Madison Square Garden Sports Corp.

Madison Square Garden Sports Corp. owns and operates a portfolio of assets featuring the New York Knickerbockers of the National Basketball Association and the New York Rangers of the National Hockey League, both of which play their home games at Madison Square Garden Arena, also known as The World's Most Famous Arena. The Company's other professional franchises include two development league teams: the Hartford Wolf Pack of the American Hockey League and the Westchester Knicks of the NBA G League. The Company operates a professional sports team performance center, the Madison Square Garden Training Center in Greenburgh, NY. The Company's business is concentrated in the New York City metropolitan area, the nation's largest media market, and its revenues are influenced by the popularity and on-court or on-ice performance of its sports teams, as well as general economic and health and safety conditions. Due to the NBA and NHL playing seasons, revenues are typically concentrated in the second and third quarters of each fiscal year.

The Company faces strong competition for the New York area sports fan base from numerous other professional sports teams in the metropolitan area, including two Major League Baseball teams (the New York Yankees and the New York Mets), two National Football League teams (the New York Giants and the New York Jets), two additional NHL teams (the New York Islanders and the New Jersey Devils), a second NBA team (the Brooklyn Nets), two Major League Soccer franchises, a Women's National Basketball Association team, and a National Women's Soccer League team, as well as collegiate and minor league teams and non-sports entertainment options. The Company's stated competitive advantages include its iconic sports franchises with renowned brands, its enduring presence in the New York metropolitan area, deep connections with large and passionate fan bases, multi-year sponsorship and suite agreements through a strategic partnership with MSG Entertainment, local media rights agreements with MSG Networks, national media rights agreements through the NBA and NHL, long-term arena license agreements with MSG Entertainment, and a seasoned management team and committed ownership. The Company also competes with other teams in its leagues to attract players.

The Company generates revenue from several primary sources: ticket sales and a portion of suite rental fees at The Garden, its share of distributions from NHL and NBA league-wide national and international television contracts and other league-wide revenue sources, sponsorships and signage, food and beverage sales at The Garden, and merchandising. The Company also earns substantial fees from MSG Networks for the local media rights to telecast the games of its sports teams. Ticket sales have historically constituted the Company's largest single source of revenue. Tickets are sold through membership plans (full season and partial plans), group sales, and single-game tickets, with single-game tickets dynamically priced. A significant portion of revenue derives from media rights fees, suite rental fees, and sponsorship and signage revenue, all of which are generally contracted on a multi-year basis. The Company's revenue mix includes both recurring income from multi-year contracts and transactional income from single-game ticket and merchandise sales.

The Company's revenue is disaggregated into four categories. Event-related revenue, which consists of ticket sales and other ticket-related revenues as well as food, beverage and merchandise sales at The Garden, totaled $462,533 for the year ended June 30, 2025 ¹, compared to $458,213 ² in the prior year. Media rights revenue, consisting of local media rights fees from MSG Networks, revenue from league-wide national and international television contracts, and other local radio rights fees, totaled $285,566 ³ for fiscal year 2025, compared to $297,756 ⁴ in fiscal year 2024. Sponsorship, signage and suite licenses revenue was $230,184 ⁵ for fiscal year 2025, compared to $210,742 ⁶ in the prior year. League distributions and other revenue totaled $60,937 ⁷ for fiscal year 2025, compared to $60,438 ⁸ in fiscal year 2024. The Knicks and the Rangers are entitled to 35% ⁹ and 32.5% ¹⁰, respectively, of the revenues received by MSG Entertainment in connection with suite and club licenses pursuant to the Arena License Agreements. The Knicks and the Rangers receive 50% ¹¹ of net profits from the sales of food and beverages during their games at The Garden pursuant to the Arena License Agreements.

The Company's other professional franchises include two development league teams: the Hartford Wolf Pack of the American Hockey League and the Westchester Knicks of the NBA G League. The Company also operates a professional sports team performance center, the Madison Square Garden Training Center in Greenburgh, NY, which is approximately 114,000 square feet ¹² and features two basketball courts and one NHL regulation-sized hockey rink. The Company previously owned a controlling interest in Counter Logic Gaming, a North American esports organization, which it sold in April 2023 to Hard Carry Gaming Inc. in exchange for a noncontrolling equity interest in the combined NRG/CLG company. The Company's sports franchises include the New York Knicks, an original franchise of the NBA with eight trips to the NBA Finals and two NBA Championships, and the New York Rangers, one of the NHL's 'Original Six' franchises with four Stanley Cup Championships. The Knicks last qualified for the post-season during the 2024-25 NBA season and the Rangers last qualified for the post-season during the 2023-24 NHL season.

