Sphere Entertainment Co. (NYSE:SPHR) Q4 2025 Earnings Call Transcript

Sphere Entertainment Co. (NYSE:SPHR) Q4 2025 Earnings Call Transcript February 12, 2026

Sphere Entertainment Co. beats earnings expectations. Reported EPS is $1.23, expectations were $-0.12.

Operator: Good morning, and thank you for standing by. Welcome to the Sphere Entertainment Co. Fourth Quarter and Year-end 2025 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Ari Danes, Investor Relations. Please go ahead.

Ari Danes: 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, 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. And with that, I’ll now turn the call over to Jim.

James Dolan: 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 spear 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 DCs. 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 land owner 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 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 effect. We are also on track to complete our next theater experience from The Edge later this year. In addition, we continue to have positive discussions with IP holders regarding new sphere experienced 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.

Robert Langer: 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 nonrecurring 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 the 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 31, 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 31, net debt was approximately $128 million. This included $159 million outstanding on the MSG Networks term loan, which, as a reminder, is that recoursed only to MSG Networks. And with that, we will now open the call for questions.

Operator: [Operator Instructions]. Your first question comes from the line of Brandon Ross from LightShed.

Q&A Session

Brandon Ross: Jim, you mentioned in your prepared, 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 you’re capital light on most, how many projects can you guys handle managing at once?

James Dolan: Well, it’s a good question. I mean my initial answer is basically as many as we can get, assuming that they’re all profitable and makes sense. I guess the limiting factor with it, Brandon, is that how much can the management team and the operation handle and we’ve decided the team to handle quite a few. So the — over the next few years, I don’t think you should be surprised by the 5 or 6 projects going on at once. Hopefully in the best markets. But 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 the resources will, I believe, will be there.

Brandon Ross: Got it. And 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?

James Dolan: Not on the conversations that the — 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 — there’s new — besides, there’s an increase of cost, but there’s also new construction methods, which help lower costs. And we’re a company that likes to go out and try to do 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 it’s still — the model still holds up.

Operator: Your next question comes from the line of David Karnovsky from JPMorgan.

David Karnovsky: 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.

James Dolan: Good. The interesting question that — because I’d love to tell you that we plan this right up to every little nuance. But the fact is that Virginia and Maryland, we’re in a competition that spin up the process of looking at the project, and we got a very good offer kind of really great location, and we took it. So the — it’s — but that one even surprised us because of the dynamics involved with it.

David Karnovsky: 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 just help us bridge that financing gap? And then we haven’t seen any mention of an operating partner. So is this a venue you potentially plan to run and consolidate in the financials?

James Dolan: Hang on, David, can you restate that?

Robert Langer: Yes. He just mentioned that the $200 million of government funding will be part of it, and we haven’t — we haven’t mentioned we have an operating partner, how are we planning funding the rest?

James Dolan: I think there’s a lot of different ways that we can do it. I mean the — I assure you we’ll do it in a way that will be the least expensive. And — but there is — I mean, we could do this the — practically just on stand-alone financing just on the projects itself because 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 if they’re in-market partners that they have. I mean we’re right next to the MGM, right? I’m not saying they’re going to be our partner, but they – but when we build the 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 act. So it’s a long-winded answer to saying there’s a lot of different sources.

Operator: Your next question comes from the line of Stephen Laszczyk from Goldman Sachs.

Stephen Laszczyk: Jim, curious if you could talk a little bit more about how ticket sales for WOZ 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?

James Dolan: Well, with us today is Jen Koester who wasn’t expected to answer a question, but this is really her area. So go for it, Jen.

Jennifer Koester: Hey, 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-side, 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.

James Dolan: And we talked about in our remarks, Wizards of Oz 2.0. 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 I think that will probably make that product get even more legs. And then we have product behind it that we think it’s going to be maybe as good as Wizard of Oz.

Stephen Laszczyk: Great. 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 and then perhaps the outlook for the expense line item in ’26?

Robert Langer: 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 fast 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 in growth for Sphere, which Jim laid out. So as you would expect, there will be quarter-over-quarter fluctuations for timing reasons, to market adjustments or other nonrecurring expenses like the one we saw in the most recent quarter. But overall, we will continue to focus much on — very much on managing our SG&A line efficiently, and we believe that our business is poised for significant growth in the year ahead.

Operator: Your next question comes from the line of Joe Stauff from Susquehanna.

Joseph Stauff: 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?

James Dolan: 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? That the — I’m selling out the capacity, right. 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. But the — 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?

Operator: Your next question comes from the line of Peter Supino from Wolfe Research.

Logan Angress: 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, what 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?

James Dolan: I really don’t see that. The — we’re trying to — we’re going as fast as we can. We think, right? And building more spears because we see great opportunity out in the worldwide and domestic marketplace. And, 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 that, right? I mean that the — these markets rates can certainly handle that. And so I’m really not concerned. I think that will 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 our customers come to see us right? But they also come for conventions, they for lots of other reasons. Then the same thing will be true with National Harbor. That’s why we say I already have 15 million people who come annually. That the — and so I don’t really see one market disturbing the other.

Operator: Your next question comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group.

Ryan Sigdahl: You mentioned positive discussions with other IP holders in your prepared remarks. I guess 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?

James Dolan: 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 that’s moving along. You do have to take into account that the — right now, we have One Sphere, right, which is there is not — I won’t say completely sold out, but it’s doing pretty well. So how much room do I have the — 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 there’s just a question of what’s the what’s the payback for them, what’s the value of it debt? And how much revenue can we build off of their IP.

Operator: Your next question comes from the line of Peter Henderson from Bank of America.

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

James Dolan: Yes, we’re pretty much booked the I mean I think there might be some slots available still in ’27. I don’t think there’s hardly any left in ’26. It might be a week at less than ’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 the artist rigs in the customers, right? And then we’re running the wisdom of ours right now in tandem with those events. So we’re looking for customers who want to come to see us twice on the weekends. And so far, that’s going pretty well.

Ari Danes: We have time for one last caller.

Operator: Our final question comes from the line of David Joyce from Seaport Research Partners.

David Joyce: You made a recent announcement that included the 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 excess of your progress?

James Dolan: That’s a Jen question.

Jennifer Koester: 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 read advertisers like Google and Delta and Lenovo running every day during CES, we also held the second CES keynote at steer in a row. And 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 Lucas’ 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 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 food 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.

Operator: And that concludes our question-and-answer session. I will now turn the call back over to Ari Danes for closing remarks.

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

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