Madison Sq. Backyard Leisure Corp. (MSGE) Q1 2022 Earnings Name Transcript


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Madison Sq. Backyard Leisure Corp. (MSGE 0.91%)
Q1 2022 Earnings Name
Nov 09, 2021, 10:00 a.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Individuals

Ready Remarks:

Operator

Good day and thanks for standing by and welcome to the Madison Sq. Backyard Leisure Corp. fiscal 2022 first quarter earnings convention name. [Operator instructions] I would now like to show the decision over to Ari Danes, investor relations. Please go forward, sir.

Ari DanesSenior Vice President-Investor Relations

Thanks. Good morning and welcome to MSG Leisure’s fiscal 2022 first quarter earnings convention name. Our president, Andy Lustgarten, will start immediately’s name with a dialogue on the corporate’s Leisure and Tao Group section. It will likely be adopted by an replace from Andrea Greenberg, president and CEO of MSG Networks.

Our EVP and chief monetary officer, Mark FitzPatrick, who will then overview our monetary outcomes. After our ready remarks, we are going to open up the decision for questions. If you happen to don’t have a duplicate of immediately’s earnings launch, it’s accessible within the Buyers part of our company web site. Please pay attention to the next.

Right this moment’s dialogue could comprise statements that represent forward-looking statements inside the that means of the Non-public Securities Litigation Reform Act of 1995. Buyers are cautioned that any such forward-looking statements aren’t ensures of future efficiency or outcomes and contain dangers and uncertainties and that precise outcomes, developments and occasions could differ materially from these within the forward-looking statements on account of numerous components. These embody monetary neighborhood perceptions of the corporate and its enterprise, operations, monetary situation and the business wherein it operates in addition to the components described within the firm’s filings with the Securities and Alternate Fee, together with the sections entitled Danger Elements and Administration’s Dialogue and Evaluation of Monetary Situation and outcomes of operations contained therein. The corporate disclaims any obligation to replace any forward-looking statements which may be mentioned throughout this name.

On Pages 5 and 6 of immediately’s earnings launch, we offer consolidated statements of operations and a reconciliation of working earnings to adjusted working earnings, or AOI, a non-GAAP monetary measure. And with that, I will now flip the decision over to Andy.

Andy LustgartenPresident and Chief Govt Officer

Thanks, Ari and good morning, everybody. First quarter of fiscal ’22 behind us. We at the moment are seeing encouraging indicators that our markets are starting to show the nook following the difficult previous 20 months. Vaccination charges already excessive within the New York space and proceed to rise and CDC’s latest approval of vaccines for kids ought to drive charges even greater.

Workplace occupancy, whereas nonetheless very low in New York Metropolis, has elevated considerably within the final month and a half forecast to enhance. Worldwide tourism to the U.S., which has been just about nonexistent, is beginning to open up this week. And in Las Vegas, we see one of many metropolis’s greatest pre-pandemic staples, company conventions starting to return. We consider these milestones may assist propel our enterprise, which is already experiencing promising momentum in various areas.

Our venues are beginning to get busy once more and are working with none capability restrictions. Live performance touring is ramping up. The Knicks and Rangers have returned to Backyard and are scheduled to play full common seasons and the Christmas Spectacular is again with this yr’s run kicking off final week at Radio Metropolis. This momentum has additionally carried over to Tao Group, which delivered one other quarter of sturdy outcomes, once more, led by sturdy efficiency in Las Vegas.

So whereas we’re not totally again, what we’re seeing is that when there are experiences that buyers discover priceless, they don’t seem to be solely going out, however they’re going out and spending greater than they did earlier than the pandemic. This has been mirrored in double-digit proportion will increase in F&B and merchandise per caps at our occasions in addition to in common verify sizes at Tao in comparison with pre-pandemic ranges. This demand for premium reside experiences performs to our energy, which we predict will assist proceed to drive our enterprise. We’re additionally very inspired by the exercise we’re seeing with advertising and marketing partnerships and premium hospitality as firms are again and discovering methods to reconnect with customers.

Lastly, we made vital progress on our building of MSG Sphere in Las Vegas, which we proceed to consider will launch an thrilling new chapter for reside leisure. First, deal with our bookings enterprise. Whereas we hosted various live shows at our venues in July and August as anticipated, live performance touring started to really return in mid-September, adopted by a really busy October. We count on this ramp-up to proceed by means of the rest of December quarter and we look ahead to a packed schedule for the second half of fiscal ’22.

