SPHERE ENTERTAINMENT CO. REPORTS FISCAL 2024 FIRST QUARTER RESULTS
- Successful opening of Sphere in Las Vegas with U2's sold-out 36-show run
- Debut of The Sphere Experience featuring Darren Aronofsky's Postcard from Earth received critical acclaim
- 11 more U2 shows added in January and February 2024 due to strong demand
- Sphere launched its first-ever brand campaign on the Exosphere with YouTube's NFL Sunday Ticket
- Formula 1 planned multi-day takeover of Sphere for the inaugural Las Vegas Grand Prix
- MSG Networks' direct-to-consumer and authenticated streaming service, MSG+, now available
- MSG Networks reached a multi-year rights renewal with the NHL's New Jersey Devils
- Revenues decreased by $5.1 million compared to the prior year quarter
- Operating loss increased by $18.7 million
- Adjusted operating loss increased by $27.1 million
Sphere in Las Vegas Successfully Opened on September 29th with Start of U2's 36-Show Run
Exosphere Launched First-Ever Brand Campaign in September, Followed by Several Additional High-Profile Campaigns
The Sphere Experience Featuring Darren Aronofsky's Postcard from Earth Debuted on October 6th to Critical Acclaim
On September 29, 2023, the Company successfully opened Sphere in
- U2 opened the venue with the start of its multi-month run at Sphere. To-date, every U2 show has been sold-out;
- In light of the strong demand, 11 more U2 shows have been added in January and February 2024, bringing the band's planned number of performances at the venue to 36 in total;
- The Sphere Experience – a signature content category – debuted on October 6th, featuring Darren Aronofsky's Postcard from Earth. This original cinematic film has already earned critical acclaim for its captivating visuals and use of the venue's next-generation, immersive technologies;
- In early September, Sphere launched its first-ever brand campaign on the Exosphere with YouTube's NFL Sunday Ticket and the venue has since featured a number of additional campaigns with prominent global brands; and
- Next week, Formula 1 will begin a planned multi-day takeover of Sphere for the inaugural Las Vegas Grand Prix.
At MSG Networks, the start of the 2023-24 NBA and NHL seasons marked the first year of availability for MSG Networks' direct-to-consumer and authenticated steaming service, MSG+, which offers monthly and annual subscriptions, and, in an industry first, the ability to purchase on a per-game basis. In addition, MSG Networks has reached a multi-year rights renewal with the NHL's New Jersey Devils. Under the arrangement, MSG Networks will continue as the exclusive regional telecast partner of the New Jersey Devils and will continue to distribute a full schedule of Devils games across MSG Networks' platforms.
For the fiscal 2024 first quarter, the Company reported revenues of
Executive Chairman and CEO James L. Dolan said, "Sphere's opening in
Segment Results for the Three Months Ended September 30, 2023 and 2022:
(In millions) | Three Months Ended | |||||||
September 30, | Change | |||||||
2023 | 2022 | $ | % | |||||
Revenues: | ||||||||
Sphere | $ 7.8 | $ 0.7 | $ 7.1 | NM | ||||
MSG Networks | 110.2 | 122.5 | (12.3) | (10) % | ||||
Total Revenues | $ 118.0 | $ 123.1 | $ (5.1) | (4) % | ||||
Operating (Loss) Income: | ||||||||
Sphere | $ (98.4) | $ (79.1) | $ (19.4) | (25) % | ||||
MSG Networks | 28.7 | 28.0 | 0.7 | 2 % | ||||
Total Operating Loss | $ (69.8) | $ (51.1) | $ (18.7) | (37) % | ||||
Adjusted Operating (Loss) Income:(1) | ||||||||
Sphere | $ (83.1) | $ (64.1) | $ (19.0) | (30) % | ||||
MSG Networks | 25.2 | 33.3 | (8.1) | (24) % | ||||
Total Adjusted Operating Loss | $ (57.9) | $ (30.8) | $ (27.1) | (88) % | ||||
Note: Does not foot due to rounding. NM — Absolute percentages greater than | |
(1) | For the three months ended September 30, 2022, results from continuing operations for the same period 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 months ended September 30, 2023 reflect the Company's results on a fully standalone basis. |
(2) | See page 3 of this earnings release for the definition of adjusted operating (loss) income included in the discussion of non-GAAP financial measures. |
Sphere
For the fiscal 2024 first quarter, the Sphere segment reported revenues of
For the fiscal 2024 first quarter, the Sphere segment had direct operating expenses of
Fiscal 2024 first quarter selling, general and administrative expenses of
