Exchange: NYSE | Sector: Communication Services | Industry: Entertainment
Q1 2025
Published: Nov 1, 2024
Earnings Highlights
Revenue of $53.31M up 23.8% year-over-year
EPS of $-0.31 increased by 60.8% from previous year
Gross margin of 83.1%
Net income of -7.54M
"" -
Madison Square Garden Sports Corp (MSGS) QQ1 2025 Earnings Analysis: Revenue Growth Amid Profitability Pressures and Leverage Challenges
Executive Summary
Madison Square Garden Sports Corp delivered a revenue increase in Q1 FY2025 (calendar Q3/Q4 2024) with total revenue of 53.31 million and gross profit of 44.31 million, yielding a robust gross margin of approximately 83.1%. However, the quarter remained unprofitable at the operating and net level, posting an operating loss of 8.27 million and a net loss of 7.54 million, resulting in an EPS of -0.31. The negative bottom line occurred despite a favorable gross margin due in part to SG&A and other operating expenses that collectively outweighed the topline performance. Free cash flow remained negative at approximately -26.52 million driven by negative operating cash flow (-26.16 million) and working capital dynamics, including significant increases in accounts receivable and other working capital movements. Cash balance stood at roughly 58.1 million at period end, while total debt extended to about 1.093 billion, with net debt approximating 1.041 billion. The balance sheet shows negative shareholders’ equity of about -277.5 million, reflecting elevated intangible/goodwill considerations and leverage that remains a material overhang. Management commentary on the call (where available) typically emphasized franchise value, continued attendance and events pipeline, and strategic focus on monetizing assets (including esports and digital platforms) while pursuing cost discipline. Given the combination of revenue growth, profitability headwinds, and high leverage, MSGS presents a bifurcated investment thesis: near-term cash flow and balance-sheet stress against a long‑term asset base and optionality from brand and venue-related monetization. Investors should monitor debt maturity schedules, working capital dynamics, and any progress toward operating margin stabilization as key indicators of medium-term risk/return trajectory.
Overview of Q1 FY2025 results and selective YoY/QoQ context:
- Revenue: 53.31 million; YoY growth +23.84%; QoQ change -76.54%.
- Gross Profit: 44.31 million; YoY +12.11%; QoQ -62.67%; Gross margin ~83.13%.
- EBITDA: -7.75 million; EBITDA margin (EBITDARatio) -0.145; reflects ongoing fixed-cost structure relative to revenue.
- Operating Income: -8.27 million; operating margin -15.52% (ratio provided -0.155).
- Net Income: -7.54 million; net margin -14.15%.
- EPS: -0.31 (diluted -0.31); weighted average shares ~24.03 million.
- Cash Flow: Operating cash flow -26.16 million; capex -0.359 million; free cash flow -26.52 million.
- Balance Sheet: Cash and equivalents ~52.25 million; total debt ~1.093 billion; total assets ~1.373 billion; total stockholders’ equity ~-277.5 million; current ratio ~0.41; quick ratio ~0.41; cash ratio ~0.091.
- Liquidity/Leverage: Net debt ~1.041 billion; debt-to-capitalization ~1.34x; debt ratio ~0.796; negative equity highlights the impact of reported non-cash impairments and accumulated deficits.
- Dividend/Buybacks: Common stock repurchased ~9.062 million; dividends paid ~0.44 million in the quarter, signaling modest capital return activity despite liquidity strain.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
53.31M
23.84%
-76.54%
Gross Profit
44.31M
12.11%
-62.67%
Operating Income
-8.27M
79.54%
-115.82%
Net Income
-7.54M
59.93%
-129.59%
EPS
-0.31
60.76%
-129.25%
Key Financial Ratios
currentRatio
0.41
grossProfitMargin
83.1%
operatingProfitMargin
-15.5%
netProfitMargin
-14.1%
returnOnAssets
-0.55%
returnOnEquity
2.72%
debtEquityRatio
-3.94
operatingCashFlowPerShare
$-1.09
freeCashFlowPerShare
$-1.1
dividendPayoutRatio
-5.83%
priceToBookRatio
-18.03
priceEarningsRatio
-165.89
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript content not provided in the data set. As a result, this section cannot quote management verbatim. In a complete report, this section would cluster management commentary by themes (strategy, operations, market conditions) and provide context for quotes such as remarks on attendance/venue utilization, monetization initiatives (esports and media rights), cost-control measures, and progress toward profitability. If a transcript becomes available, we would extract 2-3 representative quotes with attribution and explain their significance for the investment thesis.
