管理層發言
Good morning. Thank you for standing by, and welcome to the Sphere Entertainment Co. Second Quarter 2026 Earnings Conference Call. I would now like to turn the call over to Ari Danes, Investor Relations. Ari, please go ahead.
Thank you. Good morning, and welcome to Sphere Entertainment's Second Quarter 2026 Earnings Conference Call. Today's call will begin with our Executive Chairman and CEO, Jim Dolan, who will provide an update on our 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'll 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.
Thank you, Ari, and good morning, everyone. For today's call, I'd like to discuss our progress in two important areas of the business: expanding the Sphere venue footprint around the world and developing a diverse slate of original content. In Abu Dhabi, we recently announced the Sphere site location on Yas Island. Construction for Sphere is now underway and is expected to be completed by the end of 2029. Here in the U.S., we continue to advance our plans for Sphere at National Harbor. We expect to complete an agreement for third-party financing in the near term. This funding would be in addition to $200 million in state, local and private incentives. The contemplated structure would give us full operational control of the venue day-to-day. This would also allow us to consolidate the venue's financials and retain more of its economics. In addition, we recently filed our detailed site plan with Prince George's County as we work towards securing necessary permits.
We continue to believe the venue could be open in under four years. We also remain in discussions with a significant number of markets regarding large and small-scale Spheres. At the same time, we continue to focus on developing a diverse slate of original experiences. Last month, we announced a new experience, the Rocky Horror Picture Show at Sphere, which we expect to debut in 2027. Bringing this production to Sphere will expand our content slate to a new genre. It also allows us to extend Sphere Experience showings later into the evening, increasing the utilization of the venue. Meanwhile, The Wizard of Oz at Sphere has now sold nearly 3.6 million tickets for approximately $450 million in ticket sales. We also remain in discussion with IP holders for other potential Sphere experiences. We will keep you updated on our progress. Turning briefly to MSG Networks. Yesterday, we announced the partnership making DAZN our exclusive direct-to-consumer streaming home.
We believe both our subscribers and content will benefit from DAZN's state-of-the-art platform. We have also continued to reduce the amount of debt at MSG Networks, which was down to $116 million at quarter end. As a reminder, that debt is nonrecourse to Sphere. So in summary, we are advancing plans across key areas of our business as we make headway towards our long-term vision for a global network of Sphere venues. And with that, I'll turn the call over to Robert, who will take you through our financial results.
Thank you, Jim, and good morning, everyone. For the June quarter, we generated total company revenues of $313.6 million and adjusted operating income of $50.9 million. Our Sphere segment generated revenues of $226.4 million, an increase of nearly 30% compared to the prior year period. This growth was mainly driven by the Sphere experience, primarily reflecting higher virtual revenues for The Wizard of Oz at Sphere. As Jim mentioned, The Wizard of Oz is performing well as it nears its one-year anniversary. We also continue to work on both The Wizard of Oz 2.0, an enhanced version of the production, as well as Postcard from Earth. Turning back to our results for the quarter, we also saw revenue growth in Exosphere advertising, sponsorship and suite license fees and concert residencies. This was partially offset by the impact of fewer brand events held at Sphere year-over-year. Second quarter adjusted operating income for our Sphere segment was $39.9 million as compared to $24.9 million in the prior year quarter.
This reflected the increase in revenues, partially offset by higher SG&A expenses and direct operating expenses. The increase in direct operating expenses includes the impact of The Wizard of Oz at Sphere, mainly a result of higher per-show expenses. This was partially offset by lower expenses from brand events and other cost decreases. SG&A expenses for the second quarter were $125.6 million, an increase of $29.2 million. This increase includes the impact of mark-to-market adjustments for certain share-based compensation awards, driven by the appreciation in the company's stock price during the quarter. I would also note that we cash settled over half of these awards during the quarter. Therefore, all else being equal, the mark-to-market impact will be lessened in future periods. Turning to MSG Networks. The segment generated $87.3 million in revenues and $11 million in AOI in the second quarter.
