Q3 2022 Madison Square Garden Sports Corp Earnings Call
[music].
Good morning, Thank you for standing by and welcome to the Madison Square Garden Sports Corp, fiscal 2022 third quarter earnings Conference call.
This time, all participants are in a listen only mode.
After the Speakers' remarks, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.
I would now like to turn the call over to Ari Danes 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 investors 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 1095.
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 are non-GAAP financial measure.
And with that I will now turn the call over to Andy.
Good morning, and thank you 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.
You've got 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.
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 suites sponsorship food and beverage and merchandise.
Well above results both the physical.
2019, third quarter, which was the last full third quarter prior to the pandemic and.
In the fiscal 2023rd quarter.
Higher to the suspensions of the 1920 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 pact for the team's final stretch of home games.
For the Rangers first round of the Stanley Cup playoffs kicked off Tuesday, with the team taking on the Pittsburgh Penguins and we're looking forward to some nice pivotal game too.
As we look into the future with many of our core players under multiyear contracts and several young talented players continuing to develop we anticipate success in the years ahead.
Both franchises are fortunate to have <unk>.
Basis 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.
<unk> 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 Rangers 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 FTE initiative, featuring collectibles that can only be purchased well inside the garden we've.
We've also been partnering with niche fashion brands to enhance our merchandise offerings, such as kith and Jeff staple and.
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 700000 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-19 levels.
And while the average use usage of our suites for Knicks and Rangers games took a temporary step back due to omicron in December .
Level started trending up again in the back half of January .
And when we ended the quarter in March.
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.
Driven by our ability to strengthen our relationships with existing partners, while expanding into new categories and taking advantage of new inventory.
It starts with mobile sports gaming.
During this quarter, we welcomed draft kings as our third major partner.
On a multiyear agreement done in partnership with MSG Entertainment.
Mobile sports betting now represents our largest revenue category and 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 that MGM Caesars sports book in drafting representing over 50% of the mobile sports Wagering handle in New York in March we're excited to continue helping them reach new audiences.
Companies in other emerging industries also continue to recognize the value, we provide and connecting with consumers.
As you know last quarter, we signed deals with Coinbase and associates, we continue to see incremental opportunities across the blockchain space and are actively exploring potential new partnerships.
But sports betting in blockchain aren't the only areas of growth in new sectors. For example, during the quarter, we officially welcomed both door dash and future.
Digital fitness coaching company to our slate of marketing partners.
Another Avenue of sponsorship growth is a new marquee inventory created by the leaks.
For example.
<unk> introduction of a Jersey patch beginning next season provides us with an opportunity to either deepen our relationship with an existing partner.
We're engaged in new company eager to build brand awareness by developing a broader program with one of the most recognizable franchises and professional sports.
Entered around this new premium high visibility asset.
The introduction of the NHL Jersey patch follows 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 lead including in Brooklyn and in La.
The leagues have done an outstanding job in opening additional opportunities, including the NBA is decision to increase the number of permitted international sponsors for teams next season and.
And the Nhl's, new digitally enhanced dashboards, which also launched next season.
We will create significant incremental exposure for our partners during Rangers telecasts 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 a 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.
Ah playoff run by either team generate significant incremental value.
The Rangers now in the first round of the Nhl's post season, 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 increased 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 as possible.
In closing as I'm sure you are 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 am 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 2023rd 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 Rangers as our teams continued their 'twenty one 'twenty two regular season.
First full season back following the onset of the COVID-19 pandemic.
I would 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 game 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 a 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 season in the prior year period.
This was partially offset by the impact of the Nhl's, New U S media rights deals, which began at the start of the 'twenty one 'twenty two season as well as contractual rate increases on our local media rights and the Nba's National media deal.
For the balance of our revenue the majority was related to ticket suite 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 receipt.
Not a luxury taxpayer this season, but benefit from the taxes paid by other teams.
The increase in SG&A expenses.
Primarily due to higher employee compensation and related benefits.
