MSGE - Sphere Entertainment Co. Reports Fiscal 2023 Third Quarter Results

May, 10 2023 07:30 AM Madison Square Garden Entertainment Corp. Class A

Spin-off of Traditional Live Entertainment Business Completed in April

Sale of Majority Interest in Tao Group Hospitality Completed Earlier this Month

Sphere in Las Vegas on Track to Open in September 2023

Sphere Entertainment Co. (NYSE: SPHR) ("Sphere Entertainment" or the "Company") today reported financial results for the fiscal third quarter ended March 31, 2023.

On April 20, 2023, the Company completed the spin-off of its traditional live entertainment business. As a result of the timing of the spin-off, the Company’s fiscal 2023 third quarter consolidated results include the financial results of the traditional live entertainment business.

In addition, on May 3, 2023, the Company completed the sale of its 66.9% majority interest in Tao Group Hospitality. As a result, Tao Group Hospitality's results are reported as discontinued operations for all periods presented.

For the fiscal 2023 third quarter, the Company reported revenues of $363.3 million, an increase of $10.8 million, or 3%, as compared to the prior year quarter. In addition, the Company reported an operating loss of $70.3 million, a decrease of $71.1 million, and adjusted operating income of $19.4 million, a decrease of $19.0 million, both as compared to the prior year period. ⁽¹⁾

Executive Chairman and CEO James L. Dolan said, “With the completion of the spin-off of our traditional live entertainment business and the sale of our interest in Tao Group Hospitality, our Company has enhanced flexibility to execute its business strategy. As we approach the opening of Sphere in Las Vegas, we remain confident that this next chapter for our Company will drive long-term shareholder value.”

Segment Results for the Three and Nine Months Ended March 31, 2023 and 2022:


Three Months Ended

Nine Months Ended


March 31,

Change

March 31,

Change
$ millions

2023

2022

$

%

2023

2022

$

%
Revenues
















Entertainment

$
201.9


$
194.6


$
7.3


4
%

$
705.5


$
476.4


$
229.0


48
%
MSG Networks


161.4



167.6



(6.1
)

(4
)%


442.8



469.0



(26.2
)

(6
)%
Other ⁽²⁾


—



(9.6
)


9.6


100
%


(8.8
)


(17.0
)


8.2


48
%
Total Revenues

$
363.3


$
352.5


$
10.8


3
%

$
1,139.5


$
928.4


$
211.1


23
%
Operating Income (Loss)
















Entertainment

$
(81.1
)

$
(44.8
)

$
(36.3
)

(81
)%

$
(119.9
)

$
(172.8
)

$
52.9


31
%
MSG Networks


10.4



45.9



(35.5
)

(77
)%


62.9



104.3



(41.5
)

(40
)%
Other ⁽²⁾


0.4



(0.3
)


0.7


NM



0.7



(0.9
)


1.6


NM

Total Operating Income (Loss)

$
(70.3
)

$
0.9


$
(71.1
)

NM


$
(56.4
)

$
(69.4
)

$
13.0


19
%
Adjusted Operating Income (Loss)
















Entertainment

$
(39.3
)

$
(12.3
)

$
(27.0
)

NM


$
(20.7
)

$
(71.7
)

$
51.1


71
%
MSG Networks


58.3



50.8



7.5


15
%


130.5



150.5



(19.9
)

(13
)%
Other ⁽²⁾


0.4



(0.1
)


0.5


NM



1.3



(0.4
)


1.7


NM

Total Adjusted Operating Income

$
19.4


$
38.5


$
(19.0
)

(49
)%

$
111.2


$
78.3


$
32.8


42
%

Note:

Amounts may not foot due to rounding

(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.

(2)

Includes inter-segment eliminations and, for operating income (loss), purchase accounting adjustments.

Entertainment

For the fiscal 2023 third quarter, the Entertainment segment generated revenues of $201.9 million, an increase of $7.3 million, or 4%, as compared to the prior year period. Revenues related to the Company's arena license agreements with the Knicks and Rangers increased $11.7 million. This included a $10.1 million increase in revenues subject to the sharing of economics with Madison Square Garden Sports Corp. ("MSG Sports"), primarily reflecting higher food, beverage and merchandise sales and higher suite license fees revenues at Knicks and Rangers games. Revenues from the presentation of the Christmas Spectacular production increased $3.5 million, which reflected seven performances during the current year quarter as compared to no performances in the prior year quarter. The increase in revenues was partially offset by a decrease in advertising sales commissions of $9.6 million in the current year period due to the termination of MSG Networks' advertising sales representation agreement.