This compares to $107.1 million in revenues and $36.5 million in AOI in the prior year period. These year-over-year results reflect an approximately 16.5% decrease in subscribers as well as a decrease in advertising revenue. These results also reflect the impact of retroactive adjustments for the 2024-25 season recorded in the prior year second quarter related to amendments for media rights agreements with MSG Sports and certain other professional teams. Turning to our balance sheet. As of June 30, our Sphere business had approximately $534 million of unrestricted cash and cash equivalents, $259 million in convertible debt and the $275 million term loan related to Sphere in Las Vegas. At MSG Networks, as of June 30, net debt was approximately $98 million. As Jim mentioned, this included $116 million outstanding on the MSG Networks term loan, which again is debt that is recourse only to MSG Networks. And with that, we'll now open the call for questions.
分析師問答
Your first question comes from the line of David Karnovsky with JPMorgan.
Jim, with Wizard of Oz, can you discuss how you see the progression of attendance from launch until now in terms of seasonality and maybe getting past that initial period of demand? And then how does that inform your view of the show from here as you lap the anniversary and look to put enhancements into the experience?
The show is performing very, very well. And it is subject to the typical seasonality—everything in Vegas is seasonal—and we're in the middle of the summer, which is definitely the low season for it. But it's still doing very, very well. I anticipate we could run Wizard of Oz for a long, long time and do very well with it. Our plans really are to come out with the new version of Wizard of Oz sometime we hope in September, and then in March to add in Rocky Horror Picture Show, which will give us the ability to service families in the daytime and then a more adult audience in the evening. And I think that's going to work very well. If you take a look at the show O in Las Vegas, which has been running now for over 30 years, it doesn't seem like the appetite for that show has diminished at all. I think Wiz could easily go ten years, playing in other Spheres, occasionally playing in Vegas, et cetera. I think there's always going to be an audience for that product. That's one of the reasons that we picked it—it's so universally loved and it has tremendous legs—and we'll have some fun modifications and additions that we'll make starting for 2.0, including that you're going to go for a ride with a witch and new kinds of flying monkeys. So I think you'll see that the product remains robust in its demand. And if I could make more Wizard of Oz, I definitely would.
Your next question comes from the line of Stephen Laszczyk with Goldman Sachs.
Jim, you mentioned Rocky Horror represents a different genre of content for the Sphere. It also gives you the opportunity to show content on a different schedule compared to what you've historically shown. I was wondering if you could maybe talk a little bit more about this, how investors should think about the role of complementary IP within the broader content strategy as well as the opportunity it could afford you to increase show count over time at the Sphere.
I think Rocky Horror Picture Show is going to be a smash—'take a step to the left.' It's a little like movie theaters in a way in that the content fits the daytime and the time you're showing it. But the whole business equation and strategy here is to create reusable content that goes from Sphere to Sphere. Nobody in Abu Dhabi has seen Rocky Horror Picture Show, so I'm curious how they're going to receive that. The Wiz is the same with National Harbor, et cetera. As we continue to build out Spheres, our ability to create and monetize content also increases. I really would like to get ahead of that as much as we can before the openings of these venues because I think it will make their results even more robust.
Your next question comes from the line of Brandon Ross with LightShed.
Jim, regardless of the seasonality and whatever it is that's impacting Oz, I think we can all agree it's been a pretty massive hit and the concert calendar in Vegas is already really full. So with that in mind, can you take a step back and talk about what the growth levers are for the Las Vegas Sphere specifically in 2027 and beyond?
Sure. You're right about concerts. We're not shy of demand from artists to come play at Sphere. We have some great artists coming up, which I'm not going to name today. The whole strategy behind the creation of Sphere is utilization of the venue. That's where we look at growth. The Garden runs approximately 200-plus events a year and is hamstrung by the need to load in and load out for different shows. When we created Sphere and the business model around it, it was all about increasing utilization through our own IP and our own content. We're going to continue to pursue that. I don't think we've refined the model to the point where we've maximized the revenue potential. I think we have new products—some we haven't talked about and won't talk about at this point—that will increase utilization. That's where I think the growth will come.
Your next question comes from the line of Matt Condon with Citizens Bank.
