Madison Square Garden Sports Corp.
08/13/2026 | Press release | Distributed by Public on 08/13/2026 15:03
Annual Report for Fiscal Year Ending June 30, 2026 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Madison Square Garden Sports Corp. and its direct and indirect subsidiaries (collectively, "we," "us," "our," "MSG Sports," or the "Company") including the potential spin-off of the Company's New York Rangers ("Rangers") business (the "Rangers Distribution") through the distribution of the common stock of MSGS Spinco, Inc. ("Spinco"). See Note 1 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of the Rangers Distribution. Words such as "expects," "anticipates," "believes," "estimates," "may," "will," "should," "could," "potential," "continue," "intends," "plans," and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:
•the level of our revenues, which depends in part on the popularity and competitiveness of our sports teams and their ability to reach and advance in the playoffs;
•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 floors and 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, impacts from government shutdowns or inflation;
•the demand for sponsorship arrangements and for advertising;
•competition, for example, from other teams and other sports and entertainment options;
•changes in laws, National Basketball Association ("NBA") or National Hockey League ("NHL") rules, regulations, guidelines, bulletins, directives, policies and agreements, including the leagues' respective collective bargaining agreements (each, a "CBA") with their players' associations, salary caps, escrow requirements, revenue sharing, NBA luxury tax thresholds and media rights, or other regulations under which we operate;
•developments affecting the regional sports network industry, including the effects of such developments on MSG Networks Inc.'s ("MSG Networks") solvency and its ability to perform its obligations under its local telecast rights agreements with us;
•a default by our 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;
•geopolitical risks, including the risks of foreign wars and conflicts, including the conflict with Iran and related unrest in the Middle East, on international, domestic and local economies;
•the performance by our affiliates of their obligations under various agreements with the Company;
•seasonal fluctuations and other variation in our operating results and cash flow from period to period;
•the level of our expenses, including our corporate expenses;
•the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue acquisitions or other strategic transactions;
•our ability to successfully integrate acquisitions or new businesses into our operations and the operating and financial performance of strategic acquisitions and investments, including those we may not control;
•a pandemic or another public health emergency and our ability to effectively manage the impacts, including labor market disruptions;
•actual or threatened activities or other developments that discourage or may discourage congregation at prominent places of public assembly, including Madison Square Garden Arena ("The Garden") where the home games of the New York Knickerbockers (the "Knicks") and the Rangers are played;
•the impact of governmental regulations or laws, changes in how those regulations and laws are interpreted and the continued benefit of certain tax exemptions (including for The Garden) or tax deductions and the ability for us and Madison Square Garden Entertainment Corp. ("MSG Entertainment") 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 our information security or if third party facilities, systems and/or software upon which we rely 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 our business, operations, financial condition and the industry in which we operate;
•certain restrictions on transfer and ownership of our common stock related to our ownership of professional sports franchises in the NBA and NHL;
•whether or not we complete the Rangers Distribution and, if so, its impacts on our business, financial condition and results of operations;
•the tax-free treatment of the Rangers Distribution and the performance by the Company and Spinco of their obligations under transition services and other agreements expected to be entered into in connection with the Rangers Distribution; and
•the factors described under "Part I - Item 1A. Risk Factors" included in this Annual Report on Form 10-K.
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.
All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
Sphere Distribution and MSGE Distribution
On April 17, 2020, the Company distributed all of the outstanding common stock of Sphere Entertainment Co. (formerly Madison Square Garden Entertainment Corp. and referred to herein as "Sphere Entertainment") to its stockholders (the "Sphere Distribution").
On April 20, 2023 (the "MSGE Distribution Date"), Sphere Entertainment distributed approximately 67% of the issued and outstanding shares of common stock of MSG Entertainment to its stockholders (the "MSGE Distribution"). All agreements between the Company and MSG Entertainment described herein were between the Company and Sphere Entertainment prior to the MSGE Distribution (except agreements entered into after the MSGE Distribution Date).
Unless the context otherwise requires, all references to MSG Entertainment, Sphere Entertainment and MSG Networks (a wholly-owned subsidiary of Sphere Entertainment) refer to such entity, together with its direct and indirect subsidiaries.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction with, the audited consolidated financial statements and footnotes thereto included in Item 8 of this Annual Report on Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations. In this MD&A, the years ended on June 30, 2026, 2025 and 2024 are referred to as "fiscal year 2026" and "fiscal year 2025", and "fiscal year 2024", respectively.
Our MD&A is organized as follows:
Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.
Results of Operations. This section provides an analysis of our results of operations for fiscal years 2026 and 2025. For the comparison of our results of operations for fiscal years 2025 and 2024, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our 2025 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on August 12, 2025.
Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, as well as an analysis of our cash flows for fiscal years 2026 and 2025. The discussion of our financial condition and liquidity includes summaries of our primary sources of liquidity and our contractual obligations and off-balance sheet arrangements that existed
as of June 30, 2026.
Seasonality of Our Business. This section discusses the seasonal performance of the Company.
Recently Issued Accounting Pronouncements and Critical Accounting Estimates. This section includes a discussion of accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies and estimates and recently issued accounting pronouncements, are discussed in the notes to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Business Overview
The Company owns and operates a portfolio of assets featuring some of the most recognized teams in all of sports, including the Knicks of the NBA and the Rangers of the NHL. Both the Knicks and the Rangers play their home games at The Garden. The Company also includes two development league teams - the Hartford Wolf Pack of the American Hockey League and the Westchester Knicks of the NBA G League. Our professional sports franchises are collectively referred to herein as "our sports teams" or the "teams." The Company also operates a professional sports team performance center - the Madison Square Garden Training Center in Greenburgh, NY.
Revenue Sources
We earn revenue from several primary sources: ticket sales and a portion of suite rental fees at The Garden, our share of distributions from NHL and NBA league-wide national and international media contracts and other league-wide revenue sources, sponsorships and signage, food and beverage sales at The Garden and merchandising. We also earn substantial fees from MSG Networks for the local media rights to telecast the games of our sports teams. The amount of revenue we earn is influenced by many factors, including the popularity and on-court or on-ice performance of our sports teams and general economic and health and safety conditions. In particular, when our sports teams have strong on-court and on-ice performance, we benefit from increased demand for tickets and premium hospitality, potentially greater food, beverage and merchandise sales from increased attendance and increased sponsorship opportunities. When our sports teams qualify for the playoffs, we also benefit from the attendance and in-game spending at the playoff games. The year-to-year impact of team performance is somewhat moderated by the fact that a significant portion of our 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. Nevertheless, the long-term performance of our business is tied to the success and popularity of our sports teams. In addition, due to the NBA and NHL playing seasons, revenues from our business are typically concentrated in the second and third quarters of each fiscal year.
Ticket Sales and Facility and Ticketing Fees
Ticket sales have historically constituted our largest single source of revenue. Tickets to our sports teams' home games are sold through season tickets (full and partial plans), which are typically held by long-term season ticket members, through group sales, and through single-game tickets, which are purchased by fans either individually or in multi-game packages. We generally review and set the price of our tickets before the start of each team's season. However, we dynamically price our individual tickets based on opponent, seat location, day of the week and other factors. We do not earn revenue from ticket sales for games played by our teams at their opponents' arenas.