And whereas the business as a complete has not too long ago skilled some pandemic-related cancellations and postponements which have affected future occasion schedules, we’re grateful that our occasion calendar has solely been modestly impacted for the steadiness of this fiscal yr. In actual fact, the variety of live shows which are venue scheduled within the second half of fiscal ’22 is considerably forward of how we have been pacing two years in the past for the second half of fiscal ’20. And this sturdy pipeline of live performance bookings is being met by sturdy shopper demand as tickets proceed to promote extraordinarily nicely for newly introduced reveals with many promoting out. With regard to productions.

Final season marked the primary time the Christmas Spectacular was canceled in 87 years, which made final week’s debut of the 2021 season, all of the extra particular. As you understand, we scaled down various reveals this season, understanding this yr can be distinctive as a result of pandemic. Our superior ticket gross sales began gradual, particularly teams and worldwide, which traditionally are among the many first buyer segments to purchase. That mentioned, main as much as the present’s preview peer performances final week, we noticed total ticket gross sales elevated considerably week-over-week for a number of weeks in a row.

This previous week producing the best proportion improve as far as we look ahead to the present’s official opening evening this night. As well as, a number of the pandemic-related components which have impacted gross sales so far at the moment are headed in the precise path, assist ticket gross sales later within the reveals run. These embody worldwide tourism, which started to open up this week and the not too long ago authorised vaccine for kids, clearly, a optimistic for a household present. We’re actually enthusiastic about opening our doorways for many who wish to have fun the vacations at Radio Metropolis Music Corridor and look ahead to welcoming tons of of 1000’s of visitors this season, which we consider is a big first step to this reveals full return over time.

Tao Group is one other a part of our enterprise that’s clearly benefiting from folks’s need to assemble once more. Tao’s potential to ramp up operations rapidly, to fulfill the general public’s demand led to spectacular outcomes for the second consecutive quarter, with choose markets akin to Las Vegas, even outperforming pre-COVID ranges. Venues not but deemed totally staffed can be mirrored in Tao sturdy AOI margins, which we count on will normalize over time as we proceed to make progress on the hiring entrance. And whereas we additionally consider how we’ll face elevated competitors because the business continues to return again, we be ok with the long-term trajectory of the enterprise.

Tao’s acquisition of Hakkasan created a world powerhouse throughout greater than 20 home and worldwide markets. Tao is now centered on optimizing. Crew has been evaluating their current portfolio, together with doable lease extensions, rebrandings and choose cases closures. On the identical time, Tao has additionally returned to specializing in its venue growth efforts with a sturdy pipeline of deliberate openings by means of calendar ’22.

Tao not too long ago debuted a brand new venue in Mexico Metropolis with others set to comply with in a number of markets, together with Miami, Los Angeles and Las Vegas. As you’ll be able to think about, we’re extremely happy to see folks embracing the return of reside leisure and that features firms, which at the moment are reengaging with the business in significant methods. There are clear indicators that company hospitality is making its manner again. To assist our companions, we took a customer-friendly strategy, pausing our obligations for the final yr by means of September 30, to clearly meant minimal suite income within the first quarter.

On the identical time, we proceed to work on new gross sales and renewals, which at the moment are forward of expectations. And, on a go-forward run fee foundation, we’re happy to say that suite income has returned to pre-pandemic. Our advertising and marketing partnership enterprise has additionally had an thrilling few months. Final quarter, we renewed our priceless advertising and marketing associate, J.P.

Morgan Chase. This was adopted by multiyear extensions with longtime companions, Lexus and Anheuser-Busch, each a part of our signature roster. We then expanded by welcoming Infosys, a world chief in next-generation digital companies and consulting. We’re happy with the phrases of those complete agreements, which contain various MSG Leisure property, together with MSG Networks in addition to MSG Sports activities, which our advertising and marketing partnership group additionally represents giving our sponsors entry to a broader platform.

These offers have helped set the tone for our discussions with different current and probably new advertising and marketing companions, together with within the cellular sports activities gaming area. Yesterday, New York State awarded licenses to 9 operators, a considerably greater quantity than had initially been anticipated. On the heels of this optimistic information this morning, we introduced our first important partnership associated to cellular sports activities gaming in New York with BetMGM. We have talked earlier than about how our portfolio of property uniquely positions us to assist sports activities gaming operators develop their enterprise within the nation’s largest market.

