Q1 2024 Lions Gate Entertainment Corp Earnings Call
Most recent annual report on Form 10-K, as amended and also as amended in our most recent quarterly report on Form 10-Q filed with the SEC. The company undertakes no obligation to publicly release. The result of any revisions to these forward looking statements that may be made to reflect any future events or circumstances. The matters discussed on this call.
Also include the proposed separation of our TV and movie production business from our media networks business. We urge you to read the relevant materials that we and our subsidiary LG Orion Holdings have and will file with the SEC, including our registration statement on form 10, which was filed on July 12, 2023 that includes a preliminary joint information proxy.
<unk> the information on the joint information proxy statement will not be complete and may be changed.
You can find these materials and other documents filed with the SEC free of charge at the SEC's website at Www Dot FCC dot Gov or on our Investor Relations website, Lionsgate, LG Orion and our directors executive officers and certain other employees and other persons may be deemed to be participants in the solicitation of proxies from the.
Shareholders in favor of the proposed separation under SEC rules information about participants and their direct and indirect interest will be included in the joint information proxy statement and the other relevant documents filed with the SEC as available I'll now turn the call over to John .
Thank you Anita and good afternoon, everyone. Thank you for joining us.
It's been only two months since we spoke with you last but it's been a busy period, culminating in our signing a definitive agreement with Hasbro last week to acquire global Entertainment platform <unk>.
<unk> allows us to do what we do best and.
Adding 6500 titles to one of the largest and most valuable libraries in the world grow.
Growing our portfolio of brands with properties like the rookie yellow jackets, naked and afraid and film development rights to monopoly.
Continuing to strengthen our scripted and unscripted TV business and scaling our operations in Canada and the U K.
On closing, we expect the transaction to be immediately and highly accretive.
Jimmy will provide more color on that in a few minutes.
Taking a look at each of our businesses beginning with motion Pictures. Our feature film group reported strong profits in the quarter. Thanks to the over performance of library titles multi platform releases like the thriller CCU theatrical carryover from John Wick chapter for in the home Entertainment performance of <unk>.
Wayne.
This strong financial performance, even with three releases that opened softer than anticipated in the quarter speak to the resilience and diversification of our film business.
With the expandable for soft ex and the long awaited return of the hunger games coming up we're bullish about our slate for the rest of the year.
Looking ahead, we've completed principal photography on ballerina. The first of what we expect will be several movie spinoffs from the John Wick Universe, and we're readying the Michael Jackson film from producer Graham King.
And that we have a strong roster of branded world class properties, including Dirty Dancing now you see me three from director Ruben Fleischer and Highlander from John with Director Chad sale scheme.
In the faith based vertical.
Our partnership with the Kingdom story company has already produced the box office hits I can only imagine and Jesus Revolution.
In October we will release the next film from Kingdom, the inspirational drama ordinary Haynesville, starting two time Academy Award winner Hilary Swank and kingdoms Unsung Hero led screens next April in time for Easter.
Turning to television we have a robust slate of content at all stages of production Acapulco manhunt Lincoln in the Seth Rogen comedy offer Apple TV plus.
The John Krier comedy extended family for NBC.
Some of our Krych for the CW and ghost raising kanan in the surf and Queen for Starz to name a few.
And we've completed and delivered one of our biggest and most eagerly anticipated properties. The John with prequel event series, the continental launching on Peacock and Amazon Prime on September 20 <unk>.
As a number of our series move into later seasons are scripted series slate continues to drive growing profit contributions that are expected to reach record levels. This year with continued growth into fiscal 'twenty five in fiscal 'twenty six.
Ghosts, one of Tv's highest rated comedies for CBS .
Quest for Apple and BMS for Starz had a roster of 10, Lionsgate television series and their third or fourth seasons.
On the distribution front with platforms now selling some of their best content to third parties, there's more supply than ever in the marketplace and response, our aggressive approach to fast channels has created distribution opportunities with a whole new generation of Mvpds like Roku Pluto Vizio elg.
<unk> and <unk>, and we're driving substantial and growing incremental revenue using our existing infrastructure through lionsgate owned fast channels movies sphere, persevere outer sphere, Nashville, and more than a dozen others. We anticipate this revenue stream will double next year.
We've also become a leading distributor of great third party content.
Our television group was chosen by creator director and producer Dallas Jenkins to distribute the acclaimed event series the chosen which has grown from a crowdsourcing project to a massive global phenomenon with over 110 million viewers.