Fiscal 2024 first quarter operating loss of
MSG Networks
For the fiscal 2024 first quarter, the MSG Networks segment reported total revenues of
Fiscal 2024 first quarter direct operating expenses of
Fiscal 2024 first quarter selling, general and administrative expenses of
Fiscal 2024 first quarter operating income of
Other Matters
During the fiscal 2024 first quarter, the Company disposed of its remaining approximately 10.1 million shares of MSG Entertainment Class A common stock. That included the repayment of the
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
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
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 5 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 November 15, 2023
SPHERE ENTERTAINMENT CO. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) | ||||
Three Months Ended | ||||
September 30, | ||||
2023 | 2022 | |||
Revenues | $ 118,007 | $ 123,129 | ||
Direct operating expenses | (84,499) | (75,420) | ||
Selling, general, and administrative expenses | (87,144) | (94,631) | ||
Depreciation and amortization | (14,259) | (6,133) | ||
Other gains, net | 1,497 | 2,000 | ||
Restructuring charges | (3,391) | — | ||
Operating loss | (69,789) | (51,055) | ||
Other income (expense): | ||||
Interest income | 4,378 | 3,333 | ||
Other income (expense), net | 42,196 | (415) | ||
Loss from continuing operations before income taxes | (23,215) | (48,137) | ||
Income tax benefit | 90,287 | 1,834 | ||
Income (loss) from continuing operations | 67,072 | (46,303) | ||
(Loss) income from discontinued operations, net of taxes | (647) | 2,260 | ||
Net income (loss) | 66,425 | (44,043) | ||
Less: Net loss attributable to nonredeemable noncontrolling interests from discontinued operations | — | (410) | ||
Less: Net income attributable to redeemable noncontrolling interests from discontinued operations | — | 1,124 | ||
Net income (loss) attributable to Sphere Entertainment Co.'s stockholders | $ 66,425 | $ (44,757) | ||
Basic earnings (loss) per common share | ||||
Continuing operations | $ 1.92 | $ (1.35) | ||
Discontinued operations | $ (0.02) | $ 0.05 | ||
Basic earnings (loss) per common share attributable to Sphere Entertainment Co.'s stockholders | $ 1.90 | $ (1.30) | ||
Diluted earnings (loss) per common share | ||||
Continuing operations | $ 1.90 | $ (1.35) | ||
Discontinued operations | $ (0.01) | $ 0.05 | ||
Diluted earnings (loss) per common share attributable to Sphere Entertainment Co.'s stockholders | $ 1.89 | $ (1.30) | ||
Weighted-average number of common shares outstanding: | ||||
Basic | 34,911 | 34,403 | ||
Diluted | 35,226 | 34,403 | ||
SPHERE ENTERTAINMENT CO.
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 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, Sphere Entertainment Non-Employee Director Plan and MSG Networks 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.
- Other 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 | ||||
September 30, | ||||
2023 | 2022 | |||
Operating loss | (69,789) | $ (51,055) | ||
Share-based compensation | 4,883 | 11,490 | ||
Depreciation and amortization | 14,259 | 6,133 | ||
Restructuring charges | 3,391 | — | ||
Other gains, net | (1,497) | (2,000) | ||
Merger and acquisition related costs, net of insurance recoveries | (9,043) | 4,650 | ||
Amortization for capitalized cloud computing arrangement costs | 22 | 121 | ||
Remeasurement of deferred compensation plan liabilities | (107) | (154) | ||
Adjusted operating loss | $ (57,881) | $ (30,815) | ||
SPHERE ENTERTAINMENT CO. SEGMENT RESULTS (In thousands) (Unaudited) | ||||||
BUSINESS SEGMENT RESULTS | ||||||
Three Months Ended September 30, 2023 | ||||||
Sphere | MSG Networks | Total | ||||
Revenues | $ 7,779 | $ 110,228 | $ 118,007 | |||
Direct operating expenses | (7,805) | (76,694) | (84,499) | |||
Selling, general and administrative expenses | (84,150) | (2,994) | (87,144) | |||
Depreciation and amortization | (12,377) | (1,882) | (14,259) | |||
Other gains, net | 1,497 | — | 1,497 | |||
Restructuring charges | (3,391) | — | (3,391) | |||
Operating (loss) income | $ (98,447) | $ 28,658 | $ (69,789) | |||
Reconciliation to adjusted operating (loss) income: | ||||||
Share-based compensation | 3,919 | 964 | 4,883 | |||
Depreciation and amortization | 12,377 | 1,882 | 14,259 | |||
Restructuring charges | 3,391 | — | 3,391 | |||
