Sphere Entertainment (SPHR) 22 Aug 232023 Q4 Earnings call transcript

Good morning. Thank you for standing by and welcome to the Sphere Entertainment Company Fiscal 2023 Fourth Quarter and Year-End 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 Danes, Investor Relations. ahead. go Please

who morning, from review fourth results President Good CEO will to Entertainment's followed of Jim Sphere with Treasurer, Sphere. update Ranji, Thank will the This President, earnings Vice Executive Officer and our and conference XXXX be we Dolan, CEO, MSG and quarter Executive and an call Gautam provide prepared financial questions. call. fiscal Greenberg, will the an Chief our conclude will of on update period. After you. by Chairman welcome a will open Andrea Today's begin with our for call Networks; and our Financial remarks, then earnings for up

today's the available earnings release, do you If it Investors website. of of in our corporate not have copy section is a

those take obligation the Please and performance Litigation such could statements of not may within Private contain cause uncertainties Act guarantees meaning to discussion forward-looking that forward-looking of forward-looking for Today's the Securities involve risks of call. results may uncertainties. risks of discussed a from disclaims the to XXXX. in filings any materially results differ refer Any discussion forward-looking and statements. SEC the company are Reform of the that following. And statements during this or note and to the company's update actual any Please with be statements future

financial income we earnings a consolidated operating AOI, and today's On of of to reconciliation release, provide income or pages and measure. operating X X non-GAAP of a statements adjusted operations

over call turn I that, with And now Jim. the will to

have starting embark leading our June, in will here in next the in MSG everyone. recently majority traditional May interest venue two-thirds of And finalized Group the media morning, of technology generation our retained live Entertainment, next for supported XX% growth followed a equity company. believe important today Tao I MSG of Sphere, that spinoff Hospitality. chapter and as we Ari, to plans sale you, transactions, by These was sold we a of Thank be disrupt number our This am our the completed in which and April. with transactions We've interest entertainment was medium as approximately good in model. on entertainment Entertainment. we pleased a

concert-grade remain the on systems We XD installation advanced the September, open of includes Sphere vibration, And construction interior wind, technologies, scent, to as and at such and system, share June, on end this spaces an the the plane, primary finished the our majority first grounds. venue track our Sphere as In technological I'd finishing enable display like to changing such multisensory that touches That Immersive towards of exterior and month, we Las Sound, in of our progress next anticipated completed the that currently technologies generation as inside of putting interior testing the immersive well temperatures. and opening. we our and effects are highly Vegas venue. audio as the

enable and a immersive we essentially new which these a fully medium, will senses experiential. technologies This together, the experience. Taken engage is call

come day. Experience. takes The XXX will it busy with Experience days be in a its time Sphere designed we parts. full events to multiple The Sphere While potential, debut two we to have some per year October reach Sphere On will X,

The animatronic guests and the where then printing is ideal experience than visitor through impact XX holographs, guided series the the of and continue this content. consists replica video begin utilize be cinematic more chronicle Darren will of the development robots creation venue exhibits translucent market take of technology's It will be will with metaverse on a Gutenberg's will beam journey And of unique and and view local forming press part from with first of by a million in XX-foot will this through you a of annually Las and that director The a development Award that potential. It wall. Academy Aronofsky. to the immersed nominated Vegas a debut fully visitors sound bowl over in residents, multisensory million main X AI.

addition variety plan types, to The to wide In concert event Sphere a Experience, residencies. host we of including

shows. on aware, are the likely XXth UX of venue you their As band the September open rock XX will first with global

We fiscal which expect take slated to are to residencies year. place later shortly, announce this additional

with Grand exterior taking marquee also takeover well will first X's as FX watching host will Sphere's part be as to Vegas a millions the in track. of around feature of inaugural world. of have and fans events November Formula Las our multi-day will This with prominently place Prix. Sphere sporting venue opportunity events corporate well profile as as to the as race high the interior, showcase Sphere the a

more now sharing Our to calendar in the of and coming look in event forward place schedule we the months. the is through calendar 'XX on year remainder

Another advertising led number the It coverage and Sphere's the date, our with a skyline. featured our across as range grow of generated a X capabilities reach unveiled Last shows total the will content Exosphere. over on were announcements up world was content. engagement and Exosphere's significant to media. and July month, new that shared estimated by the dynamic social through the opportunity in widely that continue creative increase X is media audiences we billion, is sponsorship exterior, that lit To

seen Following inbound we've our a Exosphere's partners. advertisers in capabilities, from demonstration significant increase interest potential of marketing and the

