Madison Square Garden Entertainment Corp.
08/11/2025 | Press release | Distributed by Public on 08/11/2025 05:53
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of Sphere Entertainment Co. and its direct and indirect subsidiaries (collectively, "we," "us," "our," "Sphere Entertainment," or the "Company"), including (i) the success of Sphere and The Sphere Experience and development of new immersive productions content,(ii) our plans to bring Sphere to Abu Dhabi, United Arab Emirates under a franchise model, (iii)our ability to reduce or defer certain discretionary capital projects, (iv) our plans for possible additional debt financing and (v) MSG Networks subscriber declines. Words such as "expects," "anticipates," "believes," "estimates," "may," "will," "should," "could," "potential," "continue," "intends," "plans," and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:
•the substantial amount of debt we have incurred, the ability of our subsidiaries to make payments on, or repay or refinance, such debt under their respective credit facilities (including MSG Networks' ability to make its quarterly principal amortization payments pursuant to its term loan facility), and, if unsuccessful, the implications thereof;
•our ability to make payments on our 3.50% Convertible Senior Notes (as defined below);
•our ability to obtain additional financing, to the extent required, on terms favorable to us or at all;
•the popularity of The Sphere Experience, as well as our ability to continue to attract advertisers and marketing partners, and audiences to attend, and artists to perform at, residencies, concerts and other events at Sphere in Las Vegas and other future Sphere venues;
•the successful development of The Sphere Experience and related original immersive productions and the investments associated with such development, as well as investment in personnel, content and technology for Sphere;
•our ability to successfully provide design, construction and pre- and post-opening services to Sphere partners, including the Department of Culture and Tourism - Abu Dhabi ("DCT Abu Dhabi") in connection with Sphere Abu DhabiTM, as well as our ability to construct, finance and operate new Sphere venues, and the investments, costs and timing associated with those efforts, including obtaining financing, the impact of inflation and tariffs and any construction delays and/or cost overruns;
•DCT Abu Dhabi's ability to complete construction of Sphere Abu Dhabi;
•general economic conditions, especially in the Las Vegas and New York City metropolitan areas where we have significant business activities, including the impact of a recession on our business;
•our ability to successfully implement cost reductions and reduce or defer certain discretionary capital projects, if necessary;
•the level of our expenses and our operational cash burn rate, including our corporate expenses;
•the demand for MSG Networks programming among cable, satellite, fiber-optic and other platforms that distribute its networks ("Distributors") and the number of subscribers thereto, and our ability to enter into and renew affiliation agreements with Distributors, including the terms of any such renewals, as well as the impact of consolidation among Distributors;
•our ability to successfully execute MSG Networks' strategy for its DTC and authenticated streaming offering, MSG+ (which is included in the Gotham Sports streaming product), the success of such offering and our ability to adapt to new content distribution platforms or changes in consumer behavior resulting from emerging technologies;
•the ability of our Distributors to minimize declines in subscriber levels;
•any adverse changes in the distribution of our networks or the impact of subscribers selecting Distributors' packages that do not include our networks or distributors that do not carry our networks at all;
•MSG Networks' ability to renew, renegotiate or replace its media rights agreements with professional sports teams and its ability to perform its obligations thereunder;
•the relocation or insolvency of professional sports teams with which we have a media rights agreement;
•the demand for advertising and marketing partnership offerings at Sphere and advertising sales and viewer ratings for our networks;
•competition, for example, from other venues (including the construction of new competing venues) and other regional sports and entertainment offerings;
•our ability to effectively manage any impacts of future pandemics or public health emergencies, as well as renewed actions taken in response by governmental authorities or certain professional sports leagues, including ensuring compliance with rules and regulations imposed upon our venues, to the extent applicable;
•the effect of any postponements or cancellations of events by third-parties or the Company as a result of future pandemics, due to operational challenges and other health and safety concerns;
•the extent to which attendance at Sphere in Las Vegas or future Sphere venues may be impacted by government actions, health concerns of potential attendees or reduced tourism;
•the security of our MSG Networks program signal and electronic data;
•the on-ice and on-court performance and popularity of the professional sports teams whose games we broadcast on our networks;
•changes in laws, guidelines, bulletins, directives, policies and agreements, and regulations under which we operate;
•any economic, social or political actions, such as boycotts, protests, work stoppages or campaigns by labor organizations, including the unions representing players and officials of the National Basketball Association (the "NBA") and the National Hockey League (the "NHL"), artists or employees involved in our productions or other work stoppages that may impact us or our business partners;
•seasonal fluctuations and other variations in our operating results and cash flow from period to period;
•business, reputational and litigation risk if there is a cyber or other security incident resulting in loss, disclosure or misappropriation of stored personal information, disruption of our Sphere or MSG Networks businesses or disclosure of confidential information or other breaches of our information security;
•activities or other developments (including pandemics, such as the COVID-19 pandemic) that discourage or may discourage congregation at prominent places of public assembly, including our venue;
•the level of our capital expenditures and other investments (and any impairment charges related thereto);
•the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions;
•our ability to successfully integrate acquisitions, new venues or new businesses into our operations;
•the operating and financial performance of our strategic acquisitions and investments, including those we do not control, and the impact of goodwill and other impairments with respect to businesses (including as a result of changes to the MSG Networks business);
•our internal control environment and our ability to identify and remedy any future material weaknesses;
•the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire;
•the impact of governmental regulations or laws, changes in these regulations or laws or how those regulations and laws are interpreted, as well as our ability to maintain necessary permits, licenses and easements;
•the impact of sports league rules, regulations and/or agreements and changes thereto;
•financial community perceptions of our business, operations, financial condition and the industries in which we operate;
•the ability of our investees and others to repay loans and advances we have extended to them;
•the performance by our affiliated entities of their obligations under various agreements with us, as well as our performance of our obligations under such agreements and ongoing commercial arrangements;
•the tax-free treatment of the distribution of Madison Square Garden Entertainment Corp. ("MSG Entertainment") from the Company in 2023 and the distribution from Madison Square Garden Sports Corp. ("MSG Sports") in 2020; and
•the additional factors described under "Risk Factors" included in Part II of this Form 10-Q for the quarter ended June 30, 2025 (this "Form 10-Q") and under "Risk Factors" in the Company's Report on Form 10-KT for the six-months ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on March 3, 2025 (the "Form 10-KT").
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors" in this Form 10-Q and in the Form 10-KT. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-Q to conform these statements to actual results or to changes in our expectations.
Introduction
This MD&A is provided as a supplement to, and should be read in conjunction with, the Company's unaudited condensed consolidated financial statements (the "financial statements") and accompanying notes thereto included in "- Item 1. Financial Statements" of this Form 10-Q, as well as the Company's audited consolidated financial statements and notes thereto as of and for the period ended December 31, 2024 (the "Audited Consolidated Financial Statements") included in the Form 10-KT, to help provide an understanding of our financial condition, changes in financial condition and results of operations. The Company conducts substantially all of its business activities presented in the financial statements through Sphere Entertainment Group, LLC ("Sphere Entertainment Group") and MSG Networks Inc. (together with its subsidiaries, "MSG Networks"), and each of their direct and indirect subsidiaries.
Business Overview
The Company is a premier live entertainment and media company comprised of two reportable segments, Sphere and MSG Networks. Sphere is a next-generation entertainment medium, and MSG Networks operates two regional sports and entertainment networks, as well as a direct-to-consumer ("DTC") and authenticated streaming product.
Sphere: This segment reflects Sphere, a next-generation entertainment medium powered by cutting-edge technologies to create multi-sensory experiences at an unparalleled scale. The Company's first Sphere opened in Las Vegas in September 2023. The venue can accommodate up to 20,000 guests and can host a wide variety of events year-round, including The Sphere Experience, which features original immersive productions, as well as concerts and residencies from renowned artists, and marquee sports and corporate events. Production efforts are supported by Sphere Studios, an immersive content studio dedicated to creating multi-sensory entertainment experiences exclusively for Sphere. Sphere Studios is home to a team of creative, production, technology and software experts who provide full in-house creative and production services. The studio campus in Burbank includes a 68,000-square-foot development facility, as well as Big Dome, a 28,000-square-foot, 100-foot high custom dome, with a quarter-sized version of the interior display plane at Sphere in Las Vegas, that serves as a specialized screening, production facility, and lab for content at Sphere. The entire exterior surface of Sphere, referred to as the Exosphere, is covered with nearly 580,000 square feet of fully programmable LED paneling, creating the largest LED screen in the world - and an impactful display for artists, brands and partners. In October 2024, the Company and DCT Abu Dhabi announced plans to work together to bring the world's second Sphere to Abu Dhabi, United Arab Emirates.
MSG Networks:This segment is comprised of the Company's regional sports and entertainment networks, MSG Network and MSG Sportsnet, as well as its DTC and authenticated streaming offering, MSG+ (which is included in the Gotham Sports streaming product). MSG Networks serves the New York designated market area, as well as other portions of New York, New Jersey, Connecticut and Pennsylvania and features a wide range of sports content, including exclusive live local games and other
programming of the New York Knicks (the "Knicks") of the NBA and the New York Rangers (the "Rangers"), New York Islanders, New Jersey Devils and Buffalo Sabres of the NHL, as well as significant coverage of the New York Giants and the Buffalo Bills of the National Football League.
