Q2 2025 Sphere Entertainment Co Earnings Call
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Unknown Executive: Good morning. Thank you for standing by and welcome to the Sphere Entertainment Company earnings call for the period ended December 31st, 2024. At this time, all participants are in a listen-only mode.
Good morning, Thank you for standing by and welcome to the sphere Entertainment Company earnings call for the period ended December 31st 2024 at this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session I would now like to turn the call over to Ari Danes Investor Relations. Please go ahead.
Unknown Executive: After the speaker's remarks, there will be a question and answer session.
Ari Danes: I would now like to turn the call over to Ari Danes, Investor Relations. Please go ahead. Thank you.
Yeah.
Thank you.
Unknown Executive: Good morning and welcome to Sphere Entertainment's earnings conference call.
Good morning, and welcome to steer Entertainments earnings Conference call today's call will begin with our executive Chairman and CEO, Jim Dolan, who will provide an update on sphere.
James Dolan: Today's call will begin with our Executive Chairman and CEO, Jim Dolan, who will provide an update on Sphere.
Robert Langer: Robert Langer, our Executive Vice President, Chief Financial Officer and Treasurer, will then review our financial results for the period.
Speaker Change: Robert Langer, our executive Vice President Chief Financial Officer, and Treasurer will then review our financial results for the period.
Unknown Executive: After our prepared remarks, we will open up the call for questions.
Speaker Change: After our prepared remarks, we will open up the call for questions if.
Unknown Executive: If you do not have a copy of today's earnings release, it is available in the investors section of our corporate website. Please take note of the following.
Speaker Change: If you do not have a copy of today's earnings release. It is available on the investors section of our corporate website.
Speaker Change: Please take note of the following.
Unknown Executive: Today's discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statement. Please refer to the company's filings with the SEC for a discussion of risks and uncertainty. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call.
Speaker Change: Today's discussion may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Speaker Change: Any such forward looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements.
Speaker Change: Please refer to the company's filings with the SEC for a discussion of risks and uncertainties.
Speaker Change: The company disclaims any obligation to update any forward looking statements that may be discussed during this call.
Unknown Executive: On pages 5 and 6 of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income or AOI, a non-GAAP financial measure.
Speaker Change: On pages five and six of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income on a non-GAAP financial measure and with that I'll now turn the call over to Jim.
James Dolan: And with that, I'll now turn the call over to Jim. Thank you, Ari, and good morning, everyone. As we begin our calendar 2025, we're focused on a number of core priorities to drive profitable growth. These include developing new productions as we look to build our original content library, showcasing a diverse set of concert residencies and other corporate and marquee events, Optimizing the go-to market strategy for the exosphere and sponsorships and driving operational and cost efficiencies across our business. As you know, another component of our strategy is market expansion. In Abu Dhabi, our plans are moving forward.
Jim: Thank you Ari and good morning, everyone.
We began our calendar 2025, we're focused on a number of core priorities to drive profitable growth. These include developing new productions or we look to build our original content library showcasing a diverse set of concert residency seed and other corporate and marquee events.
Speaker Change: <unk> the go to market strategy, because he exosphere, and sponsorships and driving operational and cost efficiencies across our business.
Jim: As you know another component of our strategy is market expansion.
Jim: Darby our plans are moving forward. Our team is now working closely with our partner GCT Abu Dhabi in areas that include venue design and Preconstruction planning. We are also in discussions with other markets as we pursue our vision for a global network of spheres and.
James Dolan: Our team is now working closely with our partner DCT Abu Dhabi in areas that include venue design and pre-construction planning. We are also in discussions with other markets as we pursue our vision for a global network of spheres. In Las Vegas, the Sphere experience saw improvements in sell-through and stronger sequential results in the December quarter. This reflects our ongoing efforts to refine both our schedule and pricing in order to maximize revenue and enhance the guest experience. The Sphere experience has now generated over $450 million in high-margin revenue. We continue to make progress on our next Sphere experience and look forward to sharing more ahead of its debut this year.
Jim: In Las Vegas, the sphere experience saw improvements at sell through and stronger sequential results in the December quarter. This reflects our ongoing efforts to refine both our schedule and pricing in order to maximize revenue and enhance the guest experience.
Jim: The sphere experience has now generated over $450 million in high margin revenue.
Jim: We continue to make progress on our next VR experience and look forward to sharing more ahead of its debut. This year. We also continue to see interest from a diverse set of artists who want to play the sphere. Our first country artists Kenny Chesney began a 15 show run.
James Dolan: We also continue to see interest from a diverse set of artists who want to play the Sphere. Our first country artist, Kenny Chesney, began a 15th show run in May, actually begins a 15th show run in May. And the Backstreet Boys will start an 18th show residency this summer. In terms of corporate partners, we saw solid advertising demand for the actual Sphere at the end of 2024, which is continued into the new year. Operationally, we have brought our sponsorship and advertising sales efforts back in-house. And as we build out this team, we will also be evaluating our go-to market strategy for the exosphere and for our sponsorship assets.
Jim: Actually begins at 15 show runner and the Backstreet Boys will start in 18 show residency this summer.
Jim: Terms of corporate partners, we saw solid advertising demand for the actual sphere at the end of 2024, which has continued into the new year.