Our in depth multiyear settlement with BetMGM makes use of our distinctive portfolio to offer the gaming operator with unparalleled publicity to tens of millions of customers. This contains our regional sports activities networks, digital apps, out-of-home signage and Madison’s Sq. Backyard Area and thru our relationship with MSG Sports activities, the New York Knicks and Rangers franchises. We’re simply getting began by way of rising the sponsorship class. Our discussions with different cellular sports activities gaming operators have additionally meaningfully progressed over the previous a number of months.

And with New York State’s licensing course of now full, BetMGM is our first associate on this class. We actually do not count on it to be our final. As we’re more and more assured about how impactful this income alternative might be for our firm. And lastly, we proceed to make vital progress on building of the MSG Sphere at The Venetian as we push towards our anticipated opening in calendar 2023.

Since we final spoke, we’ve got accomplished concrete pours for the venues domed roof and began set up of the metal framework that can ultimately help the inside LED media show aircraft. At 160,000 sq. toes, which is bigger than three soccer fields will play an vital function in our potential to create immersive experiences at unparalleled scale. Over the subsequent a number of months, work will proceed on the venues interiors in addition to the outside, together with the pedestrian bridge that can hook up with MSG Sphere to The Venetian expo. I’ll finish by reiterating that the ramp-up we’re seeing throughout our Leisure enterprise displays the sturdy need of individuals to be collectively, particularly for premium reside experiences.

There’s nonetheless work to do. There are nonetheless challenges. However the truth that our property are uniquely positioned to fill the demand has made us very optimistic of the place we’re headed in fiscal ’22. Now as we get again to doing what we love, we’re additionally extremely excited concerning the progress we have made on MSG Sphere, a starting of our firm’s subsequent chapter.

With that, I’ll now flip the decision over to Andrea.

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

Thanks, Andy and good morning. With the latest begin of the NBA and NHL common seasons, we have seen sturdy curiosity from viewers and advertisers for our reside skilled product, which options 5 groups throughout each leagues. Because the seasons proceed, we hope to construct on the success we had final yr, which included double-digit proportion rankings will increase for various our groups, all-time excessive ranges of viewership and engagement on our streaming app, MSG GO and sturdy advertiser demand for our programming. Our content material has performed a giant half in our potential to resume our affiliate agreements, together with most not too long ago with Verizon Fios, one in all our largest associates, amongst a number of others.

And whereas we’re actually disillusioned with our present Comcast scenario, which has impacted roughly 10% of our subscribers, we stand prepared to barter a good and affordable deal. We worth of our content material and we’ll proceed to innovate with programming designed to broaden our viewership and improve total engagement. To that finish, to capitalize on the introduction of cellular sports activities gaming in Connecticut, which is able to quickly be adopted by New York, we’ve got launched an authentic block of entertaining and energetic sports activities betting content material, that includes athletes, specialists and different personalities. This contains two new applications, The Bettor Half Hour and The Betting Alternate, which aired back-to-back Monday by means of Thursday previous to our free sport programming.

We have additionally debuted a brand new Sunday morning soccer focus present Odds With Ends, hosted by former NFL gamers David Tyree and Mathias Kiwanuka. We proceed to work with a rising listing of sports activities betting operators, which now contains FanDuel, Caesars, BetMGM and bet365 on conventional spot buys in addition to with various these companions, in-game integrations and different distinctive content material. It is clear that sports activities gaming operators are recognizing the worth we ship as we have already secured from this class a considerably greater degree of promoting commitments for fiscal ’22 as in contrast with our final fiscal yr. We additionally proceed to see progress in different sectors which have grow to be an elevated focus for us, together with know-how firms, web-based companies and types which have thrived over the previous two years.

The ’21/’22 season, we have welcomed various new companions, together with TikTok, DoorDash and Infosys and have seen a considerably elevated presence on our air from current companions akin to Amazon and Verizon. As we glance forward, we all know the media panorama is evolving. Nevertheless, we additionally know that reside native skilled sports activities stays a few of immediately’s most beneficial programming and we proceed to discover new methods to supply and monetize our content material, together with with the direct-to-consumer product. We’re assured that our lengthy historical past of innovation will serve us nicely as we glance to capitalize on these future alternatives, all with the continued aim of driving worth for our companions, advertisers and viewers.

With that, I’ll flip the decision over to Mark.