Within a few weeks of our securing global distribution rights.
Series was picked up for multiple seasons by the CW network in the U S.
So quintin Tarantino films kill Bill volumes, one and two and Jackie Brown have become great recent additions to our library, giving us distribution rights to the industry's largest portfolio of Tarantino films.
And as you read yesterday, our worldwide television distribution group and Debmar Mercury have partnered with the Carsey Werner team to license their hit TV series. The Conners Abcs number one comedy for five straight seasons to <unk> Avon basic cable and fast platforms worldwide along with domestics.
<unk>.
This growing slate of third party properties reaffirms lionsgate stature as a place that the world's leading IP creators and trust with their big brands.
And all content roads lead to our film and TV Library, which achieved yet another record performance in the quarter reporting nearly $900 million in trailing 12 month revenue.
I want to make an important point about our library.
10 years ago over 60% of our library revenue still came from acquired and manage third party content.
By contrast, nearly 80% of higher margin library revenue today is driven by Lionsgate films TV shows and Starz original series that we have created many in the past few years as we continue to grow our crown jewel asset organically and through acquisitions.
Turning to stars the service continues to take steps to strengthen its business in preparation for becoming an independent stand alone public company after the separation.
During the quarter it streamline its distribution footprint executed a rate increase across its platforms and began to ramp up a first run studio movies to complement its original series.
So the rate increase may have impacted subscriber growth in the short term, we continue to be profitable and expect the financial benefits of that increase to become apparent in terms of revenue and contribution growth in the next few quarters combined.
Combined with new efficiencies in content and marketing spend it will be an important contributor to the growth of starz domestic margins.
On the international front after being approached by a key distributor in Latin America, we transacted, a favorable agreement that motivated us to exit the territory by December 31, as we move towards focusing the service on the U S and other English speaking territories, the U K, Canada, and Australia, while also continuing to <unk>.
Significant cost out of the business.
As movies play a large and growing role in shaping with streamers offer their consumers Starz continues to ramp its roster of hit films alongside its original series and.
In that regard I am pleased to note that the theatrical output agreement between Lionsgate and Starz has been extended through 2027.
The Lionsgate paywall and Universal pay two slates will take Starz from 14 movies last year to 28 films this year and more than 40 next year with the eagerly anticipated stars launch of John Wick Chapter four on September 26.
In closing, we remain committed to the separation of Lionsgate and Starz.
We filed a form 10 with the SEC last month as the next step in the process.
With the impact of the <unk> acquisition on regulatory approvals uncertainties surrounding the strike in our efforts to create the most efficient capital structure within a disruptive marketplace. We anticipate that the separation we will now take place in the first quarter of calendar 2024.
Now I'll turn things over to Jimmy.
Thanks, John and good afternoon, everyone.
I'll briefly discuss our first quarter financial results provide an update on the balance sheet and then provide some details on last week's <unk> acquisition announcement.
First quarter, adjusted OIBDA was $86 million and total revenue was $909 million.
Revenue grew 2% year over year, while adjusted EBITDA was up over $80 million.
The year over year increases reflect revenue growth at motion picture and segment profit growth at all three business units.
<unk> fully diluted earnings per share was a loss of 31 cents and fully diluted adjusted earnings per share was a loss of <unk>. This year.
Adjusted free cash flow for the quarter was $35 million.
We are reiterating our fiscal 2024 outlook of adjusted OIBDA of 400 million to $450 million, which at the midpoint reflects nearly 19% year over year growth.
Now I will discuss the fiscal fourth quarter performance of our studio and media networks businesses as well as the underlying segments compared to the previous year quarter.
Media Networks' quarterly revenue was $381 million and segment profit was $32 million.
Revenue was flat year over year as continued growth of domestic OTT and international ancillary distribution revenue was offset by domestic linear revenue declines.
Domestic revenue was down 3%, while international revenue was up 38%.
Media networks segment profit compared favorably to last year's due to lower international losses, and lower domestic distribution marketing and direct operating expenses.
As a reminder stars $1 price increase for retail domestic subscribers went into effect in the last week of the June quarter. Accordingly, we expect the revenue benefit of the price increase to start in the September quarter.
Now, let me discuss our subscriber numbers, which for comparability purposes, our pro forma figures that exclude the historical subscribers in territories, we have already exited which includes continental Europe and Japan.
