Q4 2025 Madison Square Garden Co Earnings Call
Speaker #3: 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: 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. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. I would now like to turn the call over to Ari Danes, Investor Relations. Please go ahead.
Speaker #3: At this time, all participants or any listen-only mode. After the speakers remarks, there will be a question and answer session. I would now like to turn the call over to Ari Danes, Investor Relations.
Speaker #3: Please go ahead.
Speaker #4: 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.
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 Executive Vice President, 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.
Speaker #4: 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.
Speaker #4: If you do not have a copy of today's earnings release, it is available in the Investor section of our corporate website. Please take note of the following.
Speaker #4: 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.
Speaker #4: 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.
Ari Danes: 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.
Speaker #4: The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On pages four and five of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI.
Speaker #4: A non-GAAP financial measure. And with that, I'll now turn the call over to Jamaal.
Speaker #3: Thank you, Ari.
Jamaal 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-arena 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. 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.
Speaker #5: 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.
Speaker #5: Driven by sustained consumer and corporate demand for the Nixon 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.
Speaker #5: 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.
Speaker #5: Now, let's discuss how 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.
Speaker #5: 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 offseason, including naming two-time Stanley Cup winner, Mike Sullivan, as head coach.
Jamaal Lesane: 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 offseason, including naming two-time Stanley Cup winner Mike Sullivan as head coach. We are looking forward to the 2025-2026 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 yields and average paid attendance were up, which helped drive growth in ticketing revenue. For the upcoming 2025-2026 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.
Speaker #5: We are looking forward to the 2025-2026 seasons for both teams. Supporting the Knicks and Rangers along the way are 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.
Speaker #5: 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.
Speaker #5: 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.
Jamaal Lesane: 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 2025 as compared to the prior year. In terms of merchandise, while in-arena per-cap spending was up modestly in Fiscal 2025, 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 postseason performance, in-arena single-game Knicks merchandise sales hit new highs during the Eastern Conference Finals.
Speaker #5: 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.
Speaker #5: 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.
Speaker #5: Including exclusive merchandise drops with existing partners such as New Yorker Nowhere and Segelman 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.
Speaker #5: 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.
Jamaal Lesane: 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.
Speaker #5: 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.
Speaker #5: Throughout the playoffs, we also continued our efforts to deliver compelling content on social media, which helped drive over 700,000 net new followers across the Knicks and Rangers throughout the year.
Speaker #5: 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.
Speaker #5: We 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.
Jamaal Lesane: 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 reflect ongoing changes across the RSN landscape.
Speaker #5: 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 2026 results.
Speaker #5: 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.
Speaker #5: 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 Nixon Rangers amended their respective local media rights agreements, which reflects ongoing changes across the RSN landscape.
Speaker #5: Those amendments included 28% and 18% reductions in annual rights fees payable to the Knicks and Rangers, respectively. Effective January 1st, 2025. Along with an elimination of annual rights fee escalators.
Jamaal Lesane: 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 multi-year 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 2025.
Speaker #5: 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.
Speaker #5: That included Abu Dhabi's Department of Culture and Tourism and its Experience Abu Dhabi brand, as well as Lenovo and its subsidiary, Motorola. As the official patch partner of the Knicks.
Speaker #5: In addition, we reached multi-year 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.
Speaker #5: 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.
Jamaal Lesane: 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 2026. In summary, we are pleased with how our business has performed this past fiscal year. 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 will now turn the call over to Victoria.
Speaker #5: 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 2026.
Speaker #5: In summary, we are pleased with how our business has performed this past fiscal year. With the 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.
Speaker #5: With that, I'll now turn the call over to Victoria.
Speaker #2: Thank you, Jamaal. And good morning, everyone. For fiscal 2025, we generated total revenues of $1.04 billion and adjusted operating income of $38.2 million. Our results for the fiscal 2025 fourth quarter reflected strong consumer and corporate demand for our teams, as they completed their 2024-2025 regular seasons.
Victoria Mink: Thank you, Jamaal, and good morning, everyone. For Fiscal 2025, we generated total revenues of $1.04 billion and adjusted operating income of $38.2 million. Our results for the Fiscal 2025 Fourth Quarter reflected strong consumer and corporate demand for our teams as they completed their 2024-2025 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 consist of ticket, food and beverage, and merchandise revenues, inclusive of the playoffs, decreased 8% year over year.