We also earn revenues in the form of certain fees added to ticket prices, which currently include a facility fee the Company charges on tickets it sells to our sports teams' games, except for season tickets.
Media Rights
We earn revenue from the licensing of media rights for our sports teams' home and away games and also through the receipt of our share of fees paid for league-wide media rights, which are awarded under contracts negotiated and administered by each league.
The Company and MSG Networks are parties to local telecast rights agreements covering the local telecast rights for the Knicks and the Rangers. On June 27, 2025, our sports teams and MSG Networks entered into amendments with respect to the local telecast rights agreements. See "- Factors Affecting Operating Results - Amendments to Local Telecast Rights Agreements" for more information.
National and international telecast arrangements differ by league. Fees paid by telecasters under these arrangements are pooled by each league and then generally shared equally among all teams.
Suites and Clubs
We earn revenue through the sale of suite and premium club licenses at The Garden, which are generally sold by MSG Entertainment to corporate customers via multi-year licenses. Under standard licenses, the licensee pays an annual license fee, which varies depending on the location and type of the suite or club. The license fee includes, for each seat in the suite or club,
tickets for our home games and other events at The Garden that are presented by MSG Entertainment for which tickets are sold to the general public, subject to certain exceptions. In addition, suite holders separately pay for food and beverage service in their suites at The Garden. Food and non-alcoholic beverage service is included in the annual license fee paid by club members.
Because suite and club licenses cover both our games and events that MSG Entertainment presents at The Garden, suite and club rental revenue is shared between us and MSG Entertainment under the Arena License Agreements (as defined below). Pursuant to the Arena License Agreements, the Knicks and the Rangers are entitled to 35% and 32.5%, respectively, of the revenues received by MSG Entertainment in connection with suite and club licenses.
Sponsorships and Signage
We earn revenue through the sale of sponsorships and signage specific to the teams. Sales of team specific signage generally involve the sale of advertising space within The Garden during our sports teams' home games and include the sale of signage on the ice and on the boards of the hockey rink during Rangers games, courtside during Knicks games, and/or on the various scoreboards and display panels at The Garden, as well as virtual signage during Knicks and Rangers broadcasts. We offer both television camera-visible and non-camera-visible signage space. We also earn a portion of revenues through MSG Entertainment's sale of venue indoor signage space and sponsorship rights at The Garden that are not specific to our teams pursuant to the Arena License Agreements. Under the Arena License Agreements, the Knicks and the Rangers are entitled to 25% and 22.5% of revenue from certain shared arena sponsorship assets, respectively, and 20% and 17.5% of revenue from any arena naming rights, respectively.
Sponsorship rights generally require the use of the name, logos and other trademarks of a sponsor in the advertising and in promotions for The Garden in general or our teams specifically during our sports events. Sponsorship arrangements may be exclusive within a particular sponsorship category or non-exclusive and generally permit a sponsor to use the name, logos and other trademarks of our teams and, in the case of sponsorship arrangements shared with MSG Entertainment, MSG Entertainment's venues and brands in connection with their own advertising and in promotions in The Garden or in the community.
Food, Beverage and Merchandise Sales
We earn revenue from the sale of food and beverages during our sports teams' games at The Garden. In addition to concession-style sales of food and beverages, which represent the majority of food and beverage revenues, The Garden also provides higher-end dining at premium clubs as well as catering for suites. Pursuant to the Arena License Agreements, the Knicks and the Rangers receive 50% of net profits from the sales of food and beverages during their games at The Garden.
We also earn revenues from the sale of our sports teams' merchandise both through the in-venue and online sale of items bearing the logos or other marks of our teams and through our share of sports league distributions of royalties and other revenues from the sports leagues' licensing of team and sports league trademarks, which are generally shared equally among the teams in the sports leagues. Pursuant to the Arena License Agreements, the Knicks and the Rangers pay MSG Entertainment a commission equal to 30% of revenues from the sales of their merchandise at The Garden.
Other
Amounts collected for ticket sales, media rights, suite licenses and clubs, sponsorships, and venue signage in advance of the Company's satisfaction of its contractual performance obligations are recorded as deferred revenue and are recognized as revenues when earned.
Expenses
Our most significant expenses are player and other team personnel salaries. We also incur costs for travel, player insurance, league operating assessments (including a 6% NBA assessment on regular season ticket sales), NBA and NHL revenue sharing, NBA luxury tax, when applicable, and charges for transactions relating to players for career-ending and season-ending injuries, trades, and waivers and contract termination costs of players and other team personnel, including coaches and team executives.
In addition, we are party to long term leases with MSG Entertainment that end June 30, 2055 that allow the Knicks and the Rangers to play their home games at The Garden (the "Arena License Agreements"). The Arena License Agreements provide for fixed payments to be made from inception through June 30, 2055 in 12 equal installments during each year of the contractual term. The contracted license fee for the first full contract year ended June 30, 2021 was approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees are 103% of the license fees for the immediately preceding contract year. Recognition of operating lease costs is recorded on a straight-line basis over the term of the applicable agreement based upon the value of total future payments under the arrangement. Operating lease costs associated with the Knicks and the Rangers playing home games at The Garden includes operating lease costs of (i) $45,374 and $44,052 of expense paid in cash for fiscal years 2026 and 2025, respectively, and (ii) a non-cash expense of $22,245 and $23,566 for fiscal years 2026 and 2025, respectively.
Player Salaries, Escrow System/Revenue Sharing and NBA Luxury Tax
The amount we pay an individual player is typically determined by negotiation between the player (typically represented by an agent) and us, and is generally influenced by the player's past performance, the amounts paid to players with comparable past performance by other sports teams, the NBA luxury tax and restrictions in the CBAs, including the salary floors and caps. The leagues' CBAs typically contain restrictions on when players may move between league clubs following expiration of their contracts and what rights their current and former clubs have.
NBA CBA. On April 26, 2023, the NBA and the National Basketball Players Association ("NBPA") announced that a new seven-year CBA had been ratified by the NBA Board of Governors and the NBA players. The new 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 new CBA includes certain changes to certain league rules and regulations, including revised luxury tax rates which became effective with the 2025-26 season.
The NBA CBA contains a salary floor (i.e., a floor on each team's aggregate player salaries with a requirement that the team pay any deficiency to the players on its roster) and a "soft" salary cap (i.e., a cap on each team's aggregate player salaries but with certain exceptions that enable teams to pay players more, sometimes substantially more, than the cap).