Fiscal 2023 third quarter direct operating expenses of $120.8 million increased $10.1 million, or 9%, as compared to the prior year quarter. Expenses associated with the sharing of economics with MSG Sports pursuant to the arena license agreements increased $4.5 million, reflecting the increase in related revenues, while direct operating expenses also included $4.4 million associated with the Company's Sphere initiative.

Fiscal 2023 third quarter selling, general and administrative expenses of $120.3 million increased $24.1 million, or 25%, as compared with the prior year quarter. This increase primarily reflected higher professional fees of $11.4 million, mainly due to costs related to the Company's spin-off of its live entertainment business, as well as higher employee compensation and related benefits of $8.0 million and other general administrative expenses of $4.7 million, both primarily due to the Company's Sphere initiative.

Fiscal 2023 third quarter operating loss of $81.1 million increased by $36.3 million and adjusted operating loss of $39.3 million increased by $27.0 million, both as compared to the prior year period. The increases in operating loss and adjusted operating loss were primarily due to higher selling, general and administrative expenses and, to a lesser extent, higher direct operating expenses, partially offset by the increase in revenues. The increase in operating loss also reflected the impact of higher restructuring charges in the current year period.

MSG Networks

For the fiscal 2023 third quarter, the MSG Networks segment generated revenues of $161.4 million, a decrease of $6.1 million, or 4%, as compared to the prior year period. Affiliation fee revenue decreased $11.1 million, primarily due to a decrease in subscribers of approximately 10%, partially offset by the impact of higher affiliation rates in the current year quarter. Advertising revenue increased $4.5 million, primarily reflecting higher advertising sales related to professional sports telecasts due to a higher number of live telecasts and an increase in per-game advertising sales as compared to the prior year period, as well as higher sales related to MSG Networks' non-ratings-based advertising initiatives.

Fiscal 2023 third quarter direct operating expenses of $89.3 million increased $2.1 million, or 2%, as compared to the prior year quarter, primarily due to higher rights fees expense of $2.5 million, which mainly reflects annual contractual rate increases in the current year period.

Fiscal 2023 third quarter selling, general and administrative expenses of $60.1 million increased $27.8 million, or 86%, as compared to the prior year quarter. This mainly reflects a $44.6 million net increase in expenses, primarily litigation-related, associated with the Company's acquisition of MSG Networks. This was partially offset by net lower advertising sales commission expenses of $8.3 million in the current year period due to the termination of MSG Networks' advertising sales representation agreement, lower advertising and marketing expenses of $5.0 million, lower employee compensation and related benefits of $1.3 million and other cost decreases.

Fiscal 2023 third quarter operating income of $10.4 million decreased $35.5 million, or 77%, as compared to the prior year quarter, primarily due to the increase in selling, general and administrative expenses (including merger and acquisition-related costs), and, to a lesser extent, the decrease in revenues and the increase in direct operating expenses. Adjusted operating income of $58.3 million increased $7.5 million, or 15%, as compared to the prior year quarter, primarily due to the decrease in selling, general and administrative expenses (excluding merger and acquisition-related costs), partially offset by the decrease in revenues and increase in direct operating expenses.

Other Matters

The Company continues to make significant progress in its final phases of construction of Sphere in Las Vegas. This includes completing LED installation on the Exosphere earlier in the third quarter, and the interior LED display plane this month, while continuing to build out the venue's interior spaces, including the suites and hospitality areas. Global rock band U2 will open the venue on September 29 ^th with the start of its five-week, 17-show run. “Sphere Experiences,” one of the core content categories to be featured at Sphere, will debut to the public on October 6 ^th with Postcard from Earth. Tickets are now on sale for this first-of-its-kind immersive production, which will run multiple times per day, year-round and is designed to utilize the full breadth of the venue’s next-generation technologies. And in mid-November, Formula 1 will have a multi-day takeover of Sphere for its inaugural Las Vegas Grand Prix.