Our MD&A is organized as follows:
Results of Operations.This section provides an analysis of our unaudited results of operations for the three and six months ended June 30, 2025 and 2024 on both a (i) consolidated basis and (ii) segment basis.
Liquidity and Capital Resources.This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the six months ended June 30, 2025 and 2024, as well as certain contractual obligations and off-balance sheet arrangements.
Seasonality of Our Business.This section discusses the seasonal performance of our business.
Recently Issued Accounting Pronouncements and Critical Accounting Policies.This section discusses accounting pronouncements that have been adopted by the Company, recently issued accounting pronouncements not yet adopted by the Company, as well as the results of the Company's impairment testing of goodwill. This section should be read together with our critical accounting policies, which are discussed in the Form 10-KT under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Recently Issued Accounting Pronouncements and Critical Accounting Estimates" and in the notes to the Audited Consolidated Financial Statements included therein.
Factors Affecting Operating Results
The operating results of our Sphere segment are largely dependent on our ability to continue to attract (i) audiences to The Sphere Experience, (ii) advertisers and marketing partners, and (iii) guests to attend, and artists to perform at, residencies, concerts and other events at our venue. The operating results of our MSG Networks segment are largely dependent on (i) the terms of MSG Networks' affiliation agreements with Distributors (including renewals thereof), (ii) the number of subscribers of MSG Networks' Distributors, (iii) the terms of MSG Networks' media rights agreements (including renewals thereof), (iv) the ability of MSG Networks to make its required debt service payments, including quarterly principal amortization payments pursuant to the terms of its term loan facility, (v) the success of MSG+, MSG Networks' DTC and authenticated streaming offering (which is available through the Gotham Sports streaming product), and (vi) the advertising rates MSG Networks charges advertisers. Certain of these factors in turn depend on the popularity and/or performance of the professional sports teams whose games MSG Networks broadcasts on its networks.
Our Company's future performance is dependent in part on general economic conditions and the effect of these conditions on our customers. Weak economic conditions may lead to lower tourism and lower demand for our entertainment offerings (including The Sphere Experience) and programming content, which would also negatively affect concession and merchandise sales, and could lead to lower levels of advertising, sponsorship and venue signage. Recent developments relating to tariffs have intensified concerns over the global macroeconomic environment, which has resulted in a rise in volatility across financial markets and concerns over the prospect of a U.S. recession. These conditions may also affect the number of immersive productions, concerts, residencies and other events that take place in the future. An economic downturn could adversely affect our business and results of operations. The Company continues to explore additional opportunities to expand our presence in the entertainment industry both domestically and internationally. Any new investment may not initially contribute to operating income, but is intended to contribute to the success of the Company over time. Our results will also be affected by investments in, and the success of, new immersive productions.
Recent Developments
MSG Networks Debt Restructuring
On April 24, 2025, the Company, MSG Networks and certain subsidiaries of MSG Networks entered into a Transaction Support Agreement (the "Transaction Support Agreement") with the other parties thereto with respect to the restructuring of the debt of subsidiaries of MSG Networks, amendments to the media rights agreements between subsidiaries of MSG Networks, on the one hand, and New York Knicks, LLC and New York Rangers, LLC, each a wholly-owned subsidiary of MSG Sports, on the other hand, and certain other matters. On June 27, 2025, the transactions contemplated by the Transaction Support Agreement were consummated, as further described below.
MSGN Term Loan Facility
MSGN Holdings, L.P. ("MSGN L.P."), MSG Networks, MSGN Eden, LLC, an indirect subsidiary of the Company and the general partner of MSGN L.P. ("MSGN Eden"), Regional MSGN Holdings LLC, an indirect subsidiary of the Company and the limited partner of MSGN L.P. ("Regional MSGN"), Rainbow Garden Corp., a wholly-owned subsidiary of MSG Networks ("Rainbow
Garden Corp." and, collectively with MSG Networks, MSGN Eden and Regional MSGN, the "MSGN Holdings Entities"), and certain subsidiaries of MSGN L.P. entered into a second amended and restated credit agreement (the "A&R MSGN Credit Agreement") with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the "MSGN Lenders"). Pursuant to the A&R MSGN Credit Agreement, MSGN L.P.'s prior credit facility was replaced with a $210,000 term loan facility (the "MSGN Term Loan Facility"), which matures on December 31, 2029. See Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in Part I - Item 1. of this Form 10-Q for a more detailed discussion of the MSGN Term Loan Facility.
Investor Agreement
The Company, the MSGN Holdings Entities and MSGN L.P. entered into an investor agreement, pursuant to which, among other matters, (i) the Company made a capital contribution to MSG Networks in an amount equal to $15,000 and (ii) the parties thereto agreed that MSGN L.P. will be a part of the same affiliated group of which the Company is the common parent that files U.S. federal income tax returns on a consolidated basis.
Limited Partnership Agreement of MSGN L.P.
The Limited Partnership Agreement of MSGN L.P. was amended to provide for the issuance of contingent interest units (the "Contingent Interest Units") to the MSGN Lenders. Beginning with the fiscal calendar year-end following the repayment in full of the MSGN Term Loan Facility, the Contingent Interest Units entitle the MSGN Lenders to receive annual payments in an amount equal to 50% of the difference between MSGN L.P.'s balance sheet cash (subject to certain exclusions) and certain minimum cash balances, specified with respect to the applicable measurement date, until the earlier of (i) December 31, 2029 and (ii) payment of $100,000 in the aggregate to the MSGN Lenders. The Contingent Interest Units are also entitled to receive 50% of the proceeds of a merger and/or acquisition event related to MSG Networks and its subsidiaries occurring prior to December 31, 2029, subject to an aggregate cap of $100,000 considered together with the annual payments of excess cash described in the previous sentence.
Amendments to Media Rights Agreements
The media rights agreements between subsidiaries of MSG Networks, on the one hand, and New York Knicks, LLC and New York Rangers, LLC, on the other hand, were amended to provide for (among other things):
•Knicks:
•a modification to the annual rights fee to effect a 28% reduction as of January 1, 2025;
•an elimination of the annual rights fee escalator; and
•a change to the contract expiration date to the end of the 2028-29 season, subject to a right of first refusal in favor of MSG Networks; and
•Rangers:
◦a modification to the annual rights fee to effect a reduction of 18% as of January 1, 2025;
•an elimination of the annual rights fee escalator; and
•a change to the contract expiration date to the end of the 2028-29 season, subject to a right of first refusal in favor of MSG Networks.
MSG Networks also entered into amendments with certain other professional sports teams that provide for, among other matters, reductions in the annual rights fees payable to such teams.
Warrants for Common Stock of MSG Networks
MSG Networks issued penny warrants to MSG Sports exercisable for 19.9% of the common stock of MSG Networks.
Sphere Abu Dhabi
On July 25, 2025, Sphere Entertainment Group and DCT Abu Dhabi finalized and entered into a Franchise Agreement, a Joint Development and Partnership Agreement and a Pre-Opening Services Agreement relating to the construction, development and operation of Sphere Abu Dhabi.
Pursuant to the terms of the Franchise Agreement, Sphere Entertainment Group granted DCT Abu Dhabi the exclusive right to build and operate Sphere Abu Dhabi. Subject to the terms of the Franchise Agreement, DCT Abu Dhabi also has the exclusive right to build and operate additional Sphere venues in the geographic region spanning the Middle East and North Africa (the "Exclusive Region")
for a period of at least 10 years after the opening date of Sphere Abu Dhabi, on terms and conditions to be negotiated in good faith and mutually agreed by Sphere Entertainment Group and DCT Abu Dhabi.
Sphere Entertainment Group has also granted DCT Abu Dhabi licenses for the relevant technology, patents, trademarks, The Sphere Experience content and other ancillary content for the development and operation of Sphere Abu Dhabi. DCT Abu Dhabi's use of Sphere Entertainment Group's intellectual property is subject to customary guidelines, restrictions and approvals, as well as quality control procedures.
In consideration for the grants of the franchise rights and licenses described above, DCT Abu Dhabi has agreed to pay Sphere Entertainment Group a franchise initiation fee and royalties for the use of Sphere Entertainment Group's intellectual property (including The Sphere Experience content and other creative content), in each case, in accordance with the terms of the Franchise Agreement. A portion of the franchise initiation fee was previously paid to Sphere Entertainment Group and an additional portion of the franchise initiation fee will be paid to Sphere Entertainment Group in connection with the execution of the agreements. The remainder of the franchise initiation fee will be paid in a series of installments in connection with the achievement of specified milestones prior to the opening date of Sphere Abu Dhabi. The royalties will be payable in quarterly installments from and after the opening date of Sphere Abu Dhabi. The intellectual property royalty will be an annual fee based on a specified percentage of Sphere Abu Dhabi's total revenues (other than total ticket sales for The Sphere Experience content licensed to DCT Abu Dhabi by Sphere Entertainment Group) for that year, subject to a specified minimum annual payment. The Sphere Experience content royalty will be an annual fee based on a specified percentage of total ticket sales for The Sphere Experience content licensed to DCT Abu Dhabi by Sphere Entertainment Group for that year, subject to a specified minimum annual payment. The royalty for ancillary content will be based on an initial annual fee that is increased by a fixed percentage annually. The Franchise Agreement has an initial term of 25 years from the opening of Sphere Abu Dhabi, with up to two 10-year renewal terms at DCT Abu Dhabi's option.