VIP suites, as will In terms well hospitality of premium in Vegas spaces. hospitality offerings, as unique other XX Sphere Las have

are a progress license agreements making suites this in goal. and these multi-year of number towards to expect We

it never will brand seen medium, and world storm. new, take believe Sphere we summary, before In is the by

is Las of next many the We are for hope excited first month's opening of in Spheres. what we Vegas

guests, Sphere of over unique advertisers, the expect its the all get to as artists, capabilities. confident not sponsors economic will full right time from experience we're start, should reach we its potential You venue but and that there and

will that, to over turn And Andrea. now I call the with

Thank you, morning. Jim, and good

completed entertainment we a we highlighted and from programming, for fiscal coverage proud postseason teams, are back supported streaming live MSG+. on the We SportsZone, As with year, channel FC new betting our Rangers, games, hundreds debut platforms season past across of slate and sports NHL TV were free NBA extensive casts this look MSG of the authenticated including direct-to-consumer another have Knicks largest Islanders, with most across XX several first-round exceptional by distributors pleased also broadcasts Devils and have five games, at content streaming Rangers of including delivered our recently, telecasts programming to Knicks, offering and year of sports 'XX, and bet our of digital launch ad and to diverse Gotham our and the and regular of renewals one affiliates. expanded new our soccer to

Turning to our fiscal financial 'XX. performance for

in sports and increased financial of delivered services. and of That was benefited reflected We strong advertising. higher our particularly rate single advertising fiscal growth ongoing well from game of non-ratings revenue and core category from the impact driven season, categories 'XX, of NHL per advertising the well returning strong subscriber in affiliate regular teams impact content. run as aggregate advertising branded the the which again as declines, as gaming, the as impact our in advertisers our included growth record for during NBA the auto by demand playoffs, we further While revenue as revenues, once based largest initiatives, such

resulted impact With meaningful which year, in of respect just the cost operating calendar to cost the we the annual business implemented forward. positioned of in ways our also believe beginning results has reduction which now adjusted income, reflect But of program was savings. our is this better we the going at one

direct-to-consumer free earlier, mentioned MSG+ in MSG+, the now traditional to TV TV our millions our of streaming charge I available operators who a not our subscribers we streaming which networks us reach launched allows MSG linear As in of replacing GO authenticated to package. region do is authenticated product. of product, participating also as through June, receive our home

seamless of our season. following new ad viewership as strong users on subscribers, MSG+ high product was foundation most all-time engaged for revenue installed update, past this establishing GO these For of a MSG a levels app and

in believe add We annual have do interest receive network, our significant for this its games subscription $XX Similar subscribing well to purchase other DXC each, a $XXX. we for any who and to option conducted purchasing individual and price opportunities. have reinforce option will and a traditional for of per monthly offering option as the of by NBA They including directly shows that approximately approximately our all $X.XX MSG+ research the to the games consumer of linear offering kind there that among fans local wider bundle. help for points The that the includes sports MSG single direct-to-consumer regional of also to subscribe two to all These drive MSG+ network. first events programming. will is GO, team as transactions, not our local a I'd features or teams. game to their an telecasts, networks, reach subscription upsell sports live NHL are that value our point entry designed live fans And

authenticated for Also, alike. DXC value devices technology, will place in viewers advertisers and add both wider for efficiencies us and on and has has as creating availability and leverage app such provided subscribers existing unified marketing, allowed staffing, one which to for

NHL and for we As the more of begin our start efforts seasons, in marketing progress and our 'XX, months. NBA on will forward 'XX MSG+ we approach look targeted to sharing the the coming

and to evolving strong in build our are of innovation So the remain year, record while mindful ahead. on of fiscal year we proud programming look sports in media we we'll of our the achievements past track this landscape,

will call that, to now Gautam. the over With turn I

Andrea. Thank you,

completed Group are we fourth as periods of all our discontinued sale quarter, review both presented. during our results. reflected in majority let's Hospitality MSG businesses financial the Now interest of for Tao operations spinoff and Since the the Entertainment fiscal

and Sphere the spinoff through did date the Entertainment corporate for of but includes incur expect to that incur XXth in costs not future discontinued date in periods, the spin addition, certain after did operations. not inclusion In the results April criteria meet does not overhead

well Vegas million as technology and total the month. as revenues in of $XX basis, related company the corporate loss which segment, Sphere and included as costs Sphere loss next of operating operating to content the $XX primarily a the for Las for opening $XXX an overhead million generated adjusted expenses of and million 'XX we quarter. we venue related reflects On fiscal This fourth prepare Studios development, to adjusted associated

