Q3 2024 Lions Gate Entertainment Corp Earnings Call
Lele Shah: With all your questions, you may press Star. Please also note that today's event is being held. At this time, I'd like to turn the floor over to Lele Shah, Investor Relations. Go ahead. Good afternoon.
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We also note that todays event is being recorded.
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Investor Relations: At this time I would like to turn the floor over to <unk> Shah Investor Relations. Please go ahead.
Investor Relations: Good afternoon. Thank you for joining us for the Lionsgate fiscal 2024 third quarter conference call will begin with opening remarks from our CEO, Jon Feltheimer, followed by remarks from our CFO Jimmy barge. After their remarks, we'll open the call up for questions also joining us on the call today are Vice Chairman Michael Burns COO.
John Feltheimer: Thank you for joining us for the Lions Gate fiscal 2024 third quarter conference call. We'll begin with opening remarks from our CEO, John Feltheimer, followed by remarks from our CFO, Jimmy Bartsch. After their remarks, we'll open the call up for questions.
Lele Shah: Also joining us on the call today are Vice Chairman Michael Burns, COO Brian Goldsmith, Chairman of the TV Group Kevin Beggs, Chairman of the Motion Picture Group Joe Drake, as well as incoming Motion Picture Group Chairman Adam Fogelson, and President of Worldwide TV and Digital Distribution Jim Packer. And from STARS, we have President and CEO Jeffrey Hirsch, CFO Scott McDonald, and President of Domestic Networks Allison Hoffman. The matters discussed on this call include the proposed business combination of our motion picture group and television studio segments and our film and television library with Screaming Eagle Acquisition Corp to launch Lions Gate Studios. We urge you to read the relevant materials that we and Screaming Eagle have filed with the SEC, including in our Form 8K filed on December 22nd, 2023, and a registration statement on Form S4 filed with the SEC on January 5th, 2024. The information in the prospectus or proxy statement is not 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, www.sec.gov, or on our investor relations website.
Investor Relations: Brian Goldsmith Chairman of the television group, Kevin Beggs Chairman of the motion Picture Group, Joe Drake as well as incoming motion picture group, Chairman, Adam Fogelson, and president of worldwide television and digital distribution Jim Packer.
Investor Relations: And from Starz, we have president and CEO, Jeffrey Hirsch CFO, Scott Macdonald and president of domestic networks Allison Hoffman. The matters discussed on this call include the proposed business combination of our motion picture group and television studio segments, and our film and TV Library with Screaming Eagle acquisition Corp to launch Lions Gate Studios, we earn.
Speaker Change: Or would you to read the relevant materials that we and screaming Eagle have filed with the SEC, including in our form 8-K filed on December 22023, and a registration statement on form S. Four filed with the SEC on January five 2024, the information in the prospectus a proxy statement is not complete and may be changed you can find these.
Speaker Change: Materials and other documents filed with the SEC free of charge at the Sec's Web site Www Dot SEC dot Gov or on our Investor Relations website.
Lele Shah: Matters discussed on this call also include forward-looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. The actual results could differ materially and adversely from those described in the forward-looking statements as a result of various factors.
Speaker Change: The matters discussed on this call also include forward looking statements, including those regarding the performance of future fiscal years, such statements are subject to a number of risks and uncertainties actual results could differ materially and adversely from those described in the forward looking statements as a result of various factors. This includes the risk factors set forth in lines gates most recent.
Lele Shah: This includes the risk factors set forth in Lions Gate's most recent annual report on Form 10-K as amended and our most recent quarterly report on Form 10-Q filed with the SEC, as well as in the S-IV 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. Moreover, Lions Gate, its subsidiary LG Orion Holdings, our directors, executive officers, and certain other employees, and other persons may be deemed to be participants in the solicitation of proxies from shareholders of Screaming Eagle in favor of the proposed business combination under SEC rules. Information about these participants and their direct and indirect interests is included in the prospectus or proxy statement and the other relevant documents filed with the SEC, as available. No offer to sell or solicitation of an offer to buy securities will be made except pursuant to an effective Form S-4 or an exemption.
Speaker Change: Annual report on Form 10-K, as amended and our most recent quarterly report on Form 10-Q filed and in the S. Four filed with the SEC. The company undertakes no obligation to publicly release the results of any revisions to these forward looking statements that may be made to reflect any future events or circumstances. Moreover, lionsgate.
