NEW
YORK, Feb. 5, 2024 /PRNewswire/ -- Sphere
Entertainment Co. (NYSE: SPHR) ("Sphere Entertainment" or the
"Company") today reported financial results for the fiscal second
quarter ended December 31, 2023.
Since opening on September 29,
2023, Sphere in Las Vegas
has attracted worldwide attention and robust demand from guests,
artists and advertisers. Recent Sphere highlights
include:
- U2 has continued its multi-month run at Sphere, with every show
sold-out to date. After extending multiple times due to strong
demand, U2 will conclude its run at Sphere early next month with
its 40th show;
- Renowned bands Phish and Dead & Co. each announced upcoming
multi-night performances to take place at Sphere;
- The Sphere Experience featuring Postcard from Earth
debuted on October 6, 2023, grossing
over one million dollars in average
daily ticket sales on days The Sphere Experience took place in the
fiscal 2024 second quarter;
- Sphere launched campaigns from numerous global brands on the
Exosphere during the quarter and was a prominent feature of Formula
1's inaugural Las Vegas Grand Prix in November.
In addition, MSG Networks is now more than halfway through the
2023-24 NBA and NHL regular seasons, marking the first year of
availability of MSG+, MSG Networks' direct-to-consumer subscription
and authenticated steaming service. Last month, MSG Networks and
the YES Network announced the formation of Gotham Advanced Media
and Entertainment (GAME), a new 50/50 streaming joint venture which
will explore new streaming products and provide a scalable solution
to third party content owners looking to connect with their own
fans.
For the fiscal 2024 second quarter, the Company reported
revenues of $314.2 million, an
increase of $154.6 million, as
compared to the prior year quarter. In addition, the Company
reported an operating loss of $159.7
million, an increase of $109.9
million as compared to the prior year quarter, and adjusted
operating income of $51.4 million, as
compared to an adjusted operating loss of $13.2 million in the prior year
quarter.(1)(2)
Executive Chairman and CEO James L.
Dolan said, "Sphere is a next-generation medium intended to
disrupt the traditional venue model. With positive adjusted
operating income at the Sphere segment in our first full quarter of
operations in Las Vegas, our early
results are beginning to prove that thesis, and we remain confident
in the global opportunities
ahead."
Segment Results for
the Three and Six Months Ended December 31, 2023 and
2022:
|
(In
millions)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
December
31,
|
|
Change
|
|
December
31,
|
|
Change
|
|
|
2023
|
|
2022
|
|
$
|
|
%
|
|
2023
|
|
2022
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sphere
|
|
$
167.8
|
|
$
0.6
|
|
$
167.2
|
|
NM
|
|
$
175.6
|
|
$
1.3
|
|
$
174.3
|
|
NM
|
MSG
Networks
|
|
146.4
|
|
158.9
|
|
(12.5)
|
|
(8) %
|
|
256.6
|
|
281.4
|
|
(24.8)
|
|
(9) %
|
Total
Revenues
|
|
$
314.2
|
|
$
159.5
|
|
$
154.6
|
|
97 %
|
|
$
432.2
|
|
$
282.7
|
|
$
149.5
|
|
53 %
|
Operating Income
(Loss)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sphere
|
|
$
(193.9)
|
|
$
(83.0)
|
|
$
(111.0)
|
|
(134) %
|
|
$
(292.4)
|
|
$
(162.0)
|
|
$
(130.3)
|
|
(80) %
|
MSG
Networks
|
|
34.2
|
|
33.2
|
|
1.0
|
|
3 %
|
|
$ 62.9
|
|
61.2
|
|
1.7
|
|
3 %
|
Total Operating
Loss
|
|
$
(159.7)
|
|
$
(49.7)
|
|
$
(109.9)
|
|
NM
|
|
$
(229.5)
|
|
$
(100.8)
|
|
$
(128.7)
|
|
(128) %
|
Adjusted Operating
Income (Loss):(1)(2)
|
|
|
|
|
|
|
|
|
Sphere
|
|
$ 14.1
|
|
$
(60.9)
|
|
$ 75.0
|
|
NM
|
|
$
(69.0)
|
|
$
(125.0)
|
|
$ 56.0
|
|
45 %
|
MSG
Networks
|
|
37.3
|
|
47.7
|
|
(10.4)
|
|
(22) %
|
|
62.5
|
|
81.0
|
|
(18.5)
|
|
(23) %
|
Total Adjusted
Operating Income
(Loss)
|
|
$ 51.4
|
|
$
(13.2)
|
|
$ 64.6
|
|
NM
|
|
$ (6.4)
|
|
$
(44.0)
|
|
$ 37.5
|
|
85 %
|
Note: Does not foot due
to rounding. NM — Absolute percentages greater than 200% and
comparisons from positive to negative values or to zero values are
considered not meaningful.
