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Sphere Entertainment Co. (SPHR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $273.4M, down sequentially from $321.3M in Q3 but up 112% year over year; AOI was $25.7M, with Sphere AOI loss narrowing materially vs prior year while MSG Networks AOI remained positive .
  • Sphere segment mix shifted: Sphere Experience revenue fell to $74.5M (208 shows) from $100.5M in Q3 (257 shows) while event-related revenue rose to $58.4M (Dead & Co., corporate keynote, NHL Draft), and Exosphere/sponsorship revenue moderated to $15.9M from $32.9M in Q3 .
  • MSG Networks’ subscriber declines accelerated (-13% YoY in Q4) but AOI held up on sharply lower SG&A; however, the company disclosed MSG Networks will pursue a lender workout to refinance ~$849.8M of debt maturing Oct 11, 2024 (recourse only to MSG Networks), a key stock narrative driver .
  • Management emphasized Sphere’s anchor content strategy, multi-event “side-by-side” scheduling, and near-term content pipeline (Eagles residency; Anyma EDM shows; UFC 306) while signaling international expansion updates “very soon” .
  • Wall Street consensus from S&P Global was unavailable for Q4, so estimate comparisons are not shown; traders likely focus on MSG Networks’ workout headline risk vs strong Sphere monetization cadence (content and sponsorship trajectory) .

What Went Well and What Went Wrong

What Went Well

  • Sphere monetization continued: Sphere Experience averaged >$1M daily ticket sales on operating days, generating $74.5M in Q4 (208 performances), while event-related revenue rose to $58.4M (Dead & Co., corporate keynote, NHL Draft) .
  • AOI turned positive at the consolidated level ($25.7M), with Sphere AOI loss narrowing vs prior year and MSG Networks delivering $31.1M AOI on lower SG&A (insurance recoveries, lower litigation) .
  • Management reinforced strategic momentum: “Sphere has already welcomed millions of guests… We are confident that we are on the right path to execute on our vision for this next-generation medium.” — James L. Dolan .

What Went Wrong

  • Sequential top-line moderation: consolidated revenue fell from $321.3M in Q3 to $273.4M in Q4, largely reflecting reduced Exosphere/sponsorship revenue and fewer Sphere Experience shows vs Q3 .
  • Persistent losses at Sphere: Q4 operating loss was $(104.5)M for Sphere (higher depreciation and venue costs), and consolidated diluted EPS from continuing operations was $(2.00) (vs $(1.33) in Q3) .
  • MSG Networks risk elevated: subscriber declines accelerated (-13%) and the company disclosed a lender workout to refinance ~$849.8M of near-term maturities (recourse only to MSG Networks), overshadowing operational progress .

Financial Results

Consolidated metrics (quarterly)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$314.2 $321.3 $273.4
Diluted EPS - Continuing Operations ($USD)$(4.91) $(1.33) $(2.00)
Operating Income (Loss) ($USD Millions)$(159.7) $(40.4) $(71.4)
Adjusted Operating Income (Loss) ($USD Millions)$51.4 $61.5 $25.7

Segment breakdown (quarterly)

MetricQ2 2024Q3 2024Q4 2024
Sphere Revenue ($USD Millions)$167.8 $170.4 $151.2
MSG Networks Revenue ($USD Millions)$146.4 $151.0 $122.2
Sphere Operating Income (Loss) ($USD Millions)$(193.9) $(83.5) $(104.5)
MSG Networks Operating Income ($USD Millions)$34.2 $43.1 $33.2
Sphere Adjusted Operating Income (Loss) ($USD Millions)$14.1 $12.9 $(5.5)
MSG Networks Adjusted Operating Income ($USD Millions)$37.3 $48.6 $31.1

Sphere segment KPIs (mix drivers)

KPIQ2 2024Q3 2024Q4 2024
Sphere Experience Revenue ($USD Millions)$92.9 $100.5 $74.5
Event-Related Revenue ($USD Millions)$55.2 $34.3 $58.4
Sponsorship/Exosphere/Suite Revenue ($USD Millions)$17.5 $32.9 $15.9
Performances (#)191 257 208

Year-over-year comparison (Q4)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$129.1 $273.4
Operating Income (Loss) ($USD Millions)$(70.3) $(71.4)
Adjusted Operating Income (Loss) ($USD Millions)$(59.8) $25.7
Diluted EPS - Continuing Operations ($USD)$10.21/$10.34 (diluted/basic) $(2.00)

Notes:

  • AOI excludes depreciation/amortization, share-based comp, impairments, restructuring, certain M&A costs, capitalized cloud amortization, and deferred comp remeasurement per non-GAAP definition .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company Revenue/EPSFY or quarterlyNone providedNone providedMaintained at “no formal quantitative guidance”
OpEx/Tax/Segment GuidanceFY or quarterlyNone providedNone providedMaintained at “no formal quantitative guidance”
Content/Events ScheduleH2 CY2024U2 run concluded Mar; Dead & Co. residency extended; Phish AprEagles 20-show residency from Sept; Anyma EDM 6 shows late Dec; UFC 306 in SeptExpanded pipeline; multiple extensions due to demand