As construction nears completion of Sphere in Las Vegas, the Company has adjusted its construction cost estimate, inclusive of core technology and soft costs, to approximately $2.3 billion, from its prior estimate of $2.175 billion, with the increase primarily reflecting the overall complexity of the project. Actual construction costs paid through May 9, 2023 were approximately $2.08 billion, which was net of $65 million received from The Venetian Resort.

As of May 9, 2023, the Company had over $230 million in unrestricted cash and cash equivalents, including proceeds from the sale of Tao Group Hospitality, and full availability under its $65 million delayed draw term loan facility with Madison Square Garden Entertainment Corp. In addition, the Company owns approximately 17 million shares of Class A common stock (equivalent to an approximately 33% economic interest) of Madison Square Garden Entertainment Corp., which had a fair market value of approximately $575 million as of May 9, 2023.

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 is currently under construction in Las Vegas. In addition, the Company includes MSG Networks, which operates two regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as a companion streaming service, MSG GO, delivering a wide range of live sports content and other programming. More information is available at www.sphereentertainmentco.com .

Non-GAAP Financial Measures

We define adjusted operating income (loss), which is a non-GAAP financial measure, as operating income (loss) before (i) the impact of non-cash straight-line leasing revenue associated with the arena license agreements with MSG Sports, (ii) depreciation, amortization and impairments of property and equipment, goodwill and other intangible assets, (iii) amortization for capitalized cloud computing arrangement costs, (iv) share-based compensation expense or benefit, (v) restructuring charges or credits, (vi) merger and acquisition-related costs, including litigation expenses, (vii) gains or losses on sales or dispositions of businesses and associated settlements, (viii) 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 (which was established in November 2021). We believe that given the length of the arena license agreements and resulting magnitude of the difference in leasing revenue recognized and cash revenue received, the exclusion of non-cash leasing revenue provides investors with a clearer picture of the Company's operating performance. We believe that this adjustment is beneficial for other incremental reasons as well. This adjustment provides senior management, investors and analysts with important information regarding a long-term related party agreement with MSG Sports. In addition, this adjustment is included under the Company’s debt covenant compliance calculations and is a component of the performance measures used to evaluate, and compensate, senior management of the Company. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units 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 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 (which was established in November 2021), 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 Miscellaneous 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 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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)


Three Months Ended

Nine Months Ended


March 31,

March 31,


2023

2022

2023

2022
Revenues

$
363,297


$
352,534


$
1,139,492


$
928,442

Direct operating expenses


(210,141
)


(197,967
)


(658,935
)


(536,076
)
Selling, general and administrative expenses


(179,870
)


(118,788
)


(442,054
)


(384,280
)
Depreciation and amortization


(22,999
)


(20,463
)


(68,090
)


(63,050
)
Impairment and other (losses) gains, net


(51
)


245



7,361



245

Restructuring charges


(20,498
)


(14,690
)


(34,180
)


(14,690
)
Operating (loss) income


(70,262
)


871



(56,406
)


(69,409
)
Interest income


2,640



767



10,161



2,311

Interest expense


—



(5,528
)


—



(22,051
)
Other income (expense), net


4,994



(10,052
)


1,939



(32,304
)
Loss from continuing operations before income taxes


(62,628
)


(13,942
)


(44,306
)


(121,453
)
Income tax benefit (expense)


8,649



(6,349
)


4,717



10,112

Loss from continuing operations


(53,979
)


(20,291
)


(39,589
)


(111,341
)
(Loss) income from discontinued operations, net of taxes


(4,576
)


985



7,548



20,399

Net loss


(58,555
)


(19,306
)


(32,041
)


(90,942
)
Less: Net loss attributable to nonredeemable noncontrolling interests from continuing operations


—



(212
)


(554
)


(579
)
Less: Net loss attributable to nonredeemable noncontrolling interests from discontinued operations


(216
)


(1,161
)


(128
)


(323
)
Less: Net (loss) income attributable to redeemable noncontrolling interests from discontinued operations


(1,492
)


(442
)


2,661



4,412

Net loss attributable to Sphere Entertainment Co.’s stockholders

$
(56,847
)

$
(17,491
)

$
(34,020
)

$
(94,452
)









Basic and diluted (loss) earnings per common share








Continuing operations

$
(1.55
)

$
(0.59
)

$
(1.13
)

$
(3.24
)
Discontinued operations

$
(0.09
)

$
0.08


$
0.15


$
0.48

Basic and diluted loss per common share attributable to Sphere Entertainment Co.’s stockholders

