Madison Square Garden Sports Corp. (MSGS) CEO Andy Lustgarten on Q4 2022 Results - Earnings Call Transcript

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Madison Square Garden Sports Corp. (NYSE:MSGS) Q4 2022 Earnings Conference Call August 18, 2022 10:00 AM ET

Company Participants

Ari Danes - Investor Relations

Andy Lustgarten - President & Chief Executive Officer

Victoria Mink - Executive Vice President, Chief Financial Officer & Treasurer

Conference Call Participants

Brandon Ross - LightShed Partners

Ben Swinburne - Morgan Stanley

David Karnovsky - JPMorgan

Devin Brisco - Wolfe Research

Farshid Javar - Jefferies

Operator

Good morning. Thank you for standing by, and welcome to the Madison Square Garden Sports Corp. Fiscal 2022 Fourth Quarter and Year-End 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. [Operator Instructions].

I would now like to turn the call over to Ari Danes, Investor Relations. Please go ahead.

Ari Danes

Thank you, operator. Good morning and welcome to MSG Sports Fiscal 2022 Fourth Quarter and Year-End 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 Investors section of our corporate website.

Please take note of the following. Today's discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

Please refer to the company's filings with the SEC for a discussion of risks and uncertainties. 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.

And with that I'll now turn the call over to Andy.

Andy Lustgarten

Good morning, and thank you for joining us. As we look back on fiscal 2022, we are incredibly proud of the year we had, highlighted by record full year financial results with revenues of over $820 million and adjusted operating income of more than $140 million. In addition, every major revenue line exceeded results for fiscal 2019, our last full year prior to the pandemic from tickets, sponsorship and suites, to food, beverage and merchandise sales and media rights. This is a true testament to the incredible demand and enthusiasm for our iconic franchises, especially in the nick of Rangers first full regular season in three years.

The Garden was packed night after night with our fans. We are clearly thrilled to be back supporting our teams in person. But it's also important to remember that the environment in which we operated over the past year was far from perfect including restrictions on international travel, very low office occupancy rates in New York and the impact of both the Delta and Omicron COVID-19 variance. And yet, despite these headwinds, we successfully navigated our business through these uncertainties. We have used the last two years to enhance the way we operate, including updating our infrastructure and processes, emerging as a stronger and more nimble organization with new growth strategies in place to drive our business.

And as we look ahead, we will focus on executing in density strategies and see numerous ways to grow our business, both in the near and long-term. These opportunities include new ticketing and premium hospitality products, such as new courtside seating, valuable sponsorship inventory including our keen jersey patches and growing and Knicks international presence, increasing our focus on knowing our consumer including through social content, which drives our sponsorship business and through new and tailored merchandising offerings and at the lead level further upside in media rights as national deals come up for renewal.

After record financial results this past year, we're already seeing our momentum carry forward. And from what we could see excluding the impact of the playoffs, our business is poised to deliver year-over-year growth across key revenue lines in fiscal 2023. Furthermore, we remain confident that our ownership of two of the most renowned teams in all of professional sports positions us well to drive long-term value creation for our shareholders.

Let's now turn to those franchises. Both the Knicks, Rangers have a talented young core of developing players with most under contract for multiple years. The Knicks has also amassed a substantial number of traffics over the next seven years, further positioning the team for success in the years ahead. And for the Rangers, the end of 2021, 2022 season was marked by a thrilling post-season run. The impact of which you can see in today's results. This included the team's first trip back to the Eastern Conference Finals since 2015, which generated one of the highest per game gate revenues ever for any NHL team in any playoff round, including the Stanley Cup finals.

Looking ahead, we know our fans are ready for Play to begin with all signs pointing to continued positive momentum for our business. For example, the average combined season ticket renewal rate for the Knicks and Rangers 2022, 2023 seasons has climbed to approximately 91% while sales of season ticket packages to new members remain strong.

We anticipate that the momentum we've seen, coupled with an increase in Ranger season ticket prices, the introduction of new technologies that have increased the effectiveness of our sales process, as well as a reconfigured Knicks courtside layout providing new floor seats will drive solid growth in ticket revenue.