Jim, in terms of original content, do you have the capacity to take on additional projects? And has the time to market gotten shorter since the development of The Wizard of Oz? And just relatedly, how many Sphere experiences could we expect to be playing in the venue by the end of 2027?
That's a good question. The first part is really about how quickly and efficiently we make content. We are definitely getting faster and becoming more efficient. Rocky Horror is a good example. Wizard of Oz took about two years to make and Rocky Horror Picture Show is going to take less than 12 months. We're getting better, particularly when it comes to the use of AI and the production techniques we developed for Wizard of Oz. So I expect we'll be able to create more content less expensively and more efficiently. That will bode well for Vegas and for other Spheres. How many by the end of '27? It's a guess, but I'd say three to four.
Your next question comes from the line of Ryan Sigdahl with Craig-Hallum.
Jim, on National Harbor, can you explain why you think the OpCo model is advantageous versus a traditional franchise model? And then second to that, if you have interest in pursuing a similar structure for future Spheres and if there could be situations where you maybe pursue multiple different operating models.
I'll answer part of this and David will answer the other part. Do we think National Harbor is the optimal model? It's the model that works for National Harbor. The idea here is to build as many of them as quickly as we can because that helps the overall business strategy. I'll let David talk about what we're thinking about with National Harbor.
Sure. As Jim mentioned, as we look at the overall expansion strategy, we analyzed several financing structures. We see a number of benefits for what we call a build-to-suit and leaseback structure for National Harbor—similar to a sale leaseback, but it's really build-to-suit because it's new construction. First, the third-party partner would fund the total construction of the venue. While that third party will own the venue, we will enter into a long-term lease and have day-to-day operational control of the venue, which we think is really important given our business in Las Vegas and leveraging our management team and operational structure. We'll also fully consolidate the National Harbor results on our financials. Most importantly, this type of financing will enable us to retain more of the AOI and also the potential upside in the future. As Jim mentioned, as we look at other structures, it could be a combination. It could be a franchise strategy, it could be the build-to-suit, it could be a minority equity investment, and it could also include debt structures. So we will look at each one individually to maximize our returns.
I think the thing about these structures is that we're looking to go fast and build as many as we can. By utilizing multiple structures, our availability of capital increases. It's not unlimited, but it's quite robust. That helps us move the strategy along.
If I may ask one quick follow-up on that. You own Vegas, MSG owns the Garden. They benefited from value appreciation of the real estate of the property. There's a ton of IP in the Spheres. I guess, why not self-finance this if you want to operate it and keep control of it?
We're not ruling that out. You have to look at each project. If we were to build a Sphere in New York, I think the likelihood is we would want to own it, maybe in conjunction with MSGE. But our goal is to go fast and build as many as we can. That has to be considered when you look at the structure. I really want five years from now, or five to six years from now, to have five venues up or more and have another five that are under construction. If we can figure out how to construct them faster, which we are working on all the time, we'll do that as well.
Your next question comes from the line of Peter Henderson with Bank of America.
First, let me congratulate you on the next championship, Jim. And then on Sphere, can you just provide some color on the progress of expansion discussions? And do you think there's a possibility that there's another expansion announcement coming in 2026? Or is it more likely to be a 2027 event?
I'll answer the second part first. Yes, I'm hopeful. I think it's very possible we'll have another announcement this year. We're in pretty serious discussions with a couple of different marketplaces. If it's not by the end of this year, certainly by the first quarter—I would be disappointed if we didn't have something by the first quarter. On the Knicks, we're going to have the most fun season as fans that we've ever had in my ownership. The team is coming back pretty much intact. You know who they are now. You know each one of those personalities. You're going to be with them on every dribble, every basket, every free throw, and it should just be a lot of fun. If it turns out really well, we'll do another parade somewhere in New York.
Your next question comes from the line of Peter Supino with Wolfe Research.
