SPHERE ENTERTAINMENT CO. REPORTS FISCAL 2025 FIRST QUARTER RESULTS
NEW YORK, Nov. 12, 2024 /PRNewswire/ -- Sphere Entertainment Co. (NYSE: SPHR) ("Sphere Entertainment" or the "Company") today reported financial results for the fiscal first quarter ended September 30, 2024.
Recent Sphere operating highlights include:
In October, the Company and the Department of Culture and Tourism, Abu Dhabi ("DCT Abu Dhabi") announced plans to make Abu Dhabi the next Sphere location under a franchise model;
The Company announced new multi-year marketing partnerships with Verizon and DCT Abu Dhabi;
V-U2 An Immersive Concert Film debuted in September, joining Postcard from Earth as the second Sphere Experience;
The Eagles are in the midst of a 28-show residency, which has been extended multiple times due to demand;
In September, Sphere hosted its first live sports event, UFC 306, which became the highest single grossing event at the venue so far; and
Delta Air Lines recently announced it will hold a keynote presentation at Sphere in Las Vegas during the Consumer Electronics Show in January 2025.
In addition, last month, MSG Networks began 2024-25 regular season coverage of its five NBA and NHL professional sports teams. Concurrent with the start of the seasons, Gotham Advanced Media and Entertainment (GAME), the digital joint venture between MSG Networks and the YES Network, launched The Gotham Sports App, the new direct-to-consumer and authenticated streaming home of each programming service.
For the fiscal 2025 first quarter, the Company reported revenues of $227.9 million, an increase of $109.9 million as compared to the prior year quarter. In addition, the Company reported an operating loss of $117.6 million, an increase of $47.8 million, and an adjusted operating loss of $10.2 million, an improvement of $47.7 million, both as compared to the prior year quarter.(1)
Executive Chairman and CEO James L. Dolan said, "The vision for Sphere has always included a global network of venues, and our recently announced plans for a second Sphere in Abu Dhabi mark a significant milestone toward that goal. We are confident in the opportunities ahead for Sphere and believe we are well-positioned to drive long-term shareholder value."
Segment Results for the Three Months Ended September 30, 2024 and 2023:
(In millions)
Three Months Ended
September 30,
Change
2024
2023
$
%
Revenues:
Sphere
$ 127.1
$ 7.8
$ 119.3
NM
MSG Networks
100.8
110.2
(9.4)
(9) %
Total Revenues
$ 227.9
$ 118.0
$ 109.9
93 %
Operating Income (Loss)
Sphere
$ (125.1)
$ (98.4)
$ (26.6)
(27) %
MSG Networks
7.5
28.7
(21.2)
(74) %
Total Operating Loss
$ (117.6)
$ (69.8)
$ (47.8)
(69) %
Adjusted Operating Income (Loss):(1)
Sphere
$ (26.3)
$ (83.1)
$ 56.8
68 %
MSG Networks
16.1
25.2
(9.1)
(36) %
Total Adjusted Operating Loss
$ (10.2)
$ (57.9)
$ 47.7
82 %
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)
See page 4 of this earnings release for the definition of adjusted operating income (loss) included in the discussion of non-GAAP financial measures.
SphereOn September 29, 2023, the Company opened Sphere in Las Vegas. As a result, the prior year quarter reflects minimal operations while the current year quarter reflects a full quarter of operations.
For the fiscal 2025 first quarter, the Sphere segment reported revenues of $127.1 million, an increase of $119.3 million as compared to the prior year quarter. Revenues related to The Sphere Experience were $71.5 million across 207 performances of Postcard from Earth and V-U2 An Immersive Concert Film during the quarter. Event-related revenues of $40.9 million increased $36.8 million as compared to the prior year quarter, primarily due to a full quarter of concerts held at Sphere in Las Vegas and, to a lesser extent, the impact of a marquee sporting event and corporate takeover held at the venue during the current year quarter. Revenues from sponsorship, signage, Exosphere advertising and suite license fees of $8.5 million increased $5.9 million as compared to the prior year quarter, primarily reflecting higher Exosphere advertising revenues and, to a lesser extent, higher suite license fee revenues, both of which were due to a full quarter of operations in the current year quarter.