NBA Luxury Tax. Amounts in this paragraph are in thousands, except for luxury tax rates. The NBA CBA generally provides for a luxury tax that is applicable to all teams with aggregate player salaries exceeding a threshold that is set prior to each season based upon projected league-wide revenues (as defined under the NBA CBA). The amount of luxury tax owed is determined based upon the amount of aggregate player salaries exceeding the season's luxury tax threshold and tax rates based upon that season's luxury tax bracket. The luxury tax brackets for the 2024-25 and 2025-26 seasons were $5,168 and $5,685, respectively, and the luxury tax bracket for subsequent seasons will increase annually at the same rate as the NBA salary cap. Through the 2024-25 season, luxury tax rates for teams with aggregate player salaries above such threshold started at $1.50 for each $1.00 of team salary exceeding the threshold by 0% - 100% of the luxury tax bracket and scaled up to $3.25 for each $1.00 of team salary exceeding the threshold by 300% - 400% of the luxury tax bracket. An additional tax rate increment of $0.50 applied for each additional 100% of the luxury tax bracket of each $1.00 of team salary exceeding the threshold by greater than 400% of the luxury tax bracket. In addition, through the 2024-25 season, for teams that were taxpayers in at least three of four previous seasons, the above tax rates were increased by $1.00 for each increment. Beginning with the 2025-26 season, luxury tax rates for teams with aggregate player salaries above such threshold start at $1.00 for each $1.00 of team salary exceeding the threshold by 0% - 100% of the luxury tax bracket and scale up to $4.75 for each $1.00 of team salary exceeding the threshold by 300% - 400% of the luxury tax bracket. An additional tax rate increment of $0.50 applies for each additional 100% of the luxury tax bracket of each $1.00 of team salary exceeding the threshold by greater than 400% of the luxury tax bracket. In addition, beginning with the 2025-26 season, for teams that are taxpayers in at least three of the four previous seasons, the above tax rates are increased by $2.00 for each increment. Fifty percent of the aggregate luxury tax payments is a funding source for the revenue sharing plan (described below) and the remaining 50% of such payments is distributed in equal shares to non-taxpaying teams. For the 2025-26 and 2024-25 seasons, the Knicks were a luxury tax payer and we recorded luxury tax expense of $44,437 and $38,035, respectively, for fiscal years 2026 and 2025. For the 2023-24 season, the Knicks were not a luxury tax payer and we recorded $11,968 of luxury tax proceeds from tax-paying teams for fiscal year 2024. Tax obligations for years beyond the 2025-26 season will be subject to contractual player payroll obligations and corresponding NBA luxury tax thresholds. The Company recognizes the estimated amount associated with luxury tax expense or the amount it expects to receive as a non-tax paying team, if applicable, on a straight-line basis over the NBA regular season as a component of direct operating expenses.
NBA Escrow System/Revenue Sharing. The NBA CBA also provides that players collectively receive a designated percentage of league-wide revenues (net of certain direct expenses) as compensation (approximately 49% to 51%), and the teams retain the remainder. The percentage of league-wide revenues paid as compensation and retained by the teams does not apply evenly across all teams and, accordingly, the Company may pay its players a higher or lower percentage of the Knicks' revenues than other NBA teams.
Effective July 1, 2023, a "Ten-and-Roll" escrow system was put in place. Under the Ten-and-Roll system, throughout each season, NBA teams withhold 10% of each player's salary. If, for a particular season, compensation reductions in excess of 10% are needed, the excess will be recouped via certain reductions to player benefit contributions and if necessary, reductions to players' compensation over subsequent seasons, with the reduction of players' salary capped at 10%. Each team is entitled to receive an equal one-thirtieth share of the compensation reductions up to 10% and the excess above 10% is allocated in proportion to each team's player payroll.
The NBA also has a revenue sharing plan that generally requires the distribution of a pool of funds to teams with below-average net revenues (as defined in the plan), subject to potential reduction based on individual team market size. The plan is funded by a combination of disproportionate contributions from teams with above-average net revenues (as defined in the plan); 50% of aggregate league-wide luxury tax proceeds (see above); and collective league sources, if necessary. Additional amounts may
also be distributed on a discretionary basis, funded by assessments on playoff ticket revenues and through collective league sources and are recorded as revenues from league distributions.
Our net provisions for revenue sharing, net of escrow, for fiscal year 2026 were approximately $66,065. The actual amounts for the 2025-26 season may vary significantly from the recorded provision based on actual operating results for the league and all NBA teams for the season and other factors.
NHL CBA. The current NHL CBA was scheduled to expire on September 15, 2026. On July 8, 2025, the NHL and the National Hockey League Players' Association announced that a new four-year CBA had been ratified by the NHL Board of Governors and the NHL players. The new NHL CBA will be effective on September 15, 2026 and expires after the 2029-30 season. The NHL CBA provides for a salary floor (i.e., a floor on each team's aggregate player salaries) and a "hard" salary cap (i.e., teams may not exceed a stated maximum), which are adjusted each season based upon league-wide revenues.
NHL Escrow System/Revenue Sharing. The NHL CBA, applicable prior to the 2026-27 season, provides that each season the NHL players in the aggregate receive as player compensation 50% of that season's league-wide revenues. Because the aggregate amount to be paid to the players is based upon league-wide revenues and not on a team-by-team basis, the Company may pay its players a higher or lower percentage of the Rangers' revenues than other NHL teams pay of their own revenues. In order to implement the escrow system, NHL teams may withhold a portion of each player's salary and contribute the withheld amounts to an escrow account. If the league's aggregate player compensation for a season exceeds the designated percentage (50%) of that season's league-wide revenues, the excess is retained by the league. Any such excess funds are distributed to all teams in equal shares. In addition, the NHL CBA limits the amount of deductions to be withheld from player salaries each year. If annual escrow deductions from player salaries are insufficient to limit league-wide player salaries to 50% of that season's league-wide revenues, any shortfall will be carried forward to future seasons and remain due from the players to the league. If the league's aggregate player compensation for a season is less than the designated percentage (50%) of that season's league-wide revenues, the deficiency is collected from the teams and distributed to the players.
The NHL CBA also provides for a revenue sharing plan. The plan generally requires the distribution of a pool of funds not more than 6.055% of league-wide revenues to certain qualifying lower-revenue teams and is funded as follows: (a) 50% from contributions by the top ten revenue earning teams (based on preseason and regular season revenues, net of arena costs) in accordance with a formula; (b) then from payments by teams participating in the playoffs, with each team contributing 35% of its gate receipts for each home playoff game; and (c) the remainder from centrally-generated NHL sources. Our net provisions for revenue sharing, net of escrow, for fiscal years 2026 and 2025 were approximately $43,530 and $43,828, respectively. The actual amounts for the 2025-26 and 2024-25 seasons may vary significantly from the recorded provision based on actual operating results for the league and all NHL teams for the season and other factors. The Rangers are consistently among the top ten revenue earning teams and, accordingly, have consistently contributed to the top ten revenue earning teams component of the plan.
The new NHL CBA, which is applicable starting with the 2026-27 season, includes certain changes to league rules and regulations, including replacing one preseason home game with a regular season home game, and changes to the revenue sharing plan which, beginning with the 2026-27 season, will be funded as follows: (a) 50% from contributions by the top eleven revenue earning teams (based on preseason and regular season revenues, net of arena costs) in accordance with a formula; (b) then from payments by teams participating in the playoffs, with each team contributing 35% of its gate receipts for each home playoff game in the first round of the playoffs and 50% of its gate receipts for each home playoff game in subsequent playoff rounds; and (c) the remainder from centrally-generated NHL sources. The Rangers are consistently among the top eleven revenue earning teams and, accordingly, are expected to contribute to the top eleven revenue earning teams component of the plan.