Speaker Change: Subsidiary, LG Orion Holdings, our directors executive officers and certain other employees and other persons may be deemed to be participants in the solicitation of proxies from shareholders screaming Eagle in favor of the proposed business combination under SEC rules information about participants and their direct and indirect interest are included in the prospectus.
Speaker Change: A proxy statement and other relevant documents filed with the SEC as available no offered a sale or solicitation of an offer to buy securities will be made except pursuant to an effective form S. Four or an exemption I will now turn the call over to John.
Josh: I'll now turn the call over to Josh. Thank you, Nealey, and good afternoon, everyone. Thanks for joining us. We just reported another strong quarter, and the performance of our businesses in the quarter gives us confidence that we can continue to deliver the growth our investors expect while keeping our balance sheets strong. Now, turning to the quarter's highlights. We celebrated the holidays of the Lionsgate Way, working through the end of the year to close two transactions and launch a third. We closed the acquisition of E1 from Hasbro, increased our equity investment in 3Arts, and took a significant step towards the separation of Lionsgate and STARS by announcing Lionsgate Studios as an independent, publicly traded, pure play content company. Our Motion Picture Group finished the year strong, with over a billion dollars at the worldwide box office for the first time since 2019, led by the reinvigoration of our Hunger Games franchise. We continue to develop and produce great television properties, with a half-hour comedy, Extended Family, off to a good start on NBC. Production is beginning on a Seth Rogen comedy for Apple TV Plus in March, and Spartacus is preparing to start shooting in New Zealand for Starz. This makes 10 films and television series entering or resuming production in a quarter. S.T.A.R.S.
John: Thank you Neil and good afternoon, everyone. Thanks for joining US we just reported another strong quarter and the performance of our businesses in the quarter gives us confidence that we can continue to deliver the growth our investors expect while keeping our balance sheet strong.
John: Turning to the quarter's highlights we celebrated the holidays the lion's gateway working through the end of the year to close two transactions and launch a third we closed the acquisition of <unk> from Hasbro increase our equity investment in <unk> and took a significant step towards the separation of Lionsgate and starz by announcing Lions gate.
John: Studios as an independent publicly traded pure play content company or.
John: Our motion picture group finished the year strong with over $1 billion at the worldwide box office for the first time since 2019 led by the reinvigoration of our hunger games franchise.
John: We continue to develop and produce great and television properties with the half hour comedy extended family off to a good start on NBC <unk>.
John: Production beginning on a Seth Rogen comedy for Apple TV, plus in March and Spartacus preparing to start shooting in New Zealand for Starz.
John: This makes 10 films and TV series entering or resuming production in the quarter.
John: Starz had another strong quarter, gaining 700000, North American OTT subscribers and more than 340000 overall net north American subscribers.
John Feltheimer: had another strong quarter, gaining 700,000 North American OTT subscribers and more than 340,000 overall net North American subscribers. This subscriber growth, coupled with STAR's recent rate increase, drove revenue and ARPU growth as well. All of these gains rolled up into a strong financial quarter with our key financial metrics exceeding estimates.
John: This subscriber growth coupled with Starz recent rate increase drove revenue and <unk> growth as well.
John: All of these gains rolled up into a strong financial quarter with our key financial metrics exceeding estimates.
John Feltheimer: With the fiscal year tracking in line with our guidance, we're looking at consolidated, adjusted, obituary growth of 20% year-over-year with our operations fully funded from our own balance sheet as we continue to throw off positive free cash flow and reduce our year-over-year leverage by nearly three-quarters of a turn. Against the backdrop of an uncertain economy, geopolitical turmoil, the aftermath of two strikes, and continued industry disruption, we continue to navigate the headwinds in our environment by leaning into the diversification of our businesses and the resilience of our culture to move the company forward. Now, let's recap each of our three business segments for the quarter. Our Motion Picture Group had a great quarter on the strength of The Hunger Games' The Ballad of Songbird and Snakes, which grossed nearly $350 million worldwide. The lift it gave to the library performance of previous Hunger Games titles.
John: With the fiscal year tracking in line with our guidance. We're looking at consolidated adjusted OIBDA growth of 20% year over year with our operations fully funded from our own balance sheet as we continue to throw off positive free cash flow and reduce our year over year leverage by nearly three quarters of a turn.