|
(1)
|
For the three and six
months ended December 31, 2022, results from continuing operations
include certain corporate overhead expenses that the Company did
not incur in
the period after the completion of the spin-off of Madison Square
Garden Entertainment Corp. ("MSG Entertainment") and does not
expect to incur in future periods, but
which did not meet the criteria for inclusion in discontinued
operations. The reported financial results of the Company for the
three and six months ended December 31,
2023 reflect the Company's results on a fully standalone
basis.
|
(2)
|
See page 4 of this
earnings release for the definition of adjusted operating income
(loss) included in the discussion of non-GAAP financial
measures.
|
Sphere
For the fiscal 2024 second quarter, the Sphere
segment reported revenues of $167.8
million, an increase of $167.2
million, as compared to the prior year quarter. Revenues
related to The Sphere Experience were $92.9
million across 191 performances during the quarter after
debuting on October 6, 2023.
Event-related revenues were $55.2
million, which reflected revenues from concerts and, to a
lesser extent, one marquee sporting event held at Sphere in
Las Vegas during the quarter. In
addition, revenues from sponsorship, signage, Exosphere advertising
and suite license fees were $17.5
million, primarily reflecting advertising campaigns on the
venue's Exosphere and, to a lesser extent, suite license fee
revenues.
For the fiscal 2024 second quarter, the Sphere segment had
direct operating expenses of $67.3
million, as compared to no direct operating expenses in the
prior year quarter. This primarily included $27.6 million of expenses associated with The
Sphere Experience, as well as $20.4
million of event-related expenses related to concerts and,
to a lesser extent, one marquee sporting event held at the venue
during the quarter. In addition, direct operating expenses
included $15.0 million of venue
operating costs as well as $1.6
million in expenses associated with sponsorship, signage,
Exosphere advertising and suite license fee revenues.
Fiscal 2024 second quarter selling, general and administrative
expenses of $97.8 million increased
$23.0 million, or 31%, as compared to
the prior year quarter, primarily due to the impact of the
Company's transition services agreement with MSG Entertainment,
higher employee compensation and related benefits and other cost
increases. The overall increase was partially offset by the absence
of certain corporate expenses that were included in the results of
the prior year quarter but were not included in the results for the
current year quarter. While the Company did not incur these costs
after the spin-off from MSG Entertainment, which occurred in
April 2023, and does not expect to
incur these costs in future periods, they did not meet the criteria
for inclusion in discontinued operations in the prior year
quarter.
In addition, fiscal 2024 second quarter results included an
increase in impairment and other losses, net, of $118.2 million, as compared to the prior year
quarter. This primarily reflects a non-cash impairment charge of
$116.5 million in the current year
quarter in connection with the Company's decision in November 2023 to no longer pursue the development
of a Sphere in London.
Fiscal 2024 second quarter operating loss of $193.9 million increased by $111.0 million, as compared to the prior year
quarter, primarily reflecting higher impairment and other losses,
net, as well as higher depreciation and amortization, direct
operating expenses and, to a lesser extent, selling, general and
administrative expenses (including share-based compensation
expense), partially offset by the increase in revenues. Adjusted
operating income of $14.1 million
increased by $75.0 million, as
compared to the prior year quarter, primarily reflecting the
increase in revenues, partially offset by higher direct operating
expenses and selling, general and administrative expenses
(excluding share-based compensation expense).