$
(1.64
)

$
(0.51
)

$
(0.98
)

$
(2.76
)









Basic and Diluted weighted-average number of common shares outstanding


34,727



34,320



34,604



34,230

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO
ADJUSTED OPERATING INCOME (LOSS)
(Unaudited)

The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating income as described in this earnings release:

Non-cash portion of arena license fees from MSG Sports . This adjustment removes the impact of non-cash straight-line leasing revenue associated with the arena license agreements with MSG Sports.
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.
Impairment and other (gains) losses, 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.
Restructuring charges. This adjustment eliminates costs related to termination benefits provided to employees as part of the Company's full-time workforce reductions.
Merger and acquisition related costs. This adjustment eliminates costs related to mergers and acquisitions, including litigation expenses, in all periods.
Amortization for capitalized cloud computing arrangement costs. This adjustment eliminates amortization of capitalized cloud computing arrangement costs.
Purchase accounting adjustments. This adjustment eliminates the impact of various purchase accounting adjustments related to business acquisitions, primarily favorable / unfavorable lease agreements of the acquiree.
Remeasurement of deferred compensation 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,


2023

2022

2023

2022
Operating (loss) income

$
(70,262
)

$
871


$
(56,406
)

$
(69,409
)
Non-cash portion of arena license fees from MSG Sports ⁽¹⁾


(12,149
)


(12,073
)


(25,078
)


(23,962
)
Share-based compensation


10,899



12,157



39,846



51,987

Depreciation and amortization ⁽²⁾


22,999



20,463



68,090



63,050

Restructuring charges


20,498



14,690



34,180



14,690

Impairment and other (losses) gains, net


51



(245
)


(7,361
)


(245
)
Merger and acquisition related costs, net of insurance recovery


47,041



2,513



57,179



42,036

Amortization for capitalized cloud computing costs


228



81



584



176

Remeasurement of deferred compensation plan liabilities


126


$
—



132



—

Adjusted operating income

$
19,431


$
38,457


$
111,166


$
78,323

_________________

(1)

This adjustment represents the non-cash portion of operating lease revenue related to the Company’s Arena License Agreements with MSG Sports. Pursuant to GAAP, recognition of operating lease revenue is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement. As a result, operating lease revenue is comprised of a contractual cash component plus or minus a non-cash component for each period presented. Operating income on a GAAP basis includes lease income of (i) $19,014 and $39,234 of revenue collected in cash for the three and nine months ended March 31, 2023, respectively, and $17,543 and $34,836, for the three and nine months ended March 31, 2022, respectively, and (ii) a non-cash portion of $12,149 and $25,078 for the three and nine months ended March 31, 2023, respectively, and $12,073 and $23,962, for the three and nine months ended March 31, 2022, respectively.

(2)

Includes depreciation and amortization related to purchase accounting adjustments.

SEGMENT RESULTS (Dollars in thousands) (Unaudited)


Three Months Ended March 31, 2023


Entertainment

MSG Networks

Other ⁽¹⁾

Total
Revenues

$
201,861


$
161,436


$
—


$
363,297

Direct operating expenses


(120,835
)


(89,251
)


(55
)


(210,141
)
Selling, general and administrative expenses


(120,307
)


(60,052
)


489



(179,870
)
Depreciation and amortization


(21,310
)


(1,689
)


—



(22,999
)
Impairment and other losses, net


(51
)


—



—



(51
)
Restructuring charges


(20,498
)


—



—



(20,498
)
Operating (loss) income

$
(81,140
)

$
10,444


$
434


$
(70,262
)
Reconciliation to adjusted operating (loss) income:








Non-cash portion of arena license fees from MSG Sports ⁽²⁾


(12,149
)


—



—



(12,149
)
Share-based compensation


10,259



640



—



10,899

Depreciation and amortization


21,310



1,689



—



22,999

Restructuring charges


20,498



—



—



20,498

Impairment and other losses, net


51



—



—



51

Merger and acquisition related costs, net of insurance recovery


1,528



45,513



—



47,041

Amortization for capitalized cloud computing costs


185



43



—



228

Remeasurement of deferred compensation plan liabilities


126



—



—



126

Adjusted operating (loss) income

$
(39,332
)

$
58,329


$
434


$
19,431












Three Months Ended March 31, 2022


Entertainment

MSG Networks

Other ⁽¹⁾

Total
Revenues

$
194,585


$
167,569


$
(9,620
)

