SPHERE ENTERTAINMENT CO. REPORTS FISCAL 2024 THIRD QUARTER RESULTS
Sphere Entertainment Co. reported fiscal 2024 third quarter results, highlighting successful concert runs, revenue generation, and corporate events. The company reported revenues of $321.3 million and an operating loss of $40.4 million, an improvement of $61.5 million compared to the prior year. The Sphere segment had revenues of $170.4 million, while MSG Networks reported revenues of $151.0 million.
Robust revenues and positive adjusted operating income demonstrate Sphere's potential to disrupt the traditional venue model.
Sphere's revenue growth and improved operating income for the fiscal quarter show promising future growth opportunities.
MSG Networks' operating income of $43.1 million marked an increase of $32.7 million, reflecting a positive trend in financial performance.
The operating loss of $40.4 million for the quarter is still a significant challenge for Sphere Entertainment Co.
Sphere's direct operating expenses of $62.3 million and increased general and administrative expenses pose financial challenges for the company.
MSG Networks reported a decrease in total revenues of $10.5 million, indicating a decline in financial performance compared to the prior year.
Insights
Recent Sphere highlights include:
- The conclusion of U2's sold-out 40-show run in March and Phish's sold-out 4-night run in April;
- Dead & Co.'s extension of its upcoming residency from 18 to 24 shows due to strong ticket demand;
- The Sphere Experience featuring Postcard from Earth, generated over
one million dollars in average daily ticket sales on the days it ran during the fiscal third quarter; - Sphere's Exosphere featured campaigns from numerous global brands during the quarter, and generated a record-setting week of advertising revenue around the Super Bowl in February; and
- Sphere announced that in June it will host both its first corporate keynote event with Hewlett Packard Enterprise, as well as this year's NHL Draft.
Subsequent to the end of the quarter, MSG Networks concluded its full regular season telecast schedules for its five professional sports teams. In addition, MSG Networks aired first round playoff telecasts of the New York Knicks, New York Rangers and New York Islanders, and is currently providing comprehensive pre/post-game coverage of the second round of the postseason for both the Knicks and Rangers across its linear and digital platforms.
For the fiscal 2024 third quarter, the Company reported revenues of
Executive Chairman and CEO James L. Dolan said, "With the second consecutive quarter of robust revenues and positive adjusted operating income at the Sphere segment, our early results continue to demonstrate Sphere's potential to disrupt the traditional venue model. We are encouraged by the demand for this new medium and remain confident in our future growth opportunities."
Segment Results for the Three and Nine Months Ended March 31, 2024 and 2023:
(In millions) | Three Months Ended | Nine Months Ended | ||||||||||||||
March 31, | Change | March 31, | Change | |||||||||||||
2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||
Revenues: | ||||||||||||||||
Sphere | $ 170.4 | $ 0.6 | $ 169.7 | NM | $ 345.9 | $ 1.9 | $ 344.0 | NM | ||||||||
MSG Networks | 151.0 | 161.4 | (10.5) | (6) % | 407.6 | 442.8 | (35.3) | (8) % | ||||||||
Total Revenues | $ 321.3 | $ 162.1 | $ 159.3 | 98 % | $ 753.5 | $ 444.7 | $ 308.8 | 69 % | ||||||||
Operating Income (Loss)(1) | ||||||||||||||||
Sphere | $ (83.5) | $ 28.9 | 26 % | (37) % | ||||||||||||
MSG Networks | 43.1 | 10.4 | 32.7 | NM | $ 106.0 | 71.7 | 34.3 | 48 % | ||||||||
Total Operating Loss | $ (40.4) | $ 61.5 | 60 % | $ (67.2) | (33) % | |||||||||||
Adjusted Operating Income (Loss):(1)(2) | ||||||||||||||||
Sphere | $ 12.9 | $ (77.0) | $ 90.0 | NM | $ (56.1) | $ 145.9 | 72 % | |||||||||
MSG Networks | 48.6 | 58.3 | (9.7) | (17) % | 111.1 | 139.3 | (28.2) | (20) % | ||||||||
Total Adjusted Operating Income | $ 61.5 | $ (18.7) | $ 80.2 | NM | $ 55.1 | $ (62.7) | $ 117.8 | NM |
Note: Does not foot due to rounding. NM — Absolute percentages greater than | |
(1) | For the three and nine months ended March 31, 2023, 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 nine months ended March 31, 2024 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 third quarter, the Sphere segment reported revenues of
For the fiscal 2024 third quarter, the Sphere segment had direct operating expenses of
Fiscal 2024 third quarter selling, general and administrative expenses of
Fiscal 2024 third quarter operating loss of
MSG Networks
For the fiscal 2024 third quarter, the MSG Networks segment reported total revenues of
Distribution revenue decreased
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+.