We ended the quarter with $29 4 million total global subscribers, including Starz play Arabia.
This represents a sequential decline of 300000 subscribers driven by domestic pressure.
Focusing specifically on our OTT subscribers, we ended the quarter with $19 9 million global OTT subscribers.
This represents a year over year global OTT subscriber growth of 9%.
As John announced in his prepared remarks subsequent to the end of the quarter, we decided to exit the Latin American market.
We expect that we will fully exit laid down by the end of calendar year 2023.
As part of this decision and subsequent to quarter end, we received accelerated payment of unpaid future contractual revenue guarantees from one of our largest bundling partners.
This consideration more than offsets the remaining in territory content commitments and shutdown cost.
Now I'd like to talk about our studio business revenue of $625 million decreased 12% year over year, while segment profit of $92 million was up 31% owner.
On a trailing 12 month basis library revenue at the studio was a record $896 million up 1% compared to the prior quarter's record trailing 12 months library revenue.
The studio has now reported three consecutive quarters of record trailing 12 month library revenues.
Breaking down the motion picture and TV studio businesses.
Let's start with motion picture.
Motion picture revenue was up 46% year over year to $407 million, while segment profit of $69 million was up 37% year over year on strength and John Wick four box office and home entertainment as well as library stream.
This segment profit growth is particularly impressive in light of the greater than 220% year over year increase in theatrical P&A spend in the period.
And finally, TV revenue of $218 million of expectedly declined year over year on a difficult comparison with last year's elevated content deliveries segment profit of $23 million increased 17% on favorable year over year comparisons at Debmar Mercury.
Now, let's talk about our balance sheet, excluding adjusted OIBDA from previously exited landscape plus territories in Continental Europe , and Japan trailing 12 months leverage for the quarter improved almost a full turn to three six times.
We continue to retain significant liquidity with $323 million of unrestricted cash on hand at quarter end and 1.25 billion of an undrawn revolver.
This level of liquidity is particularly strong after another quarter of reducing the face amount of unsecured bonds outstanding.
In particular, we purchased $85 million of our bonds for just over $60 million.
Life to date, we have repurchased $285 million of our bonds for less than $200 million.
Resulting in a total net debt reduction of approximately $90 million and significant future cash interest savings.
Finally, I want to talk about our recently announced <unk> transaction.
We're paying $375 million of cash to acquire <unk>, TV and motion picture studios as well as at 6500 title Library.
We expect that the transaction will close before the end of the calendar year.
In terms of the financial profile of <unk>, one asset I wanted to provide some more color on the normalized pro forma adjusted OIBDA that we expect to realize from the transaction.
Specifically after the transaction closes and synergies are layered in we expect the run rate annual adjusted OIBDA of E. One asset to be between 55 and $75 million.
At the midpoint this implies a highly attractive enterprise value to adjusted OIBDA multiple of just under five eight times.
We intend to fund the transaction in an efficient manner through a variety of options, which include potentially using a combination of cash on balance sheet using our one 5 billion undrawn revolver and or a nonrecourse IP backed facility similar to the structure, we used to acquire the Spyglass library.
As we integrate E. One with our complementary businesses the overall impact to leverage on a pro forma basis post synergies is expected to be less than a half turn.
So while leverage will increase by more than a half turn at closing we expect it to fall quickly.
You have seen us lower our leverage almost two turns in the last nine months and we remain confident in our ability to continue to delever through strong adjusted OIBDA growth.
Now I'd like to turn the call over to <unk> for Q&A.
Thanks, Jami operator can we open up the call for Q&A.
If you'd like to ask a question. Please press Star then one on your telephone keypad, we do ask and please pick up your handset before pressing the keys.
Definitely your point your question has been addressed and you'd like to remove yourself from queue. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And our first question today comes from Steven Cahall with Wells Fargo. Please go ahead.
Thanks, So first just on <unk>.
I think a lot of investors feel like it's been a long time since you started the strategic review and the spin of the studio was coming up and so I think the big question is while it seems like you paid a pretty attractive multiple and you get some library why did this transaction needs to happen now pushing out the date of the spin until now it sounds like the beginning of the next calendar year.
Versus waiting until you got the spin done which is only about a month away.
And then looking at that acquisition thereafter.
And then as a follow up for Jeff.
You've got to I think defined audiences. It stars that you target can you talk about how youre looking to phase the content to retain subs drive more pricing increases really ultimately just get back towards the 20% segment profit margin that you've targeted historically do you feel like four to five show of the year and your two key demos is enough or is it.
