Madison Square Garden Sports - Q2 2022

Transcript

Operator (participant)

Good morning. Thank you for standing by, and welcome to the Madison Square Garden Sports Corp. Fiscal 2022 Q2 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, press star zero. I would now like to turn the call over to Ari Danes, Investor Relations. Please go ahead.

Ari Danes (Head of Investor Relations)

Thank you, operator. Good morning and welcome to MSG Sports Fiscal 2022 Q2 earnings conference call. Our President and CEO, Andy Lustgarten, will begin this morning's call with an update on the company's operations. This will be followed by a review of our financial results with Victoria Mink, our EVP, Chief Financial Officer, and Treasurer. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today's earnings release, it is available in the investor section of our corporate website.

Please take note of the following. Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results, developments, and events may differ materially from those in the forward-looking statements as a result of various factors. These include financial community perceptions of the company and its business, operations, financial condition, and the industry in which it operates, as well as the factors described in the company's filings with the Securities and Exchange Commission, including the sections entitled Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations contained therein.

The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On pages 4 and 5 of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure.

With that, I'll now turn the call over to Andy.

Andrew Lustgarten (President and CEO)

Good morning, and thank you for joining us. When we spoke last quarter, we shared the positive momentum we were seeing across our business, driven by strong consumer and corporate demand. Those positive signs are clearly reflected in our fiscal Q2 financial results, which include revenues of $290 million and adjusted operating income of $56 million. Even with the onset of the Omicron variant, which briefly slowed us down, we are proud of the strides we have made in driving our business back.

For our Q2, I'm pleased to report that our per-game revenues were above pre-pandemic levels. This includes per-game suite and sponsorship revenues, as well as F&B and merchandise per caps that exceeded results for the fiscal 2022 Q2, while per-game ticket revenue was in line with results for that same period.

Based on our current trajectory, we expect total revenues for this fiscal year, both including and excluding our growth in media rights, to exceed our last full pre-pandemic year, pro forma for the spin-off. The speed with which our business has returned and the demand and enthusiasm we are seeing from our fans and partners reinforces our conviction that as the owner of two of the most recognized professional sports franchises, we are uniquely positioned to drive long-term growth and value creation for our shareholders.

Let's now discuss in detail how our business is performing. Our teams are more than halfway through the 2021-22 NBA and NHL regular seasons. As we look ahead to several more months of exciting competition, we continue to be pleased with the response from our fans.

On our last earnings call, we discussed the strength we were seeing in our season tickets, which represent the significant majority of tickets sold. We also noted the pandemic's lingering impact on individual and group tickets, which are a minority of overall ticket sales. Throughout much of the Q2, we were steadily closing the gap in individual and group sales relative to pre-COVID levels.

Towards the end of December, the Omicron variant slowed some of this positive momentum and also caused a small dip in attendance. Signs are pointing in the right direction again. As the impact on sales has leveled off and the percentage of ticket holders attending games is already approaching pre-Omicron levels.

For those of you who have attended a Knicks or Rangers game this season, you have seen firsthand the Garden is rocking, which is a testament to how tremendous our fans have been. Their engagement has also translated into strong spending levels inside the arena. In the Q2, we saw double-digit percentage increases in F&B and merchandise per caps compared to pre-pandemic levels.

As of early December, Knicks jersey sales at The Garden had already exceeded sales for each of the entire 18-19 and 19-20 seasons. We are also seeing that enthusiasm extend to corporate hospitality. During the quarter, average usage of suites for Knicks and Rangers games steadily improved, essentially returning to full occupancy.

While it took a temporary step back at the end of the quarter due to Omicron, average usage levels have been trending back up again over the past several weeks. In terms of marketing partnerships, our deal momentum has continued. As you know, in November, we announced our first partnership in the mobile sports gaming space with BetMGM, which was followed soon after by our partnership with Caesars Sportsbook.

