Madison Square Garden Sports Corp.

Good morning. Thank you for standing by and welcome to the Madison Square Garden Sports Corp Fiscal 2022 Third Quarter 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 this session, you will need to press star 1 on your telephone. I would now like to turn the call over to Ari Daines, Investor Relations. Please go ahead.

Thank you. Good morning and welcome to MSG Sports Fiscal 2022 Third Quarter 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 four and five 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 will now turn the call over to Andy.

Good morning, and thanks for joining us. As we near the completion of our fiscal year, we are thrilled to be here today discussing the strong operating momentum and financial results we are seeing in our business. As you know, at the time of our last call, we are coming off the height of the Omicron variant, yet another example of the ever-changing environment we have continued to face throughout the fiscal year. Thankfully, the impact from Omicron was relatively short-lived, and as you can see in today's results, our business has proven to be resilient, performing exceedingly well when faced with another challenge. For the fiscal third quarter, we delivered exceptionally strong performance, including revenues of $338 million and adjusted operating income of $81.5 million, driven by robust consumer and corporate demand. In fact, our total revenues, as well as our per-game revenues across tickets, sweets, sponsorship, food and beverage, and merchandise, were well above results both the fiscal 2019 third quarter, which was the last full third quarter prior to the pandemic, and the fiscal 2020 third quarter, prior to the suspensions of the 19-20 seasons due to COVID. And based on our current trajectory, We continue to expect total revenues for this fiscal year, even excluding growth in media rights and the impact of the playoffs to exceed our last full pre-pandemic year pro forma for the spinoff. We're incredibly proud of how we've successfully navigated our business through the uncertainties created by the pandemic and believe the challenges we have faced have made us a stronger organization. And as I will discuss in more detail shortly, we see numerous opportunities on the horizon to continue driving sustained growth for our business, as well as generate long-term value for our shareholders. Looking at our business in more detail, last month, both the Knicks and Rangers completed full regular season schedules with no capacity restrictions at the Garden. For the Knicks, fan enthusiasm remained high right through the end of the season, keeping the building packed for the team's final stretch of home games. For the Rangers, the first round of the Stanley Cup playoffs kicked off Tuesday with the team taking on the Pittsburgh Penguins, and we're looking forward to tonight's pivotal game two. As we look into the future, with many of our core players under multi-year contracts and several young, talented players continuing to develop, we anticipate success in the years ahead. Both franchises are fortunate to have fan bases that are among the most dedicated and loyal in all of sports. and this has been on display throughout the pandemic. The percentage of ticket holders attending games after dipping in late December and early January due to Omicron saw an overall improvement into February and essentially returned to pre-Omicron levels in March. We saw the same momentum in average tickets sold per game and ended the quarter on a high note, with March at the highest level for any month this season. And looking ahead, while still early, the enthusiasm is already extending into next season, with both season ticket renewals and sales of season ticket packages to new members both off to a strong start. In fact, the average combined season ticket renewal rate is already above 85% and rising. Based on our current trajectory, we now expect to see solid growth in ticket revenue next year as we benefit from the introduction of new ticket inventory and the increase in ranger season ticket prices, as well as greater sell-through with the continued improvement in tourism and office occupancy. The enthusiasm from our fans has created an exciting environment inside the garden, which has contributed to sustained strong guest spending levels. During the third quarter, we again saw double-digit percentage increases in F&B and merchandise per caps, compared to pre-pandemic levels. Engaging with our fans remains a priority, and we've continued to focus on building a more direct relationship with them while innovating how we deepen that connection, including through our social media channels and unique team products. For example, over the last eight Knicks games, we launched an NFT initiative featuring collectibles that could only be purchased while inside the garden. We've also been partnering with niche fashion brands to enhance our merchandise offerings, such as Kith and Jeff Staple. In fact, our exclusive one night only Rangers and Staple capsule collection drove one of the highest merchandise per caps of the season, demonstrating one of the novel ways we can connect with our fans while also driving our business. We also continue to engage with fans by offering original and compelling content on our team's social media channels, which added approximately 700 1,000 net new followers across both teams' channels this year. Demand for corporate hospitality, even in the face of the pandemic, has also been strong and is only increasing. As I mentioned earlier, per-game suite revenue this quarter is now above pre-COVID levels. And while the average usage of our suites for Knicks and Rangers games took a temporary step back due to Omicron in December, Levels started trending up again in the back half of January. And when we ended the quarter in March, we're at the highest monthly levels for the season, exceeding average pre-pandemic levels. The strong momentum in suite usage and sales came despite New York City office occupancy rates that, although improving, are still meaningfully below pre-pandemic levels. But as employees return to the office in greater numbers, we anticipate an equally strong return to corporate entertaining which we are well positioned to capitalize on going into next season. We've also seen continued growth in marketing partnerships, driven by our ability to strengthen relationships with existing partners while expanding into new categories and taking advantage of new inventory. It starts with mobile sports gaming, where during this quarter, we welcome DraftKings as our third major partner in a multi-year agreement done in partnership with MSG Entertainment. Mobile sports betting now represents our largest revenue category in marketing partnerships on a run rate basis. And as we move into fiscal 2023, we will see the full impact of these three new partnerships in our results. We've spoken before about the significant exposure we offer our partners. And with BetMGM, Caesar Sportsbook, and Giraffe Kings representing over 50% of the mobile sports wagering handle in New York in March, we are excited to continue helping them reach new audiences. Companies and other emerging industries also continue to recognize the value we provide in connecting with consumers. As you know, last quarter, we signed deals with Coinbase and Socios. We continue to see incremental opportunities across the blockchain space and are actively exploring potential new partnerships. But sports betting and blockchain aren't the only areas of growth in new sectors. For example, during the quarter, we officially welcomed both DoorDash and Future, a digital fitness coaching company to our slate of marketing partners. Another avenue of sponsorship growth is a new marquee inventory created by the leagues. For example, the NHL's introduction of a jersey patch beginning next season provides us with an opportunity to either deepen our relationship with an existing partner or engage a new company eager to build brand awareness by developing a broader program with one of the most recognizable franchises in professional sports centered around this new premium high visibility asset. The introduction of the NHL jersey patch follows the 2017 debut of the NBA patch, which as we noted on our last call, has only continued to increase in value, highlighted by several recent significant deals across the league, including in Brooklyn and in LA. The leagues have done an outstanding job in opening additional opportunities, including the NBA's decision to increase the number of permitted international sponsors for teams next season, and the NHL's new digitally enhanced dashboards, which also launch next season, and will create significant incremental exposure for our partners during Rangers telecast on MSG networks. As we look to maximize the value of this new inventory, we will take a deliberate approach to the sale process, and we see a bright future ahead for our marketing partnership business for the upcoming fiscal year and beyond. This adds to the list of growth opportunities we've highlighted before, including playoffs and media rights. A playoff run by either team generates significant incremental value. And with the Rangers now in the first round of the NHL's postseason, we expect a boost to our results in the fiscal fourth quarter. The benefit will also extend beyond this fiscal year, as we expect the buzz associated with the playoffs to increase demand for tickets, suites, and sponsorship next year. On the media side, we've seen a significant lift from the NHL's new U.S. media rights deal, which started this season. And with the NBA's national rights coming up in just a few years, further upside potential is possible. In closing, as I'm sure you're aware, I recently stepped down as president of MSG Entertainment, enabling me to focus my full attention on leading and growing MSG sports. With the season management team we have in place, we are more excited than ever about the future. And with two of the most iconic franchises in professional sports, which continue to have untapped value and numerous catalysts for growth ahead, I'm confident our business will continue to thrive and generate long-term value for shareholders. With that, I'll now turn the call over to Victoria.