Jim: Operationally, we have brought our sponsorship and advertising sales efforts back in house and as we build out. This team will also be evaluating our go to market strategy for the actual sphere and for our sponsorship assets.
Robert Langer: I'd now like to introduce Robert Langer, our new EVP Chief Financial Officer and Treasurer. Robert was previously with Disney where he served in a range of financial leadership roles for over 25 years. His finance and strategy experience in media and entertainment is an asset to our business and we're pleased to have him on board.
Speaker Change: Now like to introduce Robert Langer, our new EVP, Chief Financial Officer and Treasurer.
Robert Langer: Robert was previously with Disney where he served in a range of financial leadership roles for over 25 years.
Speaker Change: Finance and strategy experience in media and entertainment as an asset to our business and we're pleased to have him onboard with that I'll turn the call over to Robert.
Robert Langer: With that, I'll turn the call over to Robert. Thank you, Jim, and good morning everyone. I'm pleased to join you all here today in my new role at Sphere Entertainment. For the December quarter, we generated total company revenues of $308.3 million and adjusted operating income of $32.9 million. Our Sphere segment generated revenues of $169 million in an adjusted operating loss of $800,000. These results were primarily driven by our original content category, the Sphere Experience, which generated $87 million in revenue across 190 shows in the December quarter. Our results also reflected 12 performances from the Eagles, as well as five ANIMA shows at the end of the quarter.
Speaker Change: Thank you Tim and good morning, everyone I'm pleased to join you all year to date in my new role, it's fear entertainment.
For the December quarter, we generated total company revenues of $308 3 million and adjusted operating income of $32 9 million.
Speaker Change: Our Ccs segment generated revenues of $169 million and then adjusted operating loss of $800000.
Speaker Change: These results were primarily driven by our original content category, the sphere experience, which generated $87 million in revenue across 190 shows in the December quarter.
Speaker Change: Our results also reflected 12 performances from the <unk> as well as five animas shows at the end of the quarter.
Robert Langer: In addition, December quarter results included Formula One's takeover for the Las Vegas Grand Prix, an additional multi-day corporate takeover, ongoing advertising campaigns on Exosphere, and revenues related to our plans to bring the world's second sphere to Abu Dhabi. SG&A expenses for the December quarter were $119 million. This includes the impact of $12.4 million of executive management transition costs and non-recurring costs related to MSG networks. Excluding the $4.6 million cash component of executive management transition costs, the Sphere segment would have generated a trusting operating income of $3.8 million. With respect to the March quarter, I would like to remind you that the Sphere segment benefited from the Super Bowl in Las Vegas last year, which included a record-setting advertising week for the Exosphere.
Speaker Change: In addition December quarter results included Formula wants to take over for the Las Vegas, Grumpy and additional multi day corporate takeover ongoing advertising campaigns on exosphere and revenues related to our plans to bring the world second sphere to Abu Dhabi.
Speaker Change: SG&A expenses for the December quarter were $119 million. This.
Speaker Change: This includes the impact of $12 $4 million of executive management transition costs and nonrecurring costs related to MSG networks.
Speaker Change: Excluding the $4 $6 million cash component of executive management transition cost. The sphere segment would have generated adjusted operating income of $3 8 million.
Speaker Change: With respect to the March quarter, I would like to remind you that the sphere segment benefited from the Super Bowl in Las Vegas last year, which included a record setting advertising week for the extra sphere.
Robert Langer: However, as discussed earlier, we continue to see solid underlying demand for the exosphere so far this calendar year. Turning to MSG Networks, the segment generated $139.3 million in revenues and $33.7 million in EOI in the December quarter. This compares to the $146.4 million in revenue and $37.3 million in AOI in the prior year period. The decreases in revenue under Y mainly reflect lower distribution revenue, driven by an approximately 11.5% decrease in subscribers, inclusive of the impact of MSG Plus. As you know, on January 1st, Altice USA dropped MSG Networks from its lineup. However, on February 22nd, MSG Networks reached a new multi-year agreement with Altice that returned its programming to the over 1 million subscribers impact.
Speaker Change: However, and as discussed earlier, we continued to see solid underlying demand for the extra sphere. So far this calendar year.
Speaker Change: Turning to MSG networks, the segment generated $139 3 million in revenues and $33 7 million in Hawaii in the December quarter.
Speaker Change: This compares to the $146 $4 million in revenue and $37 3 million in <unk> in the prior year period.
Speaker Change: The decreases in revenue under why mainly reflect lower distribution revenue driven by an approximately 11, 5% decrease in subscribers inclusive of the impact of MSG plus.
Speaker Change: As you know on January one altice USA dropped MSG networks from its lineup. However on February 22nd MSG networks reached a new multiyear agreement with Altice that returned its programming to the over 1 million subscribers impacted.
Robert Langer: In connection with the preparation of our 10-KT filing and in light of the ongoing industry challenges facing MSG network. We reassess the fair market value of the MSG Networks business. And recently took a $61.2 million non-cash goodwill impairment charge. which you can see in today's Operating Income Report. Turning to our balance sheet, as of December 31st, we had approximately $502 million of unrestricted cash and cash equivalents, including approximately $104 million at MSG Network. Our debt balance was approximately $1.36 billion at quarter end. This reflected $259 million in convertible debt and a $275 million credit facility related to Sphere in Las Vegas.
Speaker Change: In connection with the preparation of our 10-K filing and in light of the ongoing industry challenges facing MSG networks.
