Venue and Event Operations - Sphere Entertainment's first venue opened in Las Vegas in September 2023, accommodating up to 20,000 guests and hosting various events year-round[193]. - The Sphere segment's operating results depend on attracting audiences, advertisers, and artists for events[201]. - The company expects continued growth in revenues driven by The Sphere Experience and event-related activities in the upcoming quarters[223]. - The Sphere Experience contributed $100,505 to revenue for the three months and $194,635 for the nine months ended March 31, 2024, with 257 and 449 performances respectively[223]. - The Company opened Sphere in Las Vegas in September 2023, which is expected to generate substantial revenue and adjusted operating income over time[261]. Financial Performance - Revenues for the three months ended March 31, 2024, increased by 98% to $321,330 compared to $162,062 in the same period of 2023[206]. - For the nine months ended March 31, 2024, revenues increased by 69% to $753,494 compared to $444,732 in the same period of 2023[207]. - Net loss attributable to Sphere Entertainment Co.'s stockholders decreased by 17% to $47,240 for the three months ended March 31, 2024, from $56,847 in the prior year[206]. - Adjusted operating income for the three months ended March 31, 2024 increased by $80,239 to $61,521, while for the nine months it increased by $117,759 to $55,074[219]. - Operating income for the three months ended March 31, 2024, increased by $32,661, or NM, compared to the prior year period, primarily due to decreased selling, general, and administrative expenses[247]. Expenses and Costs - Direct operating expenses decreased by 64% to $154,040 for the three months ended March 31, 2024, down from $93,665 in the prior year[206]. - Selling, general, and administrative expenses rose by $25,595 for the three months and $55,599 for the nine months ended March 31, 2024, mainly due to higher employee compensation and related benefits[229]. - Direct operating expenses increased by $57,880 for the three months and $133,023 for the nine months ended March 31, 2024, primarily due to expenses associated with The Sphere Experience[225]. - Restructuring charges for the three months ended March 31, 2024, were $4,667, a decrease of 75% from $18,670 in the same period of 2023[211]. - Interest expense increased by $27,119 for the three months ended March 31, 2024, due to the discontinuation of capitalization of interest expense[213]. Debt and Financing - The company faces risks related to substantial debt, including the need to refinance MSG Networks' existing debt before its maturity in October 2024[187]. - The principal balance of the company's total debt outstanding as of March 31, 2024, was $1,404,125, including $870,375 classified as short-term[250]. - The Company is in advanced stages of negotiating a refinancing of the MSG Networks Credit Facilities, which includes a reduction in the existing term loan and an extension of the maturity date to October 10, 2025[255]. - The Company anticipates making required quarterly amortization payments of $41,250 on the MSG Networks Credit Facilities prior to maturity in October 2024[254]. - The minimum liquidity level for Sphere Entertainment Group is set at $50,000, with $25,000 required to be held in cash or cash equivalents[271]. Impairment and Losses - The company recognized impairment and other losses, net of $115,738 for the nine months ended March 31, 2024, compared to gains of $3,000 in the prior year[210]. - An impairment loss of $116,541 was taken due to the decision to no longer pursue the development of a Sphere in the United Kingdom[262]. - The company recognized an impairment loss of $115,738 for the nine months ended March 31, 2024, compared to a gain of $3,000 in the prior year period[232]. - The Company performed its annual goodwill impairment tests and determined no impairments were identified for any reporting units as of the impairment test date[293]. Cash Flow and Liquidity - As of March 31, 2024, cash, cash equivalents, and restricted cash totaled $693,946, an increase from $429,114 as of June 30, 2023[285]. - Net cash provided by operating activities for the nine months ended March 31, 2024 was $52,780, a decrease of $85,044 compared to the prior year period[286]. - Net cash used in investing activities for the nine months ended March 31, 2024 decreased by $805,244 compared to the prior year period, primarily due to reduced capital expenditures for Sphere in Las Vegas[287]. - Net cash provided by financing activities for the nine months ended March 31, 2024 increased by $32,525, driven by proceeds of $251,634 from the issuance of 3.50% Convertible Senior Notes[288]. Market and Economic Conditions - Economic conditions may impact demand for entertainment offerings, affecting advertising, sponsorship, and merchandise sales[202]. - The MSG Networks segment typically earns a higher share of its annual revenues in the second and third quarters due to advertising revenue from live NBA and NHL programming[289]. - The company is exploring additional opportunities to expand its presence in the entertainment industry, although new investments may not initially contribute to operating income[203]. Stock and Shareholder Information - The company distributed approximately 67% of the outstanding common stock of Madison Square Garden Entertainment Corp. to its stockholders on April 20, 2023[197]. - The Company has not repurchased any shares under the $350,000 share repurchase program authorized by the Board of Directors[259]. - The Company completed a private offering of $258,750 in aggregate principal amount of its 3.50% convertible senior notes due 2028, with net proceeds designated for general corporate purposes and Sphere-related growth initiatives[272]. - The 3.50% Convertible Senior Notes bear interest at a rate of 3.50% per year, payable semi-annually, and will mature on December 1, 2028[275].
Sphere Entertainment (SPHR) - 2024 Q3 - Quarterly Report