Sphere Entertainment (SPHR) - 2025 Q4 - Annual Results

Financial Highlights Sphere Entertainment Co. reported a 3% revenue increase to $282.7 million, with operating loss narrowing by 30% and adjusted operating income surging 140% to $61.5 million, driven by strong Sphere segment performance Q2 2025 Key Financial Metrics (Consolidated) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $282.7M | $273.4M | +$9.3M | +3% | | Operating Loss | ($50.2M) | ($71.4M) | +$21.2M | +30% | | Adjusted Operating Income | $61.5M | $25.7M | +$35.8M | +140% | - Executive Chairman and CEO James L. Dolan stated the company is executing its strategic priorities for long-term growth and is making progress with global expansion plans[2] - Key operational highlights for the Sphere segment include surpassing four million total tickets sold for The Sphere Experience since its October 2023 opening and hosting multiple concert residencies and corporate events[5] Segment Performance Analysis The Sphere segment achieved 16% revenue growth and positive adjusted operating income, while MSG Networks saw a 12% revenue decline due to subscriber loss, partially offset by cost-cutting measures Q2 2025 Revenue by Segment (in millions) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Sphere | $175.6 | $151.2 | +16% | | MSG Networks | $107.1 | $122.2 | -12% | Q2 2025 Adjusted Operating Income by Segment (in millions) | Segment | Q2 2025 AOI | Q2 2024 AOI | Change ($) | | :--- | :--- | :--- | :--- | | Sphere | $24.9 | ($5.5) | +$30.4 | | MSG Networks | $36.5 | $31.1 | +$5.4 | Sphere Segment The Sphere segment's revenue grew 16% to $175.6 million, driven by event-related revenues, with operating loss improving by 20% and adjusted operating income turning positive at $24.9 million - Event-related revenues rose by $26.7 million due to more corporate events and nine additional concert residency shows compared to the prior year quarter[7] - Revenue from The Sphere Experience decreased by $6.7 million, as lower average per-show revenues offset an increase in the total number of performances[9] - Selling, general and administrative (SG&A) expenses decreased by $5.7 million (6%) due to lower employee compensation and professional fees[12] Sphere Segment Q2 2025 vs Q2 2024 (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $175.6 | $151.2 | +16% | | Operating Loss | ($83.4) | ($104.5) | +20% | | Adjusted Operating Income | $24.9 | ($5.5) | +$30.4M | MSG Networks Segment MSG Networks' revenue declined 12% to $107.1 million due to subscriber loss, but direct operating expenses fell 33% due to restructured media rights, leading to increased operating and adjusted operating income - Distribution revenue fell by $11.4 million, primarily driven by an approximate 13.0% decrease in total subscribers[14] - Direct operating expenses decreased significantly by $26.7 million (33%), mainly due to a $25.6 million reduction in rights fees expense following amendments to media rights agreements[16] - Selling, general and administrative (SG&A) expenses increased by $11.7 million, largely due to higher marketing costs and the absence of prior-year litigation-related insurance recoveries[17] Other Matters MSG Networks restructured its credit facilities, resulting in a $346.1 million gain on debt extinguishment, amended media rights agreements, and issued warrants for 19.9% equity to Madison Square Garden Sports Corp - MSG Networks restructured its credit facilities, replacing an $804 million term loan with a new $210 million term loan, leading to a recorded gain on debt extinguishment of $346.1 million for the quarter[19] - Media rights agreements with the Knicks and Rangers were amended to reduce annual rights fees by 28% and 18% respectively, effective January 1, 2025, and eliminate annual fee escalators[20] - MSG Networks issued penny warrants to Madison Square Garden Sports Corp. exercisable for 19.9% of the equity interests in MSG Networks[20] Consolidated Financial Statements Consolidated statements show net income of $151.8 million for Q2 2025, driven by a $346.1 million gain on debt extinguishment, with total assets at $4.2 billion and liabilities at $1.9 billion, and negative operating cash flow Condensed Consolidated Statements of Operations Q2 2025 revenues were $282.7 million with an operating loss of $50.2 million, but a $346.1 million gain on debt extinguishment led to net income of $151.8 million or $4.18 per basic share Q2 2025 Statement of Operations Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $282,677 | $273,395 | | Operating loss | ($50,159) | ($71,377) | | Gain on extinguishment of debt | $346,092 | $— | | Net income (loss) | $151,816 | ($46,586) | | Basic income (loss) per share | $4.18 | ($1.31) | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $4.2 billion, liabilities decreased to $1.9 billion due to debt restructuring, and total stockholders' equity increased to $2.3 billion Balance Sheet Summary (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents, and restricted cash | $368,927 | $515,633 | | Total Assets | $4,199,061 | $4,515,300 | | Total Liabilities | $1,885,374 | $2,313,881 | | Total Stockholders' Equity | $2,313,687 | $2,201,419 | Selected Cash Flow Information For the first six months of 2025, operating activities resulted in a $52.7 million net cash outflow, financing activities used $111.1 million, leading to a $146.7 million net decrease in cash Six Months Ended June 30 Cash Flow (in thousands) | Category | 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) | | Net decrease in cash | ($146,706) | ($54,604) | Non-GAAP Financial Measures Adjusted Operating Income (Loss) is a key non-GAAP metric, defined by excluding depreciation, amortization, share-based compensation, and restructuring charges, with Q2 2025 consolidated Adjusted Operating Income at $61.5 million - Adjusted operating income (loss) is defined as operating income (loss) excluding depreciation, amortization, share-based compensation, restructuring charges, and other specific non-recurring or non-cash items[23] Q2 2025 Reconciliation of Operating Loss to Adjusted Operating Income (in thousands) | Description | Amount | | :--- | :--- | | Operating loss | ($50,159) | | Share-based compensation | $18,850 | | Depreciation and amortization | $83,907 | | Other adjustments | $8,868 | | Adjusted operating income | $61,466 |