Speaker Change: Reassessed the fair market value of the MSG networks business, and recently took a $61 $2 million noncash goodwill impairment charge.
Speaker Change: You can see in today's operating income results.
Turning to our balance sheet as of.
Speaker Change: December 31, we had approximately $502 million of unrestricted cash and cash equivalents, including approximately $104 million.
Speaker Change: At MSG networks.
Speaker Change: Our debt balance was approximately $1 $36 billion at quarter end.
Speaker Change: This reflects a $259 million in convertible debt and the $275 million credit facility related to sphere in Las Vegas.
Robert Langer: It also reflected approximately $829 million outstanding on the MSG Networks term loan, which, as a reminder, is debt that is recourse only to MSG Networks. In February, MSG Networks made a principal repayment of $25 million using cash at MSG Networks, bringing total principal outstanding under the term loan to approximately $804 million. As you know, MSG Networks is pursuing a refinancing through a work out with its lenders, and since October has been in a forbearance period, which currently runs through March 26.
Speaker Change: It also reflected approximately $829 million outstanding on the MSG networks terminal, which as a reminder, step that is recourse only to MSG networks.
Speaker Change: In February MSG networks made a principal repayment of $25 million using cash App MSG networks, bringing total principal outstanding under the term loan to approximately $804 million.
Speaker Change: As you know MSG networks is pursuing a refinancing through a workout with its lenders and since October has been in a forbearance period, which currently runs through March 26.
Robert Langer: Before I conclude, I would like to remind you that we have shifted to a new fiscal year ending December 31st. This morning, we filed a transition report for the six-month period, which ended December 31st, 2024. The next full 12-month fiscal year will run from January 1, 2025 through December 31, 2025.
Speaker Change: Before I conclude I would like to remind you that we have shifted to a new fiscal year ending December 31.
Speaker Change: This morning, we filed that transition report for the six months period, which ended December 31 2024.
Speaker Change: The next full 12 months fiscal year will run from January one 2025 through December 31 2025.
Unknown Executive: And with that, we'll now open the call for questions. Thank you. We will now begin the question and answer session.
Speaker Change: And with that we'll now open up the call for questions.
Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad you raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.
Unknown Executive: If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
David Karnovsky: Your first question comes from a line of David Karnovsky from JP Morgan. Your line is open. Thank you for the question.
Speaker Change: Your first question comes from the line of David Karnofsky from J P. Morgan Your line is open.
Speaker Change: Thank you for the question Jim for the sphere experience.
James Dolan: Jim, for the Sphere experience, is there any incremental detail you can give around the planned third show, how you plan to launch or market that, and then related to this, just as that new content rolls on, what's your vision in terms of adjusting the overall show count or maybe the availability of postcards and YouTube? Thank you. Well, you know, I don't want to let the cat out of the bag, so I'm going to have to dance around the first part of your question. The new experience, which we will not name, will take advantage of the different features, et cetera, that we've built into the sphere, more so than anything we've done in the past.
Speaker Change: Is there any incremental detail you can give around the planned third show how you plan to March launch or market that and then related to this just as that new content roll on what's your vision in terms of adjusting the overall shout sure show count or maybe the availability of postcards and Youtube. Thank you.
David Karnofsky: Hi, David.
Speaker Change: Well.
Speaker Change: Yeah.
Speaker Change: Let the cat out of the bag, so I'm gonna have to dance around the first part of your question.
Speaker Change: That new experience, which we will not name.
Speaker Change: We'll take advantage of.
Speaker Change: It's different.
Speaker Change: Features inside of it that we built into the sphere more so than anything we've done in the past so the inverse of nature of it.
James Dolan: So the immersive nature of it, but the experiential nature of it, will be— significantly more and significantly enhanced from the postcard experience that we put together. Let's see, what else can I tell you about it? It's like, it will be iconic.
Speaker Change: The experiential nature of it will be.
Speaker Change: Significantly more nimble with significantly enhanced from the postcard.
Speaker Change: The experience that we've put together.
Speaker Change: Yeah.
Speaker Change: Let's see what else can I tell you about it and it will be iconic.
James Dolan: The, we expect to have announcements about it next month, or later this month is the, I guess it's March. As far as VU2 goes, the, that's an interesting product, because we, it is essentially attending the concert without having the band there. And so, the VUT was the first of those. But we have been recording other bands, and the sort of interesting part about this is it's not expensive at all. In fact, to record, you know, a full performance of the band is roughly less than half a million dollars, and then there's editing costs, et cetera.
Speaker Change: Okay.
Speaker Change: We expect to have announcements about it next month or later this month.
Speaker Change: This march.
Speaker Change: <unk>.
Speaker Change: As far as <unk> goes.
Speaker Change: That's an interesting products.
Speaker Change: Because we.
Speaker Change: Is essentially.
Speaker Change: Attending the concert without having the band there.
Speaker Change: And so <unk> was the first of those but we have been recording other bands.
Speaker Change: And sort of interesting part about this is it's not expensive at all.
Speaker Change: It's a record.
Speaker Change: Pulp performance out of the band.
Speaker Change: It's roughly less than a half a million dollars.
Speaker Change: And then then there is added and cost et cetera. So the cost of that product is quite low and I expect that will continue to build.