Pursuant to the terms of the Pre-Opening Services Agreement, Sphere Entertainment Group will also receive fees in connection with the provision of pre-construction and construction related services to DCT Abu Dhabi. In addition, prior to the opening of Sphere Abu Dhabi, Sphere Entertainment Group and DCT Abu Dhabi expect to enter into an Operational Services Agreement, pursuant to which Sphere Entertainment Group will provide to be agreed upon operational services to DCT Abu Dhabi following the opening of Sphere Abu Dhabi.
Other Matters:
On July 4, 2025, President Trump signed into law the reconciliation bill commonly known as the "One Big Beautiful Bill Act" (the "OBBBA"). OBBBA includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act provisions (both domestic and international), expanding certain Inflation Reduction Act incentives, and accelerating the phase-out of other incentives. The Company is currently evaluating the impact of these provisions on the Company's consolidated financial statements.
Condensed Consolidated Results of Operations
Comparison of the Three and Six Months Ended June 30, 2025 versus the Three and Six Months Ended June 30, 2024
The tables below set forth, for the periods presented, certain historical financial information.
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 282,677 | $ | 273,395 | $ | 9,282 | 3 | % | ||||||||||||||||||
| Direct operating expenses | (131,318) | (149,519) | 18,201 | (12) | % | |||||||||||||||||||||
|
Selling, general, and administrative expenses
|
(113,023) | (107,040) | (5,983) | 6 | % | |||||||||||||||||||||
| Depreciation and amortization | (83,907) | (82,337) | (1,570) | 2 | % | |||||||||||||||||||||
|
Impairments and other losses, net
|
(3,641) | (5,735) | 2,094 | (37) | % | |||||||||||||||||||||
| Restructuring charges | (947) | (141) | (806) | NM | ||||||||||||||||||||||
| Operating loss | (50,159) | (71,377) | 21,218 | (30) | % | |||||||||||||||||||||
|
Gain on extinguishment of debt
|
346,092 | - | 346,092 | NM | ||||||||||||||||||||||
| Interest income | 4,084 | 7,729 | (3,645) | (47) | % | |||||||||||||||||||||
| Interest expense | (25,862) | (26,921) | 1,059 | (4) | % | |||||||||||||||||||||
| Other expense, net | (400) | (2,613) | 2,213 | (85) | % | |||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 273,755 | (93,182) | 366,937 | NM | ||||||||||||||||||||||
| Income tax (expense) benefit | (121,939) | 21,965 | (143,904) | NM | ||||||||||||||||||||||
| Income (loss) from continuing operations | 151,816 | (71,217) | 223,033 | NM | ||||||||||||||||||||||
|
Income from discontinued operations, net of taxes
|
- | 24,631 | (24,631) | NM | ||||||||||||||||||||||
| Net income (loss) | $ | 151,816 | $ | (46,586) | $ | 198,402 | NM | |||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 563,251 | $ | 594,725 | $ | (31,474) | (5) | % | ||||||||||||||||||
| Direct operating expenses | (289,641) | (303,559) | 13,918 | (5) | % | |||||||||||||||||||||
|
Selling, general, and administrative expenses
|
(227,292) | (230,189) | 2,897 | (1) | % | |||||||||||||||||||||
| Depreciation and amortization | (168,136) | (162,204) | (5,932) | 4 | % | |||||||||||||||||||||
| Impairments and other losses, net | (4,162) | (5,735) | 1,573 | (27) | % | |||||||||||||||||||||
| Restructuring charges | (2,788) | (4,808) | 2,020 | (42) | % | |||||||||||||||||||||
| Operating loss | (128,768) | (111,770) | (16,998) | 15 | % | |||||||||||||||||||||
|
Gain on extinguishment of debt
|
346,092 | - | 346,092 | NM | ||||||||||||||||||||||
| Interest income | 7,962 | 15,383 | (7,421) | (48) | % | |||||||||||||||||||||
| Interest expense | (52,068) | (54,040) | 1,972 | (4) | % | |||||||||||||||||||||
| Other expense, net | (1,740) | (5,869) | 4,129 | (70) | % | |||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 171,478 | (156,296) | 327,774 | NM | ||||||||||||||||||||||
| Income tax (expense) benefit | (101,616) | 37,839 | (139,455) | NM | ||||||||||||||||||||||
| Income (loss) from continuing operations | 69,862 | (118,457) | 188,319 | NM | ||||||||||||||||||||||
| Income from discontinued operations, net of taxes | - | 24,631 | (24,631) | NM | ||||||||||||||||||||||
| Net income (loss) | $ | 69,862 | $ | (93,826) | $ | 163,688 | NM | |||||||||||||||||||
_________________
NM - Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
The following is a summary of changes in our segments' operating results for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024, which are discussed below under "-Business Segment Results."
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Changes attributable to | Revenues | Direct operating expenses | Selling, general and administrative expenses | Depreciation and amortization | Impairments and other losses, net | Restructuring charges |
Operating income
|
|||||||||||||||||||||||||||||||||||||
| Sphere segment | $ | 24,370 | $ | (8,481) | $ | 5,720 | $ | (1,586) | $ | 2,094 | $ | (1,035) | $ | 21,082 | ||||||||||||||||||||||||||||||
| MSG Networks segment | (15,088) | 26,682 | (11,703) | 16 | - | 229 | 136 | |||||||||||||||||||||||||||||||||||||
| $ | 9,282 | $ | 18,201 | $ | (5,983) | $ | (1,570) | $ | 2,094 | $ | (806) | $ | 21,218 | |||||||||||||||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Changes attributable to | Revenues | Direct operating expenses | Selling, general and administrative expenses | Depreciation and amortization | Impairments and other losses, net | Restructuring charges |
Operating income (loss)
|
|||||||||||||||||||||||||||||||||||||
| Sphere segment | $ | 11,551 | $ | (16,723) | $ | 18,292 | $ | (5,885) | $ | 1,573 | $ | 2,010 | $ | 10,818 | ||||||||||||||||||||||||||||||
| MSG Networks segment | (43,025) | 30,641 | (15,395) | (47) | - | 10 | (27,816) | |||||||||||||||||||||||||||||||||||||
| $ | (31,474) | $ | 13,918 | $ | 2,897 | $ | (5,932) | $ | 1,573 | $ | 2,020 | $ | (16,998) | |||||||||||||||||||||||||||||||
Impairments and other losses, net
During the three and six months ended June 30, 2025, the Company recognized impairments and other losses, net of $3,641 and $4,162 respectively. The recorded losses were primarily due to $3,741 from the sale of the Company's land in Stratford, London. During the three and six months ended June 30, 2024, the Company recognized a loss resulting from the purchase accounting related to the acquisition of Holoplot GmbH ("Holoplot") in April 2024, which was a previously held equity method investment.
Depreciation and amortization
For the three and six months ended June 30, 2025, depreciation and amortization increased $1,570 and $5,932, respectively, as compared to the prior year periods due to the increase in total property and equipment, gross in the first and second quarters of 2025 as compared to the first and second quarters in 2024.
Restructuring charges
For the three and six months ended June 30, 2025, the Company recorded restructuring charges of $947 and $2,788, respectively, as compared to restructuring charges of $141 and $4,808 in the three and six months ended June 30, 2024, respectively, related to termination benefits provided for certain executives and employees.
Gain on Debt Extinguishment
For the three and six months ended June 30, 2025, the Company recorded a gain on extinguishment of debt of $346,092, reflecting the net impact of the restructuring of the the Prior MSGN Credit Facilities (as defined below). Refer to Note 10.Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q for additional information.
Interest income
For the three and six months ended June 30, 2025, interest income decreased $3,645 and $7,421, respectively, as compared to the prior year period, primarily due to lower average cash and cash equivalent balances.
Interest expense
For the three and six months ended June 30, 2025, interest expense decreased $1,059 and $1,972, respectively, as compared to the prior year period due to a reduction in the average outstanding principal balance of the MSGN Term Loan Facility (as defined below) as compared to the prior year period and a reduction in commitment charges resulting from the termination of the revolving credit facility under the Prior MSGN Credit Agreement (as defined below) on October 11, 2024.
Other expense, net
For the three and six months ended June 30, 2025, other expense, net decreased $2,213 and $4,129, respectively, compared to the prior year period, primarily due to smaller losses on equity method investments and foreign exchange.
Income tax expense
In general, the Company is required to use an estimated annual effective tax rate to measure the tax benefit or expense recognized in an interim period. The estimated annual effective tax rate is revised on a quarterly basis.
For US income tax purposes, the Company is required to recognize cancellation of debt income ("CODI") on the difference between the face value of debt exchanged and the fair market value of new debt issued. On June 27, 2025, in connection with the execution of the A&R MSGN Credit Agreement, the Company recognized CODI of approximately $614 million, all of which was excluded from taxable income under the insolvency provisions of Internal Revenue Code Section 108.
Income tax expense for the three and six months ended June 30, 2025 of $121,939 and $101,616, respectively, reflects an effective tax rate of 45% and 59%, respectively. The effective tax rate is higher than statutory federal tax rate of 21% primarily due to discrete income tax expense related to the impact of CODI, partially offset by discrete income tax benefits from the reversal of the US GAAP gain on extinguishment of debt and income tax benefits due to a decrease in the valuation allowance and state and local taxes.