Both agreements are expansive multi-year deals done in partnership with MSG Entertainment that span the breadth of our combined portfolio and include deep integration with the Knicks and Rangers. With mobile sports gaming now live in New York State, our partners have hit the ground running and are already seeing the value we provide in helping to drive their business, and we anticipate further opportunities to increase our exposure to this sector.

Mobile sports gaming isn't the only growth category. We also recently completed multi-year deals with two companies in blockchain space, Coinbase and Socios, and are actively pursuing new opportunities in other categories. The leagues' ongoing commitment to introduce new inventory also provides additional potential upside for our marketing partnerships. For instance, the NBA recently announced the expansion of its jersey patch program to now include player warm-up shirts and jackets.

This is on top of the in-game jersey patch, which was introduced in 2017 and has only continued to increase in value, as demonstrated by several recent deals across the league in comparable cities. In addition, as you know, the NHL previously announced the introduction of a jersey patch beginning next season, which we also believe will generate significant interest from potential partners.

Before I turn things over to Victoria, I'd like to briefly touch on something we've spoken about in the past, and that's the substantial underlying value of our two iconic franchises, the Knicks and the Rangers. Since we last spoke, there have been additional transactions which demonstrate the continued demand that exists for professional sports teams.

They include a private equity firm reportedly increasing its liquid minority investment in the Golden State Warriors at a valuation of above $5 billion, and the majority stake sale of the Pittsburgh Penguins at a reported valuation of approximately $900 million. Closer to home, in December, Sportico published a ranking of NBA team valuations, with the Knicks leading the league at $6.1 billion, according to their list.

That same month, Forbes updated its NHL team valuations, with the Rangers retaining the top spot while also becoming the publication's first NHL franchise valued at $2 billion. As we pointed out in the past, these estimated team valuations continue to significantly exceed our current enterprise value, further highlighting the untapped value of these assets. In closing, with more than half of the fiscal 2022 already behind us, we are proud of how our business is performing.

Based on our current trajectory, our revenues for this year are on pace to exceed our pro forma results from our last full pre-pandemic season. On the heels of this momentum, we see a bright future for our company with substantial opportunities for growth. Our sponsorship business has come roaring back as partners reengage with our assets and brands.

Additional, Categories to target and valuable new inventory being introduced, we see a real opportunity to take this business to record levels in the future. On the media side, our local and national rights fees provide steady contractual growth, and we have started to benefit from the NHL's new U.S. media deals. There's even further upside potential when the NBA's national rights come up for renewal in a few years.

We also will look to commercialize new digital opportunities as we pursue fresh and innovative ways to engage with our fans, including NFTs, where we have already made inroads with several Knicks and Rangers products. Of course, as our teams improve their on-court and on-ice performance, nearly every aspect of our business could see revenue acceleration.

We are excited about the path ahead for our business and remain confident in our ability to generate long-term value for our shareholders. With that, I'll now turn the call over to Victoria.

Victoria Mink (EVP, CFO and Treasurer)

Thank you, Andy, and good morning, everyone. I would like to start by reviewing our fiscal 2022 Q2 financial performance and then provide an update on our balance sheet, including our recent debt refinancing. Results for the fiscal Q2 reflect preseason play as well as the start of the 2021-22 regular seasons for the Knicks and Rangers.

I'd remind you that the fiscal 2021 Q2 reflected the impact of the COVID-19 pandemic, including delayed starts to the 2021 seasons and fan attendance restrictions at The Garden, which affect the year-over-year comparability of results. In the prior period, the Knicks played 4 home games without fans, while the Rangers played none. This compares to 35 total pre and regular season home games without capacity restrictions in the current year period.

As a result, total revenues for the quarter were $289.6 million, as compared to $28.8 million in the prior year period, with significant increases in every major revenue line. In particular, national and local media rights fees represented $112.3 million of revenue this quarter, which reflects a return to normal levels of local media rights fees, anticipating full seasons for both teams, contractual escalators on the NBA's national media deals, as well as the impact of the NHL's new U.S. media rights deals, which began this season.

For the balance of our revenue, the majority was ticket related, which was in line with pre-pandemic levels on a per game basis, as well as suites and sponsorship, which, as Andy mentioned earlier, are above pre-pandemic levels.

