Q1 2022 Lions Gate Entertainment Corp Earnings Call
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Thank you for joining us I'd.
I'd like to begin with a few highlights from of strong financial quarter, and then drill down on each of our businesses.
We acquired the Spyglass Media Group Library, while investing in Spyglass is go forward business and entering 2 of first of all of the television deal between Spyglass and Lions Gate television.
In the past 6 months, we've actually acquired 3 libraries with a total of nearly 400 titles and more than $2.5 billion of underlying domestic box office as we continue to grow our stockpile of valuable premium content.
We announced that they add trickle output agreement with Universal, giving stars and exclusive 18 months post pay 1 window for Universal's live action theatrical titles.
Coupled with the Lions gate pay 1 theatrical output agreement announced with stars last quarter.
The Universal deal completes our strategy for establishing of strong and reliable pipeline of first run features for stars.
Our television group is taking advantage of unprecedented demand by producing of record 34 scripted series of this year 15 of them for stars while maintaining our leadership is of top independent third party supplier of premium scripted content.
We're coming off of 1 of our strongest years with 13, New series orders all 7 of our of pilots picked up to series and all of last year's freshman series of renewed for their second season.
In our motion picture of business, we continue to assemble of strong and diversified filmed slave for theaters streamers multi platform distribution and stars.
And despite the pandemic, we've set up a total of 26 films in the past 12 months for delivery and fiscal twenty-three and fiscal 24.
And as we continue to execute our business plan were also executing our strong commitment to greater diversity equity and inclusiveness and our workforce talent relationships and content.
Turning to our individual businesses. It was a strong financial quarter for stars, but like the rest of the industry. We were impacted by a reduction in at home viewership and importantly of like content quarter due to COVID-19 driven production delays.
We continued to grow our base of international subscribers in the quarter, but domestic subscribers declined of temporary drop that we've already reversed since the end of the quarter. In fact, 2 weeks after the quarter ended per.
Our book 3 raising Cain W to the second biggest stars original series premiere ever do.
Driving over 800000 global subscriber gross ads in the first week alone and and 80% Spike in viewership on the App.
As a result, we are again growing our domestic over the top subscriber base, which is already back to the March quarters record levels.
And with our biggest and strongest stars original serious late every of this year with 12 scripted series compared to 7 last year and of building cadence of 5 temple series over the next 3 quarters. We continue to expect stars global subscriber growth this year to outpace subscriber growth last year.
Sure.
Our confidence is buttressed by a very strong slate debt following raising Cain includes wrestling drama heels, starring Stephen of Mail and Alexander Ludwig getting great. Early reviews. The second season of the hit series Powerbook 2 ghosts, the sixth season of fan favorite Outlander.
Curtis 50 cent Jackson's crime family drama BMS, the horror of comedy Shining Veil, starring Courtney Cox and the debut of Powerbook for force.
These will be followed next season by high end properties, such as of Watergate drama Gaslit, starring Julia Roberts, and Sean Penn The Jon with prequel the continental and the surfing Queen based on the dark legend of Catherine de Medici.
Internationally subscriber growth continued but was slowed by of like content quarter as well as the global reopening here again, we've seen a significant subscribers uptick with the international launch of raising Cain and which along with ghost run the world and the girlfriend experience proves that great programming for our core audiences in the United.
States attracts of global audience as well.
Combined with Lions Gate feature films in library titles that are driving or a theatrical content offering and best in class third party acquisitions of the great gangs of London and the international premiere of Dr. Death later this quarter.
Our best of Global Escalade programming continues to set us apart as of home for original adult fiercely premium content complimentary to every platform and of compelling value proposition for every bundle.
Turning to television we continue to execute our strategy supplying stars of the bumper crop of premium scripted series, while delivering high end programming to an expanding array of new buyers in the quarter home economics debuted on a b C. On April with the strongest live plus 3 retention of any new comedy this season the.
New comedy gross debuts on CBS in the fall and welcome to Flach premieres on Fox mid season.
The growth of the nearly $10 billion Avon market has created opportunities for us the license existing television series with Avon revenues up 104% from last year to sell original new television series, an area, where we've always been of first mover and to extend the revenue food chain for shows entering syndication.
