Operator:

Good morning, and thank you for standing by. Welcome to the Sphere Entertainment Company Second Quarter 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 Second Quarter 2025 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 5 and 6 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 Lawrence Dolan: Thank you, Ari, and good morning, everyone. As we said from the start, our goal was to design and operate a venue that's busy 365 days a year with multiple events on most days. And while we started in Las Vegas, our strategy has always included a global network of Sphere venues. This year, our priorities have been to continue enhancing our operating model in Las Vegas, drive long-term profitability for the business and advance our plans to bring Sphere to Abu Dhabi and additional markets around the world. Our original content category, The Sphere Experience, has been one of the key profit drivers of the business, and we remain focused on developing a diverse slate. Our next experience, The Wizard of Oz at Sphere, will be the best example to date of experiential content in this new media. We will be utilizing innovative technologies like AI. And that innovation will continue with the production of our next Sphere Experience from the Edge, which we expect to debut in 2026. In terms of early demand for The Wizard of Oz at Sphere, we have sold over 120,000 tickets to date and expect to reach 200,000 by the opening later this month. We're also seeing increasing demand from artists across a variety of genres, which are driving renewed interest in their music by playing Sphere in Las Vegas. We have continued to add shows to our calendar and now expect to host more than 100 concerts this year, up from 70 in 2024. We are also making progress building a recurring base of revenues. In terms of corporate events, this past June, Hewlett Packard held a keynote at Sphere for the second consecutive year, and we're now in discussion with a number of companies that have held events at Sphere and are looking to return. We are also expanding our roster of advertisers on the Exosphere. This includes securing advertising commitments as part of a new multiyear sponsorship. With regards to our expansion plans, we recently entered into agreements related to the construction, development and operation of Sphere Abu Dhabi and are now finalizing the preconstruction phase with the Department of Culture and Tourism. At the same time, discussions are ongoing with a number of other international markets regarding large-scale spheres. In addition, we have now completed our design and business model for small-scale spheres, which can be built faster and at lower cost and are already in the market having discussions with potential partners. I will now turn the call over to Robert, who will take you through our financial results and MSG Networks debt restructuring. Robert Langer: Thank you, Jim, and good morning, everyone. For the June quarter, we generated total company revenues of $282.7 million and adjusted operating income of $61.5 million. Our Sphere segment generated revenues of $175.6 million as compared to $151.2 million in the prior year period. This growth was mainly driven by an increase in event-related revenues with additional corporate events and 9 additional residency shows held in the current year quarter, partially offset by the absence of a marquee sporting event. It also reflects the impact of revenues related to bringing the world's second Sphere to Abu Dhabi. These revenue increases were offset by lower revenues from the Sphere Experience, which was primarily due to lower average per- show revenues, offset by an increase in the number of total performances. Adjusted operating income for our Sphere segment was $24.9 million and increased $30.4 million year-over-year. 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 event-related expenses and higher expenses associated with the Sphere experience, both driven by an increase in the number of events year-over-year. SG&A expenses for the June quarter were $96.4 million, a decrease of $5.7 million year-over-year. This includes the impact of the company's focus on driving cost efficiencies this year. As Jim discussed, we are making progress on executing on our core priorities to drive profitable growth at our Sphere segment. While we are still a nascent business where results can fluctuate quarter-to-quarter, we remain pleased with our overall trajectory and continue to see significant long-term growth potential at Sphere. Turning to MSG Networks. The segment generated $107.1 million in revenues and $36.5 million in AOI in the June quarter. This compares to $122.2 million in revenues and $31.1 million in AOI in the prior year period. The decrease in revenues stems from lower distribution revenue, driven by an approximately 13% decrease in subscribers, partially offset by the impact of higher affiliation rates. The increase in AOI reflects lower direct operating expenses, partially offset by the decrease in revenues and higher SG&A expenses. On June 27, MSG Networks completed the restructuring of its credit facilities. In connection with that restructuring, MSG Networks also completed amendments to its media rights agreements with MSG Sports and certain other professional sports teams. Direct operating expenses include the impact of reduction in media rights fees as a result of these amendments, including retroactive adjustments for the 2024, '25 season recorded in the second quarter. Turning to our balance sheet. Under MSG Networks' debt restructuring in June, its prior $804 million term loan was replaced with a new $210 million term loan facility, which will mature in December 2029. This debt remains nonrecourse to the parent company. Upon closing, MSG Networks also made