Youll need to change catch up thank you.
Now ill answer Steven it's John I'll answer the first part which is really pretty simple you partly answered your own question, which is.
It was a really attractive multiple particularly in our hands frankly.
This is something again, we do really well, we built a company with a lot of library acquisition and there's a lot of operating assets, there and frankly in our hands I think this is as I said in my remarks Super accretive.
So the other is this is when it was for sale and so pretty pretty simple we felt it was.
An asset that would really bolster the value of our.
Of our studio side upon separation.
There were other timing issues and regulatory stuff and financial structuring capital.
Restructuring that we're working on but we felt this was something that we really didn't want to miss.
I'm glad we didn't.
Jimmy.
Yes, I think bottomed.
Bottom line, we are excited to add this puts us in a much stronger position, both operationally and strategically and as we go forward into the new quarter of the calendar year, a lot of things will line up as you've seen we've restructured latam that'll that'll be in our favor as well as we exit Latam by the end of the December quarter.
And I expect there'll be more clarity around the writers actors strike by that time as well. So anytime you remove uncertainty it's a good thing and it put us in a position of strength.
Steven It's Jeff Yes, as we've talked I think we have these very valuable to core demos and I think four to five shows for each down was actually the right number to for us to kind of string shows together move the consumer from one show to the next extend lifetime value and ultimately reduce churn. Unfortunately in the current quarter, we had BMS and <unk>.
Goes back to back in the prior quarter, we had scheduled run the world behind it hoping that it would extend it and then with a little softer than planned but ultimately we do believe that that's the right.
Portfolio, a number of content shows coupled with movies to drive the business back to a long term approximately 20% margin I think there's really two components to that one on the revenue side, obviously rate increases you've seen we've just executed our first rate increase in the history of business I think over time, we'll be able to drive more rate there as well as bundling.
On the revenue side, I think you'll start to see bundling accelerate which will ultimately help obviously lifetime value and churn and then we've been working very closely with Kevin on the Lionsgate side to look at the shows that I think ultimately we've got to start to turn to slide over to be more cost effective and the shows that we have and so as we do those three things we can approach long term approximately 12.
2% margin on the domestic business.
Thanks.
Thanks, Steven operator can we get the next question. Please absolutely. Our next question comes from Barton Crockett with Rosenblatt Securities. Please go ahead.
Okay. Thanks for taking the question.
Let me see.
Yes, two things I'm kind of curious about.
<unk> could you talk a little bit more about the financial impact of exiting Latin America.
<unk>.
In terms of subs Chinese schedules subs amongst you've already exited and we don't know Latam, we don't know the revenue and the EBITDA impact, but some color there would be helpful.
And then secondarily.
Just wondering if you could address.
A question that I've heard from some quarters.
Whether there could be some pushback from Starz bondholders.
Around maybe some concerns around that.
Possibility of their view that substantially most or all of the business might be taken away from them and the split in that my customer assistance are you seeing anything there and how do you feel about your position.
Yeah. Thanks, Martin I'll take the financial piece on Latam and if Jeff wants to add on the subs, but.
Broadly.
Broadly speaking, yes, there is as we said there is.
There's going to be in cash has been received that will.
More than cover our exit cost so to speak in our commitments in that territory Youll see that play out over the next two quarters, but it's not overly impactful, but it's beneficial it's a beneficial way to exit the territory and so we're happy with what we're doing there and focused on the U K.
With regards to the bonds.
Definitely as we've said before.
These travel with stores, so to speak or another way to say that as they remain with remain co.
The issuer of the bonds.
And.
We'll evaluate that long term, but that's part of that structure, we will refinance the term loan a and term loan b as part of the studio structure, there's more than ample assets to do that and then as we evaluate the storage structure clearly includes the bonds. Similarly, we could also layer in a level of secured financing regular.
<unk> type of a bank relationship financings term loan a as an example with the revolver.
And set that capital structure up and their cash flows are very visible and very capable of financing that and I'll remind you will be financed off of their domestic businesses because the international has been restructured its moving to profitability and that will happen in the banks will focus on it that way.
Okay, all right I'll leave it there thank you very much.
Thank you thanks Mark.
Our next question today comes from Thomas.
With Morgan Stanley . Please go ahead.