This quarter's sponsorship results also reflect our new partnerships in sports betting, a category which we expect to be a significant contributor for the rest of the fiscal year, with additional growth as we look ahead to fiscal 2023. Adjusted operating income increased $74.7 million to $55.7 million as compared to the prior year period. This improvement was due to the increase in revenues, partially offset by an increase in direct operating expenses and to a lesser extent, higher SG&A expenses.

The increase in direct operating expenses mainly reflects the impact of the COVID-19 pandemic in the prior year quarter, including the delayed start to the 2021 NBA and NHL seasons. This included increases in team personnel compensation, other team operating expenses, and arena license fees.

The increase in SG&A expenses was primarily due to higher marketing costs as well as fees related to the company's sponsorship representation agreements and services agreement with MSG Entertainment. Now turning to our balance sheet. In December, we enhanced our financial flexibility by refinancing the Knicks and Rangers senior secured revolving credit facilities at lower interest rates. Both facilities, which were previously set to mature in November 2023, were extended for another three years to December 2026.

Additionally, the Knicks' $75 million unsecured revolving credit facility, which was also set to mature in November 2023, was extinguished. This refinancing demonstrates both the quality of our assets and the confidence in the long-term outlook for both our teams and leagues.

At the end of the quarter, we had $360 million of total debt outstanding, comprised of $330 million under the Knicks and Rangers senior secured revolving credit facilities and $30 million advanced from the NHL. This debt balance reflects a $25 million dollar repayment on the Rangers senior secured revolving credit facility during the period. Turning to our liquidity.

As of December 31st, we had $249.8 million of liquidity, comprised of $54.8 million of unrestricted cash and cash equivalents and $195 million in borrowing capacity under the team's revolving credit facilities. Our quarter-end cash balance of $54.8 million represented a net increase of $21.2 million compared to our September 30 balance of $33.6 million.

I would also add that this week we paid down an additional $25 million on the Rangers revolver from cash on hand and cash flow from operations, which reflects our confidence in the trajectory of our business, given the momentum we're seeing for the remainder of fiscal 2022 and beyond. With that, I will now turn the call back over to Ari.

Ari Danes (Head of Investor Relations)

Thank you, Victoria. Operator, we'd now like to open the call for questions.

Operator (participant)

Thank you. If you could like to to ask a question please press star the number on the cellphone keypad, and again that is star one. Your first question comes from the line of David Karnovsky with JPMorgan.

David Karnovsky (Senior Research Analyst)

Hi. Thank you for the question. Andy, as we look at your share price since you last reported in November, and it's underperformed against some of those positive catalysts you mentioned, like the Forbes value or the Penguins sale. I mean, when you see this disconnect, what are some tools that you have, either capital allocation or otherwise, that are in your control and, you know, could potentially help narrow that gap to asset value?

Andrew Lustgarten (President and CEO)

Thanks, David. Before I turn over to Victoria, who will talk a little bit more about capital allocation, I think we should just take a step back. As you mentioned, we agree. We think our stock price does not appropriately reflect the value of our assets. The pandemic has clearly been a difficult operating environment for every business, but especially difficult for live entertainment.

I'm really proud at how quickly we've bounced back to pre-pandemic levels. As we saw with Omicron, it came very quickly, and we do think we're mostly through, if not totally through it. We don't know what's gonna come around the corner next. We do need to maintain our financial flexibility to handle it. I do feel really good about the business.

Our sponsorship business has come back and is already at record levels, and we believe we can continue to drive it to further levels in the future. Our media rights fees continue to grow, and we think there's future upside in renewals. As the team performance accelerates, both on ice and on court, we think there's other ways to grow across every area of our business. As our operating business continues to perform, we think that our shareholders will come along with that as well. To your point, there is capital allocation decisions, and Victoria will you please take it.