MSG Networks
For the fiscal 2024 second quarter, the
MSG Networks segment reported total revenues of $146.4 million, a decrease of $12.5 million, or 8%, as compared to the prior
year quarter.
Distribution revenue decreased $13.3
million, as compared to the prior year quarter, primarily
due to a decrease in total subscribers of approximately 11.5% and
the absence of a favorable affiliate adjustment of approximately
$2.3 million recorded in the prior
year quarter, partially offset by the impact of higher affiliation
rates in the current year quarter.
As a result of the launch of MSG+ in June
2023, distribution revenue now includes both affiliation fee
revenue earned from MSG Networks' distributors for the right to
carry the Company's networks as well as revenue earned from
subscriptions and single game purchases on MSG+. In addition,
total subscribers includes both affiliate subscribers as well as
monthly and annual subscribers of MSG+.
Fiscal 2024 second quarter direct operating expenses of
$92.4 million increased $2.0 million, or 2%, as compared to the prior
year quarter. Other programming and production costs increased
$1.5 million, as compared to the
prior year quarter, primarily due to the impact of MSG+ in the
current year quarter, partially offset by other net cost decreases.
In addition, rights fees expense increased $0.5 million, as compared to the prior year
quarter, which mainly reflects the impact of annual contractual
rate increases, substantially offset by reductions resulting from
fewer NBA and NHL games made available to MSG Networks for
exclusive broadcast.
Fiscal 2024 second quarter selling, general and administrative
expenses of $17.7 million decreased
$11.9 million, or 40%, as compared to
the prior year quarter, primarily due to lower professional fees of
$5.5 million, mainly reflecting a
decrease in litigation-related expenses associated with the merger
of a subsidiary of the Company with MSG Networks Inc., lower
employee compensation and related benefits of $2.9 million, and other cost decreases.
Fiscal 2024 second quarter operating income of $34.2 million increased $1.0 million, or 3%, as compared to the prior
year quarter, primarily due to the decrease in selling, general and
administrative expenses (including merger and acquisition related
costs, net of insurance recoveries, and share-based compensation
expense) and the absence of restructuring charges recorded in the
prior year period, partially offset by the decrease in revenues
and, to a lesser extent, the increase in direct operating expenses.
Adjusted operating income of $37.3
million decreased $10.4
million, or 22%, as compared to the prior year quarter,
primarily due to the decrease in revenues and, to a lesser extent,
the increase in direct operating expenses, partially offset by the
decrease in selling, general and administrative expenses (excluding
merger and acquisition related costs, net of insurance recoveries,
and share-based compensation expense).
Other Matters
On December 8,
2023, the Company completed an offering of 3.50% convertible
senior notes due 2028 for aggregate net proceeds of approximately
$236 million. The Company intends to
use the net proceeds from the offering for general corporate
purposes, including capital for Sphere-related growth
initiatives.
About Sphere Entertainment Co.
Sphere Entertainment
Co. is a premier live entertainment and media company. The Company
includes Sphere, a next-generation entertainment medium powered by
cutting-edge technologies to redefine the future of entertainment.
The first Sphere venue opened in Las
Vegas in September 2023. In
addition, the Company includes MSG Networks, which operates two
regional sports and entertainment networks, MSG Network and MSG
Sportsnet, as well as a direct-to-consumer and authenticated
streaming product, MSG+, delivering a wide range of live sports
content and other programming. More information is available at
www.sphereentertainmentco.com.
Non-GAAP Financial Measures
We define adjusted
operating income (loss), which is a non-GAAP financial measure, as
operating income (loss) before ((i) depreciation, amortization and
impairments of property and equipment, goodwill and intangible
assets, (ii) amortization for capitalized cloud computing
arrangement costs, (iii) share-based compensation expense or
benefit, (iv) restructuring charges or credits, (v) merger and
acquisition-related costs, including merger-related litigation
expenses, (vi) gains or losses on sales or dispositions of
businesses and associated settlements, (vii) the impact of purchase
accounting adjustments related to business acquisitions, and (ix)
gains and losses related to the remeasurement of liabilities under
the Company's Executive Deferred Compensation Plan. We believe that
the exclusion of share-based compensation expense or benefit allows
investors to better track the performance of our business without
regard to the settlement of an obligation that is not expected to
be made in cash. We eliminate merger and acquisition-related costs,
when applicable, because the Company does not consider such costs
to be indicative of the ongoing operating performance of the
Company as they result from an event that is of a non-recurring
nature, thereby enhancing comparability. In addition, management
believes that the exclusion of gains and losses related to the
remeasurement of liabilities under the Company's Executive Deferred
Compensation Plan, provides investors with a clearer picture of the
Company's operating performance given that, in accordance with U.S.