James Dolan: So, the cost of that product is quite low. And I expect that we'll continue to build up the library with that, and you'll be seeing those kinds of experiences. for years to come in the sphere. Let's see, what was the rest of your question, or did that cover it?
Speaker Change: The library with that Youll be seeing those kinds of experiences.
Speaker Change: Here's to comment on the sphere.
Speaker Change: Let's see what was your what was the rest of your question of where does that cover it.
James Dolan: It was about how the overall kind of show count might change or how we might see maybe the postcard show count change once the new show starts. Well, what likely is that you'll see a significantly reduced show count for postcards, but it won't go away. And in fact, I expect that we'll be showing postcards in Abu Dhabi as well as VU2. It is evergreen product, and there's no reason for it to disappear. Now, having said that, that the, you know. The way that we designed the Sphere business is for a competition to occur between concerts, attractions, corporates, etc., and of course the winner is the one who brings us the most amount of AOY.
Speaker Change: Just about how the overall kind of show count might change or how we might see maybe the postcard show count change once the new show starts. Thank you.
Speaker Change: Well.
Speaker Change: Likely is that you'll see.
Speaker Change: Significantly reduced show count proposed cards.
Speaker Change: Go away.
And in fact, I expect that we will be showing postcards and Abu Dhabi as well as the U two.
Speaker Change: Yeah.
Speaker Change: It is evergreen products.
Speaker Change: Ads.
Speaker Change: There's no reason for them to disappear.
Speaker Change: Having said that that the.
Speaker Change: No.
Speaker Change: The way that we design the sphere business is for our competition to occur.
Speaker Change: Between concerts attractions.
Speaker Change: Corporate.
Speaker Change: Et cetera and of course, the winner is the one who who are.
Speaker Change: For us the most amount of AOR.
James Dolan: So that's how the decisions will be made.
Speaker Change: So that's how the decisions will be made.
Speaker Change: Okay.
Speaker Change: Thank you.
Brandon Ross: Your next question comes from a line of Brandon Ross from Light Shed Partners. Your line is open. Thanks for taking the questions.
Speaker Change: Your next question comes from the lineup Brandon Ross from light shed partners. Your line is open.
Brandon Ross: Thanks for taking the questions good morning.
James Dolan: Good morning. Jim, on networks, you did get the L.T. Steele done, but the landscape remains very challenged.
Speaker Change: Jim on networks, you did get the Lp's deal done, but the the landscape remains very challenged in your view, what's the best way to go about fixing your our sand business and setting it up for long term success through license fees needs to come down what's the right capital structure or does the industry.
James Dolan: In your view, what's the best way to go about fixing your RSN business and setting it up for long-term success? Do license fees need to come down? What's the right capital structure? Or does the industry just need a totally different local rights model? Good question. I don't think we know the answer to that question. And I don't think it's a question that's unique to MSG Networks. I think it's a question that really goes through all of the content providers right across the landscape. And we're still seeing it, right? I mean, obviously, there's a reduction in cable subscribers, right?
Speaker Change: We just need a totally different local rights model.
Speaker Change: Good question.
Speaker Change: I don't think we know the answer to that question.
Speaker Change: No.
Speaker Change: And I don't think it's a question that that's a unique to MSG networks I think it's a question that that.
Speaker Change: Really it goes to all of the content providers right across the landscape.
Speaker Change: And where we're still seeing it right I mean, obviously there is a reduction.
Speaker Change: And cable subscribers alright.
James Dolan: There's the launch of the streaming product, right? But in the end, it comes down to monetization of product. And what's the best way to monetize the product? Clearly, the traditional methods, which really did a great job of monetizing the product, are no longer as viable as they used to be.
Speaker Change: There is the launch of the streaming product right, but in the end.
Speaker Change: It comes down to monetization of products.
Speaker Change: And what's the best way to monetize the product clearly the traditional methods right, which really did a great job of monetizing the product are no longer as viable as they use debate.
James Dolan: So we do have to find a new way, but I don't think that that path is clear yet.
Speaker Change: So we do have to find underway, but I don't think that that path is clear yet.
James Dolan: Okay, and then in the prepared, you mentioned your aim to drive cost-efficient. Can you elaborate on that? You've been running the business for, what, 18 months now, and presumably have a better handle on what the cost structure at the sphere segment needs to be. Are there opportunities to take costs out? Oh, yes, well. I guess it has been just about 18 months to the day, and remember that it's, you know, it's a brand new business. Let's see, no one's ever operated a business like So yes, I think there's opportunities to take costs out. I think actually that you should expect a lot of that this year with an improved bottom line.
Okay and then in the prepared you mentioned your aim to drive cost efficiencies can you elaborate on that you've been running the business for what 18 months now and presumably you have a better handle on what the cost structure at the sphere segment needs to be are there opportunities.
Speaker Change: <unk> to take costs out at this point.
Speaker Change: Oh, yes, well.
Speaker Change: So I guess it has been just about 18 months to the day.
Brad: And remember that it's Brad.
Speaker Change: Brad do business.
Speaker Change: No one's ever operated a business like this before so yes, I think there's opportunities to take.
Speaker Change: Take costs out I think actually that you should expect a lot of that this year.
Speaker Change: With an improved bottom line.
And.