Income tax benefit for the three and six months ended June 30, 2024 of $21,965 and $37,839, respectively, reflects an effective tax rate of 24% for both periods. The effective tax rate exceeds the statutory federal tax rate of 21% primarily due to income tax benefit related to state and local taxes, partially offset by income tax expense from nondeductible officer's compensation.
Adjusted operating income
The following is a reconciliation of operating loss to adjusted operating income (as defined in Note 15. Segment Information to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q) for the three and six months ended June 30, 2025 as compared to the prior year period:
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Operating loss | $ | (50,159) | $ | (71,377) | $ | 21,218 | (30) | % | ||||||||||||||||||
| Share-based compensation | 18,850 | 13,321 | 5,529 | 42 | % | |||||||||||||||||||||
| Depreciation and amortization | 83,907 | 82,337 | 1,570 | 2 | % | |||||||||||||||||||||
| Restructuring charges | 947 | 141 | 806 | NM | ||||||||||||||||||||||
| Impairments and other losses, net | 3,641 | 5,735 | (2,094) | (37) | % | |||||||||||||||||||||
| Merger, debt work-out, and acquisition related costs, net of insurance recoveries | 2,482 | (4,563) | 7,045 | NM | ||||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 1,579 | 21 | 1,558 | NM | ||||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | 219 | 42 | 177 | NM | ||||||||||||||||||||||
| Adjusted operating income | $ | 61,466 | $ | 25,657 | $ | 35,809 | 140 | % | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Operating loss | $ | (128,768) | $ | (111,770) | $ | (16,998) | 15 | % | ||||||||||||||||||
| Share-based compensation | 40,445 | 30,045 | 10,400 | 35 | % | |||||||||||||||||||||
| Depreciation and amortization | 168,136 | 162,204 | 5,932 | 4 | % | |||||||||||||||||||||
| Restructuring charges | 2,788 | 4,808 | (2,020) | (42) | % | |||||||||||||||||||||
| Impairments and other losses, net | 4,162 | 5,735 | (1,573) | (27) | % | |||||||||||||||||||||
| Merger, debt work-out, and acquisition related costs, net of insurance recoveries | 7,273 | (4,055) | 11,328 | NM | ||||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 3,158 | 43 | 3,115 | NM | ||||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | 240 | 168 | 72 | 43 | % | |||||||||||||||||||||
| Adjusted operating income | $ | 97,434 | $ | 87,178 | $ | 10,256 | 12 | % | ||||||||||||||||||
________________
NM - Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Adjusted operating income for the three months ended June 30, 2025 increased $35,809 as compared to the prior year period to $61,466. Adjusted operating income for the six months ended June 30, 2025 increased $10,256 as compared to the prior year period to $97,434. The changes in adjusted operating income were attributable to the following:
| Three Months Ended | Six Months Ended | |||||||||||||
| Changes attributable to | June 30, 2025 | June 30, 2025 | ||||||||||||
| Sphere segment | $ | 30,422 | $ | 30,660 | ||||||||||
| MSG Networks segment | 5,387 | (20,404) | ||||||||||||
| $ | 35,809 | $ | 10,256 | |||||||||||
For a discussion of these variances, see "-Business Segment Results" below.
Business Segment Results
Sphere
The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income (loss) for the Company's Sphere segment.
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 175,587 | $ | 151,217 | $ | 24,370 | 16 | % | ||||||||||||||||||
| Direct operating expenses | (76,351) | (67,870) | (8,481) | 12 | % | |||||||||||||||||||||
| Selling, general, and administrative expenses | (96,389) | (102,109) | 5,720 | (6) | % | |||||||||||||||||||||
| Depreciation and amortization | (81,707) | (80,121) | (1,586) | 2 | % | |||||||||||||||||||||
| Impairments and other losses, net | (3,641) | (5,735) | 2,094 | (37) | % | |||||||||||||||||||||
| Restructuring charges | (947) | 88 | (1,035) | NM | ||||||||||||||||||||||
| Operating loss | $ | (83,448) | $ | (104,530) | $ | 21,082 | (20) | % | ||||||||||||||||||
| Reconciliation to adjusted operating income (loss): | ||||||||||||||||||||||||||
| Share-based compensation | 17,953 | 12,337 | 5,616 | 46 | % | |||||||||||||||||||||
| Depreciation and amortization | 81,707 | 80,121 | 1,586 | 2 | % | |||||||||||||||||||||
| Restructuring charges | 947 | (88) | 1,035 | NM | ||||||||||||||||||||||
| Impairments and other losses, net | 3,641 | 5,735 | (2,094) | (37) | % | |||||||||||||||||||||
| Merger, debt work-out, and acquisition related costs, net of insurance recoveries | 2,351 | 910 | 1,441 | 158 | % | |||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 1,579 | - | 1,579 | NM | ||||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | 219 | 42 | 177 | NM | ||||||||||||||||||||||
| Adjusted operating income (loss) | $ | 24,949 | $ | (5,473) | $ | 30,422 | NM | |||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 333,132 | $ | 321,581 | $ | 11,551 | 4 | % | ||||||||||||||||||
| Direct operating expenses | (146,887) | (130,164) | (16,723) | 13 | % | |||||||||||||||||||||
| Selling, general, and administrative expenses | (192,793) | (211,085) | 18,292 | (9) | % | |||||||||||||||||||||
| Depreciation and amortization | (163,712) | (157,827) | (5,885) | 4 | % | |||||||||||||||||||||
| Impairments and other losses, net | (4,162) | (5,735) | 1,573 | (27) | % | |||||||||||||||||||||
| Restructuring charges | (2,788) | (4,798) | 2,010 | (42) | % | |||||||||||||||||||||
| Operating loss | $ | (177,210) | $ | (188,028) | $ | 10,818 | (6) | % | ||||||||||||||||||
| Reconciliation to adjusted operating income: | ||||||||||||||||||||||||||
| Share-based compensation | 37,907 | 25,610 | 12,297 | 48 | % | |||||||||||||||||||||
| Depreciation and amortization | 163,712 | 157,827 | 5,885 | 4 | % | |||||||||||||||||||||
| Restructuring charges | 2,788 | 4,798 | (2,010) | (42) | % | |||||||||||||||||||||
| Impairments and other losses, net | 4,162 | 5,735 | (1,573) | (27) | % | |||||||||||||||||||||
| Merger, debt work-out, and acquisition related costs, net of insurance recoveries | 3,339 | 1,326 | 2,013 | 152 | % | |||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | 3,158 | - | 3,158 | NM | ||||||||||||||||||||||
| Remeasurement of deferred compensation plan liabilities | 240 | 168 | 72 | 43 | % | |||||||||||||||||||||
| Adjusted operating income | $ | 38,096 | $ | 7,436 | $ | 30,660 | NM | |||||||||||||||||||
________________
NM - Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Revenues
For the three and six months ended June 30, 2025, revenues increased $24,370 and $11,551, respectively, as compared to the prior year period. The changes in revenues were attributable to the following:
| Three Months Ended | Six Months Ended | |||||||||||||
| June 30, 2025 | June 30, 2025 | |||||||||||||
| Increase in event-related revenues | $ | 26,681 | $ | 52,311 | ||||||||||
| Other net increases | 4,809 | 8,376 | ||||||||||||
|
Decrease in revenues from sponsorship, signage, Exosphere advertising and suite license fee revenues
|
(460) | (16,236) | ||||||||||||
|
Decrease in revenues for The Sphere Experience
|
(6,660) | (32,900) | ||||||||||||
| $ | 24,370 | $ | 11,551 | |||||||||||
For the three and six months ended June 30, 2025, the increase in event-related revenues reflects (i) higher revenues from concerts, primarily due to 9 and 19 additional concert residency shows held at Sphere in Las Vegas during the three and six months ended June 30, 2025, respectively, both as compared to the prior year period, and (ii) higher revenues from corporate events held at Sphere in Las Vegas, primarily driven by an increase in the number of events as compared to the prior year periods. These increases were partially offset by a decrease in revenues from marquee events due to the absence of one marquee event held during the three and six months ended June 30, 2024.
For the three and six months ended June 30, 2025, the increase in other revenues primarily reflects the impact of revenues related to bringing the world's second Sphere to Abu Dhabi, United Arab Emirates.
For the three and six months ended June 30, 2025, the decrease in revenues from sponsorship, signage, Exosphere advertising and suite license fees primarily reflects lower Exosphere advertising revenues, partially offset by higher sponsorship revenues due to increased sales of existing sponsorship inventory and higher suite license fee revenues. Exosphere advertising revenues in the six months ended June 30, 2024 included revenues from advertising campaigns around the Super Bowl which was held in Las Vegas in the prior year period.
For the three months ended June 30, 2025, the decrease in revenues for The Sphere Experience primarily reflects lower average per-show revenues, partially offset by an increase in the number of overall performances as compared to the prior year period. In the current year period, The Sphere Experience included 198 performances of Postcard From Earthand 17 performances of V-U2 An Immersive Concert Film (with combined average revenues per performance of approximately $315), as compared to 208 performances of Postcard from Earth(with average revenues per performance of approximately $358) in the prior year period.
For the six months ended June 30, 2025, the decrease in revenues for The Sphere Experience primarily reflects a decrease in the number of overall performances and lower average per-show revenues as compared to the prior year period. In the current year period, The Sphere Experience included 364 performances of Postcard From Earthand 51 performances of V-U2 An Immersive Concert Film(with combined average revenues per performance of approximately $342), as compared to 465 performances of Postcard from Earth(with average revenues per performance of approximately $376) in the prior year period.