The enthusiasm from our fans extends beyond just the tickets in their hands and they demonstrated that all season at the Garden. We saw it in double-digit percentage increases versus fiscal 2019 levels in food, beverage and merchandise per cap spending, with results hitting season highs on Henrik Lundqvist special retirement night at Arena and during the Rangers platform.

They also showed it and their desire to engage with our teams outside the Garden. For example, across both team’s social media channels, we added over one million net new followers this year, as we continue to focus on creating compelling content to directly connect with and grow our audience. The growth in followers on our social media platforms also creates valuable additional inventory for our marketing partners.

We also saw fans enthusiasm reflected in strong viewership across traditional media. For example, the Rangers Penguins opening round Playoff series on TNT and TBS was the most watched NHL first round cable broadcast on record. A remarkable stat that doesn't even take into account that the series simultaneously delivered robust ratings on MSG Networks local broadcast.

And the impressive ratings continued as the Rangers Lightning series in June was the most watched Eastern Conference finals since 2013. But this raising stream wasn't just limited to the plans. Across both leagues, the demand for premium sports content was evident the entire season.

The NBA's average regular season viewership was reported to be up 19% versus last season and was the most watched regular season since 2018, 2019. And in the first year of the NHL's new US national media rights deal with Disney and WarnerMedia, average viewership for the league in the US was up 16% as compared to last season, making it the NHL's highest since the 2016 2017 season.

As we have previously discussed, the NHL's new agreements align the leagues with two of the leaders in sports programming, which has clearly aided in increasing viewership and further raising the NHL profile. In recent weeks, new media rights agreements across various leagues have been announced, serving as further evidence of the popularity and importance of premium live sports content.

This includes major League Soccer, which landed a 10-year global deal with Apple; Formula 1, which reached a significant renewal with ESPN and crickets Indian Premier League, all of which are reportedly multiples of the prior media rights agreements. As a reminder, the NBA's US deals with Disney and WarnerMedia won through the 2024, 2025 season, and with national media rights across professional sports continuing to increase in value, we remain bullish on the opportunity ahead for the NBA.

Turning to marketing partnerships. Fiscal 2022 ushered a robust activity from both existing and new partners as companies reengage with our assets and brands coming out of the pandemic, driving our marketing partnerships business to a record level. The year was highlighted by successful renewals across a slate of key partners from Anheuser-Busch to Kia as well as our expansion into new categories.

This includes our partnerships with Infosys and Benjamin Moore as well as our push into mobile sports gaming following its legalization in New York State. In partnership with MSG Entertainment, we were swift and strategic in forming three expansion deals with BetMGM, Caesars Sportsbook and DraftKings and fiscal 2023 will benefit as we will see the full run rate impact of this new category for the first time in our results.

These partnerships demonstrate the unparalleled exposure we offer to companies trying to reach consumers in the New York market. And as the leagues open a new sponsorship inventory, we are confident we'll continue to do the same with current and future partners, whether it's the NHL jersey patch and digitally enhanced DasherBoards, where the NBA expanding the number of the international partners the team can have. These are compelling opportunities and we will be measured in our approach to the sales process.

In the past year, we have also demonstrated the strength of our premium hospitality offerings, reminding companies as they return to corporate entertaining that there is no experience like a live game experience at the Garden.

In partnership with MSG Entertainment, we saw strong suite renewal rates and new sales activity, driving record suite revenues. And with the average usage of our suites for Knicks and Rangers games, exceeding pre-pandemic levels in the last few months of the season, we are confident in our outlook heading into next season.

As we look ahead to fiscal 2023, with new sponsorship opportunities coming to market and corporate entertaining and expecting to make a more complete return, we anticipate continued growth in these revenue lines in the year ahead.

We also expect to see positive effects of our business from the Rangers outstanding running the playoffs, whether to improve consumer or corporate demand, we anticipate benefits to ticket, sponsorship and suite sales.

Since we last spoke, we continue to be reminded of the significant value that persists for marquee professional sports teams. This includes in the last three months, record majority ownership transactions in the English Premier League, with the Chelsea Football Club and in the NFL with the Denver Broncos.

