Sphere Entertainment (SPHR) Q1 2025 Earnings Call May 08, 2025 10:00 AM ET Company Participants Ari Danes - Investor RelationsJames Dolan - Executive Chairman & CEORobert Langer - EVP, CFO & TreasurerStephen Laszczyk - Vice PresidentJennifer Koester - President & COO Conference Call Participants Brandon Ross - Partner, Media & Technology AnalystDavid Karnovsky - Senior Research AnalystPeter Supino - MD & Senior Analyst - Media & Entertainment, Cable & TelecomPeter Henderson - AnalystDavid Joyce - Senior Equ ...

Sphere Entertainment (SPHR) Q1 2025 Earnings Call May 08, 2025 10:00 AM ET Speaker0 Good morning, and thank you for standing by. Welcome to the Spear Entertainment Company First Quarter twenty twenty five Earnings Conference Call. 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 Daines, Investor Relations. Please go ahead. Speaker1 Thank you. Good morning and welcome to Sphere Ent ...

Core Insights - Sphere Entertainment Co. reported a total revenue of $280.6 million for Q1 2025, a decrease of $40.8 million or 13% compared to the same quarter last year [1][2] - The company experienced an operating loss of $78.6 million, which is an increase of $38.2 million or 95% from the prior year quarter [1][2] - Adjusted operating income was reported at $36.0 million, down $25.6 million or 42% year-over-year [1][2] Financial Performance - Sphere segment revenues were $157.5 million, down $12.8 million or 8% from $170.4 million in Q1 2024 [2][4] - MSG Networks segment revenues decreased to $123.0 million, a decline of $27.9 million or 19% from $151.0 million in the prior year [2][12] - Total operating loss for the company was $78.6 million, compared to a loss of $40.4 million in the same quarter last year [2][11] Segment Analysis - Sphere's direct operating expenses increased by $8.2 million or 13% to $70.5 million, primarily due to additional concerts and higher employee compensation [9] - MSG Networks faced a significant drop in distribution revenue, decreasing by $29.9 million, largely due to the absence of revenues from Altice during a non-carriage period [12][14] - Adjusted operating income for the Sphere segment was $13.1 million, a slight increase of $0.2 million or 2% from the previous year, while MSG Networks' adjusted operating income fell to $22.8 million, down $25.8 million or 53% [2][11] Strategic Developments - The company announced new multi-year marketing partnerships with Pepsi and Google, and plans to host multiple corporate events in Las Vegas [5] - Sphere is set to host the 'Unity' electronic dance music event with nine shows scheduled between August and October [5] - MSG Networks is pursuing a refinancing of its credit facilities, which includes a Transaction Support Agreement with lenders to restructure existing debt obligations [19][20] Cash Flow and Balance Sheet - For Q1 2025, net cash provided by operating activities was $6.3 million, a significant decrease from $101.0 million in Q1 2024 [38] - The company reported a net decrease in cash, cash equivalents, and restricted cash of $37.4 million, ending the quarter with $478.2 million [39] - Total assets as of March 31, 2025, were $4.45 billion, down from $4.52 billion at the end of the previous year [36]

Financial Data and Key Metrics Changes - For the December quarter, the company generated total revenues of $308.3 million and adjusted operating income of $32.9 million [15] - The Sphere segment generated revenues of $169 million with an adjusted operating loss of $800,000 [15] - SG&A expenses for the December quarter were $119 million, including $12.4 million of executive management transition costs [17] Business Line Data and Key Metrics Changes - The original content category within the Sphere experience generated $87 million in revenue across 190 shows during the December quarter [16] - MSG Networks generated $139.3 million in revenues and $33.7 million in adjusted operating income, down from $146.4 million and $37.3 million in the prior year period due to an 11.5% decrease in subscribers [19] Market Data and Key Metrics Changes - The Sphere experience has generated over $450 million in high-margin revenue [11] - The company is seeing solid advertising demand for the Exosphere, which has continued into the new year [12] Company Strategy and Development Direction - The company is focused on developing new productions, optimizing go-to-market strategies, and driving operational efficiencies [8] - Plans for market expansion include working closely with DCT Abu Dhabi on venue design and preconstruction planning for a new Sphere [9][10] - The company is also exploring discussions for a global network of spheres [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying demand for the Exosphere and expects the upcoming year to reflect significant improvements in efficiency and results [41][71] - The company is confident in its liquidity position, ending the year with over $500 million in cash [70] Other Important Information - The company took a $61.2 million noncash goodwill impairment charge related to MSG Networks [20] - The company has shifted to a new fiscal year ending December 31, with the next full fiscal year running from January 1, 2025, to December 31, 2025 [23] Q&A Session Summary Question: Details on the planned third show for the Sphere experience - Management indicated that the new experience will leverage the Sphere's features and will be significantly enhanced compared to previous offerings [27][31] Question: Fixing the RSN business and long-term success - Management acknowledged the challenges in the RSN business and emphasized the need for better monetization strategies across the industry [36][37] Question: Update on the planned Abu Dhabi Sphere - The company is working closely with DCT Abu Dhabi on venue design and construction planning, with costs being fully funded by the partner [49][50] Question: Opportunities for cost efficiencies - Management expects to see significant improvements in operational efficiency and cost reductions in the upcoming year [41] Question: Residency business and hosting more shows - The company has seen increased interest from artists to perform at the Sphere, driven by the unique experience it offers [55] Question: Long-term revenue growth drivers - Management believes that the expansion of more spheres will be a key driver for long-term revenue growth [67] Question: Sponsorship strategy and untapped opportunities - The company is focusing on building relationships with brands and exploring various sponsorship opportunities, while maintaining brand integrity [78][82]