In fact Avon accounted for nearly 2 thirds of our recent syndication sales to the hit comedy weeds.
With a diverse portfolio of television businesses that includes our collaboration with 3 arts 1 of the world's foremost talent management and production companies of partnership that has already generated 3 series orders, including the Apple hit mythic Quest.
BBC Studios with 2 series picked up by the networks.
Pilgrim media group with more than 20 unscripted series for leading platform partners day.
Mercury home to the Evergreen properties, Wendy Williams and family feud with Nick Cannon launching in the fall.
And of roster of World class production partnerships the growth of our television slate is driven by our alias talent relationships and future proof against headwinds in any 1 part of the business.
Despite the challenge of making films during a pandemic, we continued to fill our pipeline during the quarter completing production on borderlands, starring Cate Blanchett, Kevin Hart, Jamie Lee Curtis and Jack Black.
Kelly Free mind, Craig directed adaptation of the Judy Blume Classic are you there God. It's me Margaret produced by Academy Award winner James L. Brooks.
White Bird Wonder story of the follow up to a breakout hit wonder.
Faith based American underdog to Kurt Warner story.
<unk> on weddings during Jennifer Lopez, and Roland Emmerich sci-fi epic Moon fall and.
And we couldn't be more excited about returning to the set with the incomparable can of Reeves as we began shooting Jon with chapter 4 in June.
We also have to read big brands of continuing to move towards production. The hunger games prequel the balance of songbirds and snakes. The nostalgic re imagining of the classic Dirty dancing and monopoly based on the iconic Hasbro gain ramming out of strong and diverse slate that can navigate the twists in terms of today's motion picture.
Landscape by appealing to every platform.
Last month, we announced an agreement to anchor the entertainment vertical for the N F T platform autograph, bringing the hunger games Twilight, Jon with Madmen and other top properties into the world of digital collectibles.
It's the latest in a series of franchise extensions that provides us with a high margin annuity from branded theme parks exhibitions and escape rooms live to tape global concert tours and adaptations of iconic Lions gate film and television properties headed for the Broadway stage.
In closing if.
If the media consolidation of of the past year has taught us anything it's.
Is that the global appetite for content is greater than ever.
And to paraphrase Keanu Reeves and Jon with 3 we have that content lots of content in our World Class Library are deep film and television pipelines and throughout our global streaming platform. It stars.
We live right in the sweet spot of global consumer demand bold original high end premium scripted television and film and with our talented and entrepreneurial employees working across every part of our company every single day to identify ways to create 1 in monetize this content.
We are well positioned to create outside of value for our partners consumers and shareholders.
Thank you now I'll turn things over to Jimmy.
Thanks, Jon and good afternoon, everyone I'll briefly discuss our fiscal first quarter of financial results and update you on our balance sheet.
Fiscal first quarter adjusted OIBDA was $120 million with total revenue coming in at 901 million driven by New television series deliveries and continued demand for library content <unk>.
I'm from the theatrical releases of spiraling hitman his wife's body guard vs. The prior year quarter, which had known theatrical releases due to theater closures.
This was partially offset by continuing strength and library revenue.
And finally television revenue nearly doubled to $386 million driven by new series deliveries, including raising Canaan blind spotty and hills, while segment profit came in at $3 million, reflecting of the delivery of freshmen series and of tough comp against the prior year quarter, which included.
Licensing of Madman.
Our total library revenue across our motion picture on television businesses was $740 million on of trailing 12 month basis, which compares to 711 million reported this time last year and demonstrates the resiliency of our library and all economic cycles.
On the balance sheet, we ended the quarter with leverage of 4.7 times or 3.6 times, excluding our investment in stars play International which as expected reflects the timing of PNA spend on trailing 12 months adjusted OIBDA.
We continue to retain significant liquidity with $262 million of cash on hand and of $1.5 billion of Undrawn revolver. We.
We remain committed to strengthening our balance sheet and paying down debt.
Now I'd like to turn the call over to neatly for Q&A.
X Kimmy operator can you open up the call for Q&A certainly thank you went out of begin the question and answer session.
To ask a question you May press Star then 1 on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Cat gun Morrow with RBC capital markets. Please go ahead.