Advertising revenue decreased
Fiscal 2024 third quarter direct operating expenses of
Fiscal 2024 third quarter selling, general and administrative expenses of
Fiscal 2024 third quarter operating income of
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 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 |
Sarah Rothschild Investor Relations (212) 631-5345 |
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 800-715-9871 / Conference ID Number 8089430
Conference call replay number is 800-770-2030 / Conference ID Number 8089430 until May 17, 2024
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
Three Months Ended | Nine Months Ended | |||||||
March 31, | March 31, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Revenues | $ 321,330 | $ 162,062 | $ 753,494 | $ 444,732 | ||||
Direct operating expenses | (154,040) | (93,665) | (398,305) | (259,485) | ||||
Selling, general, and administrative expenses | (123,149) | (143,433) | (325,813) | (342,479) | ||||
Depreciation and amortization | (79,867) | (8,200) | (174,157) | (21,719) | ||||
Impairment and other (losses) gains, net | — | — | (115,738) | 3,000 | ||||
Restructuring charges | (4,667) | (18,670) | (9,345) | (26,745) | ||||
Operating loss | (40,393) | (101,906) | (269,864) | (202,696) | ||||
Other income (expense): | ||||||||
Interest income | 7,654 | 3,374 | 17,958 | 9,376 | ||||
Interest expense | (27,119) | — | (52,947) | — | ||||
Other (expense) income, net | (3,256) | (4,182) | 37,810 | (5,952) | ||||
Loss from continuing operations before income taxes | (63,114) | (102,714) | (267,043) | (199,272) | ||||
Income tax benefit (expense) | 15,874 | (11,284) | 113,627 | 11,663 | ||||
Loss from continuing operations | (47,240) | (113,998) | (153,416) | (187,609) | ||||
Income (loss) from discontinued operations, net of taxes | — | 55,443 | (647) | 155,568 | ||||
Net loss | (47,240) | (58,555) | (154,063) | (32,041) | ||||
Less: Net loss attributable to nonredeemable noncontrolling | — | (216) | — | (682) | ||||
Less: Net (loss) income attributable to redeemable | — | (1,492) | — | 2,661 | ||||
Net loss attributable to Sphere Entertainment Co.'s stockholders | $ (47,240) | $ (56,847) | $ (154,063) | $ (34,020) | ||||
Basic loss per common share | ||||||||
Continuing operations | $ (1.33) | $ (3.28) | $ (4.36) | $ (5.42) | ||||
Discontinued operations | $ — | $ 1.65 | $ (0.02) | $ 4.44 | ||||
Basic loss per common share attributable to Sphere | $ (1.33) | $ (1.64) | $ (4.38) | $ (0.98) | ||||
Diluted loss per common share | ||||||||
Continuing operations | $ (1.33) | $ (3.28) | $ (4.36) | $ (5.42) | ||||
Discontinued operations | $ — | $ 1.65 | $ (0.02) | $ 4.44 | ||||
Diluted loss per common share attributable to Sphere | $ (1.33) | $ (1.64) | $ (4.38) | $ (0.98) | ||||
Weighted-average number of common shares | ||||||||
Basic and diluted | 35,418 | 34,727 | 35,212 | 34,604 |
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 | Nine Months Ended | |||||||
March 31, | March 31, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Operating loss | $ (40,393) | $ (101,906) | $ (269,864) | $ (202,696) | ||||
Share-based compensation | 16,724 | 9,105 | 33,523 | 36,950 | ||||
Depreciation and amortization | 79,867 | 8,200 | 174,157 | 21,719 | ||||
Restructuring charges | 4,667 | 18,670 | 9,345 | 26,745 | ||||
Impairment and other losses (gains), net | — | — | 115,738 | (3,000) | ||||
Merger and acquisition related costs, net of insurance | 508 | 47,045 | (8,155) | 57,181 | ||||
Amortization for capitalized cloud computing | 22 | 168 | 66 | 416 | ||||