On June 27, 2025, the media rights agreements between subsidiaries of MSG Networks and the Knicks and the Rangers were amended. The amendments effected fee reductions of 28% ¹³ for the Knicks and 18% ¹⁴ for the Rangers, both effective as of January 1, 2025, with no annual rights fee escalators, and the term of the media rights agreements was reduced to end after the 2028-29 seasons, subject to a right of first refusal in favor of MSG Networks. Concurrent with the amendments, MSG Networks issued penny warrants to the Company exercisable for 19.9% ¹⁵ of the equity interests in MSG Networks. As a result of the amendments, media rights fees for the Knicks and the Rangers were approximately $17.9 million ¹⁶ lower for the fiscal year ended June 30, 2025 compared to the prior fiscal year. Local media rights revenues for the Knicks and the Rangers totaled $157.4 million ¹⁷ in the fiscal year ended June 30, 2025, compared to $175.3 million ¹⁸ in the fiscal year ended June 30, 2024. Stated annual local media rights fees, after consideration of the media rights amendments, are approximately $139.2 million ¹⁹ for the year ending June 30, 2026 as compared to $162.9 million ²⁰ in stated annual local media rights fees for the year ended June 30, 2025. The Company also recorded luxury tax expense of $38,035 ²¹ for the year ended June 30, 2025, as the Knicks were a luxury tax payer for the 2024-25 season. The Company recorded net provisions for revenue sharing, net of escrow, of approximately $37,904 ²² for the NBA and approximately $43,828 ²³ for the NHL for the year ended June 30, 2025. The Company recorded net provisions for certain team personnel transactions of $49,148 ²⁴ for fiscal year 2025, compared to $781 ²⁵ in the prior year. As of June 30, 2025, the Company had approximately $185 million ²⁶ remaining under the $525 million ²⁷ Class A Common Stock share repurchase program. The Company completed its conversion from a Delaware corporation to a Nevada corporation on June 10, 2025.

For the fiscal year ended June 30, 2025, total revenues were $1,039,220 ²⁸, an increase of $12,071 ²⁹, or 1% ³⁰, compared to $1,027,149 ³¹ in the prior year. Direct operating expenses were $755,118 ³², an increase of $138,604 ³³, or 22% ³⁴, compared to $616,514 ³⁵ in the prior year. Selling, general and administrative expenses were $266,076 ³⁶, an increase of $4,643 ³⁷, or 2% ³⁸, compared to $261,433 ³⁹ in the prior year. Operating income was $14,808 ⁴⁰, a decrease of $131,230 ⁴¹, or 90% ⁴², compared to $146,038 ⁴³ in the prior year. Net loss was $22,438 ⁴⁴ for fiscal year 2025, compared to net income of $58,771 ⁴⁵ in the prior year. Adjusted operating income, a non-GAAP measure, was $38,156 ⁴⁶ for fiscal year 2025, a decrease of $134,086 ⁴⁷, or 78% ⁴⁸, compared to $172,242 ⁴⁹ in the prior year.

A key growth vector for the Company is maximizing the value of its exclusive live sports content. The Company receives a pro-rata share of fees related to the NBA's and NHL's national and international media rights agreements, which provides a significant recurring revenue stream. In July 2024, the NBA entered into new 11-year media rights agreements with The Walt Disney Company, NBCUniversal and Amazon, which will take effect starting with the 2025-26 season and will expire following the 2035-36 season. The NHL's U.S. national media rights agreements with The Walt Disney Company and WarnerMedia, LLC will expire following the 2027-28 season. In April 2025, the NHL and Rogers Communications entered into a new 12-year media rights agreement beginning with the 2026-27 season. The Company also receives fees related to local media rights from MSG Networks, and in June 2025, those agreements were amended and are now set to expire at the end of the 2028-29 seasons, subject to a right of first refusal in favor of MSG Networks. The stated annual local media rights fees, after consideration of the media rights amendments, are approximately $139.2 million ⁵⁰ for the year ending June 30, 2026.