John: Against the backdrop of an uncertain economy geopolitical turmoil the aftermath of two strikes and continued industry disruption, we continue to navigate the headwinds in our environment by leaning into the diversification of our businesses and the resilience of our culture to move the company forward.
John: Now, let's recap each of our three business segments in the quarter.
John: Our motion picture group had a great quarter on the strength of the hunger games. The ballad of song burden snakes, which grossed nearly $350 million worldwide. The lift it gave to the library performance of previous hunger games titles strong ancillary market performances from John Wick Chapter four in Salt 10, and a robust call.
John Feltheimer: Strong ancillary market performances from John Wick Chapter 4 and Saw X, and a robust contribution from multi-platform titles. Our Motion Picture business is tracking towards its best fiscal year segment profit performance in eight years. Looking ahead, with fewer wide theatrical releases industry-wide due to the strike, we see an opportunity to grow our share of the market with a slate of 12 wide theatrical releases and approximately 40 multi-platform and direct-to-streaming titles in fiscal 25. It's a diversified slate with strength across a broad spectrum of films built on efficient production, strong international licensing pre-sales, and cost-effective marketing. It demonstrates our confidence that moviegoers will continue to return to theaters for quality, commercial films while also showing the continued growth of the day-and-date, early PIVOD, hybrid, and other multi-platform spaces that have become an important part of our business.
John: <unk> for multi platform titles.
John: Our motion picture business is tracking towards its best fiscal year segment profit performance in eight years.
John: Looking ahead with fewer wide theatrical releases industry wide due to the strike, we see an opportunity to grow our share of the market with a slate of 12 wide theatrical releases and approximately 40 multi platform and direct to streaming titles in fiscal 'twenty five.
John: It's a diversified slate with strength across a broad spectrum of films built an efficient production strong international licensing pre sales and cost effective marketing.
John: It demonstrates our confidence that movie goers will continue to return to theaters for quality commercial films. While also showing the continued growth of the day and date early <unk> hybrid and other multi platform spaces that have become an important part of our business.
John Feltheimer: We were also busy in the quarter deepening our portfolio of franchises with the signing of John Wick filmmaker Chad Stahelski to direct and create a Highlander franchise, wrapping principal photography on the John Wick action spinoff Ballerina, and starting production on Michael, the definitive story of Michael Jackson, produced by Oscar-winning producer Graham King and directed by Antoine Fuqua, the Training Day and Equalizer filmmaker.
John: We were also busy in the quarter deepening our portfolio of franchises with the signing of John Wick filmmaker chats to healthy to direct and create a highlander franchise wrapping principal photography on the John Wick action spinoff ballerina and starting production on Michael the definitive story of Michael Jackson produced by Oscar winning producer.
John: Graham King and directed by Antoine Fuqua, the training day, an equalizer filmmaker.
I visited the set of Michael here in Los Angeles last week and came away more convinced than ever that it will be an exciting and important tentpole on our fiscal 2006 slate and a very special property.
John Feltheimer: I visited the set of Michael here in Los Angeles last week and came away more convinced than ever that it will be an exciting and important tentpole on our fiscal 26th slate and a very special promise. Turning to television, the acquisition of E1 continued to diversify our business. We integrated more than 6,000 new titles into our library and added series like the Evergreen Franchise, The Rookie, Yellow Jackets, The Recruit, and A Gentleman in Moscow to our slate.
John: Turning to TV the acquisition of <unk>, one continued to diversify our business, we integrated more than 6000, new titles into our library and added series like the evergreen franchise, the rookie yellow jackets, the recruit and a gentleman in Moscow to our slate.
John Feltheimer: The acquisition of E1 has also allowed us to restructure our unscripted business into Lions Gate Alternative Television, combining five Lions Gate and E1 labels to increase our scale, enhance our efficiency, and lower our costs. Our increased equity investment in three arts expands a partnership that has become a pillar of our talent strategy and an important source of series like Mythic Quest, The Serpent Queen, and the sexy new thriller The Hunting Wives, starring Billion's Malin Ackerman, which will soon enter production for Starz. With the strikes over, we expect a strong growth year from 3R. I want to reflect for a moment on the growth and diversification of the television business we've built. Ten years ago, nearly all of our television profits came from our core premium scripted business.