Speaker #2: Followed by an extended playoff appearance from the Knicks. Our results also reflected a combined one fewer Nixon Rangers regular season home game and six fewer playoff home games in our fourth quarter, as compared to the prior year period.
Speaker #2: 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 consist of ticket, food, beverage, and merchandise revenues inclusive of the playoffs, decreased 8% year-over-year.
Speaker #2: Suites, sponsorship, and signage revenues, also inclusive of the playoffs, totaled $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.
Victoria Mink: 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 2025 Fourth Quarter includes $2.1 million of non-cash 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.
Speaker #2: 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.
Speaker #2: AOI for our fiscal Q4 25 includes $2.1 million of non-cash arena operating lease costs, compared to $2.4 million in the prior year period.
Speaker #2: 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 best growth.
Speaker #2: 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 2026.
Victoria Mink: 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 2026. 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. 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.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: I will now turn the call back over to Ari.
Victoria Mink: I will now turn the call back over to Ari.
Speaker #4: Operator, can we now open the line for questions?
Ari Danes: Operator, can we now open the line for questions?
Speaker #3: Certainly. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad to raise your hand and join the queue.
Operator: Certainly. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question today comes from the line of Brandon Ross from LightShed Partners. Your line is open.
Speaker #3: If you would like to withdraw your question, simply press star one again. Your first question today comes from the line of Brandon Ross from Late Shed Partners.
Speaker #3: Your line is open.
Speaker #5: Good morning. Thanks for taking the questions. Two for me. First, with the rework of the MSG Networks media rights, just wanted to see if that'll mean anything for capital returns going forward.
Analyst: Good morning. Thanks for taking the questions. 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. Secondly, you alluded in the prepareds, but last week the Bears sold a minority stake, I think, at an $8-plus billion valuation. Your closest comp, the Lakers, sold for $10 billion. I am wondering if that now makes sense for MSG Sports to look to sell some small minority stakes in the Knicks or the Rangers. Thank you.
Speaker #5: And then secondly, you alluded in the prepared remarks, but last week the Bears sold a minority stake, I think, at an A-plus billion dollar valuation.
Speaker #5: 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.
Speaker #5: Thank you.
Speaker #2: Hi, 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.
Victoria Mink: Hi, Brandon. Thanks for the questions. I think I will start. I will take the capital returns and then maybe pass it over to Jamaal Lesane on the second part of your question. 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. That will all be reflected in our cash balance at September 30. In addition to our cash on hand, we have the New York Knicks and New York Rangers revolving credit facilities in place with $250 million in borrowing capacity, currently available on the Rangers revolver. We believe we have substantial financial flexibility. In terms of capital allocation, our long-term priorities remain the same.
Speaker #2: So, you know, 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, and I would note that we have a number of scheduled payments in the first quarter, including payroll and luxury tax.
Speaker #2: So that'll all be reflected in our cash balance at September 30th. You know, but in addition to our cash on hand, we have the Nixon Rangers Revolving Credit Facilities in place.
Speaker #2: With $250 million in borrowing capacity, you know, currently available on the Rangers Revolver. You know, so we believe we have substantial financial flexibility. You know, and in terms of capital allocation, our long-term priorities remain the same.
Speaker #2: You know, the first is to maintain appropriate liquidity to fund our operations and invest in our core business. You know, and second, we want to make sure we have a strong balance sheet.
Victoria Mink: The first is to maintain appropriate liquidity to fund our operations and invest in our core business. Second, we want to make sure we have a strong balance sheet. Third, we plan to be opportunistic about other uses of our cash. Right now, we do have greater clarity with our near-term capital allocation decisions, with the amendments to our local media rights agreements being completed. We wouldn't rule out a return of a capital program in the future.
Speaker #2: You know, and third, we plan to be opportunistic about other uses of our cash. You know, so right now we do have greater clarity, we can make our near-term capital allocation decisions, you know, with the amendments to our local media rights agreements being completed.
Speaker #2: You know, but we wouldn't rule out a return of capital program in the future.
Speaker #5: Hey, Brandon.
