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Sphere Entertainment (SPHR) - 2023 Q3 - Quarterly Report
SPHRSphere Entertainment (SPHR)2023-05-10 20:47

Corporate Structure and Financial Position - The Company distributed approximately 67% of the outstanding common stock of MSG Entertainment to its stockholders on April 20, 2023, retaining about 33%[169]. - The Company has classified Tao Group Hospitality as held for sale, resulting in two reportable segments: Entertainment and MSG Networks[173]. - The total debt outstanding as of May 9, 2023, was 1,227,875,reflectingthecompany′sfinancialobligationspost−MSGESpincoDistribution[244].−TheMSGNetworksCreditFacilitiesincludea1,227,875, reflecting the company's financial obligations post-MSGE Spinco Distribution[244]. - The MSG Networks Credit Facilities include a 1,100,000 term loan facility and a 250,000revolvingcreditfacility,withnoborrowingsundertherevolvingcreditfacilityasofMarch31,2023[257].−Thecompanyenteredintoadelayeddrawtermloanfacilityofupto250,000 revolving credit facility, with no borrowings under the revolving credit facility as of March 31, 2023[257]. - The company entered into a delayed draw term loan facility of up to 65,000 on April 20, 2023, which will mature on October 20, 2024[263]. Revenue and Performance - Revenues for the three months ended March 31, 2023, increased by 10,763to10,763 to 363,297, representing a 3% growth compared to the same period in 2022[188]. - For the nine months ended March 31, 2023, revenues rose by 211,050to211,050 to 1,139,492, marking a 23% increase year-over-year[189]. - Revenues for the three months ended March 31, 2023 increased by 7,276to7,276 to 201,861, and for the nine months ended March 31, 2023, revenues increased by 229,047to229,047 to 705,481, representing a 48% increase[207]. - The increase in revenues for the nine months ended March 31, 2023 was primarily driven by a 45,516increaseinrevenuessubjecttothesharingofeconomicswithMSGSportspursuanttotheArenaLicenseAgreements[207].−TheincreaseinadvertisingrevenueforthethreemonthsendedMarch31,2023was45,516 increase in revenues subject to the sharing of economics with MSG Sports pursuant to the Arena License Agreements[207]. - The increase in advertising revenue for the three months ended March 31, 2023 was 4,476, attributed to higher sales related to professional sports telecasts[232]. Expenses and Losses - Direct operating expenses for the three months ended March 31, 2023, increased by 12,174to12,174 to 210,141, a 6% rise compared to the prior year[188]. - Selling, general and administrative expenses surged by 61,082to61,082 to 179,870 for the three months ended March 31, 2023, reflecting a 51% increase year-over-year[188]. - The net loss for the three months ended March 31, 2023, was 58,555,comparedtoanetlossof58,555, compared to a net loss of 19,306 in the same period of 2022, indicating a significant increase in losses[188]. - Restructuring charges for the three months ended March 31, 2023, rose by 5,808to5,808 to 20,498, attributed to workforce reductions in the Entertainment segment[193]. - The operating loss for the three months ended March 31, 2023 was 81,140,anincreaseof81,140, an increase of 36,324 compared to the prior year period, attributed to higher direct operating and administrative expenses[222]. Cash Flow and Investments - As of March 31, 2023, cash, cash equivalents, and restricted cash totaled 327,245,downfrom327,245, down from 822,885 as of June 30, 2022[269]. - Net cash provided by operating activities for the nine months ended March 31, 2023, improved by 31,623to31,623 to 137,824 compared to the prior year period[270]. - Net cash used in investing activities increased by 277,558to277,558 to 825,484 for the nine months ended March 31, 2023, primarily due to capital expenditures for the Sphere in Las Vegas[271]. - Net cash provided by financing activities increased by 278,005to278,005 to 200,485 for the nine months ended March 31, 2023, mainly due to proceeds from the LV Sphere Term Loan Facility[272]. Future Projects and Developments - The Company is completing construction of its first Sphere venue in Las Vegas, which is expected to enhance its entertainment offerings[174]. - The estimated cost for the Sphere in Las Vegas is approximately 2,300,000,withactualconstructioncostspaidthroughMay9,2023,beingaround2,300,000, with actual construction costs paid through May 9, 2023, being around 2,080,000[252]. - The company expects to open the Sphere venue in September 2023, although construction is subject to potential delays[251]. - The company plans to finance the completion of the Sphere construction from cash-on-hand and cash flows from operations, potentially accessing proceeds from the sale of MSGE Retained Interest if needed[253]. Market and Economic Conditions - The demand for MSG Networks programming is influenced by the popularity of sports teams and the ability to renew affiliation agreements with distributors[167]. - The Company’s future performance is dependent on general economic conditions, which may affect demand for entertainment offerings and advertising revenues[183]. - The impact of COVID-19 on operations has diminished, but concerns regarding new variants and government restrictions remain[181]. Operational Metrics - The Company had 181 Christmas Spectacular performances during the holiday season, with approximately 930,000 tickets sold, representing over a 25% increase in attendance on a per-show basis compared to the prior year[211]. - For the nine months ended March 31, 2023, adjusted operating loss improved to 20,650from20,650 from 71,739 in the prior year, primarily due to an increase in revenues[224]. - The effective income tax benefit for the three months ended March 31, 2023, was 14%, compared to an effective tax expense of (46)% in the same period of 2022[199].