Thanks, So much Jimmy you mentioned some uncertainty on the strike, but you also reiterate that fiscal 'twenty for a guy can you talk about any strike impact that's baked into there and does that elevate uncertainty on expectations for deliveries that still might happen through the duration of this fiscal year.
And then I just I wanted to ask about the spin in the context of the.
Idea that you've spoken about separate asset, having greater strategic optionality longer term.
Some language in the form 10 about a two year waiting period. Its strategic conversations have been discussed in the past can you just talk about any limitations you might see there that limits you from pursuing those options. Thank you.
Okay. All of first take the strike and the uncertainty of the strike first our assumption first we're happy to reiterate guidance and I'll tell you it's not only in the aggregate, but it is also on a line by line basis for both the studio as well as media network. So that's reaffirmed.
We have in our assumptions, we built in an assumption that strike goes through the September quarter.
That was about a $30 million impact we.
As you can imagine it most primarily affects our talent management business a three arts.
In TV in that context, so we factored that in.
If it goes longer.
Similar impact probably as it rolls quarter to quarter. If it does we're hopeful that things get resolved and we're back to work in and the mid fall.
Having said that in terms of.
Overall, the overall guide we factored that in.
And we're comfortable with where we are at this time, yes, and the other part of your question I don't think Theres anything there that we're worried about in terms of.
Strategic limitations I would say.
That is part of our plan I think scaling up and but on both sides of the business is certainly part of the plan and on the studio side, we are pretty aggressive in any one deal is indicative of that I think.
<unk> is a great business, it's a profitable business. It's got two really strong demos and I can definitely say after separation and Jeff has mentioned this before.
We're going to be looking for ways to scale that up with other like kinds of platforms. I think that's definitely in the plan I don't see any limitation and the key there is nothing in contemplation at that time as you know it's a corporate as we've said before it is taxable on a corporate basis, it's tax free from a shareholder perspective.
That gives you.
Put you in a better position as you go forward if opportunities do arise in the future to capitalize on those.
Got it Super helpful and maybe just to clarify one last thing Jimmy on the moving pieces around that accelerated payment in Latin America for stars. It sounds like it's net OIBDA neutral with it just in terms of how it relates to the guide for the year is that right, yes thats right.
Somewhat positive.
But I think and certainly the cash was received after quarter end. So it's not reflected in the current shrink of our balance sheet.
Got it thank you so much.
Thanks, Thomas operator can we get the next question. Please absolutely. Our next question comes from Jim Goss with Barrington Research. Please go ahead.
Alright, thank you.
Couple of them first.
I was curious on the exiting of Latin America, you want said high hopes and I was just wondering if if it was just not generating adequate traction.
That caused the.
Separation and I was curious to between that and the.
Content you just purchased.
How complicated or does it get one you're moving toward a separation of two businesses and you're still making these strategic businesses that would affect one or the other and possibly both.
If I understand your second part of your question Jim.
We spent a lot of time and have spent a lot of time working out.
Our internal.
Internal deal between and part of the extension of the pay.
Pay TV deal with part of that our intercompany agreements about series and who owns the IP.
And so I think where we're pretty much there, which all of those rules have been have been said when you say the new IP I'm not sure if youre talking about E. One, but again that would fit into the <unk>.
Intercompany, yes that would fit into the intercompany agreement that we have negotiated.
Amongst ourselves.
So.
Taken care of.
<unk>, we've said numerous times, even after separation there will be a great brotherhood between Starz and Lionsgate numerous projects together a pay television deal for four years.
So there'll be so it's still a very very productive relationship between the two companies, yes, Jim the pricings representative of fair market values as close as we can get those so it does make it easier to reposition that that content to other third parties, who were still within various tariff.
<unk>. So you saw us do that where maybe you didn't see us do that what we did in continental Europe and other territories. So the content has continuing value.
And in terms of Latam.
Pretty excited about the territory, we have great distribution.
Obviously, our content was continuing to work there, but it was really backstopped by one of our large partner that we had when the partner approached us as Jimmy said in his prepared remarks and didn't have the same.
Second about the partnership we negotiated a very favorable deal.
With that deal being done it didn't make the path to profitability within the portfolio that we wanted and so we made the decision to exit.
Okay.
Jimmy too in terms of intercompany revenues that effectively both sides will be able to count in some way. The separation occurs is there a way of sizing that terrorists. It's just whatever is showing up on your books right now.
Because it would seem like the.
The two parts will be bigger than the aggregate revenue base.