Direct operating expenses
For the three and six months ended June 30, 2025, direct operating expenses increased by $8,481 and $16,723, respectively, as compared to the prior year period. The changes in direct operating expenses were attributable to the following:
| Three Months Ended | Six Months Ended | |||||||||||||
| June 30, 2025 | June 30, 2025 | |||||||||||||
| Increase in event-related direct operating expenses | $ | 6,362 | $ | 13,595 | ||||||||||
|
Increase in Holoplot expenses
|
1,388 | 3,381 | ||||||||||||
|
Increase (decrease) in direct operating expenses for The Sphere Experience
|
644 | (2,825) | ||||||||||||
|
Increase in venue operating expenses
|
205 | 2,640 | ||||||||||||
|
Decrease in expenses from sponsorship, signage, Exosphere advertising, and suite license fees
|
(601) | (1,552) | ||||||||||||
|
Other net increases
|
483 | 1,484 | ||||||||||||
| $ | 8,481 | $ | 16,723 | |||||||||||
For the three and six months ended June 30, 2025, the increase in event-related direct operating expenses reflects (i) higher expenses from corporate events, primarily due to additional corporate events held at Sphere in Las Vegas as compared to the prior year periods
and (ii) higher expenses from concerts, primarily due to an increase in the number of concert residency shows held at Sphere in Las Vegas as compared to the prior year periods, partially offset by lower average per-event expenses. These increases were partially offset by lower expenses from marquee events due to the absence of one marquee event held at the venue during the three and six months ended June 30, 2024.
For the three and six months ended June 30, 2025, the increase in direct operating expenses from Holoplot reflects the impact of consolidating Holoplot following its acquisition by the Company in April 2024.
For the three months ended June 30, 2025, the increase in direct operating expenses for The Sphere Experience was primarily due to an increase in total performances held in the current year period as compared to the prior year period. Combined average direct operating expenses of $106 per show in the current year period were essentially unchanged as compared to $106 per show in the prior year period.
For the six months ended June 30, 2025, the decrease in direct operating expenses for The Sphere Experience was primarily due to a decrease in total performances held in the current year period as compared to the prior year period, partially offset by higher average per-show expenses (combined average direct operating expenses of $118 per show in the current year period as compared to $112 per show in the prior year period).
For the six months ended June 30, 2025, the increase in venue operating expenses was primarily related to an increase in employee compensation and related benefits.
Selling, general, and administrative expenses
For the three months ended June 30, 2025, selling, general, and administrative expenses decreased $5,720 as compared to the prior year period, primarily due to lower employee compensation and related benefits of $8,656 and lower professional fees of $1,899, partially offset by other cost increases.
For the six months ended June 30, 2025, selling, general, and administrative expenses decreased $18,292 as compared to the prior year period, primarily due to lower employee compensation and related benefits of $13,157 and lower professional fees of $11,572, partially offset by other cost increases.
Impairments and other losses, net
During the three and six months ended June 30, 2025, the Company recognized a loss resulting from the sale of its land in Stratford, London. During the three and six months ended June 30, 2024, the Company recognized a loss resulting from the purchase accounting related to the acquisition of Holoplot in April 2024, which was a previously held equity method investment.
Depreciation and amortization
For the three and six months ended June 30, 2025, depreciation and amortization increased $1,586 and $5,885, respectively, as compared to the prior year periods primarily due to the increase in total property and equipment, gross.
Restructuring charges
For the three and six months ended June 30, 2025, the Company recognized restructuring charges of $947 and $2,788, respectively, as compared to a net restructuring benefit of of $88 for the three months ended June 30, 2024 and restructuring charges of $4,798 in the six months ended June 30, 2024. Restructuring charges related to termination benefits provided for certain executives and employees.
Operating loss
For the three months ended June 30, 2025, operating loss improved $21,082 as compared to the prior year period, primarily due to an increase in revenue and a decrease in selling, general and administrative expenses, partially offset by an increase in direct operating expenses. For the six months ended June 30, 2025, operating loss improved $10,818 as compared to the prior year period, primarily due to a decrease in selling, general and administrative expenses and an increase in revenue, partially offset by an increase in direct operating expenses and depreciation and amortization.
Adjusted operating income
For the three months ended June 30, 2025, adjusted operating income improved $30,422 as compared to the prior year period, primarily due to an increase in revenue and a decrease in selling, general and administrative expenses, partially offset by an increase in direct operating expenses. For the six months ended June 30, 2025, adjusted operating income improved $30,660 as compared to the prior year period, primarily due to a decrease in selling, general and administrative expenses and an increase in revenue, partially offset by an increase in direct operating expenses.
MSG Networks
The tables below set forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company's MSG Networks segment.
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 107,090 | $ | 122,178 | $ | (15,088) | (12) | % | ||||||||||||||||||
| Direct operating expenses | (54,967) | (81,649) | 26,682 | (33) | % | |||||||||||||||||||||
| Selling, general, and administrative expenses | (16,634) | (4,931) | (11,703) | NM | ||||||||||||||||||||||
| Depreciation and amortization | (2,200) | (2,216) | 16 | (1) | % | |||||||||||||||||||||
| Restructuring charges | - | (229) | 229 | NM | ||||||||||||||||||||||
| Operating income | $ | 33,289 | $ | 33,153 | $ | 136 | NM | |||||||||||||||||||
| Reconciliation to adjusted operating income: | ||||||||||||||||||||||||||
| Share-based compensation | 897 | 984 | (87) | (9) | % | |||||||||||||||||||||
| Depreciation and amortization | 2,200 | 2,216 | (16) | (1) | % | |||||||||||||||||||||
| Restructuring charges | - | 229 | (229) | NM | ||||||||||||||||||||||
| Merger, debt work-out, and acquisition related costs, net of insurance recoveries | 131 | (5,473) | 5,604 | NM | ||||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | - | 21 | (21) | NM | ||||||||||||||||||||||
| Adjusted operating income | $ | 36,517 | $ | 31,130 | $ | 5,387 | 17 | % | ||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| June 30, | Change | |||||||||||||||||||||||||
| 2025 | 2024 | Amount | Percentage | |||||||||||||||||||||||
| Revenues | $ | 230,119 | $ | 273,144 | $ | (43,025) | (16) | % | ||||||||||||||||||
| Direct operating expenses | (142,754) | (173,395) | 30,641 | (18) | % | |||||||||||||||||||||
| Selling, general, and administrative expenses | (34,499) | (19,104) | (15,395) | 81 | % | |||||||||||||||||||||
| Depreciation and amortization | (4,424) | (4,377) | (47) | 1 | % | |||||||||||||||||||||
| Restructuring charges | - | (10) | 10 | NM | ||||||||||||||||||||||
| Operating income | $ | 48,442 | $ | 76,258 | $ | (27,816) | (36) | % | ||||||||||||||||||
| Reconciliation to adjusted operating income: | ||||||||||||||||||||||||||
| Share-based compensation | 2,538 | 4,435 | (1,897) | (43) | % | |||||||||||||||||||||
| Depreciation and amortization | 4,424 | 4,377 | 47 | 1 | % | |||||||||||||||||||||
| Restructuring charges | - | 10 | (10) | NM | ||||||||||||||||||||||
| Merger, debt work-out, and acquisition related costs, net of insurance recoveries | 3,934 | (5,381) | 9,315 | NM | ||||||||||||||||||||||
| Amortization for capitalized cloud computing arrangement costs | - | 43 | (43) | NM | ||||||||||||||||||||||
| Adjusted operating income | $ | 59,338 | $ | 79,742 | $ | (20,404) | (26) | % | ||||||||||||||||||
________________
NM - Absolute percentages greater than 200% and comparisons from positive to negative values or to zero values are considered not meaningful.
Revenues
For the three and six months ended June 30, 2025, revenues decreased $15,088 and $43,025, respectively, as compared to the prior year period. The changes in revenues were attributable to the following:
| Three Months Ended | Six Months Ended | |||||||||||||
| June 30, 2025 | June 30, 2025 | |||||||||||||
| Decrease in distribution revenue | $ | (11,370) | $ | (41,287) | ||||||||||
|
Decrease in advertising revenue
|
(3,559) | (1,701) | ||||||||||||
| Other net decreases | (159) | (37) | ||||||||||||
| $ | (15,088) | $ | (43,025) | |||||||||||
On December 31, 2024, MSG Networks' affiliation agreement with Altice expired, subsequent to which the Company's programming networks were not carried by Altice from January 1, 2025 through February 21, 2025. On February 22, 2025, MSG Networks reached a multi-year renewal of the affiliation agreement and Altice resumed carriage of the Company's programming networks. Furthermore, MSG Networks has experienced significant ongoing subscriber declines and is expected to continue to experience significant subscriber declines in the future, which is expected to negatively impact MSG Networks' revenue, operating income and AOI in future periods.
For the three and six months ended June 30, 2025, distribution revenue decreased $11,370 and $41,287, respectively, primarily due to a decrease in total subscribers of approximately 13.0% and 12.5%, respectively, (excluding the impact of the Altice non-carriage period in the six months ended June 30, 2025), partially offset by the impact of higher affiliation rates. In addition, results for the six months ended June 30, 2025 reflect the absence of revenues from Altice during the non-carriage period.