For the fiscal 2025 first quarter, the Sphere segment had direct operating expenses of $62.4 million as compared to $7.8 million in the prior year quarter. This primarily reflects expenses associated with The Sphere Experience of $24.6 million, which increased $22.4 million, venue operating costs of $16.1 million, which increased $13.2 million, and event-related expenses of $14.7 million, which increased $12.7 million, all as compared to the prior year quarter.
Fiscal 2025 first quarter selling, general and administrative expenses of $105.0 million increased $20.8 million, or 25%, as compared to the prior year quarter, primarily due to higher employee compensation and related benefits.
Fiscal 2025 first quarter operating loss of $125.1 million increased by $26.6 million as compared to the prior year quarter, primarily reflecting higher depreciation and amortization, direct operating expenses and selling, general and administrative expenses (including share-based compensation expense and merger, debt work-out and acquisition related costs, net of insurance recoveries), partially offset by the increase in revenues. Adjusted operating loss of $26.3 million improved by $56.8 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 and merger, debt work-out and acquisition related costs, net of insurance recoveries).
MSG NetworksFor the fiscal 2025 first quarter, the MSG Networks segment reported total revenues of $100.8 million, a decrease of $9.4 million, or 9%, as compared to the prior year quarter.
Distribution revenue decreased $9.3 million as compared to the prior year quarter, primarily due to a decrease in total subscribers of approximately 13.0%, partially offset by the impact of higher affiliation rates.
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+ (which is now included in the Gotham Sports streaming product launched as part of MSG Networks' joint venture with YES Network). In addition, total subscribers includes both affiliate subscribers as well as monthly and annual subscribers of MSG+.
Fiscal 2025 first quarter direct operating expenses of $77.2 million increased $0.6 million, or 1%, as compared to the prior year quarter. Rights fees expense increased $1.3 million as compared to the prior year quarter, which mainly reflects the impact of annual contractual rate increases, partially offset by the net impact of reductions resulting from fewer NBA and NHL games made available to MSG Networks for exclusive broadcast. Other programming and production costs decreased $0.7 million as compared to the prior year quarter, including lower costs associated with MSG+.
Fiscal 2025 first quarter selling, general and administrative expenses of $14.0 million increased $11.0 million as compared to the prior year quarter, primarily due to higher professional fees of $10.4 million, which mainly reflects the absence of litigation-related insurance recoveries associated with the merger of a subsidiary of the Company with MSG Networks Inc. recorded in the prior year period and costs associated with pursuing a work-out of MSG Networks' credit facilities with its syndicate of lenders recorded in the current year period.
Fiscal 2025 first quarter operating income of $7.5 million decreased $21.2 million as compared to the prior year quarter, primarily due to the increase in selling, general and administrative expenses (including merger, debt work-out, and acquisition related costs, net of insurance recoveries, and share-based compensation expense) and the decrease in revenues. Adjusted operating income of $16.1 million decreased $9.1 million, or 36%, as compared to the prior year quarter, primarily due to the decrease in revenues, partially offset by the decrease in selling, general and administrative expenses (excluding merger, debt work-out, and acquisition related costs, net of insurance recoveries, and share-based compensation expense).
Other MattersMSG Networks continues to pursue a refinancing of its credit facilities through a work-out with its syndicate of lenders. As of September 30, 2024, MSG Networks had approximately $829.1 million of principal amount outstanding under its facilities, which matured on October 11, 2024. On October 11, 2024, MSG Networks entered into a forbearance agreement with certain of its existing lenders pursuant to which the supporting lenders agreed not to exercise certain of their remedies under the MSG Networks credit facilities with respect to nonpayment of the debt on the maturity date until the end of the forbearance period. The forbearance period was initially scheduled to expire on November 8, 2024 and was subsequently extended through November 26, 2024 while the work-out process continues.
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 MeasuresWe 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, debt work-out 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, debt work-out 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 ...
