Thank you. Good morning, and welcome to Sphere Entertainment's fiscal 2025 fourth quarter and year-end earnings conference call.

Today's call will begin with our Executive Chairman and CEO Jim Dolan, who will provide an update on the business. Robert Langer, our Executive Vice President, Chief Financial Officer and Treasurer, will then review our financial results for the period.

After our prepared remarks, we will open up the call for questions. 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. 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 statements. Please refer to the company's filings with the SEC for a discussion of risks and uncertainties.

The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On pages 4 and 5 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.

With that, I'll now turn the call over to Jim.

Thank you, Ari, and good morning, everyone. This morning, we reported our fourth quarter financial results, which serve as continued validation of the business model behind Sphere.

Our success in Las Vegas, including most recently The Wizard of Oz, is an important blueprint for our long-term vision: a global network of Sphere venues powered by our proprietary technology and immersive content. We're now one step closer to realizing that vision.

Last month, we announced that we will bring the second Sphere in the U.S. to National Harbor in Maryland, which is minutes from D.C.

National Harbor is one of the top tourist destinations in the Mid-Atlantic with more than 15 million annual visitors. This 6,000-seat Sphere venue will be built with support from the Peterson Companies, the landowner and developer of National Harbor, as well as the State of Maryland and Prince George's County.

The project will utilize a combination of public and private funding. This includes approximately $200 million in state, local, and private incentives.

We are moving quickly to finalize agreements and secure necessary approvals and believe the venue could be open in 4 years or less. In Abu Dhabi, we have reached the final stages of preconstruction and expect to share additional updates in the near future, including details on the site location.

We are also in active discussions with a significant number of domestic and international markets regarding large and smaller-scale Spheres. We will update you on our progress over the course of the year.

Moving beyond expansion, we continue to invest in immersive technology and experiential content that fortifies Sphere's leadership position. As you've seen, The Wizard of Oz at Sphere has been both a critical and commercial success, with over 2.2 million tickets now sold and approximately $290 million in ticket sales.

Later this year, we plan to release The Wizard of Oz 2.0, an enhanced version of the production with new scenes and new 4D effects. We are also on track to complete our next Sphere Experience, From the Edge, later this year.

In addition, we continue to have positive discussions with IP holders regarding new Sphere Experience projects. In summary, we are pleased with the momentum we're seeing across our business, especially our progress towards a global network of Spheres, which we believe positions the company for substantial long-term growth.

With that, I will turn the call over to Robert, who will take you through our financial results.

Thank you, Jim, and good morning, everyone. For the December quarter, we generated total company revenues of $394.3 million and adjusted operating income of $128 million.

Our Sphere segment generated revenues of $274.2 million, an increase of over 60% compared to the prior-year period. This growth was mainly driven by higher revenues from the Sphere Experience, which reflects higher per-show revenues due to the impact of The Wizard of Oz as well as an increase in the number of performances.

In addition to higher revenues from the Sphere Experience, we also saw revenue growth in concert residencies and Exosphere advertising and sponsorship. Overall revenue growth was only partially offset by the absence of a brand event held in the prior-year quarter as well as other revenue decreases.

Fourth quarter adjusted operating income for our Sphere segment was $89.4 million, as compared to an adjusted operating loss of approximately $800,000 in the prior-year quarter. This reflected the increase in revenues as well as lower SG&A expenses, partially offset by higher direct operating expenses.

The increase in direct operating expenses includes higher expenses associated with the Sphere Experience. This was mainly a result of higher per-show expenses due to the impact of The Wizard of Oz as well as a higher number of Sphere Experience performances.

SG&A expenses for the December quarter were $104.1 million, a decrease of $14.9 million year-over-year. This includes the impact of $4.6 million primarily related to executive management transition costs in the current-year quarter as compared to $12.4 million of executive management transition costs and non-recurring costs related to MSG Networks in the prior-year period.

It also includes the impact of the company's focus on driving cost efficiencies this year. Turning to MSG Networks, the segment generated $120.1 million in revenues and $38.6 million in AOI in the December quarter.

This compares to $139.3 million in revenues and $33.7 million in AOI in the prior-year period. These results reflect an approximately 14.5% decrease in subscribers and the impact of lower affiliate rates, as well as the impact of recent amendments to MSG Networks' media rights agreements with MSG Sports and certain other professional teams.

Turning to our balance sheet, as of December 31st, our Sphere business had net debt of approximately $56 million. This reflected approximately $477 million of unrestricted cash and cash equivalents, $259 million in convertible debt, and the $275 million term loan related to Sphere in Las Vegas.

In January, the company refinanced the credit facility related to Sphere in Las Vegas. This refinancing extended the facility's maturity for a new 5-year term, ending in January 2031, with an improvement in the borrowing rate and no change in the term loan balance.

We also added a $275 million revolver, which is currently undrawn and will be available for general corporate purposes. At MSG Networks, as of December 31st, net debt was approximately $128 million.