Great. Thank you for taking my question I wanted to ask about television production, it's great to see that very strong results I realize some of that includes sales to stars, but still I think it may have actually been of record for quarterly domestic television revenue you called out 13, New series orders 7 pilots day picked up and all of the freshmen.
Serious being renewed it just seems like a very healthy pipeline that should not on may help fiscal 2022, but per.
Perhaps 2023 and beyond so just 2 questions first are we approaching an inflection point for that business, where there's maybe more of his ability into a step function increase in revenue and maybe eventually profit or is this more of a function of a post COVID-19 catch up that will eventually normalize.
And second the tracks you called out with Avon is very interesting and it's just any more color you could provide on the opportunity you see of had there would be very helpful. Thank you.
[noise] outlet Kevin answer that this is Kevin if they can just in reverse order.
We're seeing in this Eva space. It it's an exciting time, that's reminiscent of really neat.
The emergence of original from the basic programming basic cable space. When we were doing that and then and shows like that.
That that.
Those revenues and of that dollars are moving and they're moving into Avon and Roku low is getting into original of Imdb television as well into originals too. They were in conversations with about various shows so I see this as a trend I think there'll be more and within within each of these verticals they will dig into more of rich.
And also as a point of differentiation from all of the others, they're not as focused on exclusivity as as 5 players. So they are often sharing similar windows on other products of what's the what makes them different will be the original which has always been the secret sauce.
And the cable space before which they're inheriting so on the on the inflection point I can just say that in on this this surplus of buyers moving into the space needing great of high quality premium content.
Is really beneficial to us as of studio supplier, there's no greater priority than our partnership with stars were thrilled that 15 of that roster are together with them in either of salt production or co production.
But things that are on exactly right for them of can travel elsewhere. We have 5 shows with HBO Max we have a big project with Showtime and the first Lady and are getting jumping into business with Peacock and I've had a long history with Hulu 2 on Apple, they're all digging in to do more and that bodes well for us as an independent.
That can work everywhere and have a really finally home creative machine.
Turning out great development with terrific producer and pod deals and frankly, great taste of Jimmy maybe take a shot at sort of of the trajectory of the KGB for the television business over the next couple of years, yeah without given specific numbers I mean, I think you're right in terms of an inflection point in terms of coming out of this with the developer.
The pipeline through and getting deeper and deeper beyond those freshmen series that you just noted and go into those back season for the margins are better and you're going to really see some nice continuation is what we foresee relative to segment profit going into from 22.23 24.
That's perfect. Thank you Hershey.
Thanks, Coke and operating could we get the next question. Please certainly on that question comes from Alan Gold with Luke Capital. Please go ahead.
Thanks of get too high there [noise].
Excuse me.
So we need to send somebody over on.
I've got 2 questions here 1 for Jimmy end of chose on the line 1 for Joe Jimmy teachers refresh our memory yeah. How much are you planning on spending on content production. This year, yeah, and can you break that down a little bit between the divisions and the question for Joe is.
The box off the seems to be having a real tough time think Barry Diller [laughter].
It was just quoted saying yeah, we should we need at home, where there's 90 per cent too. Many screens 90 per cent of the screens are gonna close down what are your thoughts on box office and alternative ways of releasing your films.
Yeah, I'll take take the first 1 there.
In terms of content spend of.
We have 1 billion 6 of content spend last year.
And what we said on the previous calls as we're expecting.
50% kind of increases from there so call it in the mid twos.
2 and a half billion ish and I would just say that is on a kind of of net basis, meaning after we've eliminated intercompany payments coming from stars to television. So if you really gross it up to look at it more comparable to of maybe other companies you're really talking about.
Closer or tipping over 3 billion, but for us, it's a pretty of cash efficient spend as we as we have that are company elements, we could put more on the screen with less cash.
And you saw on the quarter, where more heavily weighted in Q1, because we had you'll see on the training schedules will over $575 billion of of content spend in the first quarter and that was about 400 million versus the prior year quarter, so wrapping into that spend early on.
Continue the cadence into the second quarter, and then again will top out somewhere around 2 and a half billion 3 billion on on a gross basis.
Joe.
Yep I on.