Clarification: The company did not issue numerical revenue/EPS/OpEx/tax guidance in the Q4 materials or call; disclosures focused on event programming and strategic updates .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Anchor content strategy (Sphere Experience)Debuted; $92.9M; >$1M/day $100.5M; 257 shows $74.5M; 208 shows; >$1M/day on operating days ; “key economic engine” High-margin, cadence varies by schedule; expanding content library
Exosphere advertisingNumerous global campaigns; F1 visibility Record week around Super Bowl; $32.9M sponsorship $15.9M; learning sales approach; branded pitches; convention tie-ins Mixed; optimizing go-to-market
Multi-event “side-by-side” scheduling——Implemented (Experience + concerts same day) to boost utilization Improving utilization
MSG Networks subscribers~11.5% decline YoY ~12.5% decline YoY ~13% decline YoY; affiliate rates offset Deteriorating subs, revenue pressure
MSG Networks refinancingConvertible notes at Sphere level (Dec 2023) —Pursue lender workout; ~$849.8M debt maturing 10/11/24; recourse only to MSGN ; syndication failed per CFO Elevated credit/workout risk
International expansionLondon project impairment ($116.5M) —“Expansion discussions… continue to progress,” updates “very soon” Repositioning post-London
Corporate events demand & pricing——Strong interest; pricing benchmark vs Experience (“at least as much as Postcards”); some price shock Demand with price discipline
Upcoming residencies/contentU2 concluded; Phish announced; Dead & Co. extended Dead & Co. start; HPE keynote; NHL Draft Eagles 20 shows; Anyma EDM 6 shows; UFC 306; V-U2 immersive film opens Sept 5 Robust pipeline; extensions due to demand

Management Commentary

  • “Sphere is a new medium… We are learning every day how to optimize Sphere’s operating model… Since Sphere opened last September, we have welcomed millions of guests… We remain optimistic about what the future holds for this next-generation medium.” — James Dolan (prepared remarks) .
  • “The Sphere Experience again generated more than $1 million in average daily ticket sales in our fourth quarter… Since premiering in October, The Sphere Experience has generated over $300 million in high-margin revenue.” — James Dolan .
  • “For the fiscal ’24 fourth quarter, we generated total company revenues of approximately $273 million and adjusted operating income of $25.7 million… Sphere welcomed over 900,000 guests to more than 230 events.” — CFO David Byrnes .
  • “MSG Networks… has decided to pursue a refinancing through a workout with its existing lenders… we were unable to get sufficient overall support from the full lender group to complete the full syndication.” — CFO David Byrnes .

Q&A Highlights

  • MSG Networks workout dominated Q&A; CFO explained the failed voluntary refinancing and shift to a lender workout; CEO noted NBA deal “did not help” RSN economics .
  • Exosphere advertising strategy evolving toward branded, convention-aligned pitches; management acknowledged learning curve and room to improve .
  • Content partnerships: management weighing branded vs original content for Sphere Experiences, focusing on experiential use of the medium and economics (IP costs vs owning content) .
  • International expansion: updates “very soon”; centralized operating expertise (e.g., side-by-side changeovers) seen as a key value add for future venues .
  • Corporate demand: strong interest but pricing benchmarked to Sphere Experience daily monetization; corporates must meet or exceed that opportunity cost .

Estimates Context

  • Wall Street consensus for Q4 2024 EPS and revenue from S&P Global was unavailable due to API limits; therefore, no vs-estimate comparisons are shown in the tables. Traders should consider the sequential revenue moderation and MSG Networks workout headline risk when calibrating expectations for forward AOI and segment mix .

Key Takeaways for Investors

  • Sphere monetization is working: anchor content (Sphere Experience) plus residencies/events can drive high-margin revenue; watch cadence and “side-by-side” utilization to lift AOI despite heavy depreciation .
  • Mix shift matters: sequential revenue decline reflects fewer Experience shows and lower sponsorship/Exosphere activity vs Q3; near-term catalysts include Eagles, Anyma, UFC 306, and V-U2 immersive film .
  • MSG Networks is the primary risk overhang: lender workout for ~$849.8M maturities (recourse only to MSGN) and accelerating subscriber declines (-13%) could pressure Networks cash flows and valuation until resolved .
  • Advertising trajectory at Exosphere remains a swing factor; management is refining sales strategy; upside as branded/convention-aligned campaigns scale, but near-term variability persists .
  • International expansion and new Sphere Experiences are medium-term upside levers; management indicated updates “very soon,” and content investment remains in the ~$85M range with learnings from “first pancake” .
  • Tactical: stock narrative likely hinges on MSG Networks workout outcomes and visible Sphere cash generation in H2 CY2024; monitor AOI progression and segment disclosures for confirmation .
  • Strategic: Sphere’s differentiated medium creates pricing power for corporates and artists; if content library expands and Exosphere monetization matures, consolidated AOI should improve even with elevated non-cash D&A .

Citations:

  • Q4 2024 8-K press release and exhibits
  • Q4 2024 earnings call transcript
  • Q3 2024 8-K
  • Q2 2024 8-K
  • Additional press releases (Aug 2024): V-U2 immersive concert film; GAME app JV