a cash payment of $80 million to the lenders, which was comprised of $65 million from MSG Networks and a $15 million capital contribution from the company. After MSG Networks' debt restructuring, our net debt at the end of the quarter was down to approximately $388 million, which reflects $356 million of unrestricted cash and $744 million in principal debt outstanding. In addition to MSG Networks' new term loan, our debt balance at quarter end included $259 million in convertible debt and a $275 million credit facility related to Sphere in Las Vegas. And with that, we will now open the call for questions. Operator: [Operator Instructions] Your first question comes from Brandon Ross with LightShed Partners. Brandon A Ross: Jim, you finished your prepared remarks by saying you'd completed your plans for the smaller spheres. I was hoping you could tell us more about them. Anything you want to share, including the business model, the cost, potential markets and thoughts on who might be the right partners for that? James Lawrence Dolan: Okay. Well, elongated question. The smaller spheres are -- the important thing was the design, right, and at least I thought it was. And the design of these spheres is quite similar to our large Sphere in Vegas with a couple of improvements. But the business model is quite similar, right, which is to keep the venue busy 365 days a year. All the content that's created for Sphere in Vegas and eventually Abu Dhabi will also play in any of these small spheres. We have completed the design of it. We've also completed the business model, and the business model is designed along a franchise kind of approach. So we are out in the marketplace now, beginning to expose potential investors to the business model and looking at different locations for small spheres. These things -- these spheres will be less expensive, much less expensive than Las Vegas was. They'll also be faster, meaning they can get built faster. My hope would be that we could build a small sphere in a little over 2 years from when we break ground. And so we're starting and it all does follow the same model. The content, which is created out of Sphere Studios will be, as I said, playable in all spheres. So at some point, you will -- as we build these, you will see Postcards From Earth, you will see Wizard of Oz, you will see From The Edge and other products that we create for Large Sphere will play in the small spheres, too. Brandon A Ross: Okay. And just to clarify, you said that they would be on the franchise model. So that means capital light? Or you guys going to contribute capital to the mini spheres? James Lawrence Dolan: Yes. We think capital light. I won't completely eliminate the notion that we'll have some stub investment, et cetera, in order to help it. But we're -- our strategy really is to get this thing moving and to open a lot of the -- so no, we won't be investing, but -- and we shouldn't. We're -- we've proven out the model with Vegas. We'll prove it out again in the other ones and it should become the easy to invest in because you'll have a pretty solid path going forward. Operator: Your next question comes from David Karnovsky with JPMorgan. David Karnovsky: Jim, you noted tickets sold to date for Wizards of Oz, but can you help provide some context around that, maybe how the presales compared to Postcard? And maybe stepping back, what just kind of underlies your confidence generally about transitioning the audiences to the new content? James Lawrence Dolan: Sure. Look, the -- up until this point, we've sold about -- actually today, I think we're at 127,000. And we're entering that period that we're quite familiar with from the Christmas Spectacular show, which is that in the 3 weeks prior to the event, right, better than 50% of the tickets get sold. Now if you apply the same ratios to Wizard of Oz, we should start to actually see ticket sales ramp up from here, and that's how our marketing is set up, et cetera. But I mean, look, we've got to open the show and like -- a little bit like Postcards From Earth, nobody quite knows what they're going to see until we open it. We're very proud of the product. We think it's groundbreaking. We think that it's going to draw a lot of attention and that people who come to Vegas are going to want to go. Right now, the Sphere sees 7% of the total visitors to Las Vegas see the Sphere. I think that we should look to get well over 10% with the Wizard of Oz and that just turns into more success for the product. David Karnovsky: Once [ WoZ ] is live, I'm just curious how you're thinking about the library content. You referenced it a little bit before in the context of smaller spheres. But how would you think about the amount of V-U2 or Postcard shows from here? James Lawrence Dolan: Say again, please. David Karnovsky: Just wondering how you're thinking about utilizing your existing shows in U2 and Postcard? James Lawrence Dolan: So look, all of the shows that we've created so far, right, are created with the notion of them being evergreen. So it would not surprise me if 10 years from now in Abu Dhabi, you go and you could see us showing a Postcard From Earth. That's entirely -- that's actually quite likely. As there is -- really, we're the only ones who are creating experiential immersive content like we are. It's -- the -- I think those products will get used again and again as long as they're not dated, and they're not. They -- and as we get better at them, we'll have more of a slate for each one of the spheres. Likely, you'll see certain days, right, in a small sphere like Fridays Wizard of Oz day, Saturday is from the Edge day and interspersed with corporates and probably some concerts. Operator: Your next question comes from Stephen Laszczyk with Goldman Sachs. Antares Mercedes