For the three and six months ended June 30, 2025, advertising revenue decreased $3,559 and $1,701, respectively, as compared to the prior year periods, primarily due to a lower number of live regular season and postseason professional sports telecasts. This was partially offset by higher average per-game advertising sales for the six months ended June 30, 2025.
Direct operating expenses
For the three and six months ended June 30, 2025 direct operating expenses decreased by $26,682 and $30,641, respectively, as compared to the prior year period. The changes in direct operating expenses were attributable to the following:
| Three Months Ended | Six Months Ended | |||||||||||||
| June 30, 2025 | June 30, 2025 | |||||||||||||
|
Decrease in rights fees expense
|
$ | (25,612) | $ | (28,133) | ||||||||||
| Decrease in other programming and production content costs | (1,070) | (2,508) | ||||||||||||
| $ | (26,682) | $ | (30,641) | |||||||||||
On June 27, 2025, MSG Networks completed the restructuring of its credit facilities and amended certain of its media rights agreements to, among other things, effect a reduction in the annual media rights fees payable under such agreements as of January 1, 2025, discussed in further detail in Note 10. Credit Facilities and Convertible Notes and Note 14. Related Party Transactions to the condensed consolidated financial statements included in Part I - Item 1. of this Form 10-Q. For the three and six months ended June 30, 2025, rights fees expense decreased by $25,612 and $28,133, respectively, primarily reflecting reductions in media rights fees for certain professional sports teams as a result of such amendments, including any retroactive adjustments for the 2024-25 NBA and NHL seasons recorded during the three months ended June 30, 2025.
Selling, general, and administrative expenses
For the three months ended June 30, 2025, selling, general and administrative expenses increased$11,703 as compared to the prior year period, primarily due to (i) higher advertising and marketing costs of $6,030 and (ii) higher professional fees of $5,500, mainly due to the absence of litigation-related insurance recoveries recognized as an offset to professional fees in the prior year period. For the six months ended June 30, 2025, selling, general and administrative expenses increased$15,395, primarily due to (i) higher professional fees of $9,895, mainly reflecting the absence of litigation-related insurance recoveries recognized as an offset to professional fees in the prior year period and the impact of costsassociated with pursuing a work-out of the Prior MSGN Credit Facilities with its syndicate of lenders in the current year period, and (ii) higher advertising and marketing costs of $8,859, partially offset by (iii) lower employee compensation and related benefits of $2,269.
Operating income
For the three months ended June 30, 2025, operating income increased by $136 as compared to the prior year period, primarily due to the decrease in direct operating expenses, mostly offset by the decrease in revenues and higher selling, general and administrative expenses.
For the six months ended June 30, 2025, operating income decreasedby $27,816 as compared to the prior year period, primarily due to the decrease in revenues and, to a lesser extent, higher selling, general and administrative expenses, partially offset by lower direct operating expenses.
Adjusted operating income
For the three months ended June 30, 2025, adjusted operating income increased by $5,387 as compared to the prior year period, primarily due to the decrease in direct operating expenses, partially offset by the decrease in revenues and higher selling, general and administrative expenses.
For the six months ended June 30, 2025, adjusted operating income decreased by $20,404 as compared to the prior year period, primarily due to the decrease in revenues and, to a lesser extent, higher selling, general and administrative expenses, partially offset by lower direct operating expenses.
Liquidity and Capital Resources
Sources and Uses of Liquidity
The Company's primary sources of liquidity are cash and cash equivalents and cash flows from the operations of our businesses. The Company's uses of cash over the next 12 months beyond the issuance date of the accompanying condensed consolidated financial statements included in Part I - Item 1. of this Form 10-Q (the "issuance date") and thereafter are expected to be substantial and include working capital-related items (including funding its operations and satisfying its accounts payable and accrued liabilities), capital spending (including the creation of additional original content for Sphere), required debt service payments (including principal amortization payments and excess cash flow payments pursuant to the MSGN Term Loan Facility), and investments and related loans and advances that the Company may fund from time to time. The Company may also use cash to repurchase its common stock. The Company's decisions as to the use of its available liquidity will be based upon the ongoing review of the funding needs of its businesses, the optimal allocation of cash resources, and the timing of cash flow generation. To the extent that the Company desires to access alternative sources of funding through the capital and credit markets, market conditions could adversely impact its ability to do so at that time.
As of June 30, 2025, the Company's unrestricted cash and cash equivalents balance was $355,661, as compared to $465,017 as of March 31, 2025. Cash usage in the current period primarily included principal payments of $105,000 and net cash used in operating activitiesof $52,711. Included in unrestricted cash and cash equivalents as of June 30, 2025 was (1) $209,095 in advance cash proceeds primarily from ticket sales, a portion of which the Company expects to pay to artists and promoters, and (2) $17,107 of cash and cash equivalents at MSG Networks, which were not available for distribution to the Company pursuant to the terms of the A&R MSGN Credit Agreement. As of June 30, 2025, the Company had $14,775 of Accounts payable and $346,925 of Accrued expenses and other current liabilities, including $131,930 of capital expenditure accruals primarily related to Sphere construction (a significant portion of which is in dispute). The balance of the Company's total debt outstanding as of June 30, 2025 was $889,334. We believe we have sufficient liquidity from cash and cash equivalents, and cash flows from operations, to fund our operations and service debt payments under our credit facilities for the foreseeable future.
The Company's ability to have sufficient liquidity to fund its operations and refinance its indebtedness is dependent on the ability of Sphere to generate significant positive cash flow. Although Sphere has been embraced by guests, artists, promoters, advertisers and marketing partners, and the Company anticipates that Sphere will generate substantial revenue and adjusted operating income on an
annual basis over time, there can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this platform. Original immersive productions, such as Postcard From Earth, V-U2 An Immersive Concert Film, The Wizard of Oz at Sphereand From The Edge,have not been previously pursued on the scale of Sphere, which increases the uncertainty of the Company's operating expectations. To the extent that the Company's efforts do not result in viable shows, or to the extent that any such productions do not achieve expected levels of popularity among audiences, the Company may not generate the cash flows from operations necessary to fund its operations. To the extent the Company does not realize expected cash flows from operations from Sphere, it would have to take several actions to improve its financial flexibility and preserve liquidity, including significant reductions in both labor and non-labor expenses as well as reductions and/or deferrals in capital spending. Therefore, while the Company currently believes it will have sufficient liquidity from cash and cash equivalents and cash flows from operations (including expected cash flows from operations from Sphere) to fund its operations, no assurance can be provided that its liquidity will be sufficient in the event any of the preceding uncertainties facing Sphere are realized over the next 12 months beyond the issuance date. See "Part II -Item 1A. Risk Factors -Risks Related to Our Indebtedness, Financial Condition, and Internal Control - We Have Substantial Indebtedness and Are Highly Leveraged, Which Could Adversely Affect Our Business."
For additional information regarding the Company's capital expenditures, including those related to Sphere in Las Vegas, see Note 15. Segment Information to the condensed consolidated financial statements included in Part I -Item 1. of this Form 10-Q.
On March 31, 2020, the Company's Board of Directors authorized a share repurchase program to repurchase up to $350,000 of the Company's Class A Common Stock, par value $0.01 per share ("Class A Common Stock"). The program was re-authorized by the Company's Board of Directors on March 29, 2023. Under the authorization, shares of Class A Common Stock may be purchased from time to time in open market transactions, in accordance with applicable insider trading and other securities laws and regulations. The timing and amount of purchases will depend on market conditions and other factors. No shares have been repurchased under the share repurchase program to date.
Sphere
The Company opened Sphere in Las Vegas in September 2023. See "Part I - Item 1. Our Business - Sphere" in the Form 10-KT. The venue has a number of revenue streams, including The Sphere Experience (which includes original immersive productions), advertising and marketing partnerships, and concert residencies, corporate and marquee sporting events, each of which the Company expects to become significant over time. As a result, we anticipate that Sphere in Las Vegas will generate substantial revenue and adjusted operating income on an annual basis over time.
On October 15, 2024, the Company and DCT Abu Dhabi announced that they would work together to bring the world's second Sphere venue to Abu Dhabi, United Arab Emirates. On July 25, 2025, Sphere Entertainment Group and DCT Abu Dhabi finalized and entered into a Franchise Agreement, a Joint Development and Partnership Agreement and a Pre-Opening Services Agreement relating to the construction, development and operation of Sphere Abu Dhabi. Under the terms of the Franchise Agreement, DCT Abu Dhabi has agreed to pay Sphere Entertainment Group a franchise initiation fee (a portion of which has been received) and royalties in connection with DCT Abu Dhabi's use of Sphere Entertainment Group's intellectual property (including The Sphere Experience content and other creative content). Pursuant to the terms of the Pre-Opening Services Agreement, Sphere Entertainment Group will be providing pre-construction and construction related services to DCT Abu Dhabi, with construction being funded by DCT Abu Dhabi. Following the venue's opening, the Company will receive annual royalty fees for creative and artistic content licensed by Sphere Entertainment Group, such as Sphere Experiences, and use of Sphere's intellectual property and other ancillary content. In addition, prior to the opening of Sphere Abu Dhabi, Sphere Entertainment Group and DCT Abu Dhabi expect to enter into an Operational Services Agreement, pursuant to which Sphere Entertainment Group will provide to be agreed upon operational services to DCT Abu Dhabi following the opening of Sphere Abu Dhabi.