Jamaal Lesane: Hey, Brandon.
Speaker #6: Great. In response to your question, and 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.
Analyst: Great.
Jamaal Lesane: Okay, in response to your question, as I mentioned earlier, we remain as confident as ever in the value of our teams. The short answer is we do not have anything to report. You mentioned the two recent transactions, but it is 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. In the case of MSG Sports, we do not think that that value is appropriately reflected in our current stock price. We just do not. We would never rule out the possibility of a minority stake sale. As I said, we also have nothing to report at this time.
Speaker #6: You know, you mentioned the two recent transactions, but it's not just those two. There have been several other recent transactions, both rumored early stage and recently finalized, that demonstrate that these are scarce, valuable assets. In the case of MSG Sports, we don't think that value is appropriately reflected in our current stock price.
Speaker #6: We just don't. And 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.
Speaker #5: Thank you.
Analyst: Thank you.
Speaker #3: Your next question comes from a line of Peter Cepino from Wolf Research. Your line is open.
Operator: Your next question comes from a line of Peter Sapino from Wolfe Research. Your line is open.
Speaker #7: Hello, good morning. A question about the NBA's current looking for a national RSN possibility. One that might include several different or many teams. We're wondering if you'd be open to participating in something like this once your deal with MSG Networks expires.
Analyst: Hello, good morning. A question about the NBA's current looking for a national RSN possibility, one that might include several different or many teams. We are wondering if you would be open to participating in something like this once your deal with MSG Networks expires. Or how else do you see the RSN business evolving over the long term?
Speaker #7: Or how else do you see the RSN business evolving over the long term?
Speaker #5: Good morning, Peter. And thanks for that question. You know, media rights are certainly a complex ecosystem, and while we aren't going to comment on hypotheticals, we continue to monitor the changes.
Jamaal Lesane: Good morning, Peter, and thanks for that question. Media rights are certainly a complex ecosystem. While we are not going to comment on hypotheticals, we continue to monitor the changes. 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. On the hockey side, the NHL's Canadian media deals run through the 2025-2026 season. They also recently announced the new 12-year agreement starting thereafter. Their U.S. national media deals run through the 2027-2028 season. There are the local rights, which includes regional sports networks. The RSN industry continues to evolve. With that said, we continue to believe that local media coverage is a valuable part of our ecosystem and that RSNs drive enhanced fan engagement through content that is tailored for local markets.
Speaker #5: 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.
Speaker #5: And then on the hockey side, the NHL's Canadian Media Deals run through the 25-26 season, and they also recently announced the new 12-year agreement starting thereafter.
Speaker #5: And then their US 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.
Speaker #5: With that said, we continue to believe that local media coverage is a valuable part of our ecosystem and that RSNs drive enhanced fan engagement through content that is tailored for local markets.
Speaker #5: 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.
Jamaal Lesane: In our case, we are a rights holder for two marquee sports franchises. From that standpoint, we will continue to monitor the changes, but from that position as a rights holder for two marquee sports franchises.
Speaker #5: All right, thank you. And then a second question, if I may. There are some scheduled changes to the tax deductibility of compensation for 2027.
Analyst: All right, thank you. 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?
Speaker #5: Could you help us think about that for earnings purposes?
Speaker #2: Yeah, hi, Peter. You know, so we're assessing the impact of these changes in tax regulations. You know, just to be clear for our company, you know, those changes would become effective for our year ended June 30th, 2028.
Victoria Mink: Yeah, hi, Peter. We are assessing the impact of these changes in tax regulations. To be clear, for our company, those changes would become effective for our year ended June 30, 2028. At this time, we just have nothing further to share on that front.
Speaker #2: So at this time, you know, we just have nothing further to share on that front.
Speaker #5: All All right, thank you.
Analyst: All right, thank you.
Speaker #3: Your next question comes from a line of David Joyce from Seaport Research Partners. Your line is open.
Operator: Your next question comes from a line of David Joyce from Seaport Research Partners. Your line is open.
Speaker #6: Thank you. A little bit more on the rights front, please. Could 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?
Analyst: Thank you. A little bit more on the rights front, please. Could 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? Then if you could also delve in some more to the impact of the Knicks' playoff games from a financial perspective. Thanks.