Tobelem: This is Antares, on for Stephen. A couple on concert residencies. First, as you're looking into 2026, you've had some good diversification this year of the genre types that we've seen with Backstreet and Zac Brown. Do you expect more new genres to come next year? And then maybe longer term, if you could touch on what the upper limit might be for these residencies, you mentioned over 100 this year. Just wondering what that might look like over the next year or 2? James Lawrence Dolan: Well, there are -- look, there are some key things to that. Probably, most important to us is that the way the residencies are constructed, the way the performances are constructed that we're able to run things like Wizard of Oz 2 or 3 times during the day and then shift into the concert in the evening and variations off of that theme. So as long as we can do that, we can keep on taking more concerts. But you should understand the way the business was designed was to create contention between the different acts that appear at the Sphere, between Wizard of Oz and the Backstreet Boys and the Eagles and even corporates, et cetera. They're all buying for days, right, and screen time. And we will most likely decide that based on what gets us the best grosses. So the Wizard of Oz is going to be interesting to watch because it could very well be that the Wizard of Oz is doing so well that it nudges out 1 or 2 concerts or a corporate because I wouldn't rent the venue to somebody for $1.5 million or $2 million if I could do $4 million with the product that I already have and has already paid for. So that's the contention and that was by design. So I mean, I will say that that's the big name concerts, right. They do bring in people who haven't been to the Sphere before or interested in the act. And so there's a little bit of loss leader thinking on that, although I wouldn't call it a loss, but maybe a less lead thing on it. But that's what we manage. That's what Jen manages. Operator: Our next question comes from Peter Supino with Wolfe Research. Peter Lawler Supino: I'll try to work through 3 questions with you, if you don't mind. The first is whether you foresee future Sphere Experiences being based on owned IP? Or should we look at the Wizard of Oz as a template? Will you possibly -- or do you intend to have many movies that are recreated for the Sphere? James Lawrence Dolan: That's a very good question because I'm not sure what the answer is yet. I know what's on the slate for the next year. And we're -- I mean, for one thing is Wizard of Oz was not an inexpensive project and on top of which we think it's going to have a high demand. So how long do I run the Wizard of Oz, right? I mean, ultimately, we'll run Wizard of Oz forever, but who gets the screen time, right? Follow-up on Wizard of Oz is a feature called From The Edge, which is very, very different than the Wizard of Oz. It has little or no AI in it, right, but has the -- but utilizes heavily live capture, which will create even more of an experience inside of the Sphere itself. So what comes after that, we're actually talking to several different IP holders and coming up with some of our own IP. I don't think we're really very stuck on who owns the IP. It's more the question of what the cost of the IP is, right? And the Wizard of Oz model is pretty good. We like our deal with Warner Bros. And we think it's -- one of the interesting things about it is pretty much everybody who has come to the Sphere, like all the acts and now I think even Wizard of Oz, that you find a renewed public interest in the IP. So there's a benefit to the IP holder to licensing to the Sphere because they see other revenue streams increase, et cetera, like -- for instance, like the Backstreet Boys appearing at Sphere and then their record sales going up and their bookings going up, et cetera. And [ Grateful Dead ] and others, the same kind of thing that the -- so it's -- so I think we're basically somewhat indifferent to who owns the IP. What we're more focused on is that we put together a great show. Peter Lawler Supino: Following up on that subject of content. Actually, first, the digression. I have a Jimmy Chin coffee table book in my house, and I think you could sell some of those in the lobby of the Sphere after the movie. But the question is, has AI made the production of the Wizard of Oz easier? And how much cheaper and efficient do you think you can recreate films in the future? James Lawrence Dolan: Well, first off, without AI, I don't think we would have done the Wizard of Oz. We couldn't have gotten it to the resolutions. We couldn't have gotten it to immersion levels, et cetera, that we did without Google and their AI. While we're -- but in doing that, we broke a lot of new ground in AI. And I do think that the technology is going to be used again and again. I don't know that it will always be by us. I'd rather doubt it, although we do have first dibs for a while. And then the question is what's the IP, right? I mean, is it gone with the wind, right? Does that have enough appeal to bring in the kind of audiences? I mean it's hard for me to imagine a better product than Wizard of Oz right now, but you never know. And we are in active discussions with lots of IP holders who are interested in seeing their IP turn into this. I will say that the AI for Wizard of Oz was difficult -- difficult for everybody at all, right? Because we did a lot of things for the first time, outpainting resolutions, all the things that go along with using the AI were all done for the first time. So they should be definitely a lot easier the second time. But I don't have any specific plans to tell you about with that. Peter Lawler Supino: All right. And my last question relates to the price of a ticket to the Wizard of