And since the Bronco sales, Sportico has published the latest NFL team valuations with the average team valuation above $4 billion, up 18% from last year's report and the Dallas Cowboys leading the list as a new record high of $7.6 billion.

We’re eager to see the next publication of the NBA and NHL team valuations and believe these recent examples continue to highlight the untapped value of our assets, relative to where our stock currently trades.

Before closing today, I'd like to take a moment to thank our fans, partners, employees and shareholders for playing a vital role in our journey this year, as we work to drive our business to record highs.

As we look to fiscal 2023 and beyond, we see ample growth opportunities, building off the existing strength in our business and the new growth strategies we've put in place, leaving us confident in the future of our company and our ability to generate long-term value for our shareholders.

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

Victoria Mink

Thank you, Andy, and good morning, everyone. I would like to start by discussing our financial results for both the full year and fourth quarter. I will then review our balance sheet and liquidity. For fiscal 2022, we generated total revenue of $821.4 million and adjusted operating income of $142.2 million.

As a reminder, fiscal 2022 marked the first full season back for the Knicks and Rangers following the onset of the COVID-19 pandemic. And we are very pleased with the strong financial performance; we continue to see across the business; including, as Andy mentioned, record high results.

Now turning to our fiscal 2022 fourth quarter. Our results for the quarter continue to reflect robust demand for our teams, as they completed their 2021-2022 regular seasons followed by a strong playoff run by the Rangers.

I'd remind you that the prior year quarter reflected the compressed timing of the shortened 2021 NBA and NHL regular seasons, which resulted in more home games played in the prior year period than the current year period, as well as certain revenues and expenses being recognized over a shorter time frame in the prior fiscal year.

The prior year period also reflected the impact of certain capacity restrictions, as well as three Knicks playoff games as compared to the Rangers 10 this year. These factors affected the year-over-year comparability. And as a result, total revenues for the quarter were $175.2 million, as compared to $146.9 million in the prior year period.

Event-related revenues represented $99.1 million in the quarter, which mainly consists of ticket, food, beverage and merchandise revenue inclusive of the playoffs, while suites and sponsorship revenues also inclusive of the playoffs represented $34.4 million.

In addition, national and local media rights fees represented $31.9 million of revenue this quarter. This reflected a $14.7 million decrease as compared with the prior year period, primarily due to the impact of the compressed timing of the shortened NBA and NHL 2021 seasons in the prior year period.

This was partially offset by the impact of the NHL's new US media rights deals which began at the beginning of the 2021, 2022 season, as well as contractual rate increases on our local media rights and the NBA's national media deals.

As a reminder, the prior year period also included the recognition of the NHL expansion fee associated with the Seattle Kraken. Adjusted operating income improved $39 million to $33.2 million, primarily due to the increases in revenues, a decrease in SG&A expenses and to a lesser extent lower direct operating expenses. The decrease in SG&A expenses was primarily due to the absence of severance related to team executives recognized in the fourth quarter of fiscal 2021, which was partially offset by higher playoff-related and other expenses as compared to the prior year period.

The decrease in direct operating expenses included lower team personnel compensations and other team operating expenses both primarily due to the compressed timing of the 2021 season. These decreases were partially offset by higher revenue sharing expense, net of escrow reflecting a return to normal levels compared to a net credit in the prior year period as well as an increase in playoff-related expenses. As we look ahead, we believe our business is poised to deliver growth across key revenue lines in fiscal 2023, while we expect our AOI to also reflect higher team operations expenses including league-related costs.

Turning to our balance sheet. At the end of the quarter we had $250 million of total debt outstanding comprised of $220 million under the mix senior secured revolving credit facility and $30 million advanced from the NHL. Our quarter end cash balance of approximately $91 million, represented a net increase of $41.8 million compared to our March 31 balance of $49.2 million.