John: The acquisition of <unk> has also allowed us to restructure our unscripted business into Lionsgate alternative TV, combining five lionsgate and <unk> labels to increase our scale enhance our efficiency and lower our costs.
John: Our increased equity investment and three arts expands a partnership that has become a pillar of our talent strategy and an important source of series like mythic quest, the serpent Queen and the sexy new thriller the hunting wives, starring billions Marlin Ackerman, which will soon enter production for stars with the strikes over we expect us.
John: Strong growth year from three arts.
John: I want to reflect for a moment on the growth and diversification of the TV business. We built 10 years ago, nearly all of our TV profits came from our core premium scripted business today, our contributions are spread across scripted unscripted talent management syndication and international productions.
John Feltheimer: Today, our contributions are spread across scripted, unscripted, talent management, syndication, and international productions, enabling us to navigate downturns in any one part of the business and one of the reasons we're continuing to track towards record television group segment profit this year, despite the strike and several series cancellations. Looking at stars, its transition to streaming continues with 70% of its revenue expected to be digital by the end of fiscal 25. Its domestic OTT subscriber growth is accelerating with a corresponding increase in revenue.
John: Enabling us to navigate downturns in any one part of the business and one of the reasons, we're continuing to track towards record television group's segment profit this year, despite the strike and several series cancellations.
John: Looking at Starz its transition to streaming continues with 70% of its revenue expected to be digital by the end of fiscal 'twenty five its domestic OTT subscriber growth accelerating with a corresponding increase in revenue. It's core series performing strongly as part of our content offerings supercharged by the addition.
John Feltheimer: Its core series performing strongly as part of a content offering supercharged by the addition of pay one and pay two movies and its resources concentrated exclusively on domestic growth as it continues to operate as a valuable and consistently profitable premium service in a highly disrupted world. To drill down on the quarter, the balance slate of originals and movies from stars pay one and pay two deals combined to drive its best domestic OTT subscriber growth in three quarters, as demand for movies With a recent consumer survey citing movies as the most valuable part of the streaming experience by a wide margin, Starz has capitalized on the opportunity to return to its roots by ramping up its slate of quality, world-class features from 13 in fiscal 23 to more than 35 in fiscal 25.
John: Pay one and pay two movies and its resources concentrated exclusively on domestic growth as it continues to operate as a valuable and consistently profitable premium service and a highly disrupted world.
John: To drill down on the quarter, the balanced slate of originals and movies from Starz paywall and pay two deals combined to drive its best domestic OTT subscriber growth and three quarters as.
John: As demand for movies on echelon services continues to grow with a recent consumer survey, citing movies as the most valuable part of the streaming experienced by a wide margin.
John: <unk> capitalize on the opportunity to return to its roots by ramping up its slate of quality World class features from 13 in fiscal 'twenty three to more than 35 in fiscal 'twenty five.
John Feltheimer: In the coming months, Starz will offer a compelling mix of tentpole originals like B.M.F., Ghost, and Raising Canaan, newly acquired series like the psychodrama Mary and George, starring Julianne Moore, and three women starring Shailene Woodley, along with movies like Lions Gate's Saw X and Hunger Games' Ballad of Songbird and Snakes, as well as Universal's Oppenheimer Even as Starz's core series continue to excel, it's readying great new properties with the reimagining of one of its biggest original hits, Spartacus House of Usher, and The Hunting Wives, while continuing to expand the world of power and outlandishness. The Outlander prequel, Blood of My Blood, is currently in production on the distribution front with a distinctively premium content offering focused on two valuable core demos.
John: In the coming months Starz will offer a compelling mix of Tentpole originals like BMS ghost and raising kanan newly acquired series like the Psychodrama Marion George starring Julianne Moore, and three women, starting Shaveling Woodley, along with movies like Lionsgate saw 10, and hunger games ballot of song.
John: Burton snakes, as well as Universal's Oppenheimer fast turn and Megan.
John: Even if stars core series continue to excel in its reading great new properties with the re imagining of one of its biggest original hits Spartacus house of Usher and the hunting lives, while continuing to expand the worlds of power and Outlander.
John: The Outlander prequel blood of my blood is currently in production on the distribution front with a distinctively premium content offering focused on too valuable core demos starz continues to become a distribution partner of choice leaning into its partnerships with digital wholesalers Amazon Verizon Hulu in many.