Other Team Operating Expenses
Our teams also pay expenses associated with day-to-day operations, including for travel, equipment maintenance and player insurance. Direct variable day-of-event costs incurred at The Garden, such as the costs of front-of-house and back-of-house staff, including electricians, laborers, box office staff, ushers, security, and event production, are charged to the Company, and we also incur costs associated with VIP amenities provided to certain ticket holders.
In addition, our team operating expenses include operating costs of the Company's training center in Greenburgh, NY. The operation of the Hartford Wolf Pack is reported as a net Rangers player development expense.
As members of the NBA and NHL, the Knicks and the Rangers, respectively, are also subject to league assessments, which include costs incurred by the NBA and NHL to operate each league. The governing bodies of each league determine the amount of each season's league assessments that are required from each member team. The NBA imposes on each team a 6% assessment on regular season ticket revenue.
Other Expenses
Other expenses primarily include selling, general and administrative expenses that consist of (i) administrative costs, including compensation, costs under the Company's services agreement with MSG Entertainment, professional fees, and operating lease costs, (ii) fees related to the Company's Sponsorship Sales and Service Representation Agreements (as defined below), and (iii) sales and marketing costs.
Factors Affecting Operating Results
General
Our operating results are largely dependent on the continued popularity and/or on-court or on-ice competitiveness of the Knicks and Rangers, which have a direct effect on ticket sales for the teams' home games and are each team's largest single source of revenue. In addition, the popularity of our sports teams can generate fan enthusiasm, resulting in sustained premium seating, suite, sponsorship, food and beverage and merchandise sales. Furthermore, success in the regular season may qualify our sports teams for participation in post-season playoffs, which provides us with a significant source of additional revenue, operating income and adjusted operating income. As with other sports teams, the competitive positions of our sports teams depend primarily on our ability to develop, obtain and retain talented players, for which we compete with other professional sports teams.
A significant factor in our ability to attract and retain talented players is player compensation. The Company's operating results reflect the impact of high costs for player salaries (including NBA luxury tax, if any) and salaries of non-player team personnel. In addition, we have incurred significant charges for costs associated with transactions relating to players on our sports teams for season-ending and career-ending injuries and for trades, waivers and contract terminations of players and other team personnel, including team executives. Waiver and termination costs reflect our efforts to improve the competitiveness of our sports teams. These transactions can result in significant charges as the Company recognizes the estimated ultimate costs of these events in the period in which they occur, although amounts due to these individuals are generally paid over their remaining contract terms. For example, the expenses for these transactions were a net provision of $49,148 for fiscal year 2025. These expenses add to the volatility of our operating results. We expect to continue to pursue opportunities to improve the overall quality of our sports teams and our efforts may result in continued significant expenses and charges. Such expenses and charges may result in future operating losses although it is not possible to predict their timing or amount. In addition, our performance has been, and may in the future be, impacted by work stoppages. See "Part I - Item 1A. Risk Factors - Economic and Business Relationship Risks -Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations."
In addition to our future performance being dependent upon the continued popularity and/or on-court or on-ice competitiveness of the Knicks and Rangers, it is also dependent on general economic conditions, in particular those in the New York City metropolitan area, and the effect of these conditions on our customers. An economic downturn could adversely affect our business and results of operations as it may lead to lower demand for suite licenses and tickets to the games of our sports teams, which would also negatively affect merchandise and concession sales, as well as decrease levels of sponsorship and venue signage revenues.
Amendments to Local Telecast Rights Agreements
On June 27, 2025, the local telecast rights agreements between subsidiaries of MSG Networks, on the one hand, and New York Knicks, LLC ("Knicks LLC") and New York Rangers, LLC ("Rangers LLC"), on the other hand, were amended, as follows:
•New York Knicks:
◦a modification to the annual rights fee to effect a 28% reduction as of January 1, 2025;
◦an elimination of the annual rights fee escalator; and
◦a change to the contract expiration date to the end of the 2028-29 season, subject to MSG Networks' right to make a firm offer for an additional term of not less than three seasons and to match a third-party offer unless the third-party offer provides rights fees for the first three years that are at least 110% of the rights fees specified in MSG Networks' firm offer; and
•New York Rangers:
◦a modification to the annual rights fee to effect an 18% reduction as of January 1, 2025;
◦an elimination of the annual rights fee escalator; and
◦a change to the contract expiration date to the end of the 2028-29 season, subject to MSG Networks' right to make a firm offer for an additional term of not less than three seasons and to match a third-party offer unless the third-party offer provides rights fees for the first three years that are at least 110% of the rights fees specified in MSG Networks' firm offer.
Concurrent with the amendments to the local telecast rights agreements, MSG Networks issued penny warrants to the Company exercisable for 19.9% of the equity interests in MSG Networks.
As a result of the amendments to the local telecast rights agreements, local telecast rights fees revenues for fiscal years 2026 and 2025 have been recorded at the applicable reduced rate described above. The Company also expects to record local telecast rights fees revenues reflecting the reduced rates described above in future periods.
Results of Operations
Comparison of Fiscal Year 2026 versus Fiscal Year 2025
The table below sets forth, for the periods presented, certain historical financial information.
| Years Ended June 30, | Change | |||||||||||||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 1,153,822 | $ | 1,039,220 | $ | 114,602 | 11 | % | ||||||||||||||||||
| Direct operating expenses | 833,702 | 755,118 | 78,584 | 10 | % | |||||||||||||||||||||
| Selling, general and administrative expenses | 285,995 | 266,076 | 19,919 | 7 | % | |||||||||||||||||||||
| Depreciation and amortization | 3,179 | 3,218 | (39) | (1) | % | |||||||||||||||||||||
| Restructuring charges | 2,078 | - | 2,078 | NM | ||||||||||||||||||||||
| Operating income | 28,868 | 14,808 | 14,060 | 95 | % | |||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest income | 2,939 | 4,034 | (1,095) | (27) | % | |||||||||||||||||||||
| Interest expense | (21,085) | (21,652) | 567 | (3) | % | |||||||||||||||||||||
| Miscellaneous income (expense), net | 7,261 | (14,462) | 21,723 | NM | ||||||||||||||||||||||
| Income (loss) before income taxes | 17,983 | (17,272) | 35,255 | NM | ||||||||||||||||||||||
| Income tax expense | (10,224) | (5,166) | (5,058) | 98 | % | |||||||||||||||||||||
| Net income (loss) | $ | 7,759 | $ | (22,438) | $ | 30,197 | NM | |||||||||||||||||||
NM - Percentage is not meaningful
Revenues
Revenues for fiscal year 2026 increased $114,602, or 11%, to $1,153,822 as compared to fiscal year 2025. The net increase was attributable to the following:
| Increase in playoff related revenues | $ | 66,893 | ||||||
| Increase in revenues from league distributions | 41,361 | |||||||
| Increase in pre/regular season ticket-related revenues | 12,747 | |||||||
| Increase in suite revenues | 12,501 | |||||||
| Increase in sponsorship and signage revenues | 7,599 | |||||||
| Increase in pre/regular season food, beverage and merchandise sales | 4,701 | |||||||
| Decrease in revenues from local media rights fees | (31,644) | |||||||
| Other net increases | 444 | |||||||
| $ | 114,602 | |||||||
The increase in playoff related revenues was primarily due to higher average per-game Knicks playoff revenue and higher Knicks merchandise revenues during the team's playoff run as a result of winning the 2026 NBA Championship in fiscal year 2026 as compared to the Knicks advancing to the Eastern Conference Finals in fiscal year 2025. The Knicks played nine home playoff games at The Garden in both fiscal year 2026 and fiscal year 2025.
