Good morning, and thank you for standing by. Welcome to the Sphere Entertainment Co. fourth quarter and year-end 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's 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.

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 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 investor 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, 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 FEC 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 four and five 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. And 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, and 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.'s. 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 four years or less. In Abu Dhabi, we have reached the final stages of pre-construction 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 to fortify 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 In addition, we continue to have positive discussions with IP holders regarding new Sphere experience projects. So 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 visit 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 extrasphere 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 dollars 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 visit 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 AUI in the December quarter. This compares to $139.3 million in revenues and $33.7 million in AUI in the prior year period. These results reflect an approximately 14.5% decrease in subscribers in the impact of lower affiliate rates, as well as the impact of recent amendments to MSG Network's 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 five-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 that that is recourse only to MSG networks. And with that, we will now open the call for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 in your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Brandon Ross from Lightshed. Your line is open.

Thanks for taking the questions. Jim, you mentioned in your preparedness, 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? And knowing your capital light on most, how many projects can you guys handle managing at once?

Well, that's a good question. I mean, my initial answer is basically as many as we can get. assuming that they're all, you know, profitable and makes sense. I guess the limiting factor with it, Brandon, is that, you know, how much can the management team and the operation handle? And we've designed the team to, you know, to handle quite a few. So over the next few years, I don't think you should be surprised by the five or six, you know, projects going on at once, that they hopefully in the best markets. But, you know, 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? So, you know, the resources will, I believe, will be there.

Got it. And in the press reports about the capital sphere, they said it was going to cost about a billion dollars. Have the elevated construction costs had any impact on your conversations at all with potential partners?

Not on the conversations. I mean, 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. I mean, we're constantly working on, you know, there's new, besides, you know, there's increase in cost, but there's also new construction methods, which have lower costs. And we're, you know, we're a company that likes to, you know, go out and try the new stuff. And so we're looking at some of those new construction methods and see what we can do to lower some of the costs along with it. But, you know, it's still – the model still holds up.

Got it. Thank you very much.

Sure. Next question comes from the line of David Karnofsky from J.P. Morgan. Your line is open.

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.

The interesting question, because I'd love to tell you that we planned this right up to every little nuance. But the fact is that Virginia and Maryland were in a competition that the process of looking at the project, and we got a very good offer on a really great location, and we took it. So with that one, it even surprised us because of the dynamics involved.

Okay, and then you noted for National Harbor $200 million of funding against the $1 billion cost that you and Brandon were just discussing, and can you help us bridge that financing gap? And then we haven't seen any mention of an operating partner, So, is this a venue you'd potentially plan to run and consolidate in the financials?

I got it, David. Can you restate that?

Yeah, he just mentioned that the 200 million of government funding will be part of it, and we haven't had it. So, we haven't missed it. We have an operating partner. How are we planning and funding the rest?

Well, look, I think there's a lot of different ways that we can do it. I mean, I'm sure you will do it in the way that will be the least expensive. But there is, you know, I mean, we could do this practically just, you know, on standalone financing just on the projects itself because, you know, our lending institutions are bullish on our projects and they are willing to lend into them. But having partners also is there are advantages to that, particularly, you know, So if they're in-market partners or have, you know, I mean, we're right next to the MGM, right, I'm 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, you know, working hand-in-hand with the rest of the community is probably a good idea. So it's a long-winded answer to the thing. There's a lot of different sources. Thank you.

Your next question comes from the line of Stephen Lasik from Goldman Sachs. Your line is open.

Hey, great. Thanks for taking the questions. Jim, curious if you could talk a little bit more about how ticket sales for WAS are trending into what's usually a seasonally weaker period in Vegas over the winter. And then if there's 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.

Well, with us today is Jen Koster, who wasn't expecting to answer a question, but this is really her area, so go for it, Jen.

Even, you know, 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. So that's really been a lot of the strategy is demand forecasting based on visitor rates. We believe there will be a strong convention season next year, and we're putting together a show schedule that reflects that.