James Dolan: And I think we'll become, and we are becoming more efficient. We're becoming more efficient with content. We're more efficient with how we operate the business, how we schedule the shows, really across the board. And so. You know, I think that this upcoming year will obviously be our best year yet, but it will reflect a significant change in our efficiency and our results to the bottom line.
Speaker Change: I think we will become and we are.
Speaker Change: Are becoming more efficient.
Speaker Change: More efficient with content more proficient with how we operate the business how we schedule that shows that.
Speaker Change: Really across the board.
Speaker Change: And.
Speaker Change: So.
Speaker Change: I think that this upcoming year.
Speaker Change: We'll obviously be our best year yet.
Speaker Change: But it will reflect a significant change.
Speaker Change: And.
Speaker Change: And our efficiency.
Speaker Change: And our results to the bottom line, that's what we're expecting.
Unknown Executive: That's what we're expecting. Thank you very much.
Speaker Change: Great. Thank you very much.
Peter Henderson: Your next question comes from a line of Peter Henderson from Bank of America. Your line is open. Good morning, and thank you for taking the questions.
Speaker Change: Your next question comes from the lineup Peter Henderson from Bank of America. Your line is open.
Peter Henderson: Good morning, and thank you for taking the questions. Two just on the expansion opportunities if I may 1st can.
James Dolan: Two, just on the expansion opportunities, if I may. First, can you provide us with an update regarding the planned Abu Dhabi Sphere, including estimated construction costs, when the venue is expected to open, et cetera. And then the second one is, I think you mentioned discussions with other markets in your prepared remarks, and just curious if you can provide an update on expansion efforts, and whether or not you're considering expanding or are currently in discussions to expand domestically. Thanks.
Peter Henderson: Can you provide us with an update regarding the planned Abu Dhabi sphere.
Peter Henderson: Estimated construction costs when the venue is expected to open et cetera, and then and then the second one is I think you mentioned.
Speaker Change: Discussions with other markets in your prepared remarks, just curious if you can provide an update on an expansion efforts and whether or not you are considering expanding or are currently in discussions to expand domestically. Thanks.
Robert Langer: All right, I think I'll let Digger answer the first part of that one, maybe I'll take Sure, with respect to Abu Dhabi, we're working very closely with DCT Abu Dhabi, our partner on venue design and pre-construction planning. We expect to share more details, including site location, as you mentioned, and estimated opening timing once DCT has finalized those plans. So we're not prepared to do that yet. We need to do that in conjunction with them. In terms of construction costs, we continue to work with DCT to finalize those plans. Look, we've learned and Jim's mentioned this before.
Speaker Change: I think bigger bigger answer the first part of that one maybe I'll take the second part sure.
Speaker Change: With respect to Abu Dhabi, we're working very closely with DTC DCT Abu Dhabi, our partner on venue design and pre construction planning.
We expect to share more details, including site location as you mentioned an estimated opening timing once the cts of finalize those plans. So we're not prepared to do that yet and need to do that in conjunction with them.
Speaker Change: In terms of construction cost.
Speaker Change: We continue to work with DCT to finalize those plans look we've learned in Jim's mentioned this before we learned a lot during the construction of the sphere in Las Vegas, and we'll apply that obviously to the those learnings to Abu Dhabi.
Robert Langer: We learned a lot during the construction of the sphere in Las Vegas and we'll apply that obviously to those learnings to Abu Dhabi. Most importantly, and as a reminder, our partner in Abu Dhabi is fully funding the construction.
Speaker Change: Importantly, and as a reminder, our partner in Abu Dhabi is fully funding the construction project.
Speaker Change: As far as expansion goes so that'd be the odd Abu Dhabi.
Robert Langer: As far as expansion goes, beyond Abu Dhabi, we're currently working on a and the architecture for a smaller sphere. which we think will be deployable to more markets. Somewhere in the 5,000-seat range, but, you know, we're looking to take advantage of, you know, the content we've created already and the business we've created already and bringing it out to other markets. So I anticipate by year-end we'll have more to say about that, but right now we're in the planning and design phase. Thank you.
Speaker Change: Currently working on.
Speaker Change: The architecture for our smaller sphere.
Speaker Change: Which we think will be deployable to more markets.
Speaker Change:
Speaker Change: Somewhere in the 5000 seat range.
Speaker Change: Yeah.
Speaker Change: But.
Speaker Change: We're looking to take advantage of.
Speaker Change: The content, we've created already and the business, we've created already and bringing it out to.
Speaker Change: The other markets. So I anticipate by year end, we'll have more to say about that but right now we're in the <unk>.
Speaker Change: Planning and design phase.
Speaker Change: Thank you.
Peter Supino: Your next question comes from a line of Peter Supino from Wolf Research. Your line is open. Good morning, everybody. A question about the residency business. In the first half of 2025, the Sphere is set to host 55 shows. I think there were 37 in the first half of last year.
Speaker Change: Your next question comes from the lineup Peter Zaffino from Wolfe Research. Your line is open.
Peter Zaffino: Hey, good morning, everybody.
Speaker Change: <unk> about the resident seed business.
Speaker Change: In the first 25, the spheres set to host 55 shows.
Speaker Change: There were 37 in the first half of last year.