Victoria Mink (EVP, CFO and Treasurer)

Yeah, sure. Good morning, David. You know, in terms of capital allocation, you know, you'll recall that we spoke in the last few quarters about how paying down debt is our near-term focus. That's what we've been doing, reducing our revolver borrowings. You know, we spoke about $25 million on the Rangers facility in the quarter.

You know, as well as an additional $25 million that we've paid down just this week. You know, as part of our recent refinancing, you know, we lowered our borrowing costs, we freed up some restricted cash, we extended our maturities, and we also extinguished the next $75 million unsecured revolver. You know, which reflects the increasing strength of our liquidity position.

Now, while Omicron is a reminder that we need to be prudent and maintain flexibility until the pandemic meaningfully recedes. Now, as Andy said, we feel really good about the trajectory of our business, and over time, we'll evaluate all options for utilizing our free cash flow.

David Karnovsky (Senior Research Analyst)

Okay. I know this is a ways off, Andy, but you did mention renewals. You know the NHL is heading into the latter part of a twelve-year deal with Rogers in Canada and, you know, we'd appreciate any high level thoughts you have on the landscape for rights in that market, you know, and whether you think the league could, you know, similarly be positioned for an increase like they realize in the U.S. Thank you.

Andrew Lustgarten (President and CEO)

Pleasure, David. So we said it, I'll say it again. I love being a rights holder, a premium media rights holder. I think there is. Sports is the most premium of media assets, and we think that there's always going to be a demand for it. Obviously, in Canada, the NHL is the most premium of sports assets and has done very well in that market for a long time.

I look forward to what they're, you know, the NHL and the league office is going to be able to do when the rights expire. Now, this is a few years out. I think it's 2025, 2026 before it expires. So it's a little out, but I think that owning such premium rights in a premium market will deliver value for us.

David Karnovsky (Senior Research Analyst)

Thank you.

Andrew Lustgarten (President and CEO)

Thanks, David. Operator, we'll take the next question.

Operator (participant)

Your next question is from Brandon Ross with LightShed Partners.

Brandon Ross (Partner and Media and Technology Analyst)

Hey, Andy. You mentioned additional sports betting opportunities to come in the prepared remarks beyond the MGM and Caesars deals that you announced. I was wondering if you could size that opportunity for us, even if it's relative to the deals that you already signed, and tell us maybe what inventory is still available to be sold?

Andrew Lustgarten (President and CEO)

Thanks, Brandon. I always want to start when I talk about sports betting in the beginning. I've been saying this for a long time, and I believe it. Sports betting is fabulous for fan engagement, and we're going to see this across many aspects of our business. As part of the sponsorship revenue that we're generating from it, this is great for us.

Now let's turn back to the sponsorship. So, In New York, we've all seen the launch. It's been massive here. I think it's the largest launch of any market that anyone has gone into, and that's in one of the most restrictive legal systems frameworks around sports betting with the highest tax rate. What does that tell me? There is upside here.

We've hit the ground running with BetMGM and Caesars have been great partners, and are very excited about what we've been able to do with their business. Now, what we've seen is they love to reach our fans, right? How do we reach our fans best? I think this is the way we think about any partnership. We like to keep it premium. We're going to keep it limited.

We have two partners now. Both partners and anyone else we'd ever talk to or we've been talking to are very focused on how do we reach our fans. That's through on ice, on court signage, digital assets, virtual, through our social platforms, official team designations. Hospitality has been a very big part of it.

Being the fifth space for their online gaming platform players and our database of our fans. While we're not going to open up to every partner, we do think there is space to potentially add another at the right time, who has the same vision for us and how we believe we should drive this business.

Brandon Ross (Partner and Media and Technology Analyst)

Great. Beyond sports betting, are there new categories of sponsorship we should be thinking about or areas that are under-penetrated, where there could be some larger opportunities to really grow sponsorship from here?

Andrew Lustgarten (President and CEO)

Sure. Look, I think we should start from where it's been. As we come out of the pandemic, one of the things I really would like to applaud is the leagues really working with the teams to find new inventory, new types of inventory to deliver so that we're able to find partners. I can't downplay the significance of premium inventory.