Thank you, Andy, and good morning, everyone. I would like to start by reviewing our fiscal 2022 third quarter financial performance and then provide an update on our balance sheet. Our third quarter results reflect strong ongoing consumer and corporate demand for the Knicks and the Rangers as our teams continued their 21-22 regular seasons, the first full seasons back following the onset of the COVID-19 pandemic. I'd remind you that the fiscal 2021 third quarter reflected the impact of the pandemic, including fan attendance restrictions at the Garden, and the compressed timing of the shortened 2021 NBA and NHL regular seasons, which affected the year-over-year comparability of results. In the prior year period, the Knicks and Rangers played a combined 16 home games with fan attendance restricted to 10% capacity and 22 games without any fans. This compares to the same total number of regular season home games in the current year period but without capacity restrictions. As a result, total revenues for the quarter were $337.8 million as compared to $183 million in the prior year period. National and local media rights fees represented $124.8 million of revenue this quarter. This reflected a $15.2 million decrease as compared with the prior year period primarily due to higher revenue recognized over 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 start of the 21-22 season, as well as contractual rate increases on our local media rights and the NBA's national media deals. For the balance of our revenue, the majority was related to tickets, suites, and sponsorship, which, as Andy mentioned, are now above pre-pandemic levels on a per-game basis. Adjusted operating income increased $51.4 million to $81.5 million as compared to the prior year period. This improvement was primarily due to the increases 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 lifting of fan attendance restrictions at the Garden which were in place in the prior year quarter. This includes 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 higher other team operating expenses and arena license fees. These expenses were partially offset by higher estimated NBA luxury tax receipts. We are not a luxury taxpayer this season, but benefit from the taxes paid by other teams. The increase in SG&A expenses was primarily due to higher employee compensation and related benefits, marketing costs, and commissions related to the company's sponsorship sales and service representation agreements with MSG Entertainment. Turning to our balance sheet. At the end of the quarter, we had $315 million of total debt outstanding comprised of $285 million under the NICS and Rangers Senior Secured Revolving Credit Facilities and $30 million advanced from the NHL. Our quarter end cash balance of $49.2 million represented a net decrease of 5.6 million dollars compared to our december 31st balance of 54.8 million dollars our cash and debt balances both reflect 45 million dollars of repayments on the rangers senior secured revolving credit facility during the period with regards to liquidity as of march 31st we had 289.2 million dollars of liquidity comprised of $49.2 million of unrestricted cash and cash equivalents, and $240 million in borrowing capacity under the team's revolving credit facilities. I would also add that in addition to the $45 million of debt repayments in the quarter, last week we paid down an additional $15 million on the ranger's revolver for a total of $60 million since the start of the third quarter. which reflects our continued confidence in the trajectory of our business, including what is anticipated to be a strong end to the fiscal year with the benefit of the Rangers' playoff run and the runway we see to deliver sustained growth in the long term. With that, I will now turn the call back over to Ari.