Our cash and debt balances both reflect $65 million of repayments on the Rangers senior secured revolving credit facility during the period, which brought our total debt paydown in fiscal 2022 to $135 million and eliminated all outstanding balances under the Rangers facility. With regards to liquidity as of June 30, we had $396 million of liquidity comprised of $91 million unrestricted cash and cash equivalents and $305 million in borrowing capacity under the team's revolving credit facilities. Based on the momentum, we're seeing heading into fiscal 2023 and with the opportunities to drive long-term growth, we remain confident in the trajectory of our business.

And with that, I will now turn the call back over to Ari.

Ari Danes

Thanks Victoria. Operator we would now like to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Brandon Ross from Lightshed Partners. Your line is open.

Brandon Ross

Hey, Andy, it's pretty clear from your prepared remarks that sponsorship has been a big part of the revenue growth story here and frankly at MSG also. And just recently there have been some headwinds, especially with the crypto pullback. And we've seen some high-profile deals abandoned there. And then it seems like the sports betting industry is getting a little more rational. Does this any way cap your upside in sponsorship?

Andy Lustgarten

Thanks, Brandon. So let's take a step back for a second. So I think when you talk about crypto, it doesn't make up a large part of our sponsorship business. We have two really strong partners. They were new that came in last year, but it's not a very large part of our whole portfolio. So we feel pretty good there.

But when I think about crypto, I actually don't think about crypto alone, I think about the NFT space and key and really more so blockchain and the technology that come from that. So when I think about that of the category, I don't know what's coming out of blockchain. There's a lot of companies that are emerging and new technologies that I think is going to benefit our business, but that actually takes another step back.

If we went back two years, no one would have thought about crypto as part of our sponsorship book. And so what I have seen is there's new -- there's always new categories coming into this business to your point sports betting was one that didn't exist three years ago four years ago, which I think we've done very well. And I'll come back to sports betting in a second.

But when you think about the way the cyclicality of this business is, there's always a category that you either that comes into fashion or comes out of fashion. And I think we do a great job of capitalizing. And on top of that the leagues have done a really excellent job of opening up new inventory, which give us the opportunity to even further capitalize.

So, whether it be the Jersey sponsorship on the Knicks side, the NHL adding Jersey sponsorship, adding digital enhanced dashboards, the NBA opening up international, which we think is a really big opportunity really opening international allowing us to have 10 new partners and we're really thinking about that.

So, we think there's ability to go into new categories or new inventory. I'll tell you as we think on the horizon, marijuana and CBD are now in legal in New York and the New Jersey market. While they're not permitted by the leagues I could see that being an opportunity. So, I think there's further growth really here in this business. We feel really good about it.

To your question about sports gaming we think that we've got three great partners. We think that we've done a very good job of working with them and turning out how to grow that business and we think it's going to continue to a very strong part of our portfolio. And I will mention that last year it was only a partial year. so this year you will see the full year impact in our results as we go into the future.

Brandon Ross

Great. Thank you much.

Operator

Your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.

Ben Swinburne

Thank you. Hey, good morning Andy. I wanted to ask about sort of the outlook over the next kind of 12, 24 months in a couple of ways. One clearly we can hear the enthusiasm for the business in your voice, but there's some concern I think in the market that the consumer spending we're seeing for a lot of events is sort of inflated or elevated based on pent-up demand. And as we lap these trends a year from now, growth will decelerate. I know you don't have a crystal ball but you see more than we do. So, I'd love to hear your thoughts on that particularly as it relates to New York?

And then kind of a similar line of question on the corporate side. Can you just remind us as you think about suites and sponsorship kind of the typical duration of those contracts and your opportunity to reprice those as you sort of go to market in a marketplace that's really strong right now relative to maybe the last couple of years?

Andy Lustgarten

Sure. Happy to. So, let me -- let's just start where I think -- we can start at the beginning. I'm very proud and I think it's come across on how we've navigated our way through the last two years, which have been incredibly difficult to operate in for a lot sports entertainment business, especially here in New York where our venue was largely closed.

So, what we did was we took the opportunity to really think about our infrastructure, I talked about that before how could we operate more efficiently. We've made investments in technology, which allows us to sell better more effectively and drive our revenue. And then we've also put in a whole set as I mentioned earlier a set of growth strategies. And I feel really strong about these that allow us to capitalize on our base business and then continue to drive forward.