Remeasurement of deferred compensation plan | 126 | — | 264 | — | ||||
Adjusted operating income (loss) | $ 61,521 | $ (18,718) | $ 55,074 | $ (62,685) |
SEGMENT RESULTS | ||||||
BUSINESS SEGMENT RESULTS | ||||||
Three Months Ended March 31, 2024 | ||||||
Sphere | MSG | Total | ||||
Revenues | $ 170,364 | $ 150,966 | $ 321,330 | |||
Direct operating expenses | (62,294) | (91,746) | (154,040) | |||
Selling, general and administrative expenses | (108,976) | (14,173) | (123,149) | |||
Depreciation and amortization | (77,706) | (2,161) | (79,867) | |||
Restructuring charges | (4,886) | 219 | (4,667) | |||
Operating (loss) income | $ (83,498) | $ 43,105 | $ (40,393) | |||
Reconciliation to adjusted operating income: | ||||||
Share-based compensation | 13,273 | 3,451 | 16,724 | |||
Depreciation and amortization | 77,706 | 2,161 | 79,867 | |||
Restructuring charges | 4,886 | (219) | 4,667 | |||
Merger and acquisition related costs, net of insurance recoveries | 416 | 92 | 508 | |||
Amortization for capitalized cloud computing arrangement costs | — | 22 | 22 | |||
Remeasurement of deferred compensation plan liabilities | 126 | — | 126 | |||
Adjusted operating income | $ 12,909 | $ 48,612 | $ 61,521 | |||
Three Months Ended March 31, 2023 | ||||||
Sphere | MSG | Total | ||||
Revenues | $ 626 | $ 161,436 | $ 162,062 | |||
Direct operating expenses | (4,414) | (89,251) | (93,665) | |||
Selling, general and administrative expenses | (83,381) | (60,052) | (143,433) | |||
Depreciation and amortization | (6,511) | (1,689) | (8,200) | |||
Restructuring charges | (18,670) | — | (18,670) | |||
Operating (loss) income | $ (112,350) | $ 10,444 | $ (101,906) | |||
Reconciliation to adjusted operating (loss) income: | ||||||
Share-based compensation | 8,466 | 639 | 9,105 | |||
Depreciation and amortization | 6,511 | 1,689 | 8,200 | |||
Restructuring charges | 18,670 | — | 18,670 | |||
Merger and acquisition related costs | 1,532 | 45,513 | 47,045 | |||
Amortization for capitalized cloud computing arrangement costs | 125 | 43 | 168 | |||
Adjusted operating (loss) income | $ (77,046) | $ 58,328 | $ (18,718) |
SEGMENT RESULTS | ||||||
Nine Months Ended March 31, 2024 | ||||||
Sphere | MSG | Total | ||||
Revenues | $ 345,942 | $ 407,552 | $ 753,494 | |||
Direct operating expenses | (137,437) | (260,868) | (398,305) | |||
Selling, general and administrative expenses | (290,930) | (34,883) | (325,813) | |||
Depreciation and amortization | (168,127) | (6,030) | (174,157) | |||
Impairment and other losses, net | (115,738) | — | (115,738) | |||
Restructuring charges | (9,564) | 219 | (9,345) | |||
Operating (loss) income | $ (375,854) | $ 105,990 | $ (269,864) | |||
Reconciliation to adjusted operating (loss) income: | ||||||
Share-based compensation | 28,177 | 5,346 | 33,523 | |||
Depreciation and amortization | 168,127 | 6,030 | 174,157 | |||
Restructuring charges | 9,564 | (219) | 9,345 | |||
Impairment and other losses, net | 115,738 | — | 115,738 | |||
Merger and acquisition related costs, net of insurance recoveries | (2,086) | (6,069) | (8,155) | |||
Amortization for capitalized cloud computing arrangement costs | — | 66 | 66 | |||
Remeasurement of deferred compensation plan liabilities | 264 | — | 264 | |||
Adjusted operating (loss) income | $ (56,070) | $ 111,144 | $ 55,074 | |||
Nine Months Ended March 31, 2023 | ||||||
Sphere | MSG | Total | ||||
Revenues | $ 1,919 | $ 442,813 | $ 444,732 | |||
Direct operating expenses | (4,414) | (255,071) | (259,485) | |||
Selling, general and administrative expenses | (235,331) | (107,148) | (342,479) | |||