We will continue to explore additional domestic and international markets where we believe Sphere venues can be successful. The Company's intention for any future venues is to utilize several options, such as joint ventures, equity partners, a managed venue model and non-recourse debt financing.
Financing Agreements
See Note 10. Credit Facilities and Convertible Notes to the condensed consolidated financial statements included in Part I -Item 1. of this Form 10-Q for discussions of the Company's debt obligations and various financing arrangements.
MSGN Term Loan Facility
General. MSGN L.P.MSGN Eden, Regional MSGN, and certain subsidiaries of MSGN L.P. had senior secured credit facilities pursuant to a credit agreement (as amended and restated on October 11, 2019, and as further amended from time to time prior to June
27, 2025, the "Prior MSGN Credit Agreement") providing for (i) an initial$1,100,000 term loan facility and (ii) a $250,000 revolving credit facility (the "Prior MSGN Credit Facilities"). The outstanding principal amount under the Prior MSGN Credit Agreement of $829,125 matured without repayment on October 11, 2024, and an event of default occurred pursuant to the Prior MSGN Credit Agreement due to MSGN L.P.'s failure to make payment on the outstanding principal amount on the maturity date.
After a series of forbearances from the lenders under the Prior MSGN Credit Agreement, on June 27, 2025, MSG Networks, MSGN L.P., MSGN Eden, Regional MSGN, Rainbow Garden Corp. and certain subsidiaries of MSGN L.P. entered into the A&R MSGN Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the MSGN Lenders. The A&R MSGN Credit Agreement amended and restated the Prior MSGN Credit Agreement in its entirety.
Pursuant to the A&R MSGN Credit Agreement, the Prior MSGN Credit Facilities were replaced with the MSGN Term Loan Facility, which has a principal amount of $210,000 and matures on December 31, 2029.
In connection with the execution of the A&R MSGN Credit Agreement, the Company, the MSGN Holdings Entities and MSGN L.P. entered into an investor agreement, pursuant to which, among other matters, (i) the Company made a capital contribution to MSG Networks in an amount equal to $15,000; and (ii) the parties agreed that MSGN L.P. will be a part of the same affiliated group of which the Company is the common parent that files U.S. federal income tax returns on a consolidated basis. On June 27, 2025, MSGN L.P. made a cash payment of $80,000 (including the $15,000 capital contribution from the Company to MSG Networks) to the MSGN Lenders.
Interest Rates.Borrowings under the A&R MSGN Credit Agreement bear interest at a rate per annum, which at the option of MSGN L.P., may be equal to either 1) adjusted Term SOFR (i.e., Term SOFR as defined in the A&R MSGN Credit Agreement, plus 0.10%) plus 5.00% or 2) Alternate Base rate, as defined in the A&R MSGN Credit Agreement, plus 4.00%. Upon a payment default in respect of principal, interest or other amounts due and payable under the A&R MSGN Credit Agreement or related loan documents, default interest will accrue on all overdue amounts at an additional rate of 2.00% per annum. The interest rate on the MSGN Term Loan Facility as of June 30, 2025 was 9.42%.
Covenants. The A&R MSGN Credit Agreement and the related security agreement contain certain customary representations and warranties, and certain affirmative covenants and events of default. The A&R MSGN Credit Agreement contains significant restrictions (and in some cases prohibitions) on the ability of MSGN L.P. and the MSGN Subsidiary Guarantors (as defined below) to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the A&R MSGN Credit Agreement, including without limitation the following: (i) incurring additional indebtedness and contingent liabilities; (ii) creating or granting liens on certain assets; (iii) making investments, loans or advances in or to other persons, (iv) paying dividends and distributions or repurchasing capital stock; (v) changing its lines of business; (vi) engaging in certain transactions with affiliates; (vii) amending specified agreements; (viii) with respect to restricted subsidiaries, issuing shares of stock such that MSGN L.P.'s ownership of any such restricted subsidiary is reduced; (ix) merging, dissolving, liquidating, consolidating, or disposing of all or substantially all of its assets; (x) making certain dispositions; (xi) making certain changes to its accounting practices; (xii) entering into agreements that restrict the granting of liens; (xiii) requesting any borrowing the proceeds of which are used in violation of anti-corruption laws or sanctions; (xiv) engaging in a liability management transaction; and (xv) limiting certain operating expenses incurred by MSGN L.P. and the MSGN Guarantors (as defined below). The MSGN Holdings Entities are subject to the restrictions described in the foregoing clauses (iv) and (xv), as well as customary passive holding company covenants.
Principal Repayments. Subject to customary notice and minimum amount conditions, MSGN L.P. may voluntarily prepay outstanding loans under the A&R MSGN Credit Agreement at any time, in whole or in part, without premium or penalty (except for customary breakage costs with respect to Term Benchmark (as defined in the A&R MSGN Credit Agreement) loans). The MSGN Term Loan Facility has a fixed amortization of $10,000 per quarter commencing on September 30, 2025. MSGN L.P. is required to make mandatory prepayments pursuant to a mandatory cash sweep, determined at the end of each fiscal quarter, that requires 100% of MSGN L.P.'s and the MSGN Subsidiary Guarantors' excess balance sheet cash over certain thresholds (subject to certain exclusions) to be used to repay the principal amount outstanding. MSGN L.P. is further required to make mandatory prepayments in certain circumstances, including from the net cash proceeds of certain dispositions of assets or casualty insurance and/or condemnation awards (subject to a threshold below which payments are not required, as well as certain reinvestment, repair and replacement rights) and upon the incurrence of indebtedness (subject to certain exceptions).
In connection with the execution of the A&R MSGN Credit Agreement, the Limited Partnership Agreement of MSGN L.P. was amended to provide for the issuance of the Contingent Interest Units to the MSGN Lenders. Beginning with the fiscal calendar year-end following the repayment in full of the MSGN Term Loan Facility, the Contingent Interest Units entitle the MSGN Lenders to receive annual payments in an amount equal to 50% of the difference between MSGN L.P.'s balance sheet cash (subject to certain exclusions) and certain minimum cash balances, specified with respect to the applicable measurement date, until the earlier of (i)
December 31, 2029 and (ii) payment of $100,000 in the aggregate to the MSGN Lenders. The Contingent Interest Units are also entitled to receive 50% of the proceeds of a merger and/or acquisition event related to MSG Networks and its subsidiaries occurring prior to December 31, 2029, subject to an aggregate cap of $100,000 considered together with the annual payments of excess cash described in the previous sentence.
Guarantors and Collateral. All obligations under the A&R MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and MSGN L.P.'s direct and indirect domestic subsidiaries that are not designated as unrestricted subsidiaries (the "MSGN Subsidiary Guarantors" and, together with the MSGN Holdings Entities, the "MSGN Guarantors"). All obligations under the A&R MSGN Credit Agreement, including the guarantees of those obligations, are secured by certain of the assets of MSGN L.P. and each MSGN Guarantor (collectively, "MSGN Collateral"), including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the MSGN Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P. The Company, Sphere Entertainment Group and the subsidiaries of Sphere Entertainment Group (collectively, the "Non-Credit Parties") are not legally obligated to repay the outstanding borrowings under the MSGN Term Loan Facility, nor are the assets of the Non-Credit Parties pledged as security under the MSGN Term Loan Facility.
LV Sphere Term Loan Facility
General.On December 22, 2022, MSG Las Vegas, LLC ("MSG LV"), an indirect, wholly-owned subsidiary of the Company, entered into a credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders party thereto, providing for a five-year, $275,000 senior secured term loan facility (as amended, the "LV Sphere Term Loan Facility").
Interest Rates. Borrowings under the LV Sphere Term Loan Facility bear interest at a floating rate, which at the option of MSG LV may be either (i) a base rate plus a margin of 3.375% per annum or (ii) adjusted Term SOFR (i.e., Term SOFR plus 0.10%) plus a margin of 4.375% per annum. The interest rate on the LV Sphere Term Loan Facility as of June 30, 2025was 8.80%.
Principal Repayments. The LV Sphere Term Loan Facility will mature on December 22, 2027. The principal obligations under the LV Sphere Term Loan Facility are due at the maturity of the facility, with no amortization payments prior to maturity. Under certain circumstances, MSG LV is required to make mandatory prepayments on the loan, including prepayments in an amount equal to the net cash proceeds of casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.
Covenants. The LV Sphere Term Loan Facility and related guaranty by Sphere Entertainment Group include financial covenants requiring MSG LV to maintain a specified minimum debt service coverage ratio and requiring Sphere Entertainment Group to maintain a specified minimum liquidity level. The debt service coverage ratio covenant began testing in the quarter ended December 31, 2023 on a historical basis and on a prospective basis. Both the historical and prospective debt service coverage ratios are required to be at least 1.35:1.00. As of June 30, 2025, the historical and prospective debt service coverage ratio requirements were met. In addition, among other conditions, MSG LV is not permitted to make distributions to Sphere Entertainment Group unless the historical and prospective debt service coverage ratios are at least 1.50:1.00. 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, and is tested as of the last day of each quarter based on Sphere Entertainment Group's unencumbered liquidity, consisting of cash and cash equivalents and available lines of credit, as of such date.