James Dolan: We're wondering what you've learned that might have allowed you to host more residency shows this year and then I'll have another 1 if you would. Sure, I mean, it's really, I mean, we have a desire to do those concerts, and the artist has a desire to play the sphere, and it's driven by a bunch of different factors. Probably one is, most importantly, is the experience that the fans have in the show. particularly having to do with the sound, which is really the best sound in the world. So bands that value that, which is honestly most bands, really want to come and play the Now, we know that the content costs, right, are, you know, high for a band, but they're offset by the fact that it's a residency.
Speaker Change: Wondering what you've learned.
Speaker Change: They have allowed you to host more resident seat shows this year and then I have another one if you would.
Speaker Change: Sure I mean.
Speaker Change: It's really I mean, we have a desire to do pursue those concerts.
Speaker Change: And the artist has a desire to play the sphere.
Speaker Change: And it's driven by a bunch of different.
Speaker Change: Different factors probably one.
Speaker Change: Most importantly is the experience that that's our fans have industry, particularly having to do with the SaaS.
Which is really the best sound in the world.
Speaker Change: So bands that value of that which is honestly most bands.
Speaker Change: We only want to contemplate a sphere now.
Speaker Change: No that's a.
Speaker Change: That's a content costs are high.
Speaker Change: Hi.
Speaker Change: Ban, but they're offset by the fact that it's a residency so a band that is a touring band has to go to 50 cities right paper all the transportation all of the light everything move from place to place and you compare that cost up against the cost of content and I actually think content.
James Dolan: So, a band that is a touring band has to go to 50 cities, right, pay for all the transportation, all of the lighting, everything moved from place to place, and you compare that cost up against the cost of content, and I actually think content is less expensive.
Speaker Change: It is less expensive.
James Dolan: And so, the bottom line for the band is they do better, and so that's part of what drives On the same subject, I wonder if longer term, if the main gating factor to residency and concert growth event volumes at even higher levels is the produced content. And is that right? And if so, is there an opportunity to make progress on making it easier to make the content? Yes and no and yes. I already kind of answered the content question, right? So, I mean, I don't really see that as being a big barrier. What I really see as the barrier to more concerts, and it's not, it's, I don't know if barrier's the right way, is this competition is going to continue to go on, right?
Speaker Change: And so the bottom line for the band is they do better.
Speaker Change: And so that's part of what drives that.
Speaker Change: On the same subject I wonder if longer term if the main gating factor to residency in constant growth.
Speaker Change: Event volumes that even higher levels.
Speaker Change: As the produced content.
Speaker Change: And is that right and if so is there an opportunity to make progress on making it easier to make the content.
Speaker Change: Yes, and no and yes.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: I already kind of answered the contact question right. So I.
Speaker Change: I mean, I don't really see that as being a big barrier, what I really see as the barrier to more concerts and it's not a it's it's I don't know if barriers right way is this competition is going to continue to go on right.
James Dolan: The new show, right, corporates, et cetera, all buying for use days, the inside of the sphere. And so if there's anything that's going to limit concerts, it's probably going to be that. That's a good problem.
Speaker Change: The new show right corporates etcetera, all buying for use days.
Speaker Change: Inside of the sphere.
Speaker Change: And so if there's anything that's going to limit Todd search is probably going to be that.
Speaker Change: That's a good problem.
Unknown Executive: That's it.
Speaker Change: Yes. It is.
Ben Swinburne: Your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open. Thanks. Good morning, Jim. Wanted to continue this sort of topic of kind of mix of revenues and sort of optimizing monetization at the Sphere.
Speaker Change: Your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.
Speaker Change: Thanks.
Speaker Change: Jim wanted to continue the sort of the topic of.
Speaker Change: The mix of revenues, and then sort of optimizing monetization at the sphere when.
James Dolan: When you think about the longer-term revenue growth drivers for the business, you know, how do you sort of, I don't know if you'll rank them for us, but now that you've ramped up the residencies, but you're continuing to invest in, you know, experiences, what do you think, as we look at the 2024 revenue base, really drives the top line for the company on the Sphere side? And do you think that the residency, that that answer to that question in Vegas is going to be different, you know, for the Abu Dhabi's and sort of the network of Spheres over time?
Speaker Change: When you think about the longer term revenue growth drivers for the business. How do you. How do you sort of I don't know if you rank them for us, but now that you've ramped up the residences.
Speaker Change: But your <unk>.
Speaker Change: Continuing to invest in.
Speaker Change: Experiences what do you think as we look at the 2024 revenue base really drives the top line for the company on the sphere side.
And do you think that the residency did that answer to that question in Vegas is going to be different for the Abu Dhabi and sort of the network.
Speaker Change: Steers overtime. Thank you.
James Dolan: Thank you. Wow, okay. trying to parse that question apart. Between Abu Dhabi and Las Vegas, I do not think that Abu Dhabi will be a carbon copy of Las Vegas when it comes to things like residencies, etc., although I definitely believe there will be residencies in Abu Dhabi. But I think that the content has to be customized to the marketplace. And the marketplace in Abu Dhabi is going to be different, probably, than the marketplace in Las Vegas. So I think that there will be some I think bottom line, it's going to be just as robust of a product in Abu Dhabi as it is in Vegas, but probably with a different mix of content.
Speaker Change: Wow Okay.
Speaker Change: Well, let's try to parse that question apart.
Speaker Change: Between Agua Tommy and Las Vegas.
Speaker Change: Do not think that Abu Dhabi will be a carbon copy.
Speaker Change: Vegas, when it comes to things like.