Mark FitzPatrickGovt Vice President and Chief Monetary Officer

Thanks, Andrea. Let me begin by reviewing our first quarter monetary efficiency, which now contains the MSG Networks section. I will notice that whereas the acquisition was accomplished on July 9, MSG Networks outcomes are included for all intervals offered. Within the fiscal first quarter, we generated whole income of $294.5 million and adjusted working earnings of $10.3 million.

Leisure section generated $34.2 million income, which primarily displays reside occasions beginning to ramp up in mid-September. This section had an adjusted working lack of $71.4 million within the quarter. As we indicated on our final name, we’ve got been strategically hiring throughout our leisure section to help the ramp-up of reside occasions and MSG Sphere content material growth plan. This hiring is mirrored in greater section SG&A bills within the quarter.

Turning to MSG Networks. The section generated $141.5 million in income and $55.8 million in adjusted working earnings within the quarter. MSG Networks year-over-year outcomes have been impacted by various objects, akin to greater accruals for potential affiliate price rebates and decrease promoting because the prior-year quarter benefited from the timing of the NHL’s return to play and Islanders look within the playoffs. And eventually, the Tao Group generated revenues of $119.5 million and adjusted working earnings of $26.2 million, as reopening momentum continued in key markets akin to Las Vegas.

Now, let’s flip to our steadiness sheet. As of September 30, we had roughly $1.33 billion of money readily available, whereas our debt steadiness was $1.71 billion. By way of capital expenditures, we had $137 million of capex within the fiscal first quarter, primarily associated to the development of the MSG Sphere in Las Vegas. Via September 30, project-to-date building prices incurred have been roughly $976 million, which incorporates $121 million of accrued prices that weren’t paid as of September 30 and is web of the $65 million acquired from the Las Vegas Sands.

As a reminder, we beforehand disclosed a price estimate of the MSG Sphere in Las Vegas of roughly $1.865 billion and we are going to proceed to aggressively handle prices as we work towards the deliberate opening in calendar 2023. With that, I’ll now flip the decision again over to Ari.

Ari DanesSenior Vice President-Investor Relations

Thanks, Mark. Can we open up the decision for questions, please?

Questions & Solutions:

Operator

[Operator instructions] Your first query comes from the road of Brandon Ross with LightShed Companions. Brandon, your line is open.

Brandon RossLightShed Companions — Analyst

Hey, guys. Good morning. I wished to begin with MSG Networks. And there is been numerous dialogue round the way forward for the RSN enterprise currently.

Clearly, you might have the Comcast drop and there is been public posturing from Sinclair and the leagues. And I used to be questioning in the event you may simply discuss broadly about your DTC imaginative and prescient for MSG Networks. Initially, what rights do you even have? After which how are you going to steadiness your want to maximise revenues the distributor’s need for decrease charges and the leagues leads and group’s targets of maximizing distribution and eyeballs on their product. How do you clear up that puzzle?

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

Hello, Brandon. I will take that one. Effectively, as you mentioned, the panorama is completely concerned, evolving and it is actually a fragile ecosystem with a complete host of constituents. And we’ve got our associates.

Now we have our leagues. Now we have different distributors. Now we have followers. Now we have sponsors, however we consider these constituents do, in reality, acknowledge the worth of our programming, which is why we’re assured that we’ll work collectively to seek out an acceptable mannequin that balances all of those constituents curiosity.

And we predict that as we undergo this course of, there might be alternatives that come from that for us. We have talked earlier than about how the viewing expertise is reworking. It is going from a lean again expertise to a lean ahead expertise. We have got interactive video games.

We have got sports activities betting on the horizon. They usually’re all — as we have seen from what we have been doing, they’re all driving engagement and viewership. So we predict that each one of that may be a value-creating alternative for us that we’re already starting to see. Our community enterprise, this fiscal is about as much as see a considerable improve in promoting income, partly as a consequence of what’s occurring within the cellular gaming area.

And as you say, direct-to-consumer is one other creating alternative. There are tens of millions and tens of millions of properties in our area that do not obtain our networks. So discovering a strategy to serve these properties is clearly of curiosity to us. And we have been actively speaking with our companions about completely different DTC fashions we may deploy.