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

Thank you, the floor is now open for questions. I would like to remind everyone in order to ask a question, please press bar one on your telephone keypad. Your first question comes from the line of David Karnovosky from JP Morgan, your line is open.

Thank you. Andrew, just on the higher per caps you mentioned for food and merch, just wondering if you walk through some of the drivers of that versus pre-pandemic. Is that mainly price increases? Are you seeing people order more? Is there a mix of customers impacting that? And then do you see any risk to these levels? Maybe it's like pent-up demand eases or from potential economic losses? Thanks.

Thanks, David. Well, there's a few drivers that are driving the per caps. On the ticketing side, obviously, the tickets that are sold through a season package, prices are set before the season. So that's not a driver of an increase. But our ability to sell individual tickets, which we variably price depending on demand of game and team performance. And so we've been smartly but aggressively pricing and looking at our individual tickets. And then once people come in the building, we've been very focused on delivering new types of merchandise products. So we mentioned Kith designed one of our alternative jerseys and had a collection around it. Jeff Staple created a special capsule. The night that we did the Jeff Staple capsule, that was the second highest night of merchandise per capsule. So all season, only behind Henrik's retirement night. On the F&B side, yes, we focused on pricing, but we've also been focused on ways to deliver food faster and beverages faster. So we've installed cashless transactions. We've been trying to be able to move things faster along. In the beginning of the season, we also did have staffing shortages. So we've been very focused on how to maximize stands and locations where consumers want to go. And so they're able to Buy what they want and also, I mean, we do it for 2 purposes. 1 is to drive revenue, but also consumer. Want to make sure that they're enjoying their experience and having a great food and beverage experience is much very much part of their experience here in the building. So, so far, we see the demand has been there and the demand just keeps on picking up, especially as the teams play. And as more and more people come back to the building. As we look going forward, I think that we can see that the consumer has been still very much support. supporting us. We see it in our renewal rates. We see it in the way that the season ended. At the end of the year, almost all of our games, we light up to the conclusion with the Knicks, not even in the playoffs. The building was packed, the house was full, and it was just a great experience. So long as we're able to continue to deliver that great experience, I think we're going to be able to continue to drive this business.