generally accepted accounting principles ("GAAP"), gains and losses
related to the remeasurement of liabilities under the Company's
Executive Deferred Compensation Plan are recognized in Operating
income (loss) whereas gains and losses related to the remeasurement
of the assets under the Company's Executive Deferred Compensation
Plan, which are equal to and therefore fully offset the gains and
losses related to the remeasurement of liabilities, are recognized
in Other income (expense), net, which is not reflected in Operating
income (loss).
We believe adjusted operating income (loss) is an appropriate
measure for evaluating the operating performance of our business
segments and the Company on a consolidated basis. Adjusted
operating income (loss) and similar measures with similar titles
are common performance measures used by investors and analysts to
analyze our performance. Internally, we use revenues and adjusted
operating income (loss) as the most important indicators of our
business performance, and evaluate management's effectiveness with
specific reference to these indicators. Adjusted operating income
(loss) should be viewed as a supplement to and not a substitute for
operating income (loss), net income (loss), cash flows from
operating activities, and other measures of performance and/or
liquidity presented in accordance with GAAP. Since adjusted
operating income (loss) is not a measure of performance calculated
in accordance with GAAP, this measure may not be comparable to
similar measures with similar titles used by other companies. For a
reconciliation of operating income (loss) to adjusted operating
income (loss), please see page 6 of this release.
Forward-Looking Statements
This press release 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 or events may differ materially from those in the
forward-looking statements as a result of various factors,
including financial community perceptions of the Company and its
business, operations, financial condition and the industries in
which it operates and the factors described in the Company's
filings with the Securities and Exchange Commission, including the
sections titled "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 contained herein.
Contacts:
Ari Danes,
CFA
Investor Relations and
Financial Communications
(212)
465-6072
|
Justin
Blaber
Financial
Communications
(212)
465-6109
|
|
|
Grace
Kaminer
Investor
Relations
(212)
631-5076
|
|
Conference Call Information:
The conference call
will be Webcast live today at 10:00 a.m.
ET at
investor.sphereentertainmentco.com
Conference call
dial-in number is 888-800-3155 / Conference ID Number
8089430
Conference call replay number is 800-770-2030 /
Conference ID Number 8089430 until February
12, 2024
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands,
except per share data)
(Unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues
|
|
$
314,157
|
|
$
159,541
|
|
$
432,164
|
|
$
282,670
|
Direct operating
expenses
|
|
(159,766)
|
|
(90,400)
|
|
(244,265)
|
|
(165,820)
|
Selling, general, and
administrative expenses
|
|
(115,520)
|
|
(104,415)
|
|
(202,664)
|
|
(199,046)
|
Depreciation and
amortization
|
|
(80,031)
|
|
(7,386)
|
|
(94,290)
|
|
(13,519)
|
Impairment and other
(losses) gains, net
|
|
(117,235)
|
|
1,000
|
|
(115,738)
|
|
3,000
|
Restructuring
charges
|
|
(1,287)
|
|
(8,075)
|
|
(4,678)
|
|
(8,075)
|
Operating
loss
|
|
(159,682)
|
|
(49,735)
|
|
(229,471)
|
|
(100,790)
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
5,926
|
|
2,669
|
|
10,304
|
|
6,002
|
Interest