And we talked about in our remarks Wizard of Oz 2.0, which I think 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, you know, 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.

Thanks for that. And 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 than perhaps the outlook for the expense line item in 26.

Of course, Stephen. Well, 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 marked 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 visioning growth for Sphere, which Tim laid out. So as you would expect, there will be quarter-over-quarter fluctuations for timing reasons, market-to-market adjustments, or other non-recurring expenses like the one we saw in the most recent quarter. But overall, we will continue to focus very much on managing our SC&A line efficiently and we believe that our business is poised for significant growth in the year ahead. Great. Thank you very much.

Your next question comes from the line of Joe Stoff from Susquehanna. Your line is open.

Thank you. Good morning. Jim, you had mentioned, you know, 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, you know, what's involved with that.

Well, I suspect that that will debut from the edge sometime in the fourth quarter, that they could slip into the first quarter. I mean, a lot of it depends on Wizard of Oz, right? If I'm selling out the capacity, I'm not sure I want to disturb that model. And that's really what drives those decisions, 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.

Your next question comes from the line of Peter Cipino from Wolf Research. Your line is open.

Hi, this is Logan Ingress 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.

You know, I really don't see that. You know, we're trying to, you know, we're going as fast as we can, we think, right, and building more spheres because we see great opportunity out in the worldwide and domestic marketplace. I mean, Las Vegas, I mean, our total, Jen, you would know, I mean, our total attendance this year is around 4 million, somewhere in there. I mean, these markets, right, can certainly handle that. And so, you know, I'm really not concerned. I think that we'll, you know, we have a lot of opportunity. I don't see one, especially when you take a look at Las Vegas, because, I mean, Las Vegas, we have, you know, 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, you know, they already have 15 million people who come annually, right, and so I don't really see one market disturbing the other.

Your next question comes from the line of Ryan Sigball from Craig Hallam Capital Group. Your line is open.

Good morning, guys. Really nice results. Jim, you mentioned positive discussions with other IP holders in your prepared remarks. I'm 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. So, 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 are some great products out there that we would like to develop while we develop some of our own IP. And so, I mean, that's moving along. You do have to take into account that right now we have one sphere, right, which is not, I won't say, completely sold out, but it's doing pretty well. So how much room do I have that the, you know, so we watch the pacing on it, et cetera. But 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. And, you know, there's just a question of, you know, what's the payback for them, what's the value of it, and, you know, how much revenue can we build off of their IP.

Your next question comes from the line of Peter Henderson from Bank of America. Your line is open.

Good morning. Thank you for taking the question. Can you provide an update on the residency pipeline through 2027? What do you view as the sort of optimal number of residencies annually?

Yeah, we're pretty much booked. I mean, I think there might be, you know, some slots available still in 27. I don't think there's hardly any left in 26. There might be a weekend left in 26 somewhere. We're basically sticking to long weekends, right, taking advantage of how the Las Vegas market kind of runs. And there's no shortage of artists who want to play. And we're focused on, these days, on we're bringing, you know, the artist brings in the customers, right, and then we're running the Wizard of Oz right now in tandem with those events. So we're looking for, you know, for customers who want to come to see us twice on the weekends. And so far, that's going pretty well.

Great.

Thank you. we have time for one last caller your final question comes from a line of David Joyce from Seaport Research Partners your line is open thank you you made a recent announcement that included the Delta having a new branded space within the sphere could you please update us on the on the rest of the sponsorship new strategy just the updates there and on the exosphere your progress. Thanks.

That's a dead question. So 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. We had advertisers like Google and Delta and Lenovo running every day during CES. We also held the second CES keynote at SEER in a row. And then the other thing that we were particularly excited about and I think it gives us some you know 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 Lucas's film Star Wars and 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 you 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 so 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 and that concludes our question and answer session I will now turn the call back over to Ari Daines for closing remarks Thank you.

We look forward to speaking with you on our next earnings call today. Have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.