We have a very strong ballast of long-term agreements that provide us a real level of -- a certain level of certainty in our business. And then as we think through some of these growth initiatives, I feel good about where we take the business over the next 12 to 24 months regardless of what the market is.

And so let's just start with what we're seeing -- and I mentioned this earlier, but I'll say it again. Currently, we're already at a 91% renewal on a combined basis and we're still continuing to sell. That's based on particular renewals from last year. We see we have an increase of Rangers ticket pricing both on our base business, the renewed as well as any new tickets that we sell and that's both across Knicks and Rangers.

We used our opportunity during COVID when the Knicks came back to the playoffs, every single game we are looking and focusing on our -- where -- how many seats do we have in the building where do we sit in the building? And what we did was we said, we'll wait a second. Let's go and think about exactly how we've laid out our configuration.

And we worked with the league and we found a whole new set by modifying our configuration and changing where the scores table was and moving a few things around. We work with the league and we've found a whole new set of first and second row inventory that didn't exist before. So, we think that's another opportunity for growth. And we think premium, especially in this business, is incredibly valuable. We're going to continue to think about other premium opportunities.

In terms of our sponsorship front, we think there is a tremendous amount of runway here. I mentioned this, we'll see the first full year of our betting impact this year multiple deals.

We think there's ability for us to capitalize on an NHL jersey patch on the digital enhanced dashboards which are new sets of boards allowing consumers or advertisers to reach their fans in a better fashion on the teams on the road.

And the routine there's new inventory continuing to lead have been really fabulous about thinking about and innovating around the business. On our media rights fees, those are contractual both at the national level as well as below the level.

And we've talked about as the NBA renewals come up, we feel bullish about our opportunity given what we're seeing in the sports rights business, including today with the big 10 announcements or what's being reported.

And we've been really focusing on consumer knowing them better, how do we reach them better through short-form content, through merchandise. We've created new -- we're very focused on merchandising with things such as, Kith creating our new Knicks Jersey, Jeff Staple creating a little Ranger capsule to sell in venue.

So we think there's, lots of things that we can continue to do like this, that will continue to drive consumer demand. And we feel really strong. And lastly, obviously with the Rangers playoff run what its impact on multiyear demand, we think will also the [indiscernible] business and help drive our business forward. So we think there's a lot of growth and we look forward to the next 12 and 24 months.

Ben Swinburne

Thanks Andy.

Operator: Your next question comes from the line of David Karnovsky from JPMorgan. Your line is open.

David Karnovsky

Hi thank you. Just one for Victoria, wondering if you could update us on, how you're looking at capital allocation is debt pay down the priority or do you see room for our repurchases over the next year? And how do you think about the right leverage for the business overtime? Thanks.

Victoria Mink

Sure, Hi David. So as we think about our capital allocation policies I break it down we have really three priorities. First, is to maintain the appropriate liquidity to fund our operations and to invest in our core business, right?

Yes. As an example you heard me mention a little bit earlier that in this upcoming fiscal year we expect higher team operation expenses and some higher lead related expenses. Yes. An example of that is our, the impact of our current roster. We were well below the NBA salary cap last year.

And so I would note that for the upcoming season the NBA salary cap is increasing, right? It's increased from $112.4 million to $123.7 million. And the NHL as well, it's a more modest increase but it's going from $81.5 million to $82.5 million. So in these areas that we're looking to, continue to focus on and fund our operations and make investments in that core business.

The second priority in our mind is just to keep a strong balance sheet. As we've discussed and as you mentioned, we -- this includes our focus on paying down debt just to recap this fiscal year that's what we've continued to do.

We did another $65 million pay down on the Rangers facility in the quarter brought our total debt pay down for the full fiscal year to $135 million and it eliminated all of the outstanding balances under the Rangers facility.

And we know the two variants we saw this year Delta and Omicron it's just another reminder that the environment really can be unpredictable and important that we maintain the flexibility that we're going to -- that we may need in the near-term.