Thank you for the question well first I would say I don't totally agree with Mr. Deller, where we actually have found this period of late is period of can't really more of a place to look for opportunity then to see challenge, there's certainly some challenges with the marketplace, but.
Uhm when you look at the theatrical market, even though it's on all the way back certainly brands are working on big brands are working there's an audience that Wanna come back I think we I think we've got a ways before we can talk about what normalized box offices with the variance coming into the market and such but I was really pleased to see.
The way certain brands played in the market equally we've certainly spent a lot of energy and done a lot of work in the last year.
Thanks, Alex.
Yes. Thanks.
The next question will come from Steven Quay Hall with Wells Fargo. Please go ahead.
Thanks, maybe a couple of for Jeff. So on stars could you just unpack that subscriber forecast a little bit about adding more subscribers. This year than last I know you have a big content pipeline coming in the rest of the fiscal year. It just seems like a lot of what we've seen in streaming is it the pandemic might have provided some pull.
Forward. So just curious what gives you the confidence that now that we're coming out of the pandemic, you'll be able to have as strong of year for net adds.
As you did last year and then a related on on Starz International how should we just think about segment profit for that segment. This year I think maybe you've talked about it on a profitability basis looking similar to last year. Just didn't know if there was any update to that outlook. Thanks.
Hey, Steve how are you you got it great.
Jon and Jimmy talked about remarks at the very late constant quarter for US. We premiered 2 half hour comedies that were great shows debt.
I think that coupled with the world opening back up it was you know it was not our strongest quarter as we had guided on the last call.
And they said also on their prepared remarks, where we're very confident that this year will be stronger than last year.
Going from 7 original 12 originals, we have 5 tent poles in the next 3 quarters that drive of large large growth of subscribers acquisition. We also saw of churn at a historic low in this quarter. So those 2 things coupled together give us great confidence.
Debt, we can we will accelerate growth. This year came in obviously premiered as Jon said in his prepared remarks to huge numbers of huge viewership and simply put of Canada was 6 weeks earlier, we'd be having a different sequential convert K station that we're having right now.
And on the segment profit portion of things, Stephen Yes, Youre, right plus or minus.
In line with the prior year investment and that's really based off the timing of content et cetera, we like what we're doing there we like the market share we're capturing we're moving into it.
Yeah.
Great. Thank you.
Yeah.
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Operator can we go to next question. Please.
Once again, if you have a question. Please press Star then 1.
The next question is from Thomas Yeah.
Morgan Stanley. Please go ahead.
Thanks, Thanks for taking my questions 2 quick ones for Jeff on Starz <unk>, the domestic ARPA of appear to be relatively stable sequentially with last quarter, which is a little lower than the historical trend. I think you had cited some heavier promotional activity happening of then did that continue into the quarter and then a related kind of question.
He can give us an update on the unit economics across linear and U S OTT and whether or not that you know the mix of direct versus retail partners kind of impacts ARPA going forward, but the outlook is there that'd be helpful. Thank you.
So on the on the ARPA basis for the quarter sequentially. You know, we've said that our people will fluctuate around $5.75 to 610, depending on when the subs come in in the quarter and some of the promotional parts of the business again churn was really low in the quarter of a historic low and so that kind of stabilize that a little bit, but we didn't have.
As much coming in the front door. So it was actually pretty flat sequentially.
When you look at our pool of linear versus domestic remind everybody that over the last couple of years. We've moved most of our linear deals to be Ala carte deal. So over 82% of our all of our linear deals are all of the cart and so over time that all of our <unk> has actually started to collide with the with the OTT Arco.
Because in essence, it's a rev share deal and so you actually see those numbers coming together pretty quickly long term, we think that will again like I said somewhere between 5 and $6.10 for the domestic business.
Great. Thank you.
Thanks, Tom It's operating could we get the next question. Please.
Actually this concludes the question and answer session. So I'd like to turn the conference back over to Neal Shah.
Some remarks.
Thanks, everyone. Please refer to the press releases and events tab under the Investor Relations section of the company's website for a discussion of certain non-GAAP forward looking measures discussed on this call. Thank you very much.
Thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Okay.
Thanks.
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Okay.
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