All that mentioned, over the past 12 months, we have grown our database by over 25% with a watch towards deeper shopper insights and creating extra direct relationship with our clients. We have additionally carried out analysis to higher perceive what our clients would possibly need, together with numerous pricing choices. And it is rather second proper now, we’re absorbing all of this data, which, together with the various discussions that we’re having will assist us formulate the perfect path ahead. As to your final — or one in all your questions on rights, as we have mentioned up to now, we’ve got the pliability in each our rights and affiliate agreements to supply a direct-to-consumer product.

We’re engaged on a renewal of our agreements proper now with the NBA and NHL, which as we have mentioned, we have efficiently renewed many, many instances up to now. And we’re assured that we’ll proceed to have the digital rights that give us the flexibility to take MSG networks to our customers. So sure, whereas issues are actually evolving, we consider that on steadiness, the RSN enterprise will stay extremely priceless and we’ll proceed to generate important money stream going ahead.

Brandon RossLightShed Companions — Analyst

OK. After which possibly for Andy. The Tao Group carried out massively above 2019, in the event you take a look at the numbers. Are you able to increase on what you are seeing there? And in the event you suppose that is sustainable? And the way a lot Hakkasan contributed to the combination? And if all these synergies are in I imply, total, I take a look at the AOI this quarter, can this be a $100 million AOI enterprise?

Andy LustgartenPresident and Chief Govt Officer

Thanks, Brandon. So sure, we’re very happy with Tao’s outcomes this — really the previous two quarters. However I feel it is clearly pushed by what we see in all places proper now. Folks’s pent-up demand, pent-up demand to return collectively, pent-up demand to have fun and pent-up demand in doing it in a manner of premium, wonderful place that they really feel protected.

And I feel the Tao Hakkasan merger is a good instance of a kind of varieties of enterprise. And other people have been actually prepared to pay for it. We see it in our verify sizes, we see it throughout the enterprise. I’ll say and I’ve mentioned this earlier than, we do suppose we’re benefiting proper now from some decreased staffing ranges and decreased competitors that is starting to return into a few of our markets.

However that is to not say we’re going from no competitors to full competitors. There may be already competitors occurring. We really feel actually good concerning the upside in the way forward for this enterprise. The group has been engaged on integration, each organizational and operational.

They’ve taken out a number of the financial savings, however they’re persevering with to deal with it. There might be additional synergies throughout advertising and marketing, throughout promotion, databases, procurement, buying and introduction of company sponsorship. So round this merger, we predict there’s nonetheless numerous alternative in entrance of us. And it comes not solely from our present shops, however our future shops, so our growth plan.

And this group is absolutely the perfect within the — I feel the perfect within the business or among the many finest, if not the perfect, proper? We only recently opened up in Mexico Metropolis. Now we have a plan to open up a couple of different markets coming quickly. Pakistan instantly elevated Tao’s footprint and added various worldwide markets and the flexibility to achieve worldwide markets. And we predict that this firm has acquired progress for years to return and we have already begun to see it.

So we really feel actually good about bringing these two companies collectively and we really feel actually good about this enterprise.

Brandon RossLightShed Companions — Analyst

OK. And simply in a short time, there’s been information round Penn Station renovation as soon as once more. I really feel prefer it’s been occurring for many years, however are you able to simply deal with the chance of relocation? And on the flip aspect, if there’s potential upside to the air rights or possibly use of the Hulu Theater within the renovation? Thanks.

Andy LustgartenPresident and Chief Govt Officer

Positive, completely. So final week, Governor Hochul unveiled her plans for the redevelopment of Penn Station and the encompassing space. We predict it should considerably enhance this space, which is adjoining to the Backyard. We have been working with the governor and we’ve got been working to bringing the state again and he or she’s actually achieved a superb job and we actually — we totally help her efforts.

And we look ahead to persevering with to work with our on many issues to return which are at the moment in progress and innovation. So I’ll say although, we count on to proceed internet hosting Memorial occasions proper right here the place the Backyard’s present location. And to your level about, air rights or Hulu Theater look, these are very priceless piece of property in our portfolio, each strategically and financially. And I do suppose there might be a time to monetize, however I’ll say, I do not suppose that point is tomorrow or the subsequent week, proper? However we’re intently watching the developments round Penn Station and when the chance presents, we’ll make — that is smart, each strategically and financially, we are going to take that chance to create worth.

So thanks.

Brandon RossLightShed Companions — Analyst

Thanks loads.

Operator

Your subsequent query comes from the road of David Karnovsky with J.P. Morgan.