And then the third priority, of course, we would consider other uses of our free cash flow including a return of capital. But at this time we just don't have any specific plans to share.

David Karnovsky

Very helpful. Thanks.

Operator

Your next question comes from the line of Devin Brisco from Wolfe Research. Your line is open.

Devin Brisco

Thanks for taking my question. With the Rangers advancing to the Eastern Conference Finals which helped contribute to an already strong quarter, could you parse out what the playoffs impact was by segment or play off around in the quarter? And what is the strong playoff run historically meant for future performance in terms of ticketing sponsorship suites or any other tailwinds to your business?

Andy Lustgarten

Thank. So I think I'm going to start with -- I'll start answering then I'll ask to Victoria for fill in a little bit more. But so, at the highest level obviously we're extremely proud of the Rangers post-season run. We have a great news and we feel very strong about our profit going forward. And I think we see it from the fans enthusiasm both during the playoffs and as well as how they've been acting so far as we look going into this year.

So historically, whenever there is a proceed to run especially long co-season run what you see in the following years is, what's the effect on demand for tickets both on renewals, selling new folds and individuals. And obviously individuals were able to then be more effective on dynamically pricing to capture further upside. Mentioned our renewal rates, the combined rate is already 91% between the two teams and still rising.

In addition, we've -- when we do have a platform, we're able to -- we modify our seats and ticket price for the following year. So, we're starting to see that benefit as we look forward into this year and the following years. But what it really does is it also creates new fans. And so, it's hard to put exact data around this but the best data I think about is what we were able to do on our social media.

So, we've been very focused on driving social media and knowing our consumer. We added about 320,000 new social followers last year in the Rangers, but almost over half of that around half of that came just during the playoff front. Those are new fans that -- or new people really engage with our business that we will see buying tickets, buying merchandise, coming to our games and consuming our product. So, we feel good about what that's going to do to our business.

And of course, that all of happens in the same when we think about our suite renewals. As those come up, we've got more demand and ability to price those efficiently and find a larger market for it. Corporates need to be part of the best of entertainment here in New York City and I hope we'll deliver it.

And we see that with our partners. So as partners come up marketing partners come up, we're able to think about price differently. We were able to mark our inventory to different levels and so, we think there is flow on for that. So, it's great in the quarter or the year that it happens and it's great for follow on years as well. Victoria, do you want to add in a little bit more detail into this quarter?

Victoria Mink

Sure. So of course, as Andy mentioned we couldn't be more proud of the Rangers of strong play off from. So just to give a little recap and a little more color, we hosted 10 playoff games at the Garden in the fourth quarter. And as you can see in our results these games provided a significant boost to revenues and AOI.

First, part of that comes from tickets. Our tickets are priced at a significant premium to our regular season games. And just a sort of a notable mention here, we generated one of the highest per game gate revenue ever for any NHL team in any playoff round including the Stanley Cup finals. And of course, the excitement in the arena translates to strong F&B and merchandise sales which was all great.

And I think as I mentioned on our last call each home playoff game in the first round was expected to generate AOI of more than about $1.5 million and as we went deeper into the post season that per game AOI increased meaningfully as our ticket prices rose. So, in the quarter our playoff-related revenues were $64.8 million as compared to $15.2 million in the prior year period which reflected the three mix home playoff games last year.

So, this translates to approximately $6.5 million, in per game revenues. And with about $3 million in per game direct expenses, it results in a net $3.5 million per game on average, which is of course is skewed higher towards the later rounds. I do -- I will note though, this does exclude some of our marketing administrative costs that we would incur, in connection with our playoffs participation.

Devin Brisco

Great. I appreciate the color. My second question is, now that gambling in New York has been legalized for going on eight months. You've had some time to partner with major sports betting companies and your ratings are really strong, and just NBA and NHL ratings are strong across the lead. Could you speak to the increase in engagement, you've seen across your existing fan base or by new fans due to gambling? And how much of the sports betting opportunity, are you monetizing at this point? And how do you see that evolving from here?