Right. Thanks. And then maybe one for Victoria. Just any update on capital allocation here? I think last time we were on the call, you kind of indicated debt pay down as a priority, just given where we were with the pandemic and Omicron at the time. You know, restrictions have kind of lifted, you know, somewhat since then. Just want to see if there's any change to your thinking.

So, Dave, let me start with a question, and I'll pass over to Victoria. As I said before, and I'll say it again, we're very pleased with how our business has bounced back and how resilient we've been through challenges like Omicron. That said, we still remain prudent and we want to maintain our financial flexibility. We feel really good about the trajectory of business as we keep on discussing and what we've seen in our results. And there are a lot of tailwinds pushing our business. Occupancy, touring level, tourism levels have been improving. So those all make us feel good. We talked about our areas of growth. Our sponsorship business has upside. We feel really good about our ticketing given where we are in renewal rates and our ability to add new products. We feel good with our media rights deals, especially as we look forward with the NBA agreement coming up in a few years. So, as our business returns, we feel good about where we're going. That said, as we've seen, we need to be flexible and we don't know what's coming around the corner. And so, we're still being prudent on what we do. And so, Victoria, I wanted to set that stage.

Yeah, sure. Thanks, David. Yeah, I mean, you're right. You restated it. This has been our near-term focus, paying down. On the revolvers is something we have been, you know, really looking at and doing pretty, pretty actively. So, you know, just as a reminder, in the last quarter, we did pay down 45 million on the rangers facility. And actually, you know, just in the last week, an additional 15 million dollars as well. But really, as Andy just said, Omicron was a reminder that the environment continues to be unpredictable, and we have to maintain some flexibility. So we do feel really good about the direction of our business and drivers of sustained growth in the long term. So with that, over time, we will be evaluating all of our options for utilizing our free cash flow.

Thank you.

Your next question comes from the line of Brandon Ross from LightShed Partners. Your line is open.

Hello, everyone. Thanks for taking the questions. Andy, you quickly went through a list of potential sponsorship opportunities in the prepared. I was hoping maybe you could dig in on a few of those in more detail. First on jersey patches, I think you had done a $10 million a year deal with Squarespace. when the Jersey Patch sponsorship started. And we've recently seen the Nets do a new deal for, I think, $30 million a year. And there's been some pretty astronomical numbers on soccer or football, whatever you want to call it, Jersey sponsorship. When is your deal with Squarespace up? And how are you thinking about the potential upside for a renewal on the Jersey Patches?

Thanks, Brandon. So yes, we talked about jersey patches. We do think this is a really key opportunity here for us. They don't, more key assets like this don't come around often. The next side, we've, the NBA authorized it in 2017. Square Space was our first partner. We don't comment on deal size, but Brandon, your, your, your, We're seeing the same thing that's been reported. We're following the same what's going on in both in Brooklyn and in LA. And when our patch deal does come up, we do think the market has moved from when we did our deal and Squarespace has been an excellent partner. But we do expect to see some substantial increase in when we renew or find a new partner in that space. But what I do want to talk about, and also we mentioned in the ranger side, we also now have the ability to create, to have a jersey patch next year. The jersey patch is twofold, because I think it's an important thing to point out. I mean, one, it's very important who the partner is. It's so close to our identity, so we're very thoughtful about who would come on our jerseys or on our, you know, on the ranger side or on the NIC side. But we're also focused on how do we maximize the category? How do we maximize this inventory? So when you put in something that's such a premium marquee asset, like a patch, it's not only what you could sell from the patch, it's what the whole package you could do. And it's an integrated sponsorship or partnership that goes across multiple assets. And so we think of it in that forward. But also we think about how do we maximize the category? So it would not be hard for us to go and maximize the revenue by going to someone who's already spending with us. We might do that, but what's really the way we think the best way to maximize this is to find a category that maybe wasn't in our current portfolio and kicking that brand, helping them drive their business, and then becoming long-term partners. Squarespace has been an incredible example of that. It's probably a category we wouldn't have been in, but now they're an excellent partner and someone I expect to be with for a very long time. So we think about it in that fashion. How do we go find new companies, maybe who haven't spent in sports, haven't spent with us, bring them into the fold, and create a real massive marquee opportunity around it? And as you noted, the market is clearly very hot for these marquee assets. And so we have the opportunity on the Knicks side as well on the Rangers side.