operations We expect costs Vegas. in up first 'XX as quarter to ramp Las we in increase Sphere operating fiscal the

takeover in the the run, in multi-month November. Postcard With debut Sphere's will to multi-day from our on featuring on and show results our The including begin of fiscal impact really Experience UX's venue quarter, XXth, Formula financial opening September Earth second X's Sphere

generated in Turning to partially segment AOI and the prior revenues XX% year respectively quarter, in compared the The affiliate and fees decreases reflected MSG costs. the in $XX Networks, rights and million lower million $XXX decrease marketing period. AOI lower and expenses, to primarily as by advertising X% in offset revenue higher of

fiscal continued Networks we ahead subscriber 'XX, base, rate launch offset ongoing of direct-to-consumer expect initiatives. the across and As to expectation of the impact savings and look affiliate advertising MSG impact cost traditional increases to declines run results rate strong we demand, by the our reflect segment our for partially

sheet. to Turning our balance

had equivalents debt approximately and As cash cash was $XXX approximately unrestricted of XXth, of balance we August billion. our $X.X and million

retained shares of X.X the approximately sale includes term the million draw repaid from have from Entertainment, June. million subsequent drew which quarter. balance using benefit It of in of shares. the Our we $XXX loan also proceeds then, million million to of MSGE Since MSG the from approximately delayed the on balance in X.X we cash Entertainment benefits our from MSG $XX proceeds end

closing MSGE in based is was of million interest on worth XXth million X.X which the that approximately shares, date. price remaining Our August $XXX as now on

$XX the with costs XXth, construction for construction which in Las paid the is The final majority received work expect billion. Finally, August date of billion, us, Sphere project now costs $X.X $X.XX net approximately of Venetian. for from to million project Through behind to we Vegas approximately be

call With now back I over Ari. to turn that, the will

Thank you, open up Gautam. Operator, the call can for please? we questions,

LightShed Instructions] Partners. your from [Operator Ross question comes Certainly. first from line And the of Brandon

explain range number Jim, a forward. you've initial above sense makes an on an call we in you business. engage in the you keep budget announced CapEx-light to had a Sphere. transactions additional mentioned The of overhead results to believe this remarks? it appropriate will strategic came earnings show you and Spheres generate And the in? given you since haven't And project significant return, the of those that you forward in will and moving Can had the investment company? here, for today's guess from the level that support Spheres then investment be the Is put prepared of in amount you to I going overhead why

Okay.

a Let's will complicated that not is spending anticipate I confess do very that billion. you see. the to But believe $X.X investment warranted. That's did question. we I

I of is it's to We really also that And we're changing But the in what now is notion call think business didn't And right model. anticipate shape. venues. used -- good COVID. is model the that currently operate built on model look, entertainment the basically landlord still a I

instance, building, a the XX they're occupies much nights rest comes you're to they it. million XX out only generally ticket only in get team, tenants year, much The from revenue, the of time as may right, You $X you you for regardless in, have your your fee. or million make, but stream the build if limited renting but and a act have rental a you revenue $X and first as that in,

And limited. which you're play Monday. so that Sunday in come Friday, want On to therefore play Thursday, many generally or Wednesday, top not to the Saturday, want acts of

also So therefore you're your capital and languishing. dark is

days The The is is high a et XXX that someone And content. Sphere we're when changes a that be business. business not cetera, busy Sphere UX, own that will in venue a like model. margin year, we're completely our running bringing because a theoretically

product. investment there's seen great already, you've a into from As that deal numbers the already of

traditional all-in-all, But is I than it it -- what And it's the and your on you opportunity so capital the that's doing. that to harvest significantly be right, agree intensive, with to although now venue is that return we'll it's time capital is model. better with

the was what and question? right? Oh, see, the Let's second overhead,

and Overhead for Yes. CapEx additional…

Right.

all of constructing the really want Don't So, again. more this plan Spheres. a and first on franchise we're of type We at ourselves. built that doing right, off, the -- we one in looking partners model, that terms

period that we've Sphere product I multiple, other architectural and the in for construction X,XXX tell Although marketplaces. less have two area we as marketplaces than allow done of as lot innovation us plans seats into you will goes that multiple designed construction we've a a to the and that low years, of has go