expense
|
|
(25,828)
|
|
—
|
|
(25,828)
|
|
—
|
Other (expense)
income, net
|
|
(1,130)
|
|
(1,355)
|
|
41,066
|
|
(1,770)
|
Loss from continuing
operations before income taxes
|
|
(180,714)
|
|
(48,421)
|
|
(203,929)
|
|
(96,558)
|
Income tax
benefit
|
|
7,466
|
|
21,113
|
|
97,753
|
|
22,947
|
Loss from continuing
operations
|
|
(173,248)
|
|
(27,308)
|
|
(106,176)
|
|
(73,611)
|
Income (loss) from
discontinued operations, net of taxes
|
|
—
|
|
97,865
|
|
(647)
|
|
100,125
|
Net (loss)
income
|
|
(173,248)
|
|
70,557
|
|
(106,823)
|
|
26,514
|
Less: Net loss
attributable to nonredeemable noncontrolling
interests from discontinued operations
|
|
—
|
|
(56)
|
|
—
|
|
(466)
|
Less: Net income
attributable to redeemable noncontrolling
interests from discontinued operations
|
|
—
|
|
3,029
|
|
—
|
|
4,153
|
Net (loss) income
attributable to Sphere Entertainment Co.'s
stockholders
|
|
$ (173,248)
|
|
$
67,584
|
|
$ (106,823)
|
|
$
22,827
|
|
|
|
|
|
|
|
|
|
Basic (loss)
earnings per common share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
(4.91)
|
|
$
(0.79)
|
|
$
(3.02)
|
|
$
(2.13)
|
Discontinued
operations
|
|
$
—
|
|
$
2.74
|
|
$
(0.02)
|
|
$
2.79
|
Basic (loss) earnings
per common share attributable to Sphere
Entertainment Co.'s stockholders
|
|
$
(4.91)
|
|
$
1.95
|
|
$
(3.04)
|
|
$
0.66
|
|
|
|
|
|
|
|
|
|
Diluted (loss)
earnings per common share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
(4.91)
|
|
$
(0.79)
|
|
$
(3.02)
|
|
$
(2.13)
|
Discontinued
operations
|
|
$
—
|
|
$
2.74
|
|
$
(0.02)
|
|
$
2.79
|
Diluted (loss) earnings
per common share attributable to Sphere Entertainment Co.'s
stockholders
|
|
$
(4.91)
|
|
$
1.95
|
|
$
(3.04)
|
|
$
0.66
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
35,309
|
|
34,684
|
|
35,110
|
|
34,544
|
Diluted
|
|
35,309
|
|
34,710
|
|
35,110
|
|
34,609
|
ADJUSTMENTS TO RECONCILE OPERATING INCOME
(LOSS) TO
ADJUSTED OPERATING INCOME (LOSS)
(In
thousands)
(Unaudited)
The following is a description of the adjustments to operating
loss in arriving at adjusted operating income (loss) as described
in this earnings release:
- Share-based compensation. This adjustment eliminates the
compensation expense relating to restricted stock units and stock
options granted under the Sphere Entertainment Employee Stock Plan,
MSG Sports Employee Stock Plan, MSG Networks Employee Stock Plan,
as amended and assumed by Sphere Entertainment, and Sphere
Entertainment Non-Employee Director Plan in all periods.
- Depreciation and amortization. This adjustment eliminates
depreciation and amortization of property and equipment and
intangible assets in all periods.
- Restructuring charges. This adjustment eliminates costs related
to termination benefits provided to certain executives and
employees.
- Impairment and other losses (gains), net. This adjustment
eliminates non-cash impairment charges and the impact of gains or
losses from the disposition of assets or businesses in all
periods.
- Merger and acquisition related costs. This adjustment
eliminates costs related to mergers and acquisitions, including
merger-related litigation expenses and litigation-related insurance
recoveries, in all periods.
- Amortization for capitalized cloud computing arrangement costs.
This adjustment eliminates amortization of capitalized cloud
computing arrangement costs.
- Remeasurement of deferred compensation plan liabilities. This
adjustment eliminates the impact of gains and losses related to the
remeasurement of liabilities under the Company's executive deferred
compensation plan.