Okay. And then the NBA is opening up international sponsorship next season. Can you just dig into a little bit of detail about what inventory that enables any way to size that potential impact? It's not really clear what was not allowed before and what will be now.

Sure. Thanks, Brandon. The NBA started, I applaud the NBA, so Commissioner Silver has really been a leader in trying to figure out ways to grow the business. Started, just to flip it for one second, the way the NBA led with a social strategy when many other leagues were locking down five, ten years ago, really led and what's been a very much part of what's leading and growing the business. theories the league has is that the best operators are the team. So how do we figure out how to grow the business of the teams at the same time grow the league business? So recently the NBA did allow three partners, a team to have three partners in an international market. What that meant is you could have a partner within that market, certain executions in market, certain activations, merchandise, certain branding, But with only three, we really weren't actively looking internationally. We were talking to our current partners and thinking about how to expand their business into the international. And now by opening up to 10, we're actually going to invest and put two or three people focused specifically on international to go find opportunities. And what these opportunities could really yield for us is a few folds. One, I mean, I talked about gaming. We're fully maximized with three partners here in the U.S., But we could reach it. We could have a gaming partner in, pick your country, international, with focus specifically on that market. We could reach companies that are only focused in those markets. Remember, basketball is the second largest sport in the world, and in some markets, even the number one sport in the world. So there is a real opportunity, and the NBA is basketball when you think internationally. So there's a real opportunity to reach international markets. And now we can actually put some force behind and some resources to drive that business. What that will also do for us is I think it will find partners internationally who want to reach New York and reach our market. So we're hoping to be able to bring some more sponsorship business back home in the U.S. as well as reach international. And then, of course, as we grow our business internationally, we're going to have more fans. More fans mean when they come to the New York market, we'll be able to market and sell to them. so we think this is a really great opportunity for us to grow our business both directly through sponsorship but also through reaching new fans and growing our business great thank you very much your next question comes from the line of paul golding from macquarie capital your line is open great thanks so much uh andy you mentioned the uh uh

fiscal 4Q potential boost coming from the playoffs. And so I just wanted to dive a bit deeper into the Rangers-Penguins matchup here, playoff first round. What do you think the puts and takes are in terms of the economics of the playoff round? Presumably tickets up, but I'm looking for a bit of color maybe around other aspects of the business? Are there levers for incremental sponsorship and those sorts of things? Thanks so much.

Thanks, Paul. I'm going to let Victoria take you through a little bit about the playoff impact today, and then I'll talk a little bit about what it means for multi-year.

Great. Sure. Hi, Paul. Good morning. First, as I mentioned, it sort of goes without saying, we couldn't be more excited to have the Rangers in the playoffs. We hosted the first game of the series at the Garden on Tuesday, and we're really excited for game two tonight. But yeah, playoff games provide a significant boost to both revenues and AOI. On the ticket front, we're able to price the tickets at a significant premium compared to regular season games. And on the F&B and merchandise sales side, you know, we also see that higher during the playoffs. So, you know, some incremental playoff related expenses that we do obviously need to consider as well. Obviously, there are day of game costs and there are some additional league assessments associated with playoff gate receipts. With that said, we expect each home playoff game in the first round to generate AOI, let's say, a little bit more than about $1.5 million. So that contribution is substantial. And we will continue to increase if the team goes deeper into the playoffs with ticket prices increasing round to round. Andy, you want to?