Marketing costs and commissions related to the company's sponsorship sales and service representation agreement 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 Knicks and Rangers senior secured revolving credit facilities and $30 million advanced from the NHS.
Our quarter end cash balance of $49 2 million represented a net decrease of $5 6 million compared to our December 31 balance of $54 8 million.
Our cash and debt balances both reflect $45 million of repayments on the range of senior secured revolving credit facility during the period.
With regards to liquidity as of March 31, we had 289 $2 million of liquidity comprised of $49 2 million of unrestricted cash and cash equivalents and $240 million in borrowing capacity under the <unk> revolving credit facility.
I would also add that in addition to the $45 million of debt repayment in the quarter last week, we paid down an additional $15 million on the Rangers 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 star one on your telephone keypad.
Your first question comes from the line of David card Novastar from Jpmorgan. Your line is open.
Thank you Andrew just on the higher per caps, you mentioned for food and merge just wondering if you can walk through some of the drivers of that versus pre pandemic.
That mainly price increases and you're seeing people order more.
Mix of customers impacting that.
And did you see any risk to these levels, maybe as like pent up demand uses.
Potential economic softness.
Thanks, David.
Well the driver there has been a new 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. We're setting the 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 priced depending on demand of game and team performance.
And so we've been 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 and new types of merchandise product. So we.
We mentioned kit designed whenever alternative jerseys and had a collection around it just staple created a special capsule midnight. The day, we did the Jeff staple capsule that was the second highest native merchandise per captisol season, only behind and request Henry.
Henrik.
Retirement night.
On the F&B side, yes, we focus on pricing, but we've also been focused on ways to deliver food faster.
Beverages faster so.
Installed.
Cashless transactions, we've been very 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 in locations where consumers want to go and so they are able to.
By what they want and also I mean, we do it for two purposes wanted to drive revenue, but also consumer.
Want to make sure that they are enjoying their experience and having a great food and beverage experience is much very much part of their experience here in the building.
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 the last all the games almost all of our game as we lead up to the conclusion with the Knicks not even in the playoffs were building with help of the building was packed house was full and it was just a great experience. So 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.
Great. 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 that Paydown is a priority.
Just given where we were with the pandemic and omicron at the time restrictions of kind of lifted somewhat since then just wanted to see if there's any change to your thinking.
So Dave let me start with the question then I'll pass over to Victoria.
As I've said before and I'll say it again, we're very pleased with how our business has bounced back and how resilient we have 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 our business as we keep on discussing and what we've seen in our results but there.
There are a lot of tailwind pushing our business office occupancy touring level tourism levels have been improving so those all can make us feel good.
We've 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 with the NBA agreement coming up in a few years.
So as our as our business returns we feel good about where we're going that said, we've seen we need to be flexible and we need to know we don't know what's coming around the corner.
And so we're we're still we're still being prudent on what we do in Victoria I wanted to set that stage, yes sure.
Thanks, David.
You restated it this has been our near term focus paying down.
On the revolvers is something we have been really looking at and doing pretty pretty actively so.
Just as a reminder, in the last quarter, we did pay down $45 million on the Rangers facility and actually just in the last week, an additional $15 million as well.
Really as Andy.
I said I mean omicron with 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.
That over time, we will be evaluating all of our option for utilizing our free cash flow.
Yes.
Thank you.
Your next question comes from the line of Brandon Ross from <unk> Partners. Your line is open.
Hello, everyone. Thanks for taking the question.
Andy you quickly went through a list of potential sponsorship opportunities in the prepared was hoping maybe you could dig in on a few of those in more detail.
First on Jersey patches.
You had done a $10 billion a year deal with square space.
When the Jersey sponsorship started and we've recently seen the net 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 square space up and how are you thinking about the potential upside.
For a renewal on the Jersey patches.
Thanks Brendan.
So yes, we talked about Jersey patches, we do think this is a.
A really key.
The opportunity here for us.
Marquee assets like this don't come around often.