Speaker #6: And what is changing in the availability of games on either of those platforms? And then, if you could also delve in some more to the impact of the Knicks' playoff games from a financial perspective.
Speaker #6: Thanks.
Speaker #2: Sure. Hi, David. Yeah, so taking a step back, right, as you know, all NBA teams share equally in national media rights fees. And at the league level, players receive about 50% of the league-wide revenues including from the national media rights fees.
Victoria Mink: Sure. Hi, David. Taking a step back, as you know, all NBA teams share equally in national media rights fees. At the league level, players receive about 50% of the league-wide revenues, including from the national media rights fees. 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. In turn, we will see an increase in our national media rights revenue. 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 lower local media rights, we still expect an increase in our overall media rights revenue in Fiscal 26.
Speaker #2: All right, so starting with the upcoming season, the NBA will see a step up in the average annual value for its national media rights.
Speaker #2: As well as increased escalators thereafter. So, in turn, we will see an increase in our national media rights revenue. Now, fiscal 2026 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.
Speaker #2: Now, however, you know, even taking into account local lower local media rights, we still expect an increase in our overall media rights revenue in fiscal 26.
Speaker #2: You know, what 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.
Victoria Mink: I would note that our local rights agreements include thresholds around the number of live games telecasts to be exclusively provided to MSG Networks, such as a minimum number of total regular season games. 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.
Speaker #2: You know, such as a minimum number of total regular season games. 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 further reduction in our local media rights fees.
Speaker #5: 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.
Analyst: I will happily talk about the playoffs. My gosh, what a thrill ride that was for this entire city. Wow. What a run like that does is 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 is 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%. 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 run.
Speaker #5: And what a run like that does, is it results in several benefits to our business. From a ticketing standpoint, a playoff run usually increases demand across all of our offerings.
Speaker #5: 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%.
Speaker #5: 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.
Speaker #5: Of those new followers, almost half were added during that playoff run. 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.
Analyst: That increased demand also extends to the corporate side of our business, which allows us to sell more premium hospitality and more marketing partnerships. We are already seeing the momentum from the playoffs carry forward as we approach next season. I will let Victoria Mink talk about the financial impact in a little bit more detail.
Speaker #5: 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.
Speaker #2: Sure, yeah, let me provide a little bit more color here. So the playoffs result in significant incremental business for our company. You know, depending on the length of the playoff run, as you can see in our results today.
Victoria Mink: Sure. Let me provide a little bit more color here. 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. In general, playoff tickets are priced at a premium to regular season games and increase each round. As noted earlier, the Knicks' Eastern Conference Finals run generated the highest per-game gate in team history. Food and beverage and merchandise per-cap spending typically runs above regular season averages. 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 per-game revenues.
Speaker #2: So, you know, in general, playoff tickets are priced at a premium to regular season games and increase each round. As noted earlier, the Knicks' Eastern Conference Finals run generated the highest per-game gate in team history.
Speaker #2: And food and beverage and merchandise per-cap spending typically runs above regular season averages. You know, so this past quarter, we hosted nine playoff games at the Garden as compared to 15 last year.
Speaker #2: All right, and 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.
Speaker #2: So, this translates to about $12.8 million in average per-game revenues. In addition, there were approximately $5.8 million in average per-game direct operating expenses, as well as some additional marketing and administrative costs incurred in connection with the overall playoff participation.
Victoria Mink: 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. As Jamaal mentioned, we expect to see the positive impact of the playoffs this past season across our entire business in Fiscal 2026.
Speaker #2: You know, but as Jamaal mentioned, you know, we expect to see the positive impact of the playoffs this past season across our entire business in fiscal 26.
Speaker #6: Great, thank you very much.
Analyst: Great. Thank you very much.
Speaker #3: Your final question today comes from a line of Joseph Stauf from Susquehanna. Your line is open.
Operator: Your final question today comes from a line of Joseph Staff from Susquehanna. Your line is open.
Speaker #6: Thank you. Good morning. Wondering if you could talk about, you know, your OPEX outlook and upcoming season, in particular how to think about team comp and other relevant inputs.
Analyst: Thank you. Good morning. 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. Then for my second question, given the success of the season last year, Jamaal Lesane had mentioned a number of the sponsorship renewals and relationships that you have. What is the right way to think about sponsorship growth in the upcoming season, please?