Yeah, that's a way of thinking about it.
Yes, absolutely Jim Youre right. The eliminated revenues just completely goes away. So does the eliminated profit as well the revenue happens one for one dollar for dollar.
Never comes back to you in a consolidated world.
Separated world, It's just never eliminated to begin with and likewise the profit.
Similarly doesn't get eliminated because youre two standalone trading company so.
Yes, I would just eliminate everything you see there in the historical financials and in terms of going forward again with the pay one window.
On the film side of the business and TV you'd expect that just to continue to be big.
And grow as we phase into that so I would size it using the numbers that are that you see in our reported financial statements.
Okay, and one last one.
Regarding your access to the chosen and then.
Marketing that to the <unk>.
Various other partners.
Is that does that provide any template that youre going to pursue.
For any genre.
The content that you might be able to.
Given the mouth to feed out there.
With streaming services and the distribution agents are there.
Things that youll be able to.
Do with that sort of content.
To create more revenue up candidates.
Hi, Jim It's Jim.
So, yes, I think it's key.
Clear that we have a lot of really valuable partners that have chosen us excused upon to distribute their content the chosen as a unique show Thats got an incredible audience.
Pretty much over a 110 million people globally and we've done a.
A good job of getting it on the CW theyre going to run it all the way through the holidays.
Seasons, one two and three it's also on Peacock, which was a deal that we did in Amazon premiered in the last two weeks or three weeks. It is in the top five after its premier. So we get these shows and they tend to be really great opportunities for our company great opportunities for our partners and they do add to our overall revenue pie.
Yeah.
So maybe the strike provide you with an opportunity right now.
Some holes to fill.
Yes.
The other one that we've been able to pick up that you saw yesterday was the conners, which is really unique in the sense that it is a five season show.
It is the number one comedy on ABC for 25 to 54 adult and they had not been out with the show in the marketplace. So we're now going to take it out our partnership with Debmar Mercury.
Traditional syndication and then our team for global distribution and.
That is another example of.
<unk> taken advantage of our distribution infrastructure, and bringing something to market actually during the strike that I think will be quite.
Quite unique and different and we're very excited about it.
Ladies and gentlemen, thanks very much.
Operator can we get the next question. Please absolutely. Our next question comes from Alan Gould with Loop capital. Please go ahead.
Hi, Thanks for taking the questions.
Alan.
Hi, there first Jimmy the.
I realize that a lot of the value created over the years has been through these accretive acquisitions at $65 million of adjusted EBITDA, how much synergy are you projecting there.
Well, we're not going to lay out the specific synergies there as I know you can appreciate Alan but we feel confident with that I mean, it is a pretty big range right. The $55 to 75 out obviously hopeful we're at 75 okay.
And the range for a reason I think the synergies in particular.
This library, you put that in the hands of gentlemen, Ron Schwartz from the team here.
Over index, so I really am excited about the revenue synergies capabilities, there and really nobody does it better there and then the assets on the TV side, just fit like a glove with Kevin's business in term of scripted obviously as well as unscripted. So.
Yeah, we feel really good about that and as you know we do accretive transactions.
We know this is accretive and we will.
Those cash flows to.
Effectively pay for the asset.
Okay and that leads to my next question for Jim how exposed is that library already or is there a lot of opportunity.
Licensed the heck out of it.
You're thinking about E. One Alan.
Yes.
Yeah, I think it's a really unique asset a great library, it's complementary to what we have Ireland. As an example, we have two procedural there the rookie rookie Fed's, we do not have big procedural internationally. So this is going to add to our portfolio and I think be really complementary.
It's also really interesting because one was our partner on summit in places like the U K. So now all of a sudden where we did not control movies like Twilight now you see me and read my team is going to be able to go out there and take advantage of that.
And I think those are the kinds of things that we buy these libraries for all of a sudden you can take those franchises and put them with hunger games and John Wick and we have a full complement so I'm really excited about it and I'm sure. We'll find things in there that we didn't even know which is what we do on most of these library acquisition.
Okay, and one question for Joe any change to your to the mid budget film strategy. The mid budget films seem to be having a tough time out there.
Yes, Hello, everyone.
Yeah look it's a fair question, we learned a couple of things over these last couple of titles that we'll certainly focus our content strategy, particularly around the audiences that we will serve theatrically.
<unk> versus multi platform and how we focus those segments of the business that will also put.