The increase in revenues from league distributions was primarily due to increased rights fees under the NBA's new national media rights agreements, which began with the 2025-26 NBA regular season, and an incremental league distribution received from the NBA in fiscal year 2026 related to the impact of the NBA Cup on the Knicks' 2025-26 game schedule. This increase was partially offset by a decrease in certain league distributions unrelated to national media rights fees.
The increase in pre/regular season ticket-related revenues was primarily due to higher average per-game revenue, partially offset by the impact of the Knicks playing 43 pre/regular season home games at The Garden during the 2025-26 regular season as compared to 44 pre/regular season home games during the 2024-25 season as a result of the NBA Cup.
The increase in suite revenues was primarily due to higher net sales of suite products.
The increase in sponsorship and signage revenues was primarily due to higher net sales of existing sponsorship and signage inventory.
The increase in pre/regular season food, beverage and merchandise sales was primarily due to higher average per-game revenue and higher online sales of merchandise. Merchandise sales for fiscal year 2026 included the positive impact of new Rangers' jersey launches.
The decrease in revenues from local media rights fees was primarily due to reduced local telecast rights fees as a result of the amendments to the Knicks' and the Rangers' local telecast rights agreements with MSG Networks and a reduction in local telecast rights fees due to a decrease in the number of games exclusively available to MSG Networks during fiscal year 2026 as compared to fiscal year 2025. Stated annual local media rights fees, subject to adjustments in certain circumstances, including if the Company does not make available a minimum number of games in the year, after consideration of the local telecast rights amendments were $139,237 for fiscal year 2026 as compared to $162,939 in stated annual local media rights fees for fiscal year 2025.
Direct operating expenses
Direct operating expenses generally include:
•compensation expense for our sports teams' players and certain other team personnel;
•arena license fees recognized as operating lease costs associated with the Knicks and the Rangers playing home games at The Garden;
•cost of team personnel transactions for waivers/contract termination costs, trades, and season-ending player injuries (net of anticipated insurance recoveries) of players and other team personnel, including coaches;
•NBA and NHL revenue sharing (net of escrow and excluding playoffs) and NBA luxury tax;
•other team operating expenses including variable day-of-event costs, team travel, player insurance, operating costs of the Company's training center, and league assessments;
•the cost of merchandise sales; and
•playoff related expenses, which include NBA and NHL revenue sharing and other team operating expenses, as described above.
Direct operating expenses for fiscal year 2026 increased $78,584, or 10%, to $833,702 as compared to fiscal year 2025. The net increase was attributable to the following:
| Increase in playoff related expenses | $ | 49,532 | ||||||
| Increase in team personnel compensation | 41,266 | |||||||
| Increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax | 23,256 | |||||||
| Increase in other team operating expenses | 11,168 | |||||||
| Increase in pre/regular season expense associated with merchandise sales | 2,535 | |||||||
| Decrease in net (credits) provisions for certain team personnel transactions | (49,173) | |||||||
| $ | 78,584 | |||||||
The increase in playoff related expenses was primarily due to the higher average per-game Knicks playoff expenses and higher expense associated with merchandise sales due to higher Knicks merchandise revenues during the team's playoff run as a result of winning the 2026 NBA Championship in fiscal year 2026 as compared to the Knicks advancing to the Eastern Conference Finals in fiscal year 2025.
The increase in team personnel compensation was primarily due to changes in the Knicks and the Rangers rosters.
Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax were as follows:
| Years Ended June 30, | Increase | |||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
| Net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax | $ | 130,218 | $ | 106,962 | $ | 23,256 | ||||||||||||||
The increase in net provisions for league revenue sharing expense (net of escrow and excluding playoffs) and NBA luxury tax was primarily due to higher provisions for league revenue sharing expense (net of escrow and excluding playoffs) and higher
NBA luxury tax expense, partially offset by the net impact of adjustments to prior seasons' revenue sharing expense (net of escrow).
The actual net provisions for league revenue sharing expense (net of escrow and excluding playoffs) for the 2025-26 seasons may vary significantly from the recorded provisions based on actual operating results for each league and all teams within each league for the season and other factors.
The increase in other team operating expenses was primarily due to higher league assessments and higher team travel expenses.
The increase in pre/regular season expense associated with merchandise sales was primarily due to higher average per-game revenue and higher online sales of merchandise. Merchandise sales for fiscal year 2026 included the positive impact of new Rangers' jersey launches.
Net (credits) provisions for certain team personnel transactions were as follows:
| Years Ended June 30, | Change | |||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
| Player trades | $ | (2,661) | $ | 9,800 | $ | (12,461) | ||||||||||||||
| Waivers/contract terminations | 2,636 | 39,215 | (36,579) | |||||||||||||||||
| Season-ending player injuries | - | 133 | (133) | |||||||||||||||||
| Net (credits) provisions for certain team personnel transactions | $ | (25) | $ | 49,148 | $ | (49,173) | ||||||||||||||
Selling, general and administrative expenses
Selling, general and administrative expenses primarily consist of (i) administrative costs, including compensation, costs under the Company's services agreement with MSG Entertainment, professional fees, and operating lease costs, (ii) fees related to the Sponsorship Sales and Service Representation Agreements, and (iii) sales and marketing costs. Selling, general and administrative expenses generally do not fluctuate in line with changes in the Company's revenues and direct operating expenses.
Selling, general and administrative expenses for fiscal year 2026 increased $19,919, or 7%, to $285,995 as compared to fiscal year 2025 primarily driven by (i) higher playoff related expenses of $13,279, (ii) higher employee compensation and related benefits of $11,591, including executive management transition costs of $7,195 recognized in fiscal year 2026, (iii) expenses related to the Rangers Distribution of $3,754 and (iv) higher other general and administrative expenses. The increase was partially offset by lower other professional fees of $14,223.
Restructuring charges
Restructuring charges for fiscal year 2026 were $2,078 due to termination benefits provided as part of a voluntary exit program the Company implemented during fiscal year 2026. There were no restructuring charges for fiscal year 2025.
Operating income
Operating income increased $14,060, or 95%, to $28,868 as compared to fiscal year 2025, primarily due to higher revenues, partially offset by higher direct operating expenses and higher selling, general and administrative expenses.
Interest income
Interest income decreased $1,095, or 27%, to $2,939 as compared to fiscal year 2025, primarily due to lower average interest rates and lower average cash balances in fiscal year 2026.
Interest expense
Interest expense decreased $567, or 3%, to $21,085 as compared to fiscal year 2025.