Whenever we're able to offer something like a jersey patch, we're able to not only drive the revenue from the patch, but from a whole holistic partnership. What we found specifically when the NBA launched its patch is a whole host of new partners came into the space that didn't exist and didn't spend. Here in New York, Squarespace has been an amazing partner.

Anthony is a great leader, and they've been a great partner of ours, and we expect to continue to grow our relationship. The NHL is opening up jersey patch, just recently opened up the helmet patch. The NBA is opening up additional ways to use patch on warm up gear. Every time when those type of categories or those type of inventory open, we're able to drive and grow new categories. Don't let me misunderstand. Don't let me misguide you here, though.

There are categories that we need to continue to drive and grow here, where I think health insurance, fitness, home improvement, these are all categories that have upside for us. If you would have asked me two or three years ago about the whole blockchain space it's amazing how fast that changed.

We already have two great partners in this space, and we expect as blockchain continues to develop, there'll be new opportunities there. We feel really good about continuing to be able to drive our sponsorship business. There's a lot to do here. We have great assets, and we're in the greatest city. Thank you.

Brandon Ross (Partner and Media and Technology Analyst)

Thank you.

Operator (participant)

Your next question is from Curry Baker with Guggenheim Securities.

Curry Baker (Director and Equity Research Analyst)

Hey, good morning. Thanks for the question. Andy, higher level, can you help us think about the financial impact of making it to the playoffs? How should we think about home playoff games translating into incremental AOI as well as long-term value creation? And last part is there any difference to consider between a Knicks versus Rangers playoff game?

Andrew Lustgarten (President and CEO)

Sure. Thank you, Curry. Let me start. We would be thrilled, both teams, either team for a playoff run. It's a great experience for our fans. It's a great experience, it's great for New York City, and I think the fans have really embraced both teams so far this year.

A playoff run is different than a regular season. When you break down what it means, you know, what drives our business, right? The two biggest cost components of our business are already paid for and fixed. That's player salaries and our arena lease. That's fixed, and there's no incremental cost for that. Largely, the incremental revenue that comes from playoffs drops to the bottom line.

When I say largely, there are incremental gate taxes, there's revenue sharing, there's some bonuses we have to pay, but the lion's share of it drops down. Now, let me take that back even further. When you think about premium events, premium games, such as when the Lakers came here versus the Knicks or Henrik's retirement night. We're able to drive significantly premium revenues for those types of games. I'd expect the playoffs, we'd see similar types of revenues.

If we are so lucky to have multiple rounds, each round would drive further revenue. A long run would be very, you know, very beneficial for our business for now. We should even park that for one sec because current revenues are only one part of it.

Well, when we have a long run or even a run, it has knock-on effects for multiple years. It helps drive ticket renewals, it helps drive pricing, it helps us drive renewals for sponsorships, suites. In the long term, it'll even affect media rights. Every time we have long playoff runs and we feel good about the youth of our teams and where they're going, we think that there's ability to drive our business and continue to drive the business.

Curry Baker (Director and Equity Research Analyst)

Thanks for the answer. Appreciate it.

Operator (participant)

Your next question is from Paul Golding with Macquarie Capital.

Paul Golding (Senior Payments and Lifestyle Analyst)

Thanks so much. Andy, I was wondering if you could help us understand the potential revenue opportunity or relationship opportunity from the NFT partnerships and how you see that evolving. I think we've seen peers like you know at Crypto.com Arena take time to invest in NFTs for those franchises. I just wanted to get a view on that, and then a quick follow-up. Thanks.

Andrew Lustgarten (President and CEO)

Sure. Thanks, Paul. NFTs, like other collectibles, because NFT is in effect a digital collectible, do fall under. There are certain rights the teams have and there are certain rights the leagues have. Together that makes up the whole ecosystem. I actually think about NFTs a little bit at a step up, and I like the example you had of Crypto.com Arena, right? We've got two great partners already that we brought in, Socios and Coinbase.