I wondered if you would update us on your capacity to develop new Spheres and play the various consulting or principal roles that you would play in new Spheres, whether they be franchised or owned. The bottom line is, can you still support the simultaneous development of five or six Spheres, which I think was your vision in the past? And the second question just relates to National Harbor. Could you sort of take us on a history lesson of how you're thinking about financing National Harbor has evolved? When we started, I think it was likely to be a version of a franchise arrangement, and now it sounds like a principal structure. I'm wondering what you learned on that journey and what we can extrapolate to the future.
Was there a question in there? David, do you want to?
Yes, no problem. In terms of expansion and the ability to work on five to six Spheres simultaneously, as we have said on prior calls, we have the capacity to do that. We have an in-house development and construction team that is not only working on the current ones we have. In Abu Dhabi, we consult on that build; they are constructing it and building it, but we have a consulting team internal that's working on it because it's such a bespoke venue. National Harbor our team will be building, and we think they can obviously take on another two, three, four over the coming 1.5 years. So as Jim mentioned, to have five Spheres opened in five-plus years is our goal. And to have other ones in construction at that time, we think we have the capacity to do that. With respect to your question on National Harbor and financing, we did answer that before. The sale leaseback or build-to-suit structure that we're talking about, we think is the right one for National Harbor.
With Abu Dhabi, the franchise model was the right one—there they are funding and they'll own the entire Sphere in a market that's across the globe from us. We have a great partnership with them, and we'll have franchise fees and royalties associated with it. So it will be market-by-market. Domestically, you'll likely see more owned or sale leaseback structures with full operational control. Internationally, it will depend on the market—Middle East is different than Asia versus Europe. We'll take each one individually. From a financing perspective, it all depends on maximizing ROI.
In terms of the capacity to build, what's interesting to look at is the difference between National Harbor and Abu Dhabi. What we're doing in Abu Dhabi is our design and we're helping oversee construction, but there's a general contractor there, as there are general contractors around the world. Our ability to access that part of the build relies on the construction marketplace, which is robust. If we had three or four Spheres under construction, I'd anticipate different local contractors for each. The choke point for us going from Vegas to other Spheres has been the design work and the whole pipeline of going from materials to construction to labor. That's what we've been working on consistently since we opened Sphere. We've settled down the model—things like a tech stack are the same in Abu Dhabi, National Harbor and Vegas—so once you know how to do it and you have the design, you can go faster. That's where we're focused.
I think it's worth revisiting the question on National Harbor. There's a consensus among investors or at least a view that the strategy at National Harbor initially was to bring in an equity partner and that today, the strategy focuses on bringing in debt financing and owning all of the equity. Is that perception among investors inaccurate?
Yes. If you're looking for a cookie-cutter approach, we're not going to use one. We're going to look at each project. I love the idea of having local investors— they add strategic value. For instance, National Harbor is next to the convention center and hotel/casino complex, and strategic partners there can add value even if they're not equity owners. We're focused on getting as many of these started and built as we can. We're not tied to just one method of financing; we'll be as efficient and strategic with our capital as we can be.
Your next question comes from the line of David Joyce with Seaport.
You had nice growth in the sponsorship signage and Exosphere related revenue line. What were some drivers there? And could you give us your thoughts on the momentum and the next few quarters' outlook?
I'm passing that one to my Chief Operating Officer. Jen?
Thanks, Jim. Thanks, David. We did have significant growth in this category this quarter, and we're really seeing the momentum in this side of the business continue. In addition to growth opportunity in terms of venue utilization, we also see the Exosphere and sponsorship business as a true growth driver for us in the next few quarters and into next year. Some of the things that continue to drive growth are large brands coming in and spending dollars with us for impactful moments—brands like Verizon coming in for the World Cup or Dolby doing a takeover when they were in Vegas for their multi-day summit. We've got a very strong pipeline of official top partnerships in the works. That means we'll continue to secure more multi-year sponsorship deals. We remain on track for growth in 2026, and I think we have a good pipeline for 2027 to continue to drive growth.
We have reached the end of the Q&A session. I will now turn the call back to Ari for closing remarks.
Thank you all for joining us. We look forward to speaking with you on our third quarter earnings call. Have a good day.
This concludes today's call. Thank you for attending. You may now disconnect.