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Operating
loss
|
|
$ (159,682)
|
|
$
(49,735)
|
|
$ (229,471)
|
|
$ (100,790)
|
Share-based
compensation
|
|
11,916
|
|
16,355
|
|
16,799
|
|
27,845
|
Depreciation and
amortization
|
|
80,031
|
|
7,386
|
|
94,290
|
|
13,519
|
Restructuring
charges
|
|
1,287
|
|
8,075
|
|
4,678
|
|
8,075
|
Impairment and other
losses (gains), net
|
|
117,235
|
|
(1,000)
|
|
115,738
|
|
(3,000)
|
Merger and acquisition
related costs, net of insurance
recoveries
|
|
380
|
|
5,486
|
|
(8,663)
|
|
10,136
|
Amortization for
capitalized cloud computing
arrangement costs
|
|
22
|
|
127
|
|
44
|
|
248
|
Remeasurement of
deferred compensation plan
liabilities
|
|
245
|
|
154
|
|
138
|
|
—
|
Adjusted operating
income (loss)
|
|
$
51,434
|
|
$
(13,152)
|
|
$
(6,447)
|
|
$
(43,967)
|
SEGMENT
RESULTS
(In
thousands)
(Unaudited)
|
BUSINESS SEGMENT
RESULTS
|
|
|
Three Months Ended
December 31, 2023
|
|
|
Sphere
|
|
MSG
Networks
|
|
Total
|
Revenues
|
|
$
167,799
|
|
$
146,358
|
|
$
314,157
|
Direct operating
expenses
|
|
(67,338)
|
|
(92,428)
|
|
(159,766)
|
Selling, general and
administrative expenses
|
|
(97,804)
|
|
(17,716)
|
|
(115,520)
|
Depreciation and
amortization
|
|
(78,044)
|
|
(1,987)
|
|
(80,031)
|
Impairment and other
losses, net
|
|
(117,235)
|
|
—
|
|
(117,235)
|
Restructuring
charges
|
|
(1,287)
|
|
—
|
|
(1,287)
|
Operating (loss)
income
|
|
$
(193,909)
|
|
$
34,227
|
|
$
(159,682)
|
Reconciliation to
adjusted operating income:
|
|
|
|
|
|
|
Share-based
compensation
|
|
10,985
|
|
931
|
|
11,916
|
Depreciation and
amortization
|
|
78,044
|
|
1,987
|
|
80,031
|
Restructuring
charges
|
|
1,287
|
|
—
|
|
1,287
|
Impairment and other
losses, net
|
|
117,235
|
|
—
|
|
117,235
|
Merger and acquisition
related costs, net of insurance recoveries
|
|
200
|
|
180
|
|
380
|
Amortization for
capitalized cloud computing arrangement costs
|
|
—
|
|
22
|
|
22
|
Remeasurement of
deferred compensation plan liabilities
|
|
245
|
|
—
|
|
245
|
Adjusted operating
income
|
|
$
14,087
|
|
$
37,347
|
|
$
51,434
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2022
|
|
|
Sphere
|
|
MSG
Networks
|
|
Total
|
Revenues
|
|
$
643
|
|
$
158,898
|
|
$
159,541
|
Direct operating
expenses
|
|
—
|
|
(90,400)
|
|
(90,400)
|
Selling, general and
administrative expenses
|
|
(74,759)
|
|
(29,656)
|
|
(104,415)
|
Depreciation and
amortization
|
|
(5,749)
|
|
(1,637)
|
|
(7,386)
|
Other gains
|
|
1,000
|
|
—
|
|
1,000
|
Restructuring
charges
|
|
(4,087)
|
|
(3,988)
|
|
(8,075)
|
Operating (loss)
income
|
|
$
(82,952)
|
|
$
33,217
|
|
$
(49,735)
|
Reconciliation to
adjusted operating (loss) income:
|
|
|
|
|
|
|
Share-based
compensation
|
|
13,056
|
|
3,299
|
|
16,355
|
Depreciation and
amortization
|
|
5,749
|
|
1,637
|
|
7,386
|
Restructuring
charges
|
|
4,087
|
|
3,988
|
|
8,075
|
Other gains
|
|
(1,000)
|
|
—
|
|
(1,000)
|
Merger and acquisition
related costs
|
|
(58)
|
|
5,544
|
|
5,486
|
Amortization for
capitalized cloud computing arrangement costs
|
|
83
|
|
44
|
|
127
|
Remeasurement of