Miscellaneous income (expense), net
Miscellaneous income (expense), net for fiscal year 2026 reflected net income of $7,261 and Miscellaneous income (expense), net for fiscal year 2025 reflected net expense of $14,462. The increase in Miscellaneous income (expense), net relates to changes in fair value in the Company's investments.
Income taxes
Income tax expense for fiscal year 2026 of $10,224, reflecting an effective tax rate of 57%, differs from the income tax expense derived from applying the statutory federal rate of 21% to pretax income primarily due state and local tax expense of $4,434 and nondeductible officers' compensation of $3,909.
Income tax expense for fiscal year 2025 of $5,166, reflecting an effective tax rate of (30)%, differs from the income tax benefit derived from applying the statutory federal rate of 21% to pretax loss primarily due to nondeductible officers' compensation of $5,291 and state and local tax expense of $2,581.
See Note 19 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the components of income tax and a reconciliation of the statutory federal rate to the effective tax rate.
Adjusted operating income
The Company evaluates performance based on several factors, of which the key financial measure is operating income (loss) excluding (i) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (ii) share-based compensation expense or benefit, (iii) restructuring charges or credits, (iv) gains or losses on sales or dispositions of businesses, (v) the impact of purchase accounting adjustments related to business acquisitions, and (vi) gains and losses related to the remeasurement of liabilities under the Company's Executive Deferred Compensation Plan, which is referred to as adjusted operating income (loss), a non-GAAP measure.
Management believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the Company's business without regard to the settlement of an obligation that is not expected to be made in cash. In addition, management believes that the exclusion of gains and losses related to the remeasurement of liabilities under the Company's Executive Deferred Compensation Plan provides investors with a clearer picture of the Company's operating performance given that, in accordance with generally accepted accounting principles ("GAAP"), gains and losses related to the remeasurement of liabilities under the Company's Executive Deferred Compensation Plan are recognized in Operating income (loss) whereas gains and losses related to the remeasurement of the assets under the Company's Executive Deferred Compensation Plan, which are equal to and therefore fully offset the gains and losses related to the remeasurement of liabilities, are recognized in Miscellaneous income (expense), net, which is not reflected in Operating income (loss).
The Company believes adjusted operating income (loss) is an appropriate measure for evaluating the operating performance of the Company. Adjusted operating income (loss) and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company's performance. The Company uses revenues and adjusted operating income (loss) measures as the most important indicators of its business performance and evaluates management's effectiveness with specific reference to these indicators.
Adjusted operating income (loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since adjusted operating income (loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating income (loss), the most directly comparable GAAP financial measure, to adjusted operating income (loss).
The following is a reconciliation of operating income to adjusted operating income:
| Years Ended June 30, | ||||||||||||||||||||||||||
| 2026 | 2025 | Change | Percentage | |||||||||||||||||||||||
| Operating income | $ | 28,868 | $ | 14,808 | $ | 14,060 | 95 | % | ||||||||||||||||||
| Depreciation and amortization | 3,179 | 3,218 | ||||||||||||||||||||||||
| Share-based compensation | 21,524 | 17,935 | ||||||||||||||||||||||||
| Restructuring charges | 2,078 | - | ||||||||||||||||||||||||
|
Remeasurement of deferred compensation plan liabilities
|
3,077 | 2,195 | ||||||||||||||||||||||||
| Adjusted operating income | $ | 58,726 | $ | 38,156 | $ | 20,570 | 54 | % | ||||||||||||||||||
For fiscal year 2026, adjusted operating income increased $20,570, or 54%, to $58,726 as compared fiscal year 2025. The increase in adjusted operating income was primarily due to higher revenues, partially offset by higher direct operating expenses and, to a lesser extent, higher selling, general and administrative expenses.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash and cash equivalents, cash flow from operations and available borrowing capacity under our credit facilities. On November 6, 2025, the Company amended and extended the 2021 Knicks Credit Agreement and the 2021 Rangers Credit Agreement. See Note 14 to the consolidated financial statements included in Item 8 of this Annual
Report on Form 10-K for a discussion of the 2025 Knicks Credit Agreement, the 2025 Rangers Credit Agreement, and the Rangers NHL Advance Agreement (each as defined therein).
Our principal uses of cash include the operation of our businesses, working capital-related items, the repayment of outstanding debt, repurchases of shares of the Company's Class A Common Stock, dividends, if declared, and investments.
As of June 30, 2026, we had $164,511 in Cash and cash equivalents. In addition, as of June 30, 2026, the Company's deferred revenue obligations were $118,217, net of billed, but not yet collected deferred revenue. This balance is primarily comprised of obligations in connection with tickets and suites. The outstanding balance under the Knicks Revolving Credit Facility was $242,000 as of June 30, 2026 and the outstanding balance under the Rangers NHL Advance Agreement was $16,500 as of June 30, 2026. There were no borrowings under the Rangers Revolving Credit Facility as of June 30, 2026.
We regularly monitor and assess our ability to meet our net funding and investing requirements. The decisions of the Company as to the use of its available liquidity will be based upon the ongoing review of the funding needs of the business, management's view of a favorable allocation of cash resources, and the timing of cash flow generation. To the extent the Company desires to access alternative sources of funding through the capital and credit markets, restrictions imposed by the NBA and NHL and potentially challenging U.S. and global economic and market conditions could adversely impact its ability to do so at that time.
We believe we have sufficient liquidity, including $164,511 in Cash and cash equivalents as of June 30, 2026, along with $433,000 of additional available borrowing capacity under existing credit facilities (as of June 30, 2026), to fund our operations and satisfy any obligations, for the foreseeable future.
On July 22, 2026, the Company borrowed an additional $20,000 under the Knicks Revolving Credit Facility.
Financing Agreements and Stock Repurchases
See Note 14 and Note 17 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussions of the Company's debt obligations and various financing agreements, and the Company's stock repurchases, respectively.
Cash Flow Discussion
The following table summarizes the Company's cash flow activities for fiscal years 2026 and 2025:
| Years Ended June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Net income (loss) | $ | 7,759 | $ | (22,438) | ||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities | 28,101 | (13,542) | ||||||||||||
| Changes in working capital assets and liabilities | 26,803 | 127,587 | ||||||||||||
| Net cash provided by operating activities | $ | 62,663 | $ | 91,607 | ||||||||||
| Net cash used in investing activities | (2,206) | (6,920) | ||||||||||||
| Net cash used in financing activities | (49,134) | (26,406) | ||||||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 11,323 | $ | 58,281 | ||||||||||
Operating Activities
Net cash provided by operating activities for fiscal year 2026 decreased by $28,944 to $62,663 as compared to fiscal year 2025. The decrease was due to the impact of changes in working capital assets and liabilities, partially offset by the increase in net income (loss) adjusted for non-cash items. The changes in working capital assets and liabilities were primarily driven by (i) an increase in net related party receivables of $61,194 primarily due to the timing of collections related to the Company's Arena License Agreements and Sponsorship Sales and Service Representation Agreements, (ii) an increase in accounts receivable of $34,255 primarily due to the timing of receipts from the NBA and the timing of collections of sponsorship sales, (iii) a lower increase in deferred revenue of $13,885 primarily due to the timing of collections of ticket, suites, and sponsorship sales in advance of recognition, and (iv) a lower increase in accrued and other liabilities of $8,510 primarily due to impact of NBA luxury tax payments in fiscal year 2026, partially offset by higher accruals for employee compensation and league revenue sharing (net of escrow) in fiscal year 2026. These changes were partially offset by an increase in accounts payable of $9,664 primarily due to the timing of payment of playoff related expenses and a lower decrease in prepaid expenses and other assets of $4,875 primarily driven by the timing of payments related to employee compensation.