Another growth vector is utilizing the Company's unique assets and an integrated approach to drive sponsorship and suite sales. The Company possesses powerful assets that benefit from being part of a broader sports, entertainment and media offering as a result of various agreements with MSG Entertainment and Sphere Entertainment. These agreements enable an integrated approach to marketing partnerships and corporate hospitality solutions. The Company's assets are highly sought after by companies that value the popularity of its sports franchises, the demographic makeup of its fans, and its unique position in the New York market. The integrated approach has already attracted world-class partners such as JPMorgan Chase, Anheuser-Busch, Experience Abu Dhabi, Caesars Sportsbook, Delta Air Lines, Lenovo and its subsidiary Motorola, Dunkin Donuts, Benjamin Moore, Lexus, PepsiCo, Spectrum, Ticketmaster, MSC Cruises and Verizon, among others. The Arena License Agreements with MSG Entertainment enable MSG Entertainment to offer corporate hospitality solutions that bring together live sporting events with live entertainment offerings and provide for the sharing of revenues from such offerings.

The filing discusses the trajectory of direct operating expenses, which increased by 22% ⁵¹ in fiscal year 2025, driven primarily by a $62,628 ⁵² increase in net provisions for league revenue sharing expense and NBA luxury tax, a $48,367 ⁵³ increase in net provisions for certain team personnel transactions, and a $32,820 ⁵⁴ increase in team personnel compensation. The increase in NBA luxury tax expense was the result of the Knicks being a significant luxury tax payer for the 2024-25 season, whereas the Knicks were not a luxury tax payer for the 2023-24 season. Based on the current roster, the Knicks would be a luxury tax payer for the 2025-26 season, however the final determination will be based upon the Knicks roster at the end of the 2025-26 regular season. The new NHL CBA, ratified on July 8, 2025, includes changes to the revenue sharing plan which, beginning with the 2026-27 season, will be funded by contributions from the top eleven revenue earning teams and increased playoff gate receipt contributions. The new NBA CBA includes revised luxury tax rates which will become effective with the 2025-26 season, with rates starting at $1.00 for each $1.00 of team salary exceeding the threshold and scaling up to $4.75, with an additional $2.00 increment for repeat taxpayers.

The Company's operational outlook includes its strategy to develop championship-caliber teams through the ownership and operation of NBA and NHL development teams (the Westchester Knicks and the Hartford Wolf Pack) and the operation of its state-of-the-art professional sports teams performance center. The Company also employs a ticketing policy that gives it a direct relationship with its fan bases, with tickets sold through membership plans, group sales, and single-game tickets, which are dynamically priced. The Company continues to invest in the fan experience through its relationship with MSG Entertainment, offering first-class operations, innovative event presentation, premium food and beverage offerings, and unique merchandise. As of June 30, 2025, the Company had 514 ⁵⁵ full-time union and non-union employees and 493 ⁵⁶ part-time union and non-union employees. Approximately 11.4% ⁵⁷ of employees were represented by unions as of June 30, 2025, most of whom are the Company's players. There are 38 ⁵⁸ union employees subject to CBAs that expired as of June 30, 2025 and no union employees subject to CBAs that will expire by June 30, 2026.

As of June 30, 2025, the Company had approximately $185 million ⁵⁹ remaining under the $525 million ⁶⁰ Class A Common Stock share repurchase program authorized by the Company's Board of Directors on September 11, 2015. The Company has been funding and expects to continue to fund stock repurchases through a combination of cash on hand, cash generated by operations and available borrowing capacity under its existing credit facilities. During the three months ended June 30, 2025, the Company did not engage in any share repurchase activity under its share repurchase program. The Company's capital expenditures were $3,621 ⁶¹ for the year ended June 30, 2025, compared to $1,451 ⁶² in the prior year. The Company does not have a stated dividend policy; any decisions regarding the payment of future dividends will be made by the Board of Directors from time to time. The Company paid a special cash dividend of $7.00 ⁶³ per share on October 31, 2022.