Speaker #6: And then for my second question, you know, 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.
Speaker #6: You know, what's the right way to think about sponsorship growth in the upcoming season, please?
Speaker #2: Hi, Joe. 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.
Victoria Mink: Hi, Joe. Regarding operating expenses, while we are not providing specific guidance, we expect our results for Fiscal 26 to reflect those higher team operating expenses. That is going to include higher team personnel compensation and luxury tax with the Knicks' current roster above the threshold. As you may know, the NBA salary cap increased from $140.6 million to $154.6 million for the 25-26 season. The NHL salary cap increased from $88 million to $95.5 million. In addition, the NBA luxury tax threshold for the 25-26 season 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. I would also remind you that in Fiscal 25, our results included expenses for certain team personnel transactions. We would also expect that to impact our year-over-year comparison in Fiscal 26.
Speaker #2: And that's going to include higher team personnel compensation, and luxury tax with the Knicks' current roster above the threshold. Now, as you may know, the NBA salary cap increased from $140.6 million to $254.6 million for the 25-26 season.
Speaker #2: And the NHL salary cap increased from $88 million to $95.5 million. In addition, the NBA luxury tax threshold for the 2025-26 season increased to $187.9 million, up from $170.8 million this past season.
Speaker #2: You know, which is measured by the roster at the end of the season. But I'd also remind you that in fiscal 2025, our results included expenses for certain team personnel transactions, so we would also expect that to impact our year-over-year comparison in fiscal 2026.
Speaker #5: Morning, Joe, and thanks for the question. We're seeing good momentum in marketing partnerships, and that's following a year of growth in fiscal 2025. Just to look back once more on fiscal 2025, you know, I mentioned the multi-year extensions with Verizon and Benjamin Moore and the new multi-year deal with Lenovo and its subsidiary, Motorola.
Jamaal Lesane: Morning, Joe, and thanks for the question. We are seeing good momentum in marketing partnerships, and that is following a year of growth in Fiscal 2025. To look back once more on Fiscal 2025, I mentioned the multi-year extensions with Verizon and Benjamin Moore, and the new multi-year deal with Lenovo and subsidiary Motorola, and the partnership with Abu Dhabi’s Department of Culture and Tourism, and Experience Abu Dhabi becoming a global marketing partner and the official patch partner of the Knicks. As we sit here today, 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.
Speaker #5: And the partnership with Abu Dhabi's Department of Culture and Tourism and Experience Abu Dhabi becoming a global marketing partner and the official patch partner of the Knicks.
Speaker #5: So as we sit here today and, you know, 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.
Speaker #5: 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.
Jamaal Lesane: When you take all that, as we look ahead to Fiscal 2026, while, as Victoria mentioned, we are not providing specific guidance, we believe we are well-positioned to drive another year of growth in Fiscal 2026.
Speaker #6: If I could have a quick follow-up, like prior to the season or right before the season, is there a way to think about how much you know of those larger sponsorship deals that are locked in?
Analyst: If I could have a quick follow-up, prior to the season or right before the season, is there a way to think about how much of those larger sponsorship deals are locked in? One would think most of it, but I was just curious to think about what that actual percentage is.
Speaker #6: You know, one would think most of it, but I was just curious to think about, you know, what that actual percentage is.
Speaker #2: Yeah, sure. As a follow-up there, I mean, we have a number of multi-year deals, and this is how we like to position ourselves with our marketing partners.
Victoria Mink: Yeah, sure, as a follow-up there. We have a number of multi-year deals, and this is how we like to position ourselves with our marketing partners is to always have a continuing pipeline of partners under contract and then new partnership opportunities that we can pursue.
Speaker #2: Is to always have sort of a continuing pipeline of partners under contract and then, you know, new partnership opportunities that we can pursue.
Speaker #6: Got it. Thanks a lot.
Analyst: Got it. Thanks a lot.
Speaker #3: And that concludes our question-and-answer session. I will now turn the call back over to Ari Danes for closing remarks.
Operator: That concludes our question and answer session. I will now turn the call back over to Ari Danes for closing remarks.
Speaker #5: Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.
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.