Business Context and Reporting Period
Company: Madison Square Garden Sports Corp. (MSGS)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended June 30, 2026
Business Overview: MSGS owns and operates the New York Knicks (NBA) and New York Rangers (NHL), along with their respective development teams (Westchester Knicks and Hartford Wolf Pack). The teams play at Madison Square Garden ("The Garden"), which is licensed from MSG Entertainment. The Company reported a significant operational milestone with the Knicks winning the 2026 NBA Championship.
Key Financial Metrics
| Metric | Fiscal 2026 | Fiscal 2025 | Change |
|---|---|---|---|
| Revenues | $1,153.8 million | $1,039.2 million | +11% |
| Operating Income | $28.9 million | $14.8 million | +95% |
| Net Income (Loss) | $7.8 million | ($22.4 million) | Turnaround to Profit |
| Adjusted Operating Income | $58.7 million | $38.2 million | +54% |
| Cash and Cash Equivalents | $164.5 million | $144.6 million | N/A |
| Long-Term Debt | $242.0 million | $267.0 million | -$25.0 million |
| Available Borrowing Capacity | $433.0 million | N/A | N/A |
Note: All figures in millions unless otherwise noted. Adjusted Operating Income is a non-GAAP measure.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased by $114.6 million (11%). Key drivers included a $66.9 million increase in playoff-related revenues (Knicks won the 2026 NBA Championship) and a $41.4 million increase in league distributions due to new NBA national media rights agreements.
- Local Media Rights Reduction: Revenue from local media rights fees decreased by $31.6 million to $125.7 million. This decline resulted from amendments to agreements with MSG Networks (effective Jan 1, 2025) which reduced fees by 28% for the Knicks and 18% for the Rangers, and eliminated annual escalators.
- Expense Volatility: Direct operating expenses rose 10% to $833.7 million. This included a $49.5 million increase in playoff expenses and a $41.3 million increase in team personnel compensation. However, the Company recorded a net credit of $0.025 million for team personnel transactions (trades/waivers) compared to a $49.1 million provision in 2025.
- Profitability: The Company returned to profitability, reporting net income of $7.8 million compared to a net loss of $22.4 million in the prior year. Operating income nearly doubled.
Guidance, Outlook, and Risks
Potential Spin-Off (Rangers Distribution)
The Board authorized management to explore a potential spin-off of the New York Rangers business into a separate publicly traded company ("Spinco"). If completed, the distribution is expected to be tax-free, with shareholders receiving one share of Spinco Class A stock for every two shares of MSGS Class A stock held. Completion is subject to Board, league, and SEC approvals.
Management Commentary
Management highlighted the success of the Knicks' championship run as a primary driver of fiscal 2026 performance. The Company continues to leverage its position in the New York market and its integrated partnerships with MSG Entertainment and Sphere Entertainment to drive sponsorship and suite sales.
Key Risks and Contingencies
- Arena License: MSGS does not own The Garden; it operates under a license agreement with MSG Entertainment expiring in 2055. Failure to renew or MSG Entertainment's failure to operate the venue could materially impact the business.
- Media Rights Dependency: Local media rights represent a significant revenue stream. The financial stability of MSG Networks (which recently restructured debt) and the terms of future media rights agreements are critical risks.
- League Actions: The NBA and NHL have significant control over team operations, including salary caps, luxury taxes, and revenue sharing. The Knicks were a luxury tax payer for the 2025-26 season ($44.4 million expense).
- Real Estate Tax Exemption: The Garden benefits from a New York City real estate tax exemption ($45.2 million in FY2026). Repeal of this exemption could materially increase costs.
- Cybersecurity: The Company disclosed a security incident in December 2025 involving MSG Entertainment's Oracle system, which was determined not to be material to MSGS operations.
Investor Verification Checklist
- Spin-Off Status: Monitor for updates on the "Rangers Distribution" transaction, including regulatory approvals and final structuring.
- MSG Networks Solvency: Verify the ongoing financial health of MSG Networks and its ability to meet amended local media rights obligations.
- Knicks Playoff Performance: Assess the sustainability of revenue growth given the high base established by the 2026 NBA Championship.
- Debt Covenants: Review compliance with debt service ratios under the Knicks and Rangers credit facilities, particularly regarding media rights revenue shortfalls.
- Tax Exemption Renewal: Track legislative developments regarding the Garden's real estate tax exemption status.