Really to the really -- about some we And the But product. right? cetera. dig I is have precipice about up. pudding and to going actual because in sitting numbers, to be launch this be to this great product, But we're we're pudding in just the et is the to believe the -- we're formula it's having time on into We And that call a here. ought the cetera. say to really et to this conversation and able we show believe proof the business, the in next

of doing significantly construction be right, capital-light, Spheres will overall forward, the going venues so yes, plus company of So to cost we'll for because be additional this go going down. building franchise, the is these

learned knowledge We the putting one. plan on first and ton taking and And we forth most that is out one the coming. expensive. experience The a building it first of

far of cetera. As terms creating the overhead in content, et as

that all to Darren, pretty over to about product all learned And And He's lot, it. to of about -- believe cameras. the of globe. at have because for feeling And We it, of the that be too. advantage went we same positive so the I've those positive right, We I those mean that spectacular Sort on it very learned first that opening content But cameras. cameras the lot. capital-intensive learn some the the thing, to yes, parts those shifting seen over see show. but parts with it's or a lot use you. am starting of we're when had now very talented I already, a director, had money make I'm you'll how the to from invested. soon use to a going we least that it, started. capturing learn it we capital used I but how with to he Sphere time was I world of again it a was have from He capture. are cameras new a

that As a make you been any you additional said on give -- and precipice about you we'll lot sponsorships haven't up. or and you think you you're announced to a there's just money, And when but of I'll inbound us on know yet. interest, shut I residencies little color more Could why then hear?

a some say we've residencies. community will robust be soon pretty to artist the about From had interest Okay. the have from that making additional -- artist I and announcements community real we

of out, shows that to but but as has not UX, in notion that around XX instead have because kinds et we to them artists. trucks, all the They're as their appeal us. about However, cetera, play. to close has XX It's yourself in and profile And and marketplace, maybe do talk come the just residencies. those for ability, LA the to of UX and Las of into to plant having that been Vegas coming sold shows, case are to artists, to I lot to appeals high this mean, travel world a expect with artists

in. concerned at about So I'm getting not talent all

been join reaction Xth, up sponsorship know what partners, from far in part to Understand the July able and experiential lit that interest to and see, for the pursuing we advertisers been And a and it's when is a in with they pretty make see medium And of us, we've be really that that sign sponsors. to an starting But now to in that the of lot we right, that Exosphere form the projects and As future. of people new honestly, have want to it. potential. who sponsorship entertainment investment up and difficult they it's the an sponsors, ignited a interest they come are is as they in product sort haven't goes, that that and public's really -- want of also don't on their we it. to

comes question next Karnovsky your JPMorgan. And from David a of line from

this Hi, for David. is had Ted We on two questions.

on first original time from about like been types And early from Earth? content. question… over should original Postcard Postcard be Earth? we indicators how What The other beyond of have content And thinking for demand second the is

Hang one. on. the first Repeat

Yes.

for content Postcard indicators from other should of what like Postcard thinking time beyond over So have original Earth? how and demand early from Earth, we types about been be

Okay. early mean, it's Well, I for demand.

started we that's even roughly And to any haven't of this eight kind It out of Spectacular. of most feel the the one is We paid the actually runs end the of marketing. We doing kind look businesses part at our start will shows of uniquely month. maybe towards business because weeks. Christmas this XXX there we're similar of qualified in

for So like But amount it pretty to same we Sphere. that, volume the in until planning a the has don't opening itself. you are see event the ticket close actual with that generally of demand get product the you

So the tickets model same in the with for that three last the gets that XX% expect the kind sold we than to. of Christmas of in Sphere know Vegas. Spectacular, Las will instance, follow the better weeks I prior

yet, we a results don't great we yet, marketing a product. got no, But started lot have So haven't of et cetera. we

Now other your was part what question? the of

in near-term, profitability quickly how that in and terms about can Yes. AOI be And thinking of how question time? ramp the initial the to over second is,

Gautam? on giving guidance we this, let's see. Well, Are

No.

product. time. is a this Look, without with of et space, a It's we're not and cetera. going do you that because giving you see any guidance, kind in today. we learning like guidance. to that What we et to behave understand products, didn't medium, at new No you same intend other it's the new It's that to need cetera, that

to to So going you something really, that that We it's a is do the to right, do. right? when look think project that. have really to, like you the you is public, if early to this, you But believe we thing first appeal see product

then have your that, explain a about start told interested to et in time more interesting But into. you teeth unveil we're with introduce point at this the So we're that it, reap the next an you the for once you them, you you it the of. this people precipice. is for to you because with off we call to that right, public, product benefits great at get lot it, will today. have you and the cetera, I product and to a We're sink and call

ahead. will you, Operator, Thank Ted. take Go we caller. the next

Certainly.