—
—
Forward Guidance
No formal forward guidance was disclosed in the provided data set for QQ1 FY2025. Given MSGS’s leverage and negative near-term earnings, an investor-focused outlook would depend on: (1) stabilization or improvement in operating margins via cost discipline and revenue mix optimization (sports/media rights, venue-related services, sponsorships), (2) the trajectory of attendance and event scheduling, and (3) the mitochondrial debt management plan and potential refinancing opportunities. In absence of explicit guidance, our assessment is that near-term cash flow stabilization is a gating factor for multiple expansion, and any improvement in SG&A leverage or a stronger than expected attendance/events pipeline would be key catalysts. Monitoring points include debt maturities, working capital normalization, beneficiary effects from esports licensing/partnerships, and potential accretive buyback activity contingent on liquidity.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MSGS Focus
83.13%
-15.50%
2.72%
-165.89%
BATRK
-8.39%
-94.20%
-8.51%
-16.58%
FWONA
36.00%
-0.90%
4.55%
-92.03%
FWONK
36.00%
-0.90%
4.55%
-92.03%
BATRB
-8.39%
-94.20%
-8.51%
-16.58%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
MSGS presents a cautious-to-neutral investment profile in the near term. The quarter demonstrates meaningful top-line progress (YoY revenue growth) but profitability remains elusive due to a high fixed-cost structure and aggressive leverage. The stock’s current valuation metrics (e.g., price-to-sales in the vicinity of 93.88 and negative earnings multiples) imply a premium placed on franchise value and asset stability rather than earnings power. The key to a constructive investment thesis is the company’s ability to stabilize operating margins and generate positive free cash flow, which would likely require a combination of attendance recovery, successful monetization of esports/media rights, and disciplined cost management, alongside a credible debt-management plan. Investors should monitor: (1) debt maturities and liquidity runway, (2) trajectory of operating cash flow and working capital normalization, (3) progress in monetization initiatives (esports, media rights, sponsorships), and (4) any guidance or milestones provided by management that signal margin stabilization or deleveraging progress. In a scenario where MSGS delivers a sustained improvement in EBITDA and a path to positive FCF, the stock could re-rate toward more favorable capex/FCF metrics. In the meantime, the equity remains sensitive to leverage and equity impairment considerations, and risk-tolerant investors may demand a higher hurdle for valuation given the current profitability and liquidity dynamics.
Key Investment Factors
Growth Potential
Qualitative growth levers include continued attendance recovery and monetization of venue assets, brand licensing opportunities, and expansion of esports (Knicks Gaming, Counter Logic Gaming) and related media rights/streaming deals. Potential revenue upside also depends on improving stadium ancillary services and sponsorship-rich event calendars. If MSGS leverages its iconic ecosystem (Knicks, Rangers, MSG-branded venues) into favorable media rights deals and sponsorships, EBITDA and cash flow could stabilize on a path toward margin expansion.
Profitability Risk
Key risks include high leverage and negative stockholders’ equity, sensitivity to seasonality and event-driven demand, ongoing SG&A pressure, and potential refinancing risk if liquidity tightens. The negative FCF in QQ1 2025 highlights near-term cash-burn risk unless operating cash flow improves or external financing mitigates liquidity needs. Regulatory, macroeconomic shocks, or a protracted downturn affecting live events could further depress attendance and sponsorship revenue.
Financial Position
Balance sheet shows substantial debt (total debt ~$1.093B) and negative equity (~-$277.5M). Cash balance at period-end was ~ $58.1M with current liabilities (~$574.7M) exceeding current assets (~$234.6M), yielding a weak liquidity profile (current ratio ~0.41). The company relies on asset-backed or franchise-value cushioning rather than strong equity-based cushion, and the negative equity reflects impairment/chronic losses. On the positive side, gross margin remains high (~83%) on the revenue base, indicating a favorable product mix, but fixed cost absorption and leverage impede profitability and cash generation in the near term.
SWOT Analysis
Strengths
Iconic brand and assets (New York Knicks, New York Rangers) with deep venue ecosystem (MSG facilities)
Diversified revenue streams including live sports, entertainment, and esports investments (Knicks Gaming, CLG)
High gross margin on a revenue base indicating favorable product mix and pricing power within the portfolio assets
Weaknesses
Significant leverage and negative equity creating balance-sheet headwinds
Persistent profitability challenges with negative EBITDA and net income in QQ1 2025