David KarnovskyJ.P. Morgan — Analyst

Hello. Thanks. Perhaps to comply with on Brandon’s MSG Networks query. It does seem like a number of the lease in RSN mannequin are thinking about creating their our personal DTC platforms that might mix in-market and out-of-market streaming.

And simply given your combine within the underwriter by means of 2035 I feel, are you able to remind us what protections you might have if a competing streaming product did come to the market? After which on the identical time, would you see room to probably take part in an OTT product that the NBA or NHL can provide?

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

Yeah, I will reply that one. I imply the NBA, NHL has all the time acknowledged that the RSNs are a vital a part of their total ecosystem. And we have — by means of our group offers labored in partnership with each leagues to make sure over time that there is a continued sturdy potential for us to supply regional merchandise to clients on this market and we totally count on that to proceed going ahead. As I mentioned many instances up to now, there was nothing that precluded us from launching a direct-to-consumer product.

And we’ll proceed to discover fashions which are useful for all concerned, as I indicated within the first query. We’re assured that working with our leagues and our distributors and our sponsors that can proceed to have broad digital rights that can give us the flexibility to take advantage of direct-to-consumer together with our present linear distribution.

David KarnovskyJ.P. Morgan — Analyst

OK. After which, Andrew, as you famous yesterday, New York moved to approve 9 betting operators within the state. I feel that is greater than double what we talked about on the final earnings name. Simply desirous to your ideas on what this market dynamic means for you by way of the variety of companions you could possibly probably tackle? After which simply the general significance of your property that these operators look to achieve market share?

Andy LustgartenPresident and Chief Govt Officer

Thanks, David. So let me begin by saying what I’ve mentioned many instances earlier than, however I’ll proceed to say it as a result of I feel it is extremely vital. Earlier than we even discuss concerning the income alternative immediately, we love sports activities gaming and what it is impression is on viewership and fan engagement. And we predict that is going to bear fruit not solely immediately, however for years to return.

And Andrea hit on it a little bit bit as we — as you talked concerning the curiosity in customers and thru MSG GO, proper? So it is — that is going to play out in lots of locations. That mentioned, we’re speaking about what it’s immediately. So the state initially talked about having a minimal of 4 operators. Yesterday, they introduced 9.

Clearly, for us, this can be a nice alternative, extra competitors, extra aggressive setting. Operators are going to should aggressively market themselves to seek out their customers, increase consciousness and draw their clients in, proper? And that is the place we are available in. I feel that our manufacturers have unmatched presence in New York market. Now we have super worth for companions, mounted property, together with leisure, Tao venues.

As Andrea talked about earlier than, MSG Networks linear networks and our out of doors signage. Our relationship throughout MSG Sports activities with the Knicks and Rangers. And this drove us to signing our first settlement with BetMGM. It is an expansive settlement, multiyear.

It demonstrates the worth we will ship to a associate. However I’ll say it is nonexclusive and we don’t count on them to — this to be our solely associate. We’re in lively discussions with extra operators. We’re very selective about who can be our associate and the quantity.

However I’ll, I wish to emphasize that we’re more and more assured about how impactful this class might be for our firm.

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

And simply including to Andy’s feedback, at Networks, sports activities betting operators are already clearly recognizing the worth we ship immediately. And as I discussed throughout our ready remarks, we proceed to work with a rising listing of those operators. Right this moment, we’ve got partnerships on the community aspect, clearly, with BetMGM, with FanDuel, with Caesars, with bet365 and we have seen appreciable progress in income from this class for this fiscal versus final with, as Andy indicated, extra alternatives past that — completely different alternatives that can come sooner or later.

David KarnovskyJ.P. Morgan — Analyst

Thanks.

Operator

Your subsequent query comes from the road of John Janedis with Wolfe Analysis.

John JanedisWolfe Analysis — Analyst

Thanks. I’ve acquired one for Mark and one for Andy. First, for Mark, given the Comcast scenario, are you able to give us an replace on any potential covenant or compliance points on the networks associated to the time period mortgage? After which Andy, are you able to give us the expectation on how the Christmas present goes to carry out relative to historic norms, possibly on a per-show foundation, how impactful is slower tourism? Is that almost all of visitors? And on the worldwide journey restrictions being lifted, did that come at a time the place it may be tough to seize, given typical lead instances of bookings of vacation journey plans? Thanks.