Andy Lustgarten

Sure. Thank you. Well, I'll note, you actually hit a few of the key points so as well, I respond it's still early it's only eight months into the run. And when you think about engagement, the first point of engagement to me is ratings and people coming to our events. So both of those are up. It's very hard to parse exactly, what's driven by what factor. But as I take a more macro point of view, the New York market, is clearly very large for gaming.

We have three great partners. There has definitely been some hesitancy, by certain both publicly and by other partners about the tax rate. And so we think that, we could see as over time, if the tax rates have changed to see even further investment and further interest in this market by our partners. But when I again, take a more macro point of view and say where is sports betting been much more developed, if you go to Europe, or you go to other sports that have been in grain for a long time, you see more in-game bets.

You see more immediate betting and you see it. And those are the things that actually when I take over a long period of time, I've always talked about yes, I'm excited about what this does for revenue directly from marketing partner, but what it does for consumer engagement that comes from small micro bets, that are more quick bets about what's going to happen next.

So you look at sports like Tennis, which is one of the better betting sports in parts of the world. There's so many points of places for people to bets, they're further engagement. I think that we're going to see that here both in the NBA and the NHL as well as other sports here in the US, as it develops further. And as the technology moves along, we'll see more of those types of actions which will drive even further engagement.

So I think it's been a great - I think it's gone very well as we've launched. I think our partners have been very happy, with how we've been able to help drive their business. And I think that there's further growth in this industry especially, if there is changes in regulation such as kiosks and tax rate. So we feel very good here.

Devin Brisco

Thanks.

Ari Danes

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

Operator

Your final question comes from the line of Farshid Javar from Jefferies. Your line is open.

Farshid Javar

Thanks, for squeezing me in here. You briefly touched on this a little bit, but with broader tailwinds in the NBA for international sponsors, can you maybe elaborate more on what that specific space looks like for the company?

Andy Lustgarten

Sure, absolutely. So, again I think both leagues have done an amazing job of prior to COVID thinking about new categories and new inventory, but really during COVID and coming out of it how do we think about leading and pushing our business. So one of the things that the NBA has done is there's always the opportunity to have two partners internationally. And what that means is, besides China and Canada, the ability to have a partner activate in international markets. The issue is when you only add two is – the truth is we didn't spend a ton of time focused on trying to find the partners.

So now the NBAs raised it to 10 partners. And so what we've done is – and let me take a step up and I say wait, we have a lot of international experience here within MSG. I came from the NBA. I ran global strategy. I have a ton of experience doing international, our President of Business Operations here is David Hopkinson, he came from before this. He's got Real Madrid, where he was the Head of Global Head of Partnerships.

So, tremendous international experience and so when we think about this, we say, well, this is a great opportunity for twofold. One, it allows us to find either domestic partners who are trying to activate internationally or where I think we're going to see further upside is new international partners. And those partners can either be focused in their home markets, until we could give you give up even a category, and have a domestic partner in a category, and have an international partner in the category, or an international partner that's actually trying to find its way to the US and unless you're out there talking to them, and showing – talking about your business, you're not going to find it.

And so now that, we can have 10 partners, it's actually worth investing around it. So we hired a couple of people who are very – who are only focused on finding international partners and with David Hopkinson, and my experience, I think there's a real ability to grow this business. And as we grow this business to take – to really put the Knicks and New York is a lifestyle brand that we could take into those international markets.

So, we'll have opportunities to growth to broaden our exposure, broaden our reach, and broaden our fan. So we really – we think this is a great opportunity. It's obviously going to take a little while to harvest. It's not a immediate. And actually, the last one more point that I should add is, if you look at some of the largest or the largest Jersey patch deals, those have all come from international buyers were trying to reach the US. And so, I'm even further enthused, as I think about the future of the Jersey patch opportunity, given the ability for us to invest around the international to go find partners. So this is a real – this will be a real driver of our business long term. It will take a little to get there, but it will be a big driver.

Farshid Javar

I appreciate the color. That's all for me. Thank you.

Operator

And this ends our Q&A session Mr. Ari Danes. I turn the call back over to you for some final closing remarks.

Ari Danes

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

Victoria Mink

Good-bye.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

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