A significant headwind explicitly flagged by management is the financial condition of MSG Networks, the Company's broadcasting partner for local media rights. MSG Networks was not able to refinance its credit facilities prior to their maturity in October 2024, and after a series of forbearances, on June 27, 2025, MSG Networks restructured its indebtedness, with MSG Networks' lenders writing off approximately $510 million ⁶⁴ of indebtedness. As part of this restructuring, the media rights agreements were amended to effect fee reductions of 28% ⁶⁵ for the Knicks and 18% ⁶⁶ for the Rangers. The filing notes that MSG Networks could in the future default on its obligations under the media rights agreements or seek bankruptcy protection, which would cause the Company to lose a significant recurring revenue stream. Furthermore, if MSG Networks were to experience a bankruptcy or insolvency event, the Company would be prevented, absent a cure or waiver, from making borrowings under its revolving credit facilities.

Another structural headwind is the potential for labor disputes. The current NBA CBA expires after the 2029-30 season, but each of the NBA and the NBPA has the right to terminate the CBA effective following the 2028-29 season. The current NHL CBA was set to expire on September 15, 2026, but on July 8, 2025, the NHL and the NHLPA announced that a new four-year CBA had been ratified, which expires after the 2029-30 season. Both the NBA and the NHL have experienced labor difficulties in the past, including work stoppages that resulted in shortened regular seasons. The filing also notes that the Company's business is subject to seasonal fluctuations, with revenues typically concentrated in the second and third quarters of each fiscal year, and that period-to-period comparisons may not be meaningful.

The most material risk is the Company's dependence on MSG Networks for local media rights revenue, which totaled $157.4 million ⁶⁷ in fiscal year 2025. MSG Networks restructured its debt in June 2025, with lenders writing off approximately $510 million ⁶⁸ of indebtedness, and the media rights agreements were amended to effect fee reductions of 28% ⁶⁹ for the Knicks and 18% ⁷⁰ for the Rangers. A future bankruptcy of MSG Networks could cause the Company to lose this significant recurring revenue stream and also prevent borrowings under its credit facilities. A second major risk is the substantial indebtedness of the Company's subsidiaries, with $267 million ⁷¹ outstanding under the Knicks Revolving Credit Facility and $24 million ⁷² under the Rangers NHL Advance Agreement as of June 30, 2025. These facilities bear interest at variable rates, and a 100 basis point increase in floating interest rates would increase annual interest expense by approximately $2.7 million ⁷³. The Company incurred a net loss of approximately $22.4 million ⁷⁴ in fiscal year 2025 and has incurred operating losses and negative cash flow in prior periods. A third key risk is the potential for labor disputes, as both the NBA and NHL have experienced work stoppages that shortened regular seasons. The current NBA CBA can be terminated by either party effective following the 2028-29 season, and while a new NHL CBA was ratified in July 2025, labor difficulties remain a possibility. The Company's business is also substantially dependent on the continued popularity and competitive success of the Knicks and the Rangers, and the Knicks were a luxury tax payer for the 2024-25 season, recording $38,035 ⁷⁵ in luxury tax expense, with the expectation of being a tax payer again for the 2025-26 season based on the current roster.

Management's message emphasizes the Company's strategy to leverage the strength and popularity of its professional sports franchises and its unique position in the nation's largest media market to grow its business and increase the long-term value of its sports assets. Key components of this strategy include developing championship-caliber teams, employing a ticketing policy that gives the Company a direct relationship with its fan bases, maximizing the value of its exclusive live sports content, utilizing its unique assets and an integrated approach to drive sponsorship and suite sales, and continuing to invest in the fan experience. Management highlights that the Knicks are coming off a trip to the Eastern Conference Finals heading into the 2025-26 season and that the Rangers reached the Eastern Conference Finals two of the past four seasons and captured the Presidents' Trophy for the league's best regular season record in the 2023-24 season. The filing discusses the amendments to the media rights agreements with MSG Networks, noting that stated annual local media rights fees, after consideration of the media rights amendments, are approximately $139.2 million ⁷⁶ for the year ending June 30, 2026 as compared to $162.9 million ⁷⁷ in stated annual local media rights fees for the year ended June 30, 2025. Management's strategic priorities for the period ahead include continuing to pursue opportunities to improve the overall quality of its sports teams, which may result in continued significant expenses and charges, and navigating the financial difficulties of MSG Networks.