Mark FitzPatrickGovt Vice President and Chief Monetary Officer

Nice. That is Mark. I will bounce in and reply your first query after which hand it over to Andy. I will begin by noting that we totally count on to stay in compliance with all our covenants underneath the time period mortgage.

But in addition notice that there is no recourse to the mum or dad firm because the mortgage was issued by our subsidiary of MSG Leisure. Just a bit background on the mortgage. There’s at the moment roughly $1 billion excellent and it matures in October 2024. It is topic to 2 key monetary covenants, most leverage of 5.5 instances.

and minimal curiosity protection of two instances. The primary governing covenant is the leverage ratio. Now we have the flexibility to web as much as $175 million in money because the borrower towards the leverage covenants. And with that, I will flip it over to Andy.

Andy LustgartenPresident and Chief Govt Officer

So Christmas Spectacular present. So we simply — we had a preview interval ultimately weekend or opening of this night and we’re thrilled to have the present again. It was tough for us to have take a yr off after 87 years of being on. However we knew coming into this yr, this was going to be not the standard yr given the impression of the pandemic.

So we decreased our variety of reveals as we headed into the yr in comparison with a typical yr, as I discussed and we picked up on. Now the present gross sales began a lot slower than the place they traditionally have been. Now Jack, we predict, is an element — pushed by various components. However once we misplaced two of our key segments, each our vacationers or particularly worldwide and our teams.

And the rationale the teams is numerous them are tied in with the kids. The youngsters present unknown place the place we have been going to be with the vaccine and guidelines. So we needed to make some tough choices. I’ll say the final — every week has improved.

The gross sales had improved previous to the next week and day-after-day has been stronger than the day earlier than. So sometimes, Mondays aren’t our strongest day. We had a really sturdy Monday of gross sales yesterday. However to your level, it is a little bit — it is displaying up a little bit bit nearer towards the second half of the run, not these subsequent few weeks.

These weeks sometimes have been extra the place our group gross sales have gone into, particularly faculties, which actually weren’t patrons this era. We’re beginning to hear about faculties coming of curiosity. However once more, they should take a couple of weeks, they want a plan. They should get themselves set.

So this — we’re hoping this could possibly be useful submit Thanksgiving, which — when most of our tickets get offered. So pleasure appears to be constructing. And we’ve got seen some compressed and last-minute shopping for, which can be fully in keeping with Broadway. So — and the opposite factor that is an attention-grabbing level is our ticket yields have remained sturdy.

So — and higher than what we have been anticipating. So whereas this yr is not going to be our typical yr, is not going to hit our 2019 numbers, we’re nonetheless very completely satisfied and excited to welcome tons of of 1000’s of visitors this season. And I do suppose that is the primary signal of coming again. And we do consider in the long run, very strongly on this enterprise.

John JanedisWolfe Analysis — Analyst

Thanks, Andy.

Operator

Our subsequent query comes from the road of David Katz with Jefferies.

Unknown speaker

Hello. Good morning. That is Cassandra asking on behalf of David. I simply have one on the Sphere.

Have you ever seen or foresee any challenges with provide chain? And the way are you managing the chance there?

Mark FitzPatrickGovt Vice President and Chief Monetary Officer

Thanks on your query. Simply I will begin off by saying when you consider the Sphere and the complexity related to it, we have been really managing our provide chain since day 1. I feel as we talked about in our ready remarks, we’re on observe to open in 2023. We do not see something altering within the close to time period.

I feel as we talked about on our final name, we’ve got accelerated the acquisition of upper danger objects, together with securing nearly all of our structural metal for the challenge. As well as, the place doable, we have recognized different producers and supply strategies for sure elements akin to semiconductors to reduce any potential delays. I feel total, we have achieved a great job of managing our provide chain and ensuring we proceed to be on observe for 2023 opening.

Unknown speaker

Acquired it. Thanks very a lot.

Ari DanesSenior Vice President-Investor Relations

Now we have time for one final query.

Operator

Your final query comes from the road of Ben Swinburne with Morgan Stanley.

Ben SwinburneMorgan Stanley — Analyst

Thanks, good morning. Andy, may you discuss a little bit bit extra about form of the way you suppose the BetMGM relationship evolves? And the way a lot greater the enterprise could possibly be in the event you look two to a few years out, particularly as you herald extra companions? And in the event you guys may also help us in any respect take into consideration the place that income goes to indicate up throughout your segments? That will even be useful. After which I simply wished to comply with up on the dialog on streaming rights. Once more, Andrea talked about that you simply’re in discussions with the leagues proper now on the renewal.