deferred compensation plan liabilities
|
|
$
154
|
|
$
—
|
|
$
154
|
Adjusted operating
(loss) income
|
|
$
(60,881)
|
|
$
47,729
|
|
$
(13,152)
|
SEGMENT
RESULTS
(In
thousands)
(Unaudited)
|
|
|
Six Months Ended
December 31, 2023
|
|
|
Sphere
|
|
MSG
Networks
|
|
Total
|
Revenues
|
|
$
175,578
|
|
$
256,586
|
|
$
432,164
|
Direct operating
expenses
|
|
(75,143)
|
|
(169,122)
|
|
(244,265)
|
Selling, general and
administrative expenses
|
|
(181,954)
|
|
(20,710)
|
|
(202,664)
|
Depreciation and
amortization
|
|
(90,421)
|
|
(3,869)
|
|
(94,290)
|
Impairment and other
losses, net
|
|
(115,738)
|
|
—
|
|
(115,738)
|
Restructuring
charges
|
|
(4,678)
|
|
—
|
|
(4,678)
|
Operating (loss)
income
|
|
$
(292,356)
|
|
$
62,885
|
|
$
(229,471)
|
Reconciliation to
adjusted operating (loss) income:
|
|
|
|
|
|
|
Share-based
compensation
|
|
14,904
|
|
1,895
|
|
16,799
|
Depreciation and
amortization
|
|
90,421
|
|
3,869
|
|
94,290
|
Restructuring
charges
|
|
4,678
|
|
—
|
|
4,678
|
Impairment and other
losses, net
|
|
115,738
|
|
—
|
|
115,738
|
Merger and acquisition
related costs, net of insurance recoveries
|
|
(2,502)
|
|
(6,161)
|
|
(8,663)
|
Amortization for
capitalized cloud computing arrangement costs
|
|
—
|
|
44
|
|
44
|
Remeasurement of
deferred compensation plan liabilities
|
|
138
|
|
—
|
|
138
|
Adjusted operating
(loss) income
|
|
$
(68,979)
|
|
$
62,532
|
|
$
(6,447)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
December 31, 2022
|
|
|
Sphere
|
|
MSG
Networks
|
|
Total
|
Revenues
|
|
$
1,293
|
|
$
281,377
|
|
$
282,670
|
Direct operating
expenses
|
|
—
|
|
(165,820)
|
|
(165,820)
|
Selling, general and
administrative expenses
|
|
(151,950)
|
|
(47,096)
|
|
(199,046)
|
Depreciation and
amortization
|
|
(10,264)
|
|
(3,255)
|
|
(13,519)
|
Other gains
|
|
3,000
|
|
—
|
|
3,000
|
Restructuring
charges
|
|
(4,087)
|
|
(3,988)
|
|
(8,075)
|
Operating (loss)
income
|
|
$
(162,008)
|
|
$
61,218
|
|
$
(100,790)
|
Reconciliation to
adjusted operating (loss) income:
|
|
|
|
|
|
|
Share-based
compensation
|
|
22,842
|
|
5,003
|
|
27,845
|
Depreciation and
amortization
|
|
10,264
|
|
3,255
|
|
13,519
|
Restructuring
charges
|
|
4,087
|
|
3,988
|
|
8,075
|
Other gains
|
|
(3,000)
|
|
—
|
|
(3,000)
|
Merger and acquisition
related costs
|
|
2,691
|
|
7,445
|
|
10,136
|
Amortization for
capitalized cloud computing arrangement costs
|
|
160
|
|
88
|
|
248
|
Adjusted operating
(loss) income
|
|
$
(124,964)
|
|
$
80,997
|
|
$
(43,967)
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In thousands,
except per share data)
(Unaudited)
|
|
|
December
31,
|
|
June
30,
|
|
|
2023
|
|
2023
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash, cash
equivalents, and restricted cash
|
|
$
627,827
|
|
$
429,114
|
Accounts receivable,
net
|
|
179,964
|
|
112,309
|
Related party
receivables, current
|
|
24,047
|
|
26,405
|
Prepaid expenses and
other current assets
|
|
46,810
|
|
56,085
|
Total current
assets
|
|
878,648
|
|
623,913
|
Non-Current
Assets:
|
|
|
|
|
Investments in
nonconsolidated affiliates
|
|
50,906
|
|
394,519