Other gains, net | (1,497) | — | (1,497) | |||
Merger and acquisition related costs, net of insurance recoveries | (2,702) | (6,341) | (9,043) | |||
Amortization for capitalized cloud computing arrangement costs | — | 22 | 22 | |||
Remeasurement of deferred compensation plan liabilities | (107) | — | (107) | |||
Adjusted operating (loss) income | $ (83,066) | $ 25,185 | $ (57,881) | |||
Three Months Ended September 30, 2022 | ||||||
Sphere | MSG Networks | Total | ||||
Revenues | $ 650 | $ 122,479 | $ 123,129 | |||
Direct operating expenses | — | (75,420) | (75,420) | |||
Selling, general and administrative expenses | (77,191) | (17,440) | (94,631) | |||
Depreciation and amortization | (4,515) | (1,618) | (6,133) | |||
Other gains, net | 2,000 | — | 2,000 | |||
Operating (loss) income | $ (79,056) | $ 28,001 | $ (51,055) | |||
Reconciliation to adjusted operating (loss) income: | ||||||
Share-based compensation | 9,786 | 1,704 | 11,490 | |||
Depreciation and amortization | 4,515 | 1,618 | 6,133 | |||
Other gains, net | (2,000) | — | (2,000) | |||
Merger and acquisition related costs | 2,749 | 1,901 | 4,650 | |||
Amortization for capitalized cloud computing arrangement costs | 77 | 44 | 121 | |||
Remeasurement of deferred compensation plan liabilities | $ (154) | $ — | $ (154) | |||
Adjusted operating (loss) income | $ (64,083) | $ 33,268 | $ (30,815) | |||
SPHERE ENTERTAINMENT CO. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) | ||||
September 30, | June 30, | |||
2023 | 2023 | |||
ASSETS | ||||
Current Assets: | ||||
Cash, cash equivalents and restricted cash | $ 451,742 | $ 429,114 | ||
Accounts receivable, net | 114,247 | 112,309 | ||
Related party receivables, current | 41,778 | 26,405 | ||
Prepaid expenses and other current assets | 66,255 | 56,085 | ||
Total current assets | 674,022 | 623,913 | ||
Non-Current Assets: | ||||
Investments in nonconsolidated affiliates | 50,788 | 394,519 | ||
Property and equipment, net | 3,471,141 | 3,307,161 | ||
Right-of-use lease assets | 90,000 | 84,912 | ||
Goodwill | 456,807 | 456,807 | ||
Intangible assets, net | 17,131 | 17,910 | ||
Other non-current assets | 104,765 | 87,793 | ||
Total assets | $ 4,864,654 | $ 4,973,015 | ||
LIABILITIES AND EQUITY | ||||
Current Liabilities: | ||||
Accounts payable, accrued and other current liabilities | $ 428,091 | $ 515,731 | ||
Related party payables, current | 27,691 | 56,446 | ||
Current portion of long-term debt | 103,125 | 82,500 | ||
Operating lease liabilities, current | 13,104 | 10,127 | ||
Deferred revenue | 70,904 | 27,337 | ||
Total current liabilities | 642,915 | 692,141 | ||
Non-Current Liabilities: | ||||
Long-term debt, net of deferred financing costs | 1,098,335 | 1,118,387 | ||
Operating lease liabilities, non-current | 111,591 | 110,259 | ||
Deferred tax liabilities, net | 285,852 | 379,552 | ||
Other non-current liabilities | 90,073 | 88,811 | ||
Total liabilities | 2,228,766 | 2,389,150 | ||
Commitments and contingencies | ||||
Equity: | ||||
Class A Common Stock (1) | 282 | 278 | ||
Class B Common Stock (2) | 69 | 69 | ||
Additional paid-in capital | 2,368,059 | 2,376,420 | ||
Retained earnings | 278,461 | 212,036 | ||
Accumulated other comprehensive loss | (10,983) | (4,938) | ||
Total stockholders' equity | 2,635,888 | 2,583,865 | ||
Total liabilities and equity | $ 4,864,654 | $ 4,973,015 | ||
_________________ |
(1) Class A Common Stock, |
(2) Class B Common Stock, |
SPHERE ENTERTAINMENT CO. SELECTED CASH FLOW INFORMATION (In thousands) (Unaudited) | ||||
Three Months Ended | ||||
September 30, | ||||
2023 | 2022 | |||
Net cash used in operating activities | $ (94,641) | $ (81,183) | ||
Net cash provided by (used in) investing activities | 66,498 | (285,218) | ||
Net cash provided by (used in) financing activities | 50,854 | (20,023) | ||
Effect of exchange rates on cash, cash equivalents and restricted cash | (83) | (693) | ||
Net increase (decrease) in cash, cash equivalents and restricted cash | 22,628 | (387,117) | ||
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 | 451,742 | 325,748 | ||
Cash, cash equivalents and restricted cash from discontinued operations, end of period | — | 133,145 | ||
Cash, cash equivalents and restricted cash at end of period | $ 451,742 | $ 458,893 | ||
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SOURCE Sphere Entertainment Co.
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