In addition to the covenants described above, the LV Sphere Term Loan Facility and the related guaranty and security and pledge agreements contain certain customary representations and warranties, affirmative and negative covenants and events of default. The LV Sphere Term Loan Facility contains certain restrictions on the ability of MSG LV and Sphere Entertainment Group to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the LV Sphere Term Loan Facility and the related guaranty and security and pledge agreements, including the following: (i) incur additional indebtedness; (ii) make investments, loans or advances in or to other persons; (iii) pay dividends and distributions (which will restrict the ability of MSG LV to make cash distributions to the Company); (iv) change its lines of business; (v) engage in certain transactions with affiliates; (vi) amend organizational documents; (vii) merge or consolidate; and (viii) make certain dispositions.
Guarantors and Collateral. All obligations under the LV Sphere Term Loan Facility are guaranteed by Sphere Entertainment Group. All obligations under the LV Sphere Term Loan Facility, including the guarantees of those obligations, are secured by all of the assets of MSG LV and certain assets of Sphere Entertainment Group including, but not limited to, MSG LV's leasehold interest in the land on which Sphere in Las Vegas is located, and a pledge of all of the equity interests held directly by Sphere Entertainment Group in MSG LV.
3.50% Convertible Senior Notes
On December 8, 2023, the Company completed a private unregistered offering (the "Offering") of $258,750 in aggregate principal amount of its 3.50% Convertible Senior Notes due 2028 (the "3.50% Convertible Senior Notes"), which amount includes the full exercise of the initial purchasers' option to purchase additional 3.50% Convertible Senior Notes. See Note 14. Credit Facilities and Convertible Notes, to the Audited Consolidated Financial Statements included in the Form 10-KT, for details on the 3.50% Convertible Senior Notes.
Letters of Credit
The Company uses letters of credit to support its business operations. The Company has letters of credit relating to operating leases which are supported by cash and cash equivalents that are classified as restricted.
Contractual Obligations
See Note 9. Commitments and Contingencies to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q.
Cash Flow Discussion
As of June 30, 2025, cash, cash equivalents and restricted cash totaled $368,927, as compared to $515,633 as of December 31, 2024. The following table summarizes the Company's cash flow activities for the six months ended June 30, 2025 and 2024:
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Net cash (used in) provided by operating activities | $ | (52,711) | $ | 28,570 | ||||||||||
| Net cash provided by (used in) investing activities | 16,441 | (46,156) | ||||||||||||
| Net cash used in financing activities | (111,059) | (36,242) | ||||||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | 623 | (776) | ||||||||||||
| Net decrease in cash, cash equivalents, and restricted cash | $ | (146,706) | $ | (54,604) | ||||||||||
Operating Activities
Net cash used in operating activities attributable to changes in assets and liabilities for the six months ended June 30, 2025 and 2024 equaled $86,300 and $70,367, respectively, a net increase of $15,933. The primary drivers of that net change are as follows. First, the Company had an increase in net cash used in operating activities related to Accrued and other current and non-current liabilities of $65,741, primarily due to the timing of payments for payroll and employee related benefits as well as other accrued expenses and to a lesser extent, timing of settlements with promoters. Second, the Company had an increase in net cash used in operating activities related to Accounts payable of $10,056, primarily as a result of the timing of payments to vendors. The increases in net cash used in operating activities were partially offset by an increase in net cash provided by operating activities related to Accounts receivable, net of $51,004. During the six months ended June 30, 2024, the Company generated higher Exosphere advertising revenue in comparison to the six months ended June 30, 2025, resulting in an increase in the Accounts receivable balance as of June 30, 2024 as compared to June 30, 2025. Additionally, since the opening of the Sphere in Las Vegas on September 29, 2023, the revenue generating activities and collection of Accounts receivable have normalized, resulting in smaller changes in the Accounts receivable balance in 2025 as compared to 2024. Also offsetting the increase in net cash used in operating activities was an increase in net cash provided by operating activities related to Deferred revenue of $9,224, which was driven by the timing of cash receipts partially offset by the timing of revenue generating activities. The due to promoter and deferred revenue balance sheet liability accounts increase as cash is collected in advance of revenue generating activities and decrease as the Company's obligations are satisfied, including when The Sphere Experience, other live events and Exosphere advertising occur. Timing of when other live events go on sale, tickets are sold, cash is collected, the live events occur and cash is paid to the promoters also significantly impact the balances. Refer to "- Business Segment Results" for further detail pertaining to the Company's revenue results.
In addition to the net increase in cash used in operating activities driven by changes in assets and liabilities, the Company generated net income of $69,862 in the current year period, compared to a net loss of $93,826 in the prior year period, as adjusted by non-cash net amounts of $36,273 in the current year period, compared to $192,763 in the prior year period. Refer to "- Business Segment Results" for further detail pertaining to the Company's operating results.
Investing Activities
Net cash provided by investing activities for the six months ended June 30, 2025 increased by $62,597 as compared to the prior year period, primarily due the cash received from the sale of land in Stratford, London. The prior year period included the acquisition of Holoplot GmbH.
Financing Activities
Net cash used in financing activities for the six months ended June 30, 2025 increased by $74,817 as compared to the prior year period, primarily due to an increase in principal repayments of debt in the current year period as well as a reduction in cash proceeds from the exercise of stock options.
Seasonality of Our Business
Our MSG Networks segment generally earns a higher share of its annual revenues in the first and fourth quarters of its year as a result of MSG Networks' advertising revenue being largely derived from the sale of inventory in its live NBA and NHL professional sports programming.
Recently Issued Accounting Pronouncements and Critical Accounting Estimates
Recently Issued and Adopted Accounting Pronouncements
See Note 2. Accounting Policies to the condensed consolidated financial statements included in "- Item 1. Financial Statements" of this Form 10-Q, for discussion of recently issued accounting pronouncements.
Critical Accounting Estimates
There have been no material changes to the Company's critical accounting policies. The following discussion has been included to provide the results of our annual impairment testing of goodwill performed during the quarterly period ended September 30, 2024 as well as the interim impairment test performed during the period ended December 31, 2024.
Impairment of Goodwill
Goodwill is tested annually for impairment as of August 31 and at any time upon the occurrence of certain events or substantive changes in circumstances. The Company performs its goodwill impairment test at the reporting unit level. As of June 30, 2025, the Company had two reportable segments and two reporting units, Sphere and MSG Networks, consistent with the way management makes decisions and allocates resources to the business.
The goodwill balance reported on the Company's condensed consolidated balance sheets as of June 30, 2025 by reporting unit was as follows:
| As of | |||||
|
June 30, 2025 |
|||||
| Sphere | $ | 46,864 | |||
| MSG Networks | 363,308 | ||||
| Total Goodwill | $ | 410,172 | |||
The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company would not need to perform a quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, a quantitative goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The estimates of the fair value of the Company's reporting units are primarily determined using discounted cash flows, comparable market transactions or other acceptable valuation techniques, including the cost approach. These valuations are based on estimates and assumptions including projected future cash flows, discount rates, cost-based assumptions, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables. Significant judgments inherent in a discounted cash flow analysis include the selection of the appropriate discount rate, the estimate of the amount and timing of projected future cash flows and identification of appropriate continuing growth rate assumptions. The discount rates used in the analysis are intended to reflect the risk inherent in the projected future cash flows. The amount of an impairment loss is measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying
amount of goodwill.
On December 31, 2024, MSG Networks' affiliation agreement with Altice, one of its major Distributors, expired, subsequent to which the Company's networks were not carried by Altice from January 1, 2025 through February 21, 2025. On February 22, 2025, the Company and Altice entered into a multi-year renewal of the affiliation agreement and Altice resumed carriage of the Company's programming networks. In connection with the preparation of the financial statements included in the Form 10-KT, and in light of changes affecting the MSG Networks reporting unit and the programming industry, the Company concluded that a triggering event had occurred as of December 31, 2024 ("interim testing date") for the MSG Networks reporting unit, which required the Company to assess the carrying value of its long-lived assets, amortizable intangible assets and goodwill as of the interim testing date.
Amortizable intangible assets and other long-lived assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent from cash flows from other assets and liabilities. In determining whether an impairment of long-lived assets has occurred, the Company considers both qualitative and quantitative factors. The quantitative analysis involves estimating the undiscounted future cash flows directly related to that asset group and comparing the resulting value against the carrying value of the asset group. If the carrying value of the asset group is greater than the sum of the undiscounted future cash flows, an impairment loss is recognized for the difference between the carrying value of the asset group and its estimated fair value.
For the interim impairment test, the Company estimated the fair value of the MSG Networks reporting unit based on a discounted cash flow model (income approach). This approach relied on numerous assumptions and judgments within the model that were subject to various risks and uncertainties. Principal assumptions utilized, all of which are considered Level III inputs under the fair value hierarchy, include the Company's estimates of future revenue, estimates of future operating cost, margin assumptions, terminal growth rates and the discount rate applied to estimate future cash flows. The assumptions utilized were subject to a high degree of judgment and complexity, particularly in light of economic and operational uncertainty relating to the MSG Networks business.
Based upon the results of the Company's interim quantitative impairment test, the Company concluded that the carrying value of the MSG Networks reporting unit exceeded its estimated fair value as of the interim testing date. Based on the evaluation of amortizable intangible assets and other long-lived assets performed as of the interim testing date, the Company did not record any impairments of such assets. The Company did however record a non-cash goodwill impairment charge of $61,200 for the MSG Networks reportable segment. The goodwill impairment charge was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value as of the interim testing date.
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