This side with the NBA authorize it in 2017 square spaces. Our first partner, we don't comment on deal size, but Brendan.
You're we're seeing the same thing that you would what's been reported we're following the same what's going on in both Brooklyn, and one in la and win our patch deal does come up we do think the market has moved from when we did our deal in square space. There has been an excellent partner.
But we do expect to see some.
Some substantially.
Increase in when we renew or finding a new partner in that space.
I do want to talk about and also we mentioned in the Ranger side. We also now have the ability to create for the Tableau Jersey patch next year.
The Jersey patch is twofold to because I think it's an important thing to point out I mean, one is very important who the partner is so close to our identity. So we're very thoughtful about who would come on our jerseys or on our.
On her on her.
On the Ranger side or on the Nic side.
But we're also focused on how do we how do we maximize the category how do we maximize this inventory. So when you put in something as such a premium marquee asset patch.
It's not only what you could sell from attaches what's a hole.
Package, you can do and it's all 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 we.
Would not be hard for us to go and maximize the revenue by going to someone who is already spending with us.
We might do that but what's really the way we think the best way to maximize this has defined a category that maybe wasn't in our current portfolio and kicking that brand, helping them drive their business and then becoming long term partner square space has been an incredible example of that it's probably a category. We wouldn't have been in but now they are an excellent partner to them and I expect to be with for a very long time.
So we think about it in that fashion, how do we go find new type new companies, New maybe who haven't spent in sports haven't spent with us bringing them into the fold and create a real massive more key opportunity around it.
And as you noted the market is clearly very hot for these.
Mark key assets and so we have the opportunity on the <unk> side as well on the Ranger side.
Okay and then the NBA is opening up international sponsorship next season.
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 there.
Sure. Thanks, Brandon so.
The MBA has started I applaud the NBA So commissioner.
Commissioner Silver has really been a leader in trying to figure out ways to grow the business started just flip it for one second the way the NBA led with a social strategy. When many other leagues were locking down five to 10 years ago really led and what's hot what's been a very much part of what's leading and growing the business and one of the theories Lee has is that diverse.
Operators are the teams so how do we figure out how to grow the business with the teams at the same time grow the lead business. So recently the MBA did allowed three partners 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 merchandize.
Branding.
But with only three we really were in actively looking internationally, we're 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 focus specifically on certain international to go find opportunities and what these opportunities could real yield for us is.
A few fold one I talked about gaming we've now full we're fully maximize the three partners here in the U S. We could reach it we could have a gaming partner and pick your country International was focused specifically on that market. We can reach of companies that are only focused in those markets remember basketball is the second largest sport in the world and in some markets, even though the number one sport in the world. So there is a real.
<unk> and the NBA is basketball when you think of internationally. So there's a real opportunity to reach international markets.
And now we can actually put some force behind and some real 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 and reach our market. So we will be able to we were hoping to be able to bring some more sponsorship business back home and in the U S as well as reach international and then of course as we grow our business internationally, we're going to reach more fans more.
Fans I mean, we're going to when they come to the New York market will be able to market and sell to them. So we think it's a really great opportunity for us to grow our business both directly through sponsorship, but also through reaching new films.
In 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.
You mentioned the.
Fiscal <unk> potential boost coming from the playoffs, and so I just wanted to dive a bit deeper into the Rangers Penguins match, a pure play off.
First round, what do you think the puts and takes are in terms of.
The economics of the playoff round, presumably ticket up but I'm looking for a bit of color maybe around other aspects of the business is there is there are there.
<unk> for incremental sponsorship.
Those sorts of things thanks, so much.
Thanks, Paul I'm going to let Victoria start about the take.
Take you through a little bit about the playoff impact today, and then I'll talk a little bit about what it means for multiyear.
Sure.
Hi, Paul Good morning, So first as I mentioned it sort of goes without saying we are we couldnt be more excited to have the ranges in the playoffs. We hosted the first game of the series at the Garden on Tuesday.
And we're really excited for game to Tonight.