$
352,534

Direct operating expenses


(110,688
)


(87,174
)


(105
)


(197,967
)
Selling, general and administrative expenses


(96,198
)


(32,237
)


9,647



(118,788
)
Depreciation and amortization


(18,522
)


(1,764
)


(177
)


(20,463
)
Impairment and other gains, net


245



—



—



245

Restructuring charges


(14,238
)


(452
)


—



(14,690
)
Operating (loss) income

$
(44,816
)

$
45,942


$
(255
)

$
871

Reconciliation to adjusted operating (loss) income:








Non-cash portion of arena license fees from MSG Sports ⁽²⁾


(12,073
)


—



—



(12,073
)
Share-based compensation


10,399



1,758



—



12,157

Depreciation and amortization


18,522



1,764



177



20,463

Restructuring charges


14,238



452



—



14,690

Impairment and other gains, net


(245
)


—



—



(245
)
Merger and acquisition related costs, net of insurance recovery


1,647



866



—



2,513

Amortization for capitalized cloud computing costs


38



43



—



81

Adjusted operating (loss) income

$
(12,290
)

$
50,825


$
(78
)

$
38,457



Nine Months Ended March 31, 2023


Entertainment

MSG Networks

Other ⁽¹⁾

Total
Revenues

$
705,481


$
442,813


$
(8,802
)

$
1,139,492

Direct operating expenses


(403,642
)


(255,071
)


(222
)


(658,935
)
Selling, general and administrative expenses


(336,421
)


(115,951
)


10,318



(442,054
)
Depreciation and amortization


(62,514
)


(4,944
)


(632
)


(68,090
)
Impairment and other gains, net


7,361



—



—



7,361

Restructuring charges


(30,192
)


(3,988
)


—



(34,180
)
Operating (loss) income

$
(119,927
)

$
62,859


$
662


$
(56,406
)
Reconciliation to adjusted operating (loss) income:








Non-cash portion of arena license fees from MSG Sports ⁽²⁾


(25,078
)


—



—



(25,078
)
Share-based compensation


34,204



5,642



—



39,846

Depreciation and amortization


62,514



4,944



632



68,090

Restructuring charges


30,192



3,988



—



34,180

Impairment and other gains, net


(7,361
)


—



—



(7,361
)
Merger and acquisition related costs, net of insurance recovery


4,221



52,958



—



57,179

Amortization for capitalized cloud computing costs


453



131



—



584

Remeasurement of deferred compensation plan liabilities


132



—



—



132

Adjusted operating (loss) income

$
(20,650
)

$
130,522


$
1,294


$
111,166












Nine Months Ended March 31, 2022


Entertainment

MSG Networks

Other ⁽¹⁾

Total
Revenues

$
476,434


$
469,023


$
(17,015
)

$
928,442

Direct operating expenses


(294,333
)


(241,521
)


(222
)


(536,076
)
Selling, general and administrative expenses


(283,715
)


(117,404
)


16,839



(384,280
)
Depreciation and amortization


(57,202
)


(5,317
)


(531
)


(63,050
)
Impairment and other gains, net


245



—



—



245

Restructuring charges


(14,238
)


(452
)


—



(14,690
)
Operating (loss) income

$
(172,809
)

$
104,329


$
(929
)

$
(69,409
)
Reconciliation to adjusted operating (loss) income:








Non-cash portion of arena license fees from MSG Sports ⁽²⁾


(23,962
)


—



—



(23,962
)
Share-based compensation


36,697



15,290



—



51,987

Depreciation and amortization


57,202



5,317



531



63,050

Restructuring charges


14,238



452



—



14,690

Impairment and other gains, net


(245
)


—



—



(245
)
Merger and acquisition related costs, net of insurance recovery


17,095



24,941



—



42,036

Amortization for capitalized cloud computing costs


45



131



—



176

Adjusted operating (loss) income

$
(71,739
)

$
150,460


$
(398
)

$
78,323

_________________

(1)

Includes inter-segment eliminations and, for operating (loss) income, purchase accounting adjustments.

