certain restrictions on transfer and ownership of common stock related to ownership of professional sports franchises in the NBA and NHL.
• The expansion of Section 162(m) of the U.S. Internal Revenue Code, effective for the fiscal year ending June 30, 2028, which could reduce available tax deductions and increase income tax expense.

Future Outlook

The company expects to continue recording media rights fees at reduced rates in future periods due to recent amendments. Management anticipates pursuing opportunities to improve sports teams' overall quality, which may result in continued significant expenses and charges, potentially leading to future operating losses. The expansion of Section 162(m) of the U.S. Internal Revenue Code, effective for the fiscal year ending June 30, 2028, is expected to reduce available tax deductions and increase income tax expense.

Management Comments

• Management believes its use of estimates in the Financial Statements to be reasonable and evaluates its estimates on an ongoing basis using historical experience and other factors.
• Management does not believe that resolution of the various lawsuits will have a material adverse effect on the Company.
• Management believes we have sufficient liquidity, including approximately $81.3 million in Cash and cash equivalents as of December 31, 2025, along with $408.0 million of additional available borrowing capacity under existing credit facilities, to fund our operations and satisfy any obligations for the foreseeable future.

Industry Context

StockSavvy.ai notes that the sports and entertainment industry continues to navigate evolving media landscapes, as evidenced by Madison Square Garden Sports Corp.'s renegotiated local media rights agreements. While national media deals, like the NBA's new agreements, provide a significant revenue boost, regional sports networks face ongoing challenges, impacting local rights fees. The company's strategy of investing in team personnel and leveraging increased home game schedules aligns with broader industry efforts to maximize event-driven revenue and fan engagement amidst these shifts.

Legal Proceedings

• The company is a defendant in various lawsuits.
• Management does not believe the resolution of these lawsuits will have a material adverse effect on the company.

Related Party Transactions

• Extensive agreements with MSG Entertainment, including arena license agreements, sponsorship sales and service representation agreements, team sponsorship allocation, services agreement, ticketing/hospitality/sponsorship management services, sublease agreement for offices, group ticket sales representation, and single night rental commission agreement.
• Agreements with Sphere Entertainment (including MSG Networks), such as amended media rights agreements for Knicks and Rangers games, issuance of penny warrants for 19.9% equity interests in MSG Networks, virtual advertising inventory allocation, and business operations services.
• Time-sharing and dry lease arrangements for aircraft with MSG Entertainment.
• Allocation of certain executive support costs (office space, assistants, security, transportation) and personal aircraft/helicopter usage with Sphere Entertainment, MSG Entertainment, and AMC Networks Inc.

Stakeholder Impact

• Shareholders: Mixed impact due to revenue growth but also significant cash burn and reduced local media rights. The remaining stock repurchase program could provide some support.
• Employees: Continued investment in team personnel compensation and active share-based compensation plans.
• Customers (Fans): More home games for the Knicks and Rangers could increase engagement and ticket/merchandise sales.
• MSG Networks: Reduced media rights fees from MSGS, but MSGS received penny warrants for 19.9% equity interest in MSG Networks.
• NBA/NHL: Increased league distributions from new NBA national media rights agreements. Higher NBA luxury tax payments.

Next Steps

• Continue to pursue opportunities to improve the overall quality of sports teams.
• Evaluate the impact of ASU No. 2023-09 (Income Taxes) on income tax disclosures for the Annual Report on Form 10-K for the fiscal year ending June 30, 2026.
• Evaluate the impact of ASU No. 2024-03 (Expense Disaggregation Disclosures) on disclosures for the Annual Report on Form 10-K for the fiscal year ending June 30, 2028.
• Evaluate the impact of ASU No. 2025-06 (Internal-Use Software) on consolidated financial statements for the first quarter of fiscal year 2028.
• Potential stock repurchases under the existing authorization of $184.6 million.
• Repayment of $7.5 million under the Rangers NHL Advance Agreement on January 5, 2026.
• Repayment of $25.0 million under the Knicks Revolving Credit Facility on February 3, 2026.

Key Dates

Recommendation

While Madison Square Garden Sports Corp. demonstrated solid revenue growth for the quarter, driven by increased home games and new national media rights, the substantial negative cash flow from operations and the six-month operating loss are significant concerns. The reduction in local media rights fees represents a structural headwind. The company's liquidity position, while still adequate with available credit, has deteriorated. Investors should monitor the company's ability to reverse the negative operating cash flow trend and manage the impact of reduced local media rights, suggesting a 'hold' position until clearer signs of sustainable profitability and cash generation emerge.

Keywords

Madison Square Garden Sports, MSGS, New York Knicks, New York Rangers, NBA, NHL, SEC Filing, 10-Q, Financial Results, Sports Franchises, Media Rights, Operating Income, Net Income, Cash Flow, Debt, Share Repurchase, MSG Networks, Sports Entertainment, Quarterly Report