Investing Activities
Net cash used in investing activities for fiscal year 2026 decreased by $4,714 to $2,206 as compared to fiscal year 2025 primarily due to lower capital expenditures in fiscal year 2026, the impact of a distribution received from an equity method investee in fiscal year 2026 and lower purchases of investments in fiscal year 2026.
Financing Activities
Net cash used in financing activities for fiscal year 2026 increased by $22,728 to $49,134 as compared to fiscal year 2025 primarily due to higher principal repayments under the Company's credit facilities and Rangers NHL Advance Agreement in fiscal year 2026 and payments for financing costs in fiscal year 2026.
Contractual Obligations and Off-Balance Sheet Arrangements
Future cash payments required under contracts entered into by the Company in the normal course of business as of June 30, 2026 are summarized in the following table:
| Payments Due by Period | |||||||||||||||||||||||||||||
| Total |
Year
1
|
Years
2-3
|
Years
4-5
|
More Than
5 Years
|
|||||||||||||||||||||||||
|
Off-balance sheet arrangements (a)
|
$ | 863,181 | $ | 288,035 | $ | 423,026 | $ | 102,121 | $ | 49,999 | |||||||||||||||||||
| Contractual obligations reflected in the balance sheet: | |||||||||||||||||||||||||||||
|
Short-term debt (b)
|
16,500 | 16,500 | - | - | - | ||||||||||||||||||||||||
|
Leases (c)
|
2,315,274 | 59,716 | 126,262 | 132,525 | 1,996,771 | ||||||||||||||||||||||||
|
Long-term debt (d)
|
242,000 | - | - | 242,000 | - | ||||||||||||||||||||||||
|
Contractual obligations (e)
|
148,651 | 120,050 | 19,170 | 3,772 | 5,659 | ||||||||||||||||||||||||
| 2,722,425 | 196,266 | 145,432 | 378,297 | 2,002,430 | |||||||||||||||||||||||||
|
Total (f)
|
$ | 3,585,606 | $ | 484,301 | $ | 568,458 | $ | 480,418 | $ | 2,052,429 | |||||||||||||||||||
_________________
(a)Contractual obligations not reflected in the balance sheet consist principally of the Company's obligations under employment agreements that the Company has with certain of its professional sports teams' personnel where services are to be performed in future periods and that are generally guaranteed regardless of employee injury or termination.
(b)Consists of amounts under the Rangers NHL Advance Agreement. See Note 14 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details.
(c)Includes contractually obligated minimum license fees under the Arena License Agreements, which fees are characterized as lease payments for operating leases having an initial noncancelable term in excess of one year under GAAP. These commitments are presented exclusive of the imputed interest used to reflect the payment's present value. See Note 8 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for information on the contractual obligations related to future lease payments, which are reflected in the consolidated balance sheet as lease liabilities as of June 30, 2026.
(d)Consists of amounts drawn under the Knicks Revolving Credit Facility. See Note 14 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details.
(e)Contractual obligations reflected in the balance sheet consist principally of the Company's obligations under employment agreements that the Company has with certain of its professional sports teams' personnel where services have been fully performed and that are being paid on a deferred basis.
(f)Pension obligations have been excluded from the table above as the timing of the future cash payments is uncertain. See Note 15 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information in the Company's pension obligations.
Seasonality of Our Business
The Company's dependence on revenues from its NBA and NHL sports teams generally means that it earns a disproportionate share of its revenues in the second and third quarters of the Company's fiscal year, which is when the majority of the teams' games are played.
Recently Issued Accounting Pronouncements and Critical Accounting Estimates
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussion of recently issued accounting pronouncements.
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Management believes its use of estimates in the consolidated financial statements to be reasonable. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
Arrangements with Multiple Performance Obligations
The Company has contracts with customers, including multi-year sponsorship agreements, that contain multiple performance obligations. Payment terms for such arrangements can vary by contract, but payments are generally due in installments throughout the contractual term. The performance obligations included in each sponsorship agreement vary and may include various advertising benefits such as, but not limited to, signage, digital advertising, and event or property specific advertising, as well as non-advertising benefits such as suite licenses and event tickets. To the extent the Company's multi-year arrangements provide for performance obligations that are consistent over the multi-year contractual term, such performance obligations generally meet the definition of a series as provided for under the accounting guidance. If performance obligations meet the definition of a series, the contractual fees for all years during the contract term are aggregated and the related revenue is recognized proportionately as the underlying performance obligations are satisfied.
The timing of revenue recognition for each performance obligation is dependent upon the facts and circumstances surrounding the Company's satisfaction of its respective performance obligation. The Company allocates the transaction price for such arrangements to each performance obligation within the arrangement based on the estimated relative standalone selling price of the performance obligation. The Company's process for determining its estimated standalone selling prices involves management's judgment and considers multiple factors including company specific and market specific factors that may vary depending upon the unique facts and circumstances related to each performance obligation. Key factors considered by the Company in developing an estimated standalone selling price for its performance obligations include, but are not limited to, prices charged for similar performance obligations, the Company's ongoing pricing strategy and policies, and consideration of pricing of similar performance obligations sold in other arrangements with multiple performance obligations.
The Company may incur costs to obtain its multi-year sponsorship agreements. The Company assesses such costs for capitalization on a contract by contract basis. To the extent costs are capitalized, the Company estimates the useful life of the related contract asset which may be the underlying contract term or the estimated customer life depending on the facts and circumstances surrounding the contract. The contract asset is amortized over the estimated useful life.
Impairment of Long-Lived and Indefinite-Lived Assets
The Company's long-lived and indefinite-lived assets accounted for approximately 23% of the Company's consolidated total assets as of June 30, 2026 and consisted of the following:
| Goodwill | $ | 226,523 | |||
| Indefinite-lived intangible assets | 103,644 | ||||
| Property and equipment, net | 27,163 | ||||
| $ | 357,330 | ||||
In assessing the recoverability of the Company's long-lived and indefinite-lived assets, the Company must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized as well as the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve significant uncertainties and judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. If these estimates or material related assumptions change in the future, the Company may be required to record impairment charges related to its long-lived and/or indefinite-lived assets.
Goodwill
Goodwill is tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level, which is the same as or one
level below the operating segment level. The Company has one operating and reportable segment, and as of June 30, 2026, the Company had one reporting unit for goodwill impairment testing purposes.
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative assessment is performed by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of the fair value of the Company's reporting units are primarily determined using discounted cash flows and comparable market transactions. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. The amount of an impairment loss is measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
The Company elected to perform the qualitative assessment of impairment for the Company's reporting unit for the fiscal year 2026 impairment test. These assessments considered factors such as:
•macroeconomic conditions;
•industry and market considerations;
•market capitalization;
•cost factors;
•overall financial performance of the reporting unit;
•other relevant company-specific factors such as changes in management, strategy or customers; and
•relevant reporting unit specific events such as changes in the carrying amount of net assets.