Speaker Change: Residents change et cetera, although I definitely believe there will be.
Speaker Change: Is it a case in Abu Dhabi.
Speaker Change: But I think that that the content has to be customized to the marketplace.
Speaker Change: And the marketplace in Abu Dhabi is going to be different probably than they are in the marketplace in Las Vegas.
Speaker Change: So.
Speaker Change: So I think that there will be some differences.
Speaker Change: I think bottom line.
Speaker Change: It's going to be just as robust from a product and I was obvious it isn't vegas, but probably with a different mix of content.
James Dolan: All right, let's see.
Speaker Change: Alright, let's see what was the rest of your question.
James Dolan: Now, what was the rest of your question? Basically, just trying to understand how you see Vegas's revenue growth over time. Yeah, you did over $600 million in calendar 24. So, short term, meaning like this year, right, that the, I think that the biggest opportunities are in the operating efficiencies and how well we exploit the marketplace, right, the nuts and bolts of operating the business. I think, you know, that short term is going to provide a boost. Longer term, it's an interesting competition, right, about, but if I had to pick one, I would probably say that the expansion of more spheres is probably my, the one I think will deliver the most.
Speaker Change: Basically just trying to understand how how you see Vegas is revenue growth over time, I think you did over $600. Okay under 24.
Speaker Change: So.
Speaker Change: Short term, meaning like this year right.
Speaker Change: I think the biggest opportunities are in the operating efficiencies and and.
Speaker Change: And how well we exploit the marketplace right now.
Speaker Change: That's in bulk of operating the business I think.
Speaker Change: That's that's short term it is going to provide a boost.
Speaker Change: Longer term.
Speaker Change: It's an interesting competition right about but if I had to pick one I would probably say that debt.
Speaker Change: The expansion of more spheres.
Speaker Change: Is is probably <unk>.
Speaker Change: My one I think we will we will deliver the most I mean, essentially its a bit of a franchise model right.
James Dolan: I mean, essentially, it's a bit of a franchise model, right, and, you know, what we make to play in Las Vegas will play everywhere else, and so, therefore, you get to spread the capital costs out across a greater base. And so, as far as like the overall business equation goes, I think that's probably the best opportunity, but there are plenty of other opportunities that are there and probably some we don't know yet, but that would be my number. That's very helpful.
Speaker Change: And you know what.
Speaker Change: What we what we make to play in Las Vegas will play everywhere else.
Speaker Change: And so therefore, you got to spread the capital costs out across a greater base.
Speaker Change: And so as far as like the overall business equation goes.
Speaker Change: I think that problem.
Speaker Change: Opportunity, but there are plenty of other opportunities.
Speaker Change: Is that are there and probably something we don't know yet.
Speaker Change: But but that would be it might novel one.
Speaker Change: That's very helpful. If I could ask a follow up maybe to Robert on the on the sort of liquidity free cash flow front, obviously, we will see how networks plays out here a couple of months, but that's that's still cash generating asset for the company today.
Ben Swinburne: If I could ask a follow-up maybe to Robert on the sort of liquidity-free cash flow front. Obviously, we'll see how networks plays out here in the next couple months, but that's still a cash-generating asset for the company today.
Robert Langer: Can you just talk about how we should think about your liquidity position and kind of funding sphere, particularly if we sort of remove networks from the equation as we look at the next year or two? Thanks for your help. Sure, Ben. As I mentioned kind of early in the prepared remarks, we are we're actually quite comfortable with our liquidity position. We at year end, we ended the year end with slightly above five hundred million in cash balance. One hundred and four million was at MSG Network. So we have four hundred million dollars in unrestricted cash and equivalents at the sphere segment.
Speaker Change: Just talk about how we should think about your liquidity position and kind of funding sphere, particularly if we sort of remove networks from the equation as we look at the next year or two.
Speaker Change: Thanks for your help.
Ben Swinburne: Sure Ben.
Speaker Change: As I mentioned earlier.
Speaker Change: Earlier in the prepared remarks, we are we're actually quite comfortable with our liquidity position at year end, we ended the year and with a slightly above 500 million.
And cash balance $104 million worth of MSG networks. So we have $400 million in unrestricted cash and equivalents at the sphere segment has to work for us.
Robert Langer: As Jim was pointing out, we're we're actually optimistic in both the revenue side and for our calendar year this year, driven by kind of new offerings at the sphere segment, but all the residency and the actual sphere, which we see on a good track, as well as kind of your cost initiatives, which we're putting in place, both on the operational side, as well as on the overhead side. So we do believe that we have the potential to drive a trusted operating income in a meaningful way this year. And this will put us in a great position to invest both short and longer term in content and technology.
Speaker Change: Pointed out we're actually optimistic in regard book the revenue side.
Speaker Change: Our own calendar year this year.
Speaker Change: Driven by kind of new offerings at the sphere segment by the other residents index with peer, which we've seen on a good track as well as kind of cost initiatives, we're putting in place both on the operational side as well as kind of a problem on the overhead side. So we do believe that we have.
Speaker Change: The potential to drive.
Speaker Change: Adjusted operating income in a meaningful way this year and this will put us in a great position to invest though.
Speaker Change: Both short and longer term into content and technology. So overall, we think we are kind of in a very strong position here.
Unknown Executive: So kind of overall, we think we are kind of in a very sound position here. Thank you.