We think there are other ways to play in the space as well, especially as blockchain continues to grow. Going back to NFTs, we do have certain rights. The Knicks launched a limited NFT release at the end of last season and over the summer.

We recently launched Henrik NFT around his retirement night. What's great, not only the revenue that generates, but also just the fan engagement and the continued fan engagement and ability to speak with our fans and hear and watch what they do with the NFTs. There's a lot of benefits here, both as blockchain changes, as the leagues who have done an amazing job, especially the NBA and NHL with Dapper Labs and Top Shot. Like, there's a lot of revenue that's being generated that flows through as a collective revenue. We think this is a growing business, and there's many ways for us to play it.

Paul Golding (Senior Payments and Lifestyle Analyst)

Great. Does that come through on the sponsorship side, or do we see that just in rights, just a different kind of right? How should we think about that hitting the P&L?

Andrew Lustgarten (President and CEO)

There'll be some when we release the NFT sale, you'll see something and hit our merchandise. So far, the two partnerships we have are much more in the sponsorship and hospitality side of the world, which is generally the way we think about our partners, right? There is a component of signage and data reaching our fans. There's always the hospitality. We think there's ways to continue to drive this business.

Paul Golding (Senior Payments and Lifestyle Analyst)

Great. Thanks. Just a quick housekeeping one. In terms of the BetMGM and Caesars partnerships, you've been live. The state's been live for a few weeks now. Should we think about the cadence as being proportional in terms of what we could see going forward as in terms of you know late stage in F2Q, now you have more runway and it should be proportional revenue represented? Or do you see acceleration now that you're sort of more underway? How should we think about the cadence of layering that in?

Andrew Lustgarten (President and CEO)

Well, let me just add one thing and then Victoria might jump in after me. Remember when we did announce our deals and complete the deals. Caesars was in early November. BetMGM was in late November. There's only gonna be a piece of that in this year. Of course, as the time goes on in most of our partnerships, we see step-ups in the year. This was a partial year. Anything.

Victoria Mink (EVP, CFO and Treasurer)

You know, Andy, I think you covered it perfectly, right? We have a limited amount recorded in this quarter. We'll expect, you know, increases as we're performing, you know, through a full quarter period and then into the future.

Andrew Lustgarten (President and CEO)

I do think there's room to continue to grow this category. I mentioned as well, you know, we do have one of the most restrictive gaming laws here in New York State. There's been discussion of kiosks. There's been discussion of other changes that could drive that change in the law, changes in tax code. Those things will impact our business. We do feel very good at where we are right now, and we do think there's further upside.

Paul Golding (Senior Payments and Lifestyle Analyst)

Thanks so much.

Operator (participant)

Your next question is from David Joyce with Barclays.

David Joyce (Senior Equity Research Analyst)

Thank you. A couple questions, please. First, in thinking about the sustainability of the per cap spending growth, you've obviously mentioned some new areas like NFTs, maybe that's lumped into the merchandising side but,

What else do you think you can do on food and beverage and merch to help sustain this growth and maybe even expand it some more? You know, what's the strategy there, and what's your outlook on sustainability versus this pent-up demand of people coming out of COVID? Then secondly, on sports betting, in that area, could we think about a revenue stream related to the data for your IP that's supplied ultimately to the sports books? Meaning is that part of your media rights already, or is that some incremental upside from here? Thank you.

Andrew Lustgarten (President and CEO)

My pleasure. Thank you. Let's start with your first question on the sustainability of our per cap. One thing we've seen not just here, but across the whole industry, is as people have come back, as they've come back to live entertainment. They've come back spending for things that they care about. That's definitely been a theme that we see, and we believe our fans really care about our business.

They're super passionate, and they care. What that does is it drives our business, drives our merchandise. Our merchandise levels are above. We've already broken our pre-pandemic full season merchandise from before the pandemic for a full whole year. The spending has continued for every game we've had so far. We've seen no step back on any game.