Your next Morgan Daniel of Duran Stanley. question from line from comes

whether pure coming given from So Sphere the revenue pressures live at Networks, year weigh cutting, a play? Sphere versus leaving separating MSG Networks due cord next term entertainment you Networks' refinance to how loan creating do equity and as

is But sector. it great, I'm of point are great you going to that something in et continues with you that let interest are of Gautam monetization broken. want look when who to particularly appeal, right, no business, grow does, answer mechanisms the New question. consumer to the sports. things has this on There's in cetera, going before harvest in basically interest all like I watching been Sports, the Diamond Sports What's and at he to that take out York. to lack that marketplace, this a

true, underlying great sports, not all. a but interest such plan the be and and think I shape, at calls, that. But have cetera, not mechanism thirst The this diminished is. might -- that the addresses think live right? in public's interest I said all public's we other that has before for right, it is in I've et monetizing remains and this,

think, business. go to And want can regain, we ahead, the so Andrea. -- I you Yes,

consumer market that Jim just add is to to offering. we our game a saying is only Yes. with per regional what are first the I was network going and sports direct going to

and them to brings directly our people I them. that ecosystem, speak and serve premier a super with teams, market, our this in market particularly up us them, to allows think into opens to particularly and that upsell funnel

of key viable it. plan, we very, that strong says Jim a and very piece believe So that's we a when have

loan to the And in I just process. note, great the bank of of think our with important options our with the relationships have of process, table. are Thanks, move matures is it on refinancing, The still early we October forward Andrea. all and it's this as And XXXX, terms in we in group.

second my question. just And

retained has all, if open next been the how, to in performance at in Sphere's Sphere Sphere Sphere's with that cut you. interest impact MSGE month, remaining what do Now does and set half operational shares? roughly the of MSGE Thank is you

Well, operational Look, everything. let's the affects see. performance

So, with our right, show first sense before we think good be we performance get get But right are we period turns time, the won't to going that the making right? the decisions short retained We out, adjust interest, on a obviously will we'll be the the a of to over of what operational for that's fairly business do how balances sell, our focus that business. we that where and upon I right? depending

We say that shareholders. our we and adjust it will to value make have builds that profitable sure for business a

the take part? to You want second

the stake. with been we're final to Sure. what retained decisions made with to No have regard going do

to approach We around have we three monetization, in deliberate extent some And options going retained the continue on stake, or our the to the offer we're and retained to be that. follow all sell of spinoff. stake: exchange a the for

time one we have caller. Operator, for last

Partners. Seaport question of from comes David a our And from Research final Joyce line

things relative profiles, versus margin proprietary other you versus events some it kind different you. the MSG might bring building discussions facing then Could in be do? that MSGN versus cash look the of respective first, is or Networks, other kind corporate could branding event on you But they us please the through Thank questions, can how walk the explain residencies on And to types you secondly, further and here. of content their challenges that Sphere kind up that as flows ramp to question. of refinance? offset Two

All right.

Let take one. the first part me that of

of with let's your the content, because you've business our business. own is basically already invested a is of So, sort really capital. original That margin high the backbone which start

merch, kinds like attraction, things made running show, your basically security, ushers, you've You've of costs those now built and things. are your your

of So the And as with that At strong. residencies the and not time they really tickets gets on at and does acts. the them, you same also building, to people the into turn to but on Residencies following less it's right, right, improve profile has you're bit are rent the a but looked own return that sale of is it upside model, traditional and in, say, basically a a pretty loss a the be of for come the less of risk the lot -- too. should in that leader those it of content. your customers products building

piece if corporate of the of or become other is of a incurred are good not with fee operating final of you is call sort risk, I know rentals building like FX for that. margin we expenses basically discussion is building And a content, of renter. what there's appropriate don't The That Basically lot even right? and have really -- all example the the low the the extremely -- a this. rental and responsibility then that is everything a

there's business. of the which… sponsorship And guaranteed other and three a there's those top-line the So to then it, course sales, streams than of advertisement usage, are for basically

insignificant. Which is not

And situation, that. are we table going forward. it as monitor forward, the There Jim to the refinancing. second the with important as move we're Sphere's to Obviously question. ramp a are as regard then your factors going one number think mentioned, up and to related all performance large we of and important is one in to a and on about year And options

Danes, Mr. session. our for you the concludes back I call final question-and-answer to some closing this over And turn Ari remarks.

earnings on Have Thank speaking with our you next all day. for joining call. a look us. forward you to good We

for Thank This you conference your participation. concludes today's call.

disconnect. now may You