Speaker Change: Thank you.
Speaker Change: Thanks, John Operator, we have time for one last caller.
David Joyce: Operator, we have time for one last caller. Your final question comes from the line of David Joyce from Seaport Research Partners. Your line is open.
Speaker Change: Your final question comes from the line of David Joyce from Seaport Research Partners. Your line is open.
David Joyce: Thank you. A couple related to sponsorship. Jim, you alluded to earlier that you brought the sponsorship sales efforts back in-house, but how does that change the go-to-market strategy for the sponsorship and for the exosphere, if you could drill down on that a bit more? And then also, kind of related to that, what are the largest untapped opportunities for sponsorship, including various types of naming rights? Thanks.
Speaker Change: Thank you a couple related to sponsorship, but Jim you alluded to earlier.
Speaker Change: You brought the sponsorship sales efforts back in house, but how does that change the go to market strategy.
Speaker Change: For the sponsorship in for the Ecosphere, if you could drill down on that a bit more and then also kind of related to that what are the largest untapped opportunities for sponsorship, including various types of a naming rights. Thanks.
Unknown Executive: So I'm going to turn that over to my chief operating officer, Jen, who's in charge of making it all work. Let them have a chance. Thank you. Thank you, David. So, as Jim mentioned earlier, we've brought our sales efforts back in house and we're building out that team. So, that in combination with a year of learnings under our belt. We think we're positioned well for long term success. We really continue to see a lot of solid interest from brands to advertise on the exosphere and with all those learnings. We're going to take a fresh look at our go to market strategy.
Jan: So I'm going to turn that over to my Chief operating Officer Jan.
Speaker Change: In charge of making it all work.
Avishai: Let them Avishai. Thank you David.
Avishai: As Jim mentioned earlier, we've brought ourselves efforts back in house and we're building out that team so that in combination with a year of learnings under our belt.
Avishai: We think we're positioned well for long term success, we really continue to see a lot of solid interest from brands to advertise on the extra sphere.
Avishai: And with all those learnings, we're going to take a fresh look at our go to market strategy. So we will be looking at adjusting pricing and packaging, we're going to focus on establishing and expanding relationships with gmos and media agencies directly.
Unknown Executive: So, we will be looking at adjusting pricing and packaging. We're going to focus on establishing and expanding relationships with CMOs and media agencies directly. And we're going to look at more targeted efforts that are aligned with the convention market in Vegas. So, it's premature to say, but we are definitely more confident in the upside from here.
Avishai: And we're going to look at more targeted efforts that are aligned with the convention market in Vegas. So it's premature to say, but we are definitely more confident in the upside from here.
Unknown Executive: Let me get your, do you have a second question? Just what the largest untapped opportunities are, including various types of naming rights. So we've announced a number of deals already. Verizon, Ticketmaster, Experience, Abu Dhabi. There's a lot of opportunity. And in terms of ongoing discussions, the Exosphere is always going to be a big draw when we have those conversations, as well as other premium inventory opportunities like entitlements and integration when we think about the various spaces within that within that beautiful venue. And Sphere is a premium global brand. So we're going to continue to be protective of that brand and thoughtful in terms of who we partner with from a sponsorship standpoint.
Avishai: Let me get you get a second question.
Avishai: Just what's the largest untapped opportunities are including various types of naming rights.
Avishai: So we've announced a number of deals already Verizon at Ticketmaster experience Abu Dhabi Theres, a lot of opportunity and in terms of ongoing discussions the axis. There is always going to be a big draw when we have those conversations as.
Avishai: As well as other premium inventory opportunities like entitlements and integration when we think about the various spaces within that within that beautiful venue.
Avishai: And series of premium global brands. So we're going to continue to be protective of that brand and thoughtful in terms of hooey partnership partnering with from a sponsorship standpoint.
Unknown Executive: Naming rights and the potential there still remains, but I think that's going to be a pretty high bar if we move forward. I don't really think, to be honest, that you're going to ever see a name in front of the sphere. And you may see it right now, you see a name after the sphere, Phoenician, right? But I don't think that you'll ever see a name in front of it, just like there's no name in front of Madison Square Garden. You know, the value of the brand equity is too high, right, to sacrifice that to a naming option.
Avishai: Naming rights and the potential there still remains but I think that's going to be a pretty high bar, if we move forward there.
Avishai: I don't really think to be honest that youre going to ever see a name and a lot of the sphere.
Avishai:
You may see it right now you see a name after this year finish.
Avishai: Finished right where they are.
Avishai: But I don't think you'll ever see a name that has a lot of it just like Theres no name a plot of Madison Square Garden.
Avishai: You know the value of the brand equity is too high right.
Avishai: <unk> opportunity.
Unknown Executive: Makes sense. Thank you very much.
Avishai: Makes sense. Thank you very much.
Unknown Executive: And that concludes our question and answer session.
Avishai: And that concludes our question and answer session I will now turn the call back over to Ari Danes for closing remarks.
Ari Danes: I will now turn the call back over to Ari Danes for closing remarks. Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day.
Speaker Change: Thank you all for joining US we look forward to speaking with you on our next earnings call have a good day.
Unknown Executive: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Sir please wait for the next available operate.
Thank you for holding they had the name of your conference.
Uh huh.
Uh huh.
Yeah.
Okay.