But yes playoff games provide a significant boost to both revenues and NOI.
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 merchandize sales side.
We also see that higher during the playoffs.
So some incremental play off related expenses that we do obviously need to consider as well obviously, there Dave game costs and there are some additional Liga ligue assessments associated with playoff gate receipts, but.
That said and we expect each home playoff game in the first round to generate.
Let's take a little bit more than that $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 ground to round.
And even so.
The pulp, but I think to your question about incremental sponsorship.
I actually think about it as incremental opportunities now, but more also on a multiyear 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 rate here again.
The fan engagement increases.
That helps us by the way seller.
Do renewals increase our prices in following year.
<unk> sponsorship of 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 briefing pricing price increases. So a playoff is both what it does today, but also what does it do for our business.
On a multiyear basis, then and obviously the more longer term and more play out do you hit your drive even further fan engagement and drives ratings and eventually youll see it in your media rights.
Does drive our business in many both both short term as well as long term.
Great I appreciate that concrete color, there and just a follow up.
Seems like you are having.
A bit of success with the NFC collectibles.
Tying that into the playoff question do you have you done and do you plan to do NFC 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 entities of the playoffs. It doesn't mean, we won't or Paul or something on the afterwards, there's many different ways to think about in NFC.
I'll note the warriors were probably the most successful team I've seen in the NFC space by creating special editions around some of their championships.
So there is ways that you own a piece of many theres many different ways to do it but where we've been most successful it's really a little bit less of what were generating revenue today, but more about a way we connect with our fans and new fans.
We've done entities in our building.
We've done it around the Hendrick event, we've done it in our building where you can only purchase it while you are in the building those purchases.
It was very surprising to us.
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.
<unk>.
And so.
I do want to temper expectations. These numbers are not big numbers with the entities, but it does show the way that we see fans wanting to interact.
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 entities blockchain and any other new industries.
Great. Thanks, so much and congrats on the quarter.
Thank you. Thanks, Paul Operator, I believe we have one final analysts in the queue can we take that caller. Please.
Yes. The last question that we have is from the line of Marcia GFR from Jefferies. Your line is open.
Hey, good morning, everyone.
You touched on the positive outlook for season tickets sales and re ups is there anything specifically from corporates for next year any insight there would be appreciated.
So corporate I guess, what you mean by corporates as our suites are premium and suite sales and our sponsorship business. So.
As I've talked about.
There's a few things you could dissect there obviously discussed.
Just recently added our third partner.
In the mobile gaming space.
All three partners were.
Early part of this year. So you will see an increase on a run rate basis. We go next year, which we're we'll be the largest category we have in our.
Does the sponsors as you look at the whole for 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 one of the best if not the best way to get there.
And so we feel really good about our corp on the corporate side on the sponsorship side in terms of the sweet side.
We sold more new.
Many more new suites that we thought we were going to do this year, especially in the face of the pandemic.
Single night sales have been very strong for the playoff games that we have.
And as we're talking to partners.
We're currently looking actually looking at new inventory and trying to find new premiums basis here in the building and we believe that when we do find those locations. We think we will be able to sell them and so we think there is we're seeing a lot of demand.
Feel really good about our future here.
Got it that makes sense and then just lastly has there been any discussion of of our leverage target is debt paydown accelerates.
Barry Landa.
Sure.
So it's certainly something that we're thinking about and where we're discussing internally.
But as I mentioned earlier, our near term focus.
It has been on paying down the revolver, obviously, we drew down a lot of debt as a result of it and so we've been focusing on lowering that.
I did mentioned earlier, what we've done in the quarter and in the last week in terms of some pay downs.
But I still just want to reiterate omicron, 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 we want to continue to maintain our flexibility in the near term but.
This will be part of all options that will be evaluating as.
As we continue on this trajectory with generating free cash flow.
Awesome I appreciate it thanks Tom.
There are no questions at this time I would like to turn the call over back to Mr. Ari Danes. 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.