Depreciation and amortization | (16,775) | (4,944) | (21,719) | |||
Other gains | 3,000 | — | 3,000 | |||
Restructuring charges | (22,757) | (3,988) | (26,745) | |||
Operating (loss) income | $ (274,358) | $ 71,662 | $ (202,696) | |||
Reconciliation to adjusted operating (loss) income: | ||||||
Share-based compensation | 31,308 | 5,642 | 36,950 | |||
Depreciation and amortization | 16,775 | 4,944 | 21,719 | |||
Restructuring charges | 22,757 | 3,988 | 26,745 | |||
Other gains | (3,000) | — | (3,000) | |||
Merger and acquisition related costs | 4,223 | 52,958 | 57,181 | |||
Amortization for capitalized cloud computing arrangement costs | 285 | 131 | 416 | |||
Adjusted operating (loss) income | $ (202,010) | $ 139,325 | $ (62,685) |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
March 31, | June 30, | |||
2024 | 2023 | |||
ASSETS | ||||
Current Assets: | ||||
Cash, cash equivalents, and restricted cash | $ 693,946 | $ 429,114 | ||
Accounts receivable, net | 178,702 | 112,309 | ||
Related party receivables, current | 13,195 | 26,405 | ||
Prepaid expenses and other current assets | 30,216 | 56,085 | ||
Total current assets | 916,059 | 623,913 | ||
Non-Current Assets: | ||||
Investments | 51,849 | 395,606 | ||
Property and equipment, net | 3,219,889 | 3,307,161 | ||
Right-of-use lease assets | 109,663 | 84,912 | ||
Goodwill | 456,807 | 456,807 | ||
Intangible assets, net | 15,574 | 17,910 | ||
Other non-current assets | 98,971 | 86,706 | ||
Total assets | $ 4,868,812 | $ 4,973,015 | ||
LIABILITIES AND EQUITY | ||||
Current Liabilities: | ||||
Accounts payable, accrued and other current liabilities | $ 423,113 | $ 515,731 | ||
Related party payables, current | 11,263 | 56,446 | ||
Current portion of long-term debt, net | 869,776 | 82,500 | ||
Operating lease liabilities, current | 17,748 | 10,127 | ||
Deferred revenue | 76,712 | 27,337 | ||
Total current liabilities | 1,398,612 | 692,141 | ||
Non-Current Liabilities: | ||||
Long-term debt, net | 522,057 | 1,118,387 | ||
Operating lease liabilities, non-current | 130,419 | 110,259 | ||
Deferred tax liabilities, net | 254,995 | 379,552 | ||
Other non-current liabilities | 119,130 | 88,811 | ||
Total liabilities | 2,425,213 | 2,389,150 | ||
Commitments and contingencies | ||||
Equity: | ||||
Class A Common Stock (1) | 284 | 278 | ||
Class B Common Stock (2) | 69 | 69 | ||
Additional paid-in capital | 2,392,247 | 2,376,420 | ||
Retained earnings | 57,973 | 212,036 | ||
Accumulated other comprehensive loss | (6,974) | (4,938) | ||
Total stockholders' equity | 2,443,599 | 2,583,865 | ||
Total liabilities and equity | $ 4,868,812 | $ 4,973,015 |
_________________ | |
(1) | Class A Common Stock, |
(2) | Class B Common Stock, |
SELECTED CASH FLOW INFORMATION | ||||
Nine Months Ended | ||||
March 31, | ||||
2024 | 2023 | |||
Net cash provided by operating activities | $ 52,780 | $ 137,824 | ||
Net cash used in investing activities | (20,240) | (825,484) | ||
Net cash provided by financing activities | 233,010 | 200,485 | ||
Effect of exchange rates on cash, cash equivalents, and restricted cash | (718) | (729) | ||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 264,832 | (487,904) | ||
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 | 693,946 | 204,264 | ||
Cash, cash equivalents and restricted cash from discontinued operations, end of period | — | 153,842 | ||
Cash, cash equivalents, and restricted cash at end of period | $ 693,946 | $ 358,106 |
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SOURCE Sphere Entertainment Co.
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