|
Property and equipment,
net
|
|
3,287,933
|
|
3,307,161
|
Right-of-use lease
assets
|
|
86,599
|
|
84,912
|
Goodwill
|
|
456,807
|
|
456,807
|
Intangible assets,
net
|
|
16,353
|
|
17,910
|
Other non-current
assets
|
|
106,038
|
|
87,793
|
Total assets
|
|
$
4,883,284
|
|
$
4,973,015
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts payable,
accrued and other current liabilities
|
|
$
391,903
|
|
$
515,731
|
Related party
payables, current
|
|
23,407
|
|
56,446
|
Current portion of
long-term debt, net
|
|
890,110
|
|
82,500
|
Operating lease
liabilities, current
|
|
14,727
|
|
10,127
|
Deferred
revenue
|
|
78,381
|
|
27,337
|
Total current
liabilities
|
|
1,398,528
|
|
692,141
|
Non-Current
Liabilities:
|
|
|
|
|
Long-term debt,
net
|
|
521,413
|
|
1,118,387
|
Operating lease
liabilities, non-current
|
|
109,296
|
|
110,259
|
Deferred tax
liabilities, net
|
|
272,447
|
|
379,552
|
Other non-current
liabilities
|
|
116,436
|
|
88,811
|
Total
liabilities
|
|
2,418,120
|
|
2,389,150
|
Commitments and
contingencies
|
|
|
|
|
Equity:
|
|
|
|
|
Class A Common
Stock (1)
|
|
283
|
|
278
|
Class B Common
Stock (2)
|
|
69
|
|
69
|
Additional paid-in
capital
|
|
2,365,913
|
|
2,376,420
|
Retained
earnings
|
|
105,213
|
|
212,036
|
Accumulated other
comprehensive loss
|
|
(6,314)
|
|
(4,938)
|
Total stockholders'
equity
|
|
2,465,164
|
|
2,583,865
|
Total liabilities and
equity
|
|
$
4,883,284
|
|
$
4,973,015
|
_________________
|
(1)
|
Class A Common Stock,
$0.01 par value per share, 120,000 shares authorized; 28,263 and
27,812 shares issued and outstanding as of December 31, 2023 and
June 30, 2023,
respectively.
|
(2)
|
Class B Common Stock,
$0.01 par value per share, 30,000 shares authorized; 6,867 shares
issued and outstanding as of December 31, 2023 and June 30,
2023.
|
SELECTED CASH FLOW
INFORMATION
(In
thousands)
(Unaudited)
|
|
|
Six Months
Ended
|
|
|
December
31,
|
|
|
2023
|
|
2022
|
Net cash (used in)
provided by operating activities
|
|
$
(48,238)
|
|
$
54,965
|
Net cash provided by
(used in) investing activities
|
|
973
|
|
(575,909)
|
Net cash provided by
financing activities
|
|
245,973
|
|
229,175
|
Effect of exchange
rates on cash, cash equivalents, and restricted cash
|
|
5
|
|
(505)
|
Net increase (decrease)
in cash, cash equivalents, and restricted cash
|
|
198,713
|
|
(292,274)
|
Cash, cash equivalents,
and restricted cash from continuing operations, beginning of
period
|
|
429,114
|
|
760,312
|
Cash, cash equivalents,
and restricted cash from discontinued operations, beginning of
period
|
|
—
|
|
85,698
|
Cash, cash
equivalents, and restricted cash at beginning of
period
|
|
429,114
|
|
846,010
|
Cash, cash equivalents
and restricted cash from continuing operations, end of
period
|
|
627,827
|
|
366,748
|
Cash, cash equivalents
and restricted cash from discontinued operations, end of
period
|
|
—
|
|
186,988
|
Cash, cash
equivalents, and restricted cash at end of period
|
|
$
627,827
|
|
$
553,736
|
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SOURCE Sphere Entertainment Co.