John Feltheimer: S.T.A.R.S. continues to become a distribution partner of choice, leaning into its partnerships with digital wholesalers, Amazon, Verizon, Hulu, and many others. Its ability to be part of every package and sit on top of any platform positions STARS to bundle with more aggregators and stand up new partnerships with broad-based streamers in the future. One of the hallmarks of Lions Gate's growth over the past 25 years has been our ability to acquire and integrate companies with great libraries and other complementary assets. As we continue to integrate E-1, we really like what we see.
John: Others.
John: Its ability to be part of every package and sit on top of any platform position starz to bundle with more aggregators and stand up new partnerships with broad based streamers in the future.
John: One of the hallmarks of Lionsgate growth over the past 25 years has been our ability to acquire and integrate companies with great libraries and other complementary assets.
John: As we continue to integrate <unk>, one we really like what we see significant incremental value for our library and opportunity to grow and diversify our scripted and unscripted TV businesses.
Jimmy: Significant incremental value for our library, an opportunity to grow and diversify our scripted and unscripted television businesses, significant GNA and revenue synergies, and ongoing best of the best integration of our respective workforces. In closing, we're continuing to execute our plan to launch Lions Gate Studios as one of the world's largest independent publicly traded pure play content companies. I'm pleased to report that we expect to be launching on NASDAQ under the ticker symbol LION in the spring. Our Investor Roadshow is giving us the opportunity to tell our story to a broader audience, and we believe that investors are gaining a better understanding of the breadth and the depth of the portfolio of assets that we've assembled, the strategy driving its growth, and our commitment to a full separation of Lions Gate and STARS that Now I'll turn things over to Jimmy. Thanks, John, and good afternoon, everyone.
John: <unk> G&A and revenue synergies and ongoing best of the best integration of our respective Workforces.
John: In closing we are continuing to execute our plan to launch Lionsgate studios and its one of the world's largest independent publicly traded pure play content companies.
John: I'm pleased to report that we expect to be launching on NASDAQ under the ticker symbol lion in the spring.
John: Our investor Roadshow was giving us the opportunity to tell our story to a broader audience and we believe that investors are gaining a better understanding of the breadth and the depth of the portfolio of assets that we've assembled the strategy driving its growth and our commitment to a full separation of lionsgate and starz that will help unlock the value that we have.
John: Created.
John: Now I'll turn things over to Jimmy.
James Charles Goss: Thanks, John and good afternoon, everyone I'll briefly discuss our third quarter financial results and provide an update on the balance sheet Q.
Jimmy: I'll briefly discuss our third quarter financial results and provide an update on the balance sheet. In Q3, adjusted EBITDA was $151 million, and total revenue was $975 million. Consolidated revenue and adjusted oeuvre were down year-over-year due primarily to difficult comparisons at television, while both motion picture and media networks showed year-over-year revenue and segment profit growth. Reported fully diluted earnings per share was a loss of $0.45 per share, and fully diluted adjusted earnings per share was a positive $0.27 per share. Adjusted free cash flow for the quarter was $64 million.
James Charles Goss: Q3, adjusted OIBDA was $151 million in total revenue was $975 million.
James Charles Goss: <unk> revenue and adjusted OIBDA were down year over year, due primarily to difficult comparisons that TV, while both motion picture and media networks showed year over year revenue and segment profit growth.
Reported fully diluted earnings per share was a loss of <unk> 45 per share and fully diluted adjusted earnings per share was a positive 27 per share.
James Charles Goss: Adjusted free cash flow for the quarter was $64 million.
Jimmy: We are reiterating our fiscal 2024 outlook for each of our business segments, as well as our consolidated adjusted OEBDI target of $400 to $450 million, which at the midpoint reflects nearly 19% year-over-year growth. As noted before, our adjusted OEBDI target for fiscal year 24 excludes the net benefit from exited or exiting STARS International Territories and also excludes the benefit from E-1, which We are also reiterating the fiscal year 25 adjusted OEBDOT outlook for the studio business that we announced as part of the Lions Gate Studios transaction. Specifically, we continue to forecast FY25 adjusted OEBDOF for Lions Gate Studios, which we define as the studio segment profit less all corporate G&A, to be $370 million.