The Company performed its most recent annual impairment test of goodwill during the first quarter of fiscal year 2026, and there was no impairment of goodwill. Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.
Identifiable Indefinite-Lived Intangible Assets
Identifiable indefinite-lived intangible assets are tested annually for impairment as of August 31st and at any time upon the occurrence of certain events or substantive changes in circumstances. The following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the consolidated balance sheet as of June 30, 2026:
| Sports franchises | $ | 102,564 | |||
| Photographic related rights | 1,080 | ||||
| $ | 103,644 | ||||
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis, if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) forgoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. For all periods presented, the Company elected to perform a qualitative assessment of impairment for the indefinite-lived intangible assets. These assessments considered the events and circumstances that could affect the significant inputs used to determine the fair value of the intangible asset. Examples of such events and circumstances include:
•cost factors;
•financial performance;
•legal, regulatory, contractual, business or other factors;
•other relevant company-specific factors such as changes in management, strategy or customers;
•industry and market considerations; and
•macroeconomic conditions.
The Company performed its most recent annual impairment test of identifiable indefinite-lived intangible assets during the first quarter of fiscal year 2026, and there were no impairments identified. Based on this impairment test, the Company concluded it was not more likely than not that the fair value of the indefinite-lived intangible assets was less than their carrying amount.
Lease Accounting
The Company's leases primarily consist of the lease of the Company's corporate offices under the Sublease Agreement (as defined below) with MSG Entertainment for the Company's principal executive offices at Two Pennsylvania Plaza in New York and an aircraft lease. In addition, the Company accounts for the rights of use of The Garden pursuant to the Arena License Agreements as leases under the Accounting Standards Codification Topic 842, Leases. The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the lease term is assessed based on the date when the underlying asset is made available for the Company's use by the lessor. The Company's assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain not to exercise, as well as periods covered by renewal options which the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded in the consolidated balance sheet at lease commencement reflecting the present value of the fixed minimum payment obligations over the lease term. A corresponding right-of-use ("ROU") asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received.
The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as the Company has elected to account for lease and non-lease components together as a single lease component. ROU assets associated with finance leases, if any, are presented separate from operating lease ROU assets and are included within Property and equipment, net in the consolidated balance sheets. For purposes of measuring the present value of the Company's fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in the underlying leasing arrangements are typically not readily determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment surrounding the associated lease.
The Company is party to the Sublease Agreement for the Company's principal executive offices at Two Pennsylvania Plaza in New York. The sublease ROU assets and liabilities are recorded in the balance sheet at lease commencement based on the present value of minimum base rent and other fixed payments over the reasonably certain lease term.
In November 2021, Sphere Entertainment entered into a new lease for principal executive offices at Two Pennsylvania Plaza in New York, which was assigned to MSG Entertainment in connection with the MSGE Distribution (the "New MSGE Lease Agreement"). In accordance with the terms of the Prior Sublease Agreement (as defined below) and the New MSGE Lease Agreement, the lease term of the Prior Sublease Agreement was extended until October 31, 2024. The Company accounted for this extension as a lease remeasurement and remeasured the ROU asset and operating lease liability utilizing the Company's incremental borrowing rate as of the date of remeasurement.
During the second quarter of fiscal year 2025, the Company amended and restated its prior sublease agreement with MSG Entertainment (the "Prior Sublease Agreement") to enter into a short term lease for new principal executive offices through December 31, 2024. The Company recorded the short term operating lease costs for this amendment within Selling, general and administrative expenses in the consolidated statements of operations for fiscal year 2025.
In January 2025, the Company entered into a new sublease agreement with MSG Entertainment for new principal executive offices at Two Pennsylvania Plaza in New York with a lease term which ends January 31, 2046 (the "New Sublease Agreement" and together with the Prior Sublease Agreement, the "Sublease Agreement") and fixed lease payment obligations of $167,444 over the lease term. The Company recorded a lease right-of-use asset and liability in the consolidated balance sheet as of June 30, 2025 based on the present value of minimum fixed lease payments over the lease term utilizing the Company's incremental borrowing rate as of the lease commencement date. In addition, the Company entered into a commitment whereby if the MSG Entertainment's lease for principal executive offices at Two Pennsylvania Plaza in New York were terminated under certain circumstances, the Company would be required to enter into a new lease for executive offices at Two Pennsylvania Plaza directly with the landlord, with a consistent lease term through January 31, 2046.
In addition, the Company is party to long term leases with MSG Entertainment that end June 30, 2055 that allow the Knicks and the Rangers to play their home games at The Garden. The Arena License Agreements provide for fixed payments to be made from inception through June 30, 2055 in 12 equal installments during each year of the contractual term. The contracted license fee for the first full contract year ended June 30, 2021 was approximately $22,500 for the Knicks and approximately $16,700 for the Rangers, and then for each subsequent year, the license fees are 103% of the license fees for the immediately preceding contract year.
The Knicks and the Rangers are entitled to use The Garden on home game days, which are usually nonconsecutive, for a pre-defined period of time before and after the game. In evaluating the Company's lease cost, the Company considered the timing of payments throughout the lease terms and the nonconsecutive periods of use, provided for within each license. While payments are made throughout the contract year in twelve equal installments under each arrangement, the periods of use only span each of the individual team event days. As such, the Company concluded that the related straight-line operating lease costs should be recorded equally as pre/regular season home games are played by each team.
As part of the Arena License Agreements, we recognized license fees which are characterized as operating lease liabilities and ROU assets. We measured the lease liabilities at the present value of the future lease payments as of April 17, 2020 and remeasured the operating lease liabilities and ROU assets as a result of government-mandated suspension of events and government-mandated assembly restrictions in response to COVID-19. We use our incremental borrowing rates based on the remaining lease term to determine the present value of future lease payments. Our incremental borrowing rate for a lease is the rate of interest we would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.
Our incremental borrowing rate is calculated as the weighted average risk-free rate plus a spread to reflect our current unsecured credit rating. We subsequently measure the lease liability at the present value of the future lease payments as of the reporting date with a corresponding adjustment to the right-to-use asset. Absent a lease modification we will continue to utilize the April 17, 2020 incremental borrowing rate.
In June 2023, the Company entered into a lease agreement for an aircraft with a term through December 30, 2031. The lease ROU asset and operating lease liability were recorded in the consolidated balance sheet based on the present value of minimum lease fixed payments over the lease term utilizing the Company's incremental borrowing rate as of the lease commencement date.
Estimation of the incremental borrowing rate requires judgment by management and reflects an assessment of credit standing to derive an implied secured credit rating and corresponding yield curve. Changes in management's estimates of discount rate assumptions could result in a significant overstatement or understatement of ROU assets or lease liabilities, resulting in an adverse impact to MSG Sports' financial position. See Note 8 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information on our leases.
Madison Square Garden Sports Corp. published this content on August 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 13, 2026 at 21:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]