And Paul, but I think to your question about incremental sponsorship, I actually think about it as incremental opportunities now, but more also on a multi-year basis. So obviously a playoff run, this is the best time for us when we're sitting around talking and bringing partners into the building to experience what it means to be at a Ranger game. The fan engagement increases. That helps us, by the way, do renewals, increase our prices in the following year. It drives sponsorship or partnership demand both this year and for the following year and multi-year. It helps us when we're thinking about selling suites on what our rating price increases. So a playoff is both what it does today, but also what it can do for our business on a multi-year basis. And then, obviously, the more longer-term, the more playoffs you hit, you drive even further fan engagement, it drives ratings, and eventually you'll see it in your media rights. So it does drive our business in both short-term as well as long-term.

Great. I appreciate that concrete color there. And just a follow-up, it seems like you're having quite a bit of success with the NFT collectibles. Tying that into the playoff question, Do you have you done and do you plan to do NFT collectibles for the playoffs? And if so, what are your thoughts on how they price relative to regular season?

So, I'll start. As of right this minute, we're not doing anything for the NFTs to the playoffs. That doesn't mean we won't or follow something on the afterwards. There's many different ways to think about an NFT. I'll note the Warriors were probably the most successful team I've seen in the NFT space by creating special editions around some of their championships. So there's ways to do NFTs. There's many different ways to do NFTs, but where we've been most successful, it's really a little bit less of what we're generating revenue today, but more about a way we connect with our fans and new fans. We've done NFTs in our building. We've done it around the Henrik event. We've done it in our building where you can only purchase it while you're in the building. Those purchases was very surprising to us where 60% of those purchases were new buyers that weren't in our database. So we have a pretty big database. So it's finding new fans and connecting in new ways. And so I do want to temper expectations. These numbers are not big numbers with the NFTs, but it does show the way that we see fans wanting to interact in new ways. And we want to play with it and look at new ways to drive those business. So we're going to be continuing to focus on NFTs, blockchain, and any other new industries.

Great. Thanks so much. Congrats on the quarter.

Thank you. Thanks, Paul. Operator, I believe we have one final analyst in the queue. Can we take that caller, please?

Yes. The last question that we have is from the line of Farshid Javar from Jefferies. Your line is open.

Morning, everyone. You touched on the positive outlook for season ticket sales and re-ups. Is there anything specifically from corporates for next year? Any insight there would be appreciated.

Corporates, I guess what you mean by corporates is our premium and suite sales and our sponsorship business. As I've talked about, I think there's a few things you could dissect there. Obviously, as I discussed, we just recently added our third partner in the mobile gaming space. All three partners were only part of this year, so you will see an increase on a run rate basis as we go next year, which will be the largest category we have in our sponsors, if you look at the whole in a category. We're seeing a lot of demand in the corporate space. partners want to reach fans and they see that we're the one of the best, if not the best way to get there. Um, and so we feel really good about our corp on the corporate side, on the sponsorship side, in terms of the suite side, um, we've sold more new, um, more, many more new suites than we thought we were going to do this year, especially in the face of the pandemic. Um, single night sales have been very strong for the playoff games that we have, um, upcoming. And as we're talking to partners, we're, we're, We're currently looking at new inventory and trying to find new premium spaces here in the building. And we believe that when we do find those locations, we think we'll be able to sell them. So we think there's, we're seeing a lot of demand. And we feel really good about our future here.

Gotcha. It makes sense. And then just lastly, has there been any discussion of a leveraged target as debt paydown accelerates? Sorry, can you handle that?

Sure. You know, so it's certainly something that we're thinking about and, you know, we're discussing internally. You know, but as I mentioned earlier, our near-term focus just, you know, has been on paying down the revolvers. Obviously, we drew down a lot of debt as a result of COVID, and so we've been, you know, focusing on lowering that. You know, I did mention earlier, you know, what we've done in the quarter and in the last week in terms of some paydowns. You know, but I still just want to reiterate, you know, Omicron, you know, we're talking about it for the first time just last quarter. We continue to be in an environment that is a bit unpredictable and, you know, we want to continue to maintain our flexibility in the near term. But, you know, this will be part of all options, you know, that we'll be evaluating as, you know, as we continue on this trajectory with generating free cash flow.

Awesome. Appreciate it. Thanks, Tom.

There are no questions at this time. I would like to turn the call over back to Mr. Ari Daines. Please go ahead, sir.

Thank you all for joining us. We look forward to speaking with you on our year-end call in August. Have a good day.

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