James Charles Goss: We are reiterating our fiscal 2020 for outlook for each of our business segments as well as our consolidated adjusted OIBDA target of $400 million to $450 million, which at the midpoint reflects nearly 19% year over year growth.
James Charles Goss: As noted before our adjusted OIBDA target for fiscal year 'twenty four excludes the net benefit from exited or exiting Starz International territories and also excludes the benefit from a one which was acquired at the end of December.
James Charles Goss: We are also reiterating the fiscal year 'twenty five adjusted OIBDA outlook for the studio business that we announced as part of the Lionsgate Studios transaction, specifically, we continue to forecast fiscal year 'twenty five adjusted OIBDA for Lionsgate Studios, which we define as the studio.
Segment profit less all corporate G&A to be $370 million.
Jimmy: This moves up to $430 million of pro forma adjusted OEBIDI, inclusive of the projected $60 million of post synergies run rate adjusted OEBIDI from E1. Now, let me briefly discuss the fiscal third quarter performances of our studio and media networks businesses, as well as the underlying segments compared to the previous year's quarter. Media Network's quarterly revenue was $417 million, and segment profit was $86 million. Total revenue was up 10% as continued growth of domestic OTT and international OTT revenue more than offset domestic linear revenue pressure. Given the exit of nearly all stars from international markets, I want to focus primarily on domestic financial performance.
James Charles Goss: This moves up to $430 million.
James Charles Goss: Pro forma adjusted EBITDA inclusive of the projected $60 million of post synergies run rate adjusted OIBDA from E. One.
James Charles Goss: Now, let me briefly discuss the fiscal third quarter performances of our studio and media networks businesses as well as the underlying segments compared to the previous year quarter.
James Charles Goss: Media Networks' quarterly revenue was $417 million in segment profit was $86 million.
James Charles Goss: Total revenue was up 10% as continued growth of domestic OTT and international OTT revenue more than offset domestic linear revenue pressure.
James Charles Goss: Given the exit of nearly all stars international markets I want to focus primarily on domestic financial performance.
Jimmy: Total domestic revenue grew modestly both year-over-year and sequentially, as the impact of the June 2023 price increase continues to help Star's top line. Domestic segment profit was up 7.6% year over year, driven by revenue growth as well as lower content amortization, partially offset by higher distribution and marketing costs in G&A. Similar to Q2, as part of STAR's exit from Latin America, international segment results for the quarter benefited from the accelerated revenue we recognize related to minimum guarantees from our bundling partner in LATAM. Finally, with Starz UK's exit expected to be completed in the coming months, Starz will have a simplified streaming strategy in fiscal year 25 that is focused on growing segment profit and expanding margins in the U.S. and Canada.
James Charles Goss: Total domestic revenue grew modestly both year over year and sequentially as the impact of the June 2023 price increase continues to help stars topline.
James Charles Goss: Domestic segment profit was up seven 6% year over year, driven by revenue growth as well as lower content amortization, partially offset by higher distribution and marketing cost and G&A.
James Charles Goss: Similar to Q2 as part of stars exit from Latin America, and International segment results for the quarter benefited from the accelerated revenue, we recognize related to minimum guarantees from our bundling partner in Lat am.
James Charles Goss: Finally, with Starz UK exit expected to be completed in the coming months Starz will have a simplified streaming strategy in fiscal year 'twenty five that is focused on growing segment profit and expanding margins in the U S and Canada.
Jimmy: Now let me discuss our subscriber trends in North America, which will be the market for Stars in fiscal year 25 and beyond. We ended the quarter with 22.3 million North American subscribers, which represented sequential net additions of 340,000. Focusing specifically on North American OTT subs, Stars ended the quarter with 13.4 million subscribers, which represents sequential net additions of 700,000 and 10% year-over-year subscriber growth. OTT subscribers now represent 60% of the sub-base, and exiting fiscal year 25, we expect OTT revenue to be approaching 70%. Now, I'd like to talk about our studio business. Revenue of $692 million decreased 23% year-over-year, while segment profit of $109 million was down approximately 27%.
James Charles Goss: Now, let me discuss our subscriber trends in North America, which will be the market for starz in fiscal year 'twenty five and beyond we ended the quarter with $22 3 million North American subscribers, which represented sequential net additions of 340000.
James Charles Goss: Focusing specifically on North American OTT subs Starz ended the quarter with $13 4 million subscribers, which represents sequential net additions of 700010% year over year subscriber growth.