We believe that that's gonna continue. The real question is then how do we continue to grow it? We've been focused on bringing in new, fresh ideas, new, fresh brands. For example, we have a great partnership with Kith, who designs one of our Knicks jerseys, and will be releasing and releases a release around it. Brands like that help us drive our business, help us stay relevant, help us stay connected to our fans.

We've got numerous other ideas like that. We're always focused with how do we change and improve the customer experience here in the venue, try to be innovative with how do people pay, where's the right place to put stands. We're always changing locations where people are able to pick up and buy goods. You wanna make,

We are very careful about not making ourselves overly commercial inside the venue, doing it at the right premium place. We do it to drive fan experience because when we find fans have a great experience, they wanna spend, they wanna be with us, and they wanna be here. In terms of your second question on data IP, I think I'm gonna split it a little bit.

I gotta tease it apart from what you're asking. I think part of all of our deals so far, we've talked about reaching our consumers and through many different sources, social, our database. I think what you're really talking about is statistics and IP around stats.

If that's the part of the question, the official stats feeds are league rights and are able to grant them as part of their league deals. We see the benefit of pickup of league IP as this business grows. We do think that at a team level, integration in our media, integration in the games, virtual signage are ways to continue to drive the category.

David Joyce (Senior Equity Research Analyst)

Okay, great. Thank you very much.

Ari Danes (Head of Investor Relations)

Thanks, David. Operator, we have time for one last caller.

Operator (participant)

Your last question comes from David Katz with Jefferies.

David Katz (Managing Director)

Hi, everyone. Thanks for taking my question. I did wanna go back to the sports betting category, because it does seem as though there's quite a few tributaries of ways that the teams can earn off of it. I just wonder if you could, you know, help us sit down and pencil something.

Not to give us a number, but, you know, any tools you can provide us with to sit down and perhaps assign some value. 'Cause it is happening. It's happening in New York, and, you know, it's happening related to you. You know, I suppose it'd be helpful to me and maybe the group at large.

Andrew Lustgarten (President and CEO)

I need to think how to respond exactly. I mean, we don't share, obviously the individual details of any partnerships. What I can tell you is that, we think this is a very large category and a very large growing category. Potential to be our largest category, and we might be there already. This is big, and we think there's lots of ways to continue to grow it.

The way we break out the exact split between sponsorship and hospitality, we don't believe, you know, when we work with a partner, it's an integrated partnership. As we've talked about, we think it's about helping drive their business, which enables us to drive our business and enables us to keep our partners for long periods of time.

There's a reason why our partners come back and wanna be with us, because we don't view them as just sponsors. We think we're gonna be able to help our partners drive their business, and I think it's already shown in the results from who are the leaders in the New York market and who are our partners.

David Katz (Managing Director)

I completely understand and appreciate the answer. If I can just follow this up, and recognizing that some of this may be, you know, beyond the scope of MSGS, you know, now that it's legal in New York, we've seen, you know, other venues include, you know, actual sports betting, you know, kiosks or, you know, sports book type lounges. If something like that were to occur, without asking you whether it will or it won't, you know, is that something that would be financially beneficial for the teams as well, or is that just a venue, more of a venue issue?

Andrew Lustgarten (President and CEO)

Well, it is a hypothetical, so it's hard to give you a specific answer on it. There has been a lot of talks about kiosks coming to the market. What I'll say is there's if you look at our lease agreement between MSG Sports, MSG Entertainment, there's sharing in many different forms of revenue, suite signage, and different parts of the business. So I wouldn't assume that a kiosk would be only for entertainment nor only for sports.

There's different ways to share, and we think that there's ways if there were kiosks or other changes in the industry, changes around micro betting, other rules that would enable us to further drive the business. There's lots of ways to grow this business for both the teams and for MSG Entertainment.

David Katz (Managing Director)

Perfect. I appreciate it. Thanks for taking my questions.

Operator (participant)

Thank you. I would like to turn the conference back over to Ari Danes for closing remarks.

Andrew Lustgarten (President and CEO)

Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.

Operator (participant)

Goodbye. Thank you. This concludes today's conference call. You may now disconnect.