Oz. It's a lot higher than a ticket to Postcard From Earth when that went on sale. Could you unpack what gave you the confidence to take prices up? James Lawrence Dolan: Well, look, we're still, I think, either at or below the average of ticket in Las Vegas for the major shows like O and Mystere, et cetera. So I think initially with Postcard From Earth, we wanted to make entry really easy, right, just to get people familiar with the product, to get it being talked about, et cetera. But I think the product has proven itself. I think it's certainly worth the price -- the ticket price. And so that's why we went forward with the pricing. Operator: Your next question comes from Peter Henderson with Bank of America. Peter John Henderson: I want to start with one on Sphere and then I have a follow-up on MSGN. So I just want to touch upon your opening comments around international expansion. Can you provide any additional color on those conversations and whether or not they're in sort of early or advanced stages? And I believe that you mentioned that for the international expansion that you're focused on full-size Spheres and just want to confirm that? James Lawrence Dolan: We'll do both. I don't think we're particularly -- it has to match the market size, right? And market is judged by what the population is in the market to start off with and then things like tourism, et cetera. So you don't want to build a smaller facility that will get overrun. You don't want to build a bigger facility that will get underused. So you kind of got to match it up. As far as the individual markets, we are in discussions with a bunch of different marketplaces. I don't really have a lot more color to add to you today. Maybe at the next quarter's review, we'll have something more to say. Peter John Henderson: Okay. And then on MSG Networks, just wondering with the restructuring now complete, do you have any updated thoughts on the possibility for a strategic transaction there? James Lawrence Dolan: Well, I think that we're considering it, looking at it, trying to figure out the marketplace. I will say that I think we're big believers in a consolidated marketplace with sports. In other words, one place for you to go to, to see all of your teams in your marketplace, that product has a lot of power with the consumer, right? So we're -- we have between us and the YES Network, we have most of the teams, right? I wouldn't mind getting the rest. It's really only one. But in terms of what a transaction like that would look like and what the ownership structures would look like, we don't have enough meat on the bone yet to say. Ari Danes: Operator, we have time for one last caller. Operator: Your final question comes from David Joyce with Seaport Research Partners. David Carl Joyce: A couple, please. Could you please update us on the sponsorship and advertising trajectory? Any thoughts on the forward demand and the progress on the Exosphere? Granted it was down 3% in the quarter, what were the puts and takes on that? And then maybe you could tie that into a second question on the Las Vegas overall market visitation being down. What are you seeing in terms of the impact on that for the September quarter? James Lawrence Dolan: I think I'm going to give both of those to Jen. Jennifer Koester: Let me take your first one, the forward demand on Exosphere and sponsorship. So we're continuing to make progress on our evolving go-to-market approach and establishing this recurring book of business when we think about sponsors and advertisers on the Exosphere. We've seen some early successes with our new packages, including 60-second spots that gives our advertisers even more exposure. We've also been rolling out some more comprehensive in-venue packages that includes IPTVs, [ Atrium Services ]. And again, this is a complementary to our Exosphere advertising and gives just even more value to our partners. During this quarter, we also secured a deal with a media agency to drive upfront ad buys. Again, that's directly going against the priority to build more recurring revenue base. To that point as well, we've expanded our roster of ad sponsors and have announced several multiyear sponsorship agreements. So I mean, I think we're making progress here, and we continue to see significant demand and growth in that area of the business. James Lawrence Dolan: I will say that if you remember, we changed our representation, right, at the beginning of this year. So it almost felt like we were starting from ground zero in some way. We have not fully staffed that group, although we're well on our way to doing it. So I think building a sales force, having been a salesman for a long time, is not an easy thing to do and getting it rolling, et cetera. And I think we're making really good progress. Jennifer Koester: Then your second question on impact of Las Vegas visitation. So we're mindful of the Vegas visitation trends. But as Jim said before, we are focused on positioning the business for long-term growth. And a lot of the priorities that we've been focused on the past 2 quarters, building original experience slate, diversifying artists in the venue and establishing a recurring book of business is really where our focus is. And as a nascent business, you're going to see fluctuations quarter-to-quarter, and that's going to vary based on a number of factors, whether end market or not. So that being said, we remain pleased with the overall trajectory of the business, and we're going to continue to see significant long-term growth. Operator: That concludes our Q&A session. I'll now turn the conference back over to Ari Danes for closing remarks. Ari Danes: Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day. Operator: This concludes today's conference call. You may now disconnect.