This included $159 million outstanding on the MSG Networks term loan, which, as a reminder, is debt that is recourse only to MSG Networks. With that, we'll now open the call for questions.

Thanks for taking the questions. Jim, you mentioned in your prepareds you're in several discussions on new big and small Spheres.

How many Sphere expansion projects, full-size versus smaller scale, do you expect to be able to begin in the next few years? Knowing you're capital light on most, how many projects can you guys handle managing at once?

It's a good question. My initial answer is basically as many as we can get.

Assuming that they're all profitable and make sense. I guess the limiting factor with it, Brandon, is that how much can the management team and the operation handle?

We've designed the team to handle quite a few. Over the next few years, I don't think you should be surprised by five or six projects going on at once.

Hopefully in the best markets. If we can figure out how to do more and there's more opportunity, we're going to try and take advantage of it.

Keeping in mind that we will separately finance them, right? The resources I believe will be there.

Got it. In the press reports about the Capital Sphere, they said it was going to cost about $1 billion.

Have the elevated construction costs had any impact on your conversations at all with potential partners?

Not on the conversations. The model still very much holds up to support that level of investment.

I'm hoping we bring it in for less. We're working on that right now.

Besides, there's increase in cost, but there's also new construction methods which help lower costs. We're a company that likes to go out and try the new stuff.

We're looking at some of those new construction methods and seeing what we can do to lower some of the costs along with it. The model still holds up, so.

Got it. Helpful.

Thank you very much.

Hey, thank you. Jim, just on National Harbor, can you speak a bit more to how you settled on the location as optimal for the small-scale Sphere?

Just any background on the process would be helpful. Thanks.

I'd love to tell you that we planned this right up to every little nuance. The fact is that Virginia and Maryland were in a competition.

That sped up the process of looking at the project, and we got a very good offer on a really great location, and we took it. That one even surprised us because of the dynamics involved with it.

Okay. Then, you noted for National Harbor $200 million of funding against a $1 billion cost that you and Brandon were just discussing.

Can you just help us bridge that financing gap? Then, we haven't seen any mention of an operating partner, is this a venue you potentially plan to run and consolidate in the financials?

Hang on, David. Can you restate that?

Because I couldn't

hear. He just mentioned that the $200 million of government funding will be part of it, and we haven't mentioned we have an operating partner, how we're planning funding the rest.

Look, I think there's a lot of different ways that we can do it. I can assure you we'll do it in the way that will be the least expensive.

We could do this practically just on standalone financing, just on the projects itself because our lending institutions are bullish on our projects, and they're willing to lend into them. Having partners also there are advantages to that, particularly if they're in-market partners or have, we're right next to the MGM, right, not saying they're going to be our partner, but when we build a Sphere, as we've seen in Las Vegas, right, it affects the entire community, right, and the entire business community, and they benefit from it, and so working hand-in-hand with the rest of the community probably a good idea.

It's a long-winded answer to saying there's a lot of different sources.

All right. Thank you.

Hey, great. Thanks for taking the questions.

Jim, curious if you could talk a little bit more about how ticket sales for Oz are trending into what's usually a seasonally weaker period in Vegas over the winter. Then, is there anything you're seeing on the demand front from the show that's encouraging your thinking in one direction or the other on things like show count and pricing as we head into the spring and the summer?

Thank you.

With us today is Jen Koester, who wasn't expecting to answer a question, but this is really her area, go for it, Jen.

Thanks, Stephen. We've seen Las Vegas headwinds our way, but we've been resilient and experienced strong growth despite headwinds this past year, and we feel confident that we'll continue to do the same in the next year.

In terms of ticket calendar and show calendar, we have been aggressively putting forward days where we have multiple shows, these side-by-sides, and we continue to enhance that and grow revenue per day. That's really been a lot of the strategy is demand forecasting based on visitor rates.

We believe there'll be a strong convention season next year, and we're putting together a show schedule that reflects that.

We talked about in our remarks The Wizard of Oz 2.0, right, which I think, and I'm not even sure, to be honest, whether we need Wizard of Oz 2.0 with the demand that we're seeing, but we're going to do it anyway, and I think that will probably make that product get even more legs, and then we have product behind it that we think is going to be maybe as good as Wizard of Oz.

Great. Thanks for that.

Then, Robert, maybe on the cost side, SG&A came in a bit heavier in the fourth quarter, even adjusting for some of the management transition expenses. Just curious if there's anything more you can say on SG&A in the quarter, and then perhaps the outlook for the expense line item in '26?

Sure, Stephen. Let me start by pointing out that we are extremely focused on managing our cost infrastructure as efficiently as possible.

We have identified a number of cost-saving opportunities in 2025 and brought the SG&A number meaningfully down versus the prior year. In regard to the fourth quarter SG&A numbers you pointed out, they did include certain executive transition costs as well as expenses related to share-based awards, which are mark-to-market on our stock price.