(2)

This adjustment represents the non-cash portion of operating lease revenue related to the Company’s Arena License Agreements with MSG Sports. Pursuant to GAAP, recognition of operating lease revenue is recorded on a straight-line basis over the term of the agreement based upon the value of total future payments under the arrangement. As a result, operating lease revenue is comprised of a contractual cash component plus or minus a non-cash component for each period presented. Operating income on a GAAP basis includes lease income of (i) $19,014 and $39,234 of revenue collected in cash for the three and nine months ended March 31, 2023, respectively, and $17,543 and $34,836, for the three and six months ended March 31, 2022, respectively, and (ii) a non-cash portion of $12,149 and $25,078 for the three and nine months ended March 31, 2023, respectively, and $12,073 and $23,962, for the three and nine months ended March 31, 2022, respectively.

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)


March 31, 2023

June 30, 2022
ASSETS




Current Assets:




Cash, cash equivalents and restricted cash

$
327,245


$
822,885

Accounts receivable, net


214,443



188,012

Prepaid expenses and other current assets


145,838



135,671

Current assets (Held for Sale)


502,567



72,088

Total current assets


1,190,093



1,218,656

Non-Current Assets:




Property and equipment, net


3,690,234



2,853,656

Right-of-use lease assets


339,601



337,305

Goodwill


498,817



498,817

Intangible assets, net


82,490



86,464

Other non-current assets


248,246



173,298

Non-current assets (Held for Sale)


—



400,430

Total assets

$
6,049,481


$
5,568,626






LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY




Current Liabilities:




Accounts payable, accrued and other current liabilities

$
699,769


$
529,083

Current portion of long-term debt


98,750



74,762

Operating lease liabilities, current


46,086



45,559

Deferred revenue


265,611



208,895

Current liabilities (Held for Sale)


289,817



102,801

Total current liabilities


1,400,033



961,100

Non-Current Liabilities:




Long-term debt, net of deferred financing costs


1,781,748



1,584,446

Operating lease liabilities, non-current


342,629



338,534

Deferred tax liabilities, net


209,742



209,907

Other non-current liabilities


142,531



144,103

Non-current liabilities (Held for Sale)


—



170,960

Total liabilities


3,876,683



3,409,050

Redeemable noncontrolling interests


138,812



184,192

Equity:




Class A Common Stock ⁽¹⁾


277



273

Class B Common Stock ⁽²⁾


69



69

Additional paid-in capital


2,391,409



2,301,970

Accumulated deficit


(324,756
)


(290,736
)
Accumulated other comprehensive loss


(46,439
)


(48,355
)
Total Sphere Entertainment Co. stockholders’ equity


2,020,560



1,963,221

Nonredeemable noncontrolling interests


13,426



12,163

Total equity


2,033,986



1,975,384

Total liabilities, redeemable noncontrolling interests and equity

$
6,049,481


$
5,568,626

_________________

(1)

Class A Common stock, par value $0.01, 120,000 shares authorized; 27,692 and 27,368 shares outstanding as of March 31, 2023 and June 30, 2022, respectively.

(2)

Class B Common stock, par value $0.01, 30,000 shares authorized; 6,867 shares outstanding as of March 31, 2023 and June 30, 2022.

SELECTED CASH FLOW INFORMATION (Dollars in thousands) (Unaudited)


Nine Months Ended


March 31,


2023

2022
Net cash provided by operating activities

$
137,824


$
106,201

Net cash used in investing activities


(825,484
)


(547,926
)
Net cash provided by (used in) financing activities


200,485



(77,520
)
Effect of exchange rates on cash, cash equivalents and restricted cash


(729
)


22

Net decrease in cash, cash equivalents and restricted cash


(487,904
)


(519,223
)
Cash, cash equivalents and restricted cash from continuing operations, beginning of period


822,885



1,508,174

Cash, cash equivalents and restricted cash from discontinued operations, beginning of period


23,125



31,802

Cash, cash equivalents and restricted cash at beginning of period


846,010



1,539,976

Cash, cash equivalents and restricted cash from continuing operations, end of period


327,245



987,922

Cash, cash equivalents and restricted cash from discontinued operations, end of period


30,861



32,831

Cash, cash equivalents and restricted cash at end of period

$
358,106


$
1,020,753

View source version on businesswire.com: https://www.businesswire.com/news/home/20230510005360/en/

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

Company Name:	Madison Square Garden Entertainment Corp. Class A
Stock Symbol:	MSGE
Market:	NYSE
Website:	www.msgentertainment.com

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