Even more dissimilar, we're pretty darn disciplined on that mid budget level will get even more disciplined on the greenlight metrics there.
John mentioned in his opening remarks. So it was really at the same time this quarter the performance on the quarter really highlighted the strength of the diversified nature and the diversified nature of the portfolio structure, we have in the motion picture business, because while those movies did underperform a little bit I think we'll see a couple of them gets.
The profitability, we have a multi platform business that did really really great business, there John talked about prior theatrical releases and their value in the ancillary market that is true for all theatrical films I've spoken before about how the just general economics of <unk>.
Theatrical films are as strong as they could ever be.
So while it will focus us a little bit more on what we released in that mid budget range will lean will continue to lean hard into our big brands, We've got expendables and saw on hunger games coming up. So we are as bullish about the theatrical business has ever will be a little more disciplined on the mid budget.
Overall, the business is performing really really well.
And by the way one thing the numbers in the quarter reflected actually a great performance in the ancillary markets on playing playing with.
In that same realm worked really well and I think that we're honing in at least on some rules Allen, which is these midsized pictures has to have a real recognizable name maybe a recognizable brand as you know we have <unk> coming out we've got expandable coming out.
I've got to have the right budget and actually you have to really know who the audience you're going after is so so look we learned everyday just like everybody else.
Thanks, So one quick accounting question for Jimmy the Starz International revenue does that still include revenue from the exited territory and when does that change.
That's as we close those territories.
The revenues are excluded so the numbers are on a historical basis, we do pro forma the subscribers for you.
To make that trending easier, but the revenue recognition of losses, just follow followed suit with the.
With the closures.
Okay. Thanks, a lot.
Thanks, Allen operating could we get the next question. Please.
Our next question comes from Matthew Harrigan with benchmark. Please go ahead.
Thank you the monopoly moving to development certainly seems like an exciting project, but a lot of the family IP you retain that Hasbro clearly your transformers, Dungeons and Dragons and then some franchises where youre lionsgate.
<unk> been involved before your power Rangers My Little Pony I'm sure a lot of people on the call waiting for the next <unk>.
A little Pony movie.
How do you do.
Do you feel like this transaction.
Actually pushes you to do some more things with Hasbro in terms of some of the retained IP I mean do you fully expect to be in.
<unk> been more of the projects that have not offer I know everyone's getting a little greedy on account of Barbie clearly everything is gonna be barbie, but they still have a lot of great.
Great content in house.
We will have even after the <unk> sale. Thank you.
Yes sure. It absolutely does we're we're really really really excited about monopoly brands are working we talk about leaning into brand. This is a brand for the entire family globally and that that's a category of film that is working in theaters everywhere and drives enormous ancillary value when you think about adding that to.
Ah pool like now you see me in Neruda hunger games, and John Wick and Highlander.
Okay.
Hello.
Yeah.
Pardon me everyone. This is the conference operator.
Hello are you all back yet we are alright, sorry about that please continue.
Don't know, where we lost you, but what I was saying is that we are looking forward to getting back also getting into their developments latency and where else. We can be great partners and helped grow brands together.
Highlanders really a terminal franchise too, but thanks for your answer.
Operator can we get the next question. Please absolutely. Our next question comes from Douglas Crudes with Cowen. Please go ahead.
Hey, thanks.
I think in the past you've talked about.
Willingness or desire to explore the possibility of bundling stars with other streaming services.
It seems like there's been more conversations about that at a high level.
Can you tell me are there are there are people in positions of power actually actively talking about that at this point, particularly with some of the labor issues that are going on with the industry.
Yeah, Hi, it's Jeff actually it's already going on I mean were bundled with MGM plus on Amazon today were bundled with AMC plus on Amazon today were bundled with a bunch of other premiums on Roku, where bundled on a couple of other platforms.
Verizon just launched Verizon plus bundle with your buy stars you get Netflix included for a year and so the bundling is happening it's happening across the industry.
Paramount did it with Showtime.
And so I think it will accelerate as we get through through the year. So we're excited about that what we've seen around the globe in bundles as.
Lifetime value or extended churn comes down obviously, you don't have to market as much on the front end and what you give up foreign rate you more than make up for a lifetime value and churn reduction. So we liked the bundles. We're in today and we expect to be in a lot more in the coming months.
Great. Thank you.
Thank you ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Neil Shah for any closing remarks.
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 everyone.
Thank you ladies and gentlemen. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.