Adjusting for these items, our SG&A expenses in the quarter are actually quite similar to levels we saw for the rest of 2025. Looking to '26 and beyond, we will absolutely continue to look for further cost-saving opportunities wherever it makes sense, but we will balance that with ensuring that we have an infrastructure in place that supports the global vision and growth for Sphere, which Jim laid out.

As you would expect, there will be quarter-over-quarter fluctuations for timing reasons, mark-to-market adjustments, or other non-recurring expenses like the one we saw in the most recent quarter. Overall, we will continue to focus very much on managing our SG&A line efficiently, and we believe that our business is poised for significant growth in the year ahead.

Great. Thank you very much.

Thank you. Good morning.

Jim, you had mentioned that you'll complete The Edge later this year. Wondering if you or Jennifer can kind of talk about how we should think about when you might launch that, what's involved with that?

I suspect that will debut From the Edge sometime in the fourth quarter. Could slip into the first quarter.

A lot of it depends on Wizard of Oz, right? If I'm selling out the capacity, right, I'm not sure I want to disturb that model.

That's really what drives those decisions, right, is the desire to maximize revenue inside of the facility. I think that From the Edge and other products that we're working on are all designed to do just that, maximize the use of the capacity and bring the highest return.

Hi, this is Logan Angress on for Peter. Jim, in the context of a broader Sphere franchise rollout, how do you think about the potential cannibalization or competition between Spheres?

For example, would a potential franchisee on the East Coast be concerned at all that they'd have to compete with the newly announced National Harbor Sphere for demand? Thanks.

I I really don't see that. That the the, I I we're trying to, we're we're going as fast as we as we can, we think, right, in building in building more Spheres because we see great opportunity out in the in the worldwide and domestic marketplace.

That the, and and, the Las Vegas, our total Jen, you would know, our total attendance this year is around 4 million somewhere in there.

Yep.

Right, these markets, right, can certainly handle that. I'm really not concerned.

I think that we have a lot of opportunity. I don't see one, especially when you take a look at Las Vegas, because Las Vegas, we have our customers come to see us, right, but they also come for conventions, they come for lots of other reasons, that the same thing will be true at National Harbor.

That's why we say they already have 15 million people who come annually, right, and so I don't really see one market disturbing the other.

Good morning, guys. Really nice results.

Jim, you mentioned positive discussions with other IP holders in your prepared remarks. Curious if you could elaborate on that.

I guess in the context of the success, Wizard of Oz, and really the longevity of demand and the strength there, as it's continued now for a handful more months than the last time we spoke. I guess the question is, what does that pipeline look like?

Any additional details you can give from interested IP holders and how those conversations are going?

We are in discussions with other IP holders, and there is some great product out there that we would like to develop while we develop some of our own IP, and so that's moving along. You do have to take into account that right now, we have one Sphere, right, which is I won't say completely sold out, but it's doing pretty well, how much room do I have?

We watch the pacing on it, et cetera. I will say one thing, that every IP holder that we talk to is incredibly enthusiastic about taking their IP and putting it into this new medium.

They all would like to do it. There's just the question of what's the payback for them, what's the value of it, and how much revenue can we build off of their IP?

Great. Thanks, Jim.

Good morning. Thank you for taking the question.

Can you provide an update on the residency pipeline through 2027? Just what you view as the sort of optimal number of residencies annually?

The the, we're pretty much booked. The the, I think there might be, some slots available still in '27.

I don't think there's there's hardly any left in '26. There might be a weekend left in '26 somewhere.

The, the the, we're basically, sticking to, long weekends, right, that the, taking advantage of how that the Las Vegas market kind of runs, the, and, there's no shortage of of artists who want to play, the, and we're focused on these days on we're bringing, the artists brings in brings in the, the customers, right, and then we're running the the, Wizard of Oz right now in tandem with those with those events. We're looking for, for customers who want to come see us twice on the weekends, that the, and, so far that's going pretty well.

Great. Thank you.

We have time for one last caller.

Thank you. You made a recent announcement and that included that Delta having a new branded space within the Sphere.

Could you please update us on the rest of the sponsorship strategy, just the updates there, and on the Exosphere progress? Thanks.

That's a Jen question.

We're off to a strong start in '26. If you looked at our performance at CES this year, our year-over-year growth was strong, and we had advertisers like Google and Delta and Lenovo running every day.

During CES, we also held the second CES keynote at Sphere in a row. Then the other thing that we were particularly excited about, and I think it gives us some good projections on where we can go is that we debuted the first interactive game experience on the Exosphere in partnership with LEGO and Lucasfilm Star Wars.

We're going to continue to look for opportunities like that selectively that give us the opportunity to drive additional revenue as well as showcase our technology and innovation capabilities. We're making progress, as you mentioned, with our roster of official partners.

You mentioned Delta. We also have recently announced Anheuser-Busch, and we're in active conversations with a lot of other blue-chip brands in this regard.

We expect to have more announcements like this throughout the year, but overall, I think we're well positioned for growth in this area for the coming year.

Great. Thank you.

Thank you. We look forward to speaking with you on our next earnings call.

Hey, have a good day.