Do you suppose that can have any impression on expense progress? I feel we sometimes see bills develop sort of within the escalator degree, however I did not know if due to the deal with streaming, there is perhaps some volatility there we must be trying to as you renew these two agreements.

Andy LustgartenPresident and Chief Govt Officer

Thanks, Ben. In order I discussed, BetMGM is our first associate. It is not unique. We predict this class could be very significant throughout all elements of our enterprise.

It begins with easiest promoting on MSG Community, integrations and video games, however then extra so throughout our mounted property. So we’re capable of present one thing that I do not suppose a cellular operator may attain on their very own, which is mounted land-based onerous attain of the patron, our potential to attach immediately with the patron to essentially present each a loyalty program. So take into consideration our Tao venues. Now we have 60 venues in 5 continents.

Take into consideration the Area and premium areas in seating. Take into consideration or simply our potential to — by the best way, deeper attain outdoors of sports activities to different varieties of each eating and live shows. So we’re capable of present actually a sturdy providing to a associate or allow them to to essentially drive their enterprise. We clearly have a priceless assortment of property and we predict that we actually blanket the New York market and the better New York market in a manner no person else within the business does throughout on-line, linear networks, media, on the internet and in particular person.

And eventually, the opposite piece of the worth that we’ve got that’s extraordinarily vital to companions is our knowledge, realizing our buyer. We do it higher than I feel anybody else and we wish to proceed — and we offer it to our associate and talent to trip and actually construct their enterprise. So we predict it is a super alternative. By way of throughout our property, clearly, there is a piece of the enterprise that can undergo MSG Community.

There might be a chunk that involves the Area relying on the place it suits to what sort of activations we offer, sponsorship will get shared between the groups and the Area as nicely. So it is shared between MSG Sports activities and MSG Leisure. And there will be part of it, clearly, that goes to the group for official branding. However I’ll say that this can be a very sturdy deal and we count on — we really feel superb about this class and what we’ll capable of drive from it.

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

And on any potential expense progress, as Andy simply indicated, there’s important offsetting income alternatives. If you happen to simply take into consideration networks and Andy touched on a couple of of those alternatives, along with simply our conventional spot stock, we may and need to launch new services and products centered round sports activities gaming, together with married to our reside sport content material. Now we have extra programming and manufacturing alternatives. As we indicated, we have simply launched a collection of recent sports activities betting reveals that can air on Sundays throughout the soccer season and previous to our pregame programming.

So in prime viewership spots, branded content material alternatives. There’s a complete host of wager solid alternatives. We have achieved a few of that previously. We are going to look to do extra of that with a number of the companions that we have outlined throughout the season, hopefully and simply basic integrations.

Now we have a free to play app. Our MSG GO streaming app, which is performing splendidly this yr in comparison with prior seasons. So we see this as — simply on the community aspect alone, as being an amazing alternative for progress.

Ben SwinburneMorgan Stanley — Analyst

Yeah. I suppose that is smart, Andrea. I used to be really particularly asking concerning the streaming rights that you simply mentioned. I feel you mentioned you have been in negotiations with the NBA and NHL and the renewal in these have been large enough to impression expense progress of the networks as you look ahead?

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

Sure. I would not count on any appreciable expense progress associated to these rights. As I’ve mentioned up to now, we have had the rights with the NBA and the NHL to supply direct-to-consumer — to supply our machine networks direct to shopper.

Operator

I would now like to show the decision again over to Ari Danes for any closing remarks.

Ari DanesSenior Vice President-Investor Relations

Thanks all for becoming a member of us. We look ahead to talking with you on our subsequent earnings name. Have a fantastic day.

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

Good bye.

Operator

[Operator signoff]

Length: 45 minutes

Name contributors:

Ari DanesSenior Vice President-Investor Relations

Andy LustgartenPresident and Chief Govt Officer

Andrea GreenbergPresident and Chief Govt Officer, MSG Networks

Mark FitzPatrickGovt Vice President and Chief Monetary Officer

Brandon RossLightShed Companions — Analyst

David KarnovskyJ.P. Morgan — Analyst

John JanedisWolfe Analysis — Analyst

Unknown speaker

Ben SwinburneMorgan Stanley — Analyst

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