James Charles Goss: OTT subscribers now represent 60% of the sub base and exiting fiscal year 'twenty five we expect OTT revenue to be approaching 70%.
Speaker Change: Now I'd like to talk about our studio business.
Speaker Change: Revenue of $692 million decreased 23% year over year, while segment profit of $109 million was down approximately 27% on a trailing 12 month basis library revenue of the studio was $784 million down 7% compared to the prior year quarters trailing 12.
Jimmy: On a trailing 12-month basis, library revenue of the studio was $784 million, down 7% compared to the prior year quarter's trailing 12-month library revenue. The year-over-year decline in year-over-year library revenue was expected as the prior year's licensing of Schitt's Creek rolled out of the trailing 12-month metric in the December quarter. Excluding the impact of Schitt's Creek's relatively low-margin revenue from the prior period, trailing 12 months library revenue was up year over year.
Library revenue.
Speaker Change: The year over year trailing 12 month library revenue decline was expected as the prior year's licensing of Shits Creek rolled out of the trailing 12 month metric and the December quarter.
Speaker Change: Excluding the impact of shifts creek's relatively low margin revenue from the prior period trailing 12 months Library revenue was up year over year. In addition library revenue for the quarter grew on a sequential basis breaking down the motion picture and TV studio businesses, let's start with motion picture motion picture revenue was.
Jimmy: In addition, library revenue for the quarter grew on a sequential basis. Breaking down the motion picture and television studio businesses, let's start with motion picture revenue. Motion picture revenue was up 53% year over year to $443 million, while segment profit of $100 million was up 31% year over year.
Speaker Change: 53% year over year to $443 million, while segment profit of $100 million was up 31% year over year.
Jimmy: Revenue and segment profit growth was driven by strength in Hunger Games, Ballad of Songbirds and Snakes, theatrical performance, library performance of prior Hunger Games titles, and the carryover effect of prior quarter performances of John Wick 4 and Saw X. And finally, television revenue of $248 million and segment profit of $8 million expectedly declined on the difficult comparison given the strike's lingering impact on both the timing of scripted deliveries and revenues in our talent management businesses, as well as the comparison to last year's licensing of Schitt's Creek. Now, let's talk about our balance sheet. Excluding adjusted OEBDI from previously exited or soon to be exited Lions Gate Plus territories and including 60 million dollars of projected run rate adjusted OEBDI from E1, trailing 12 months pro forma leverage was 3.7 times. This includes a $375 million use of a revolver to close E1 at quarter end. We continue to retain significant liquidity with $283 million of unrestricted cash on hand and $875 billion of remaining undrawn revolver at quarter end.
Speaker Change: Revenue and segment profit growth was driven by strength in hunger games valid of songbirds and snakes theatrical performance library performance of power hunger game titles and the carryover effect of prior quarter performances of John Wick, four and saw a 10.
Speaker Change: And finally, TV revenue of $248 million and segment profit of $8 million expectedly declined on the difficult comparison, given the strikes lingering impact on both the timing of scripted deliveries and revenues and our talent management businesses as well as the <unk>.
Parison to last year's licensing of Shits Creek.
Speaker Change: Now, let's talk about our balance sheet.
Speaker Change: Excluding adjusted OIBDA from previously exited or soon to be exited landscape, plus territories, and including $60 million of projected run rate adjusted OIBDA for me one trailing 12 months pro forma leverage was three seven times.
Speaker Change: This includes a $375 million use of our revolver to close 81 at quarter end.
Speaker Change: We continue to retain significant liquidity with $283 million of unrestricted cash on hand, and $875 billion of remaining undrawn revolver at quarter end.
Jimmy: Looking forward, I want to remind everyone that we purchased an incremental 25% of 3Arts for approximately $200 million in cash in January, and we expect to close our equity raise in the spring. Finally, as we prepare for separation and look out to the next fiscal year, implied standalone leverage for both Lions Gate Studios and STARS is trending below 3.5 times fiscal year 25 adjusted for a webinar. For the studio, as previously outlined on the January 4th investor call, including the $350 million of gross proceeds from the Lions Gate Studios transaction, we project the studio will exit fiscal 2024 with net debt of approximately $1.4 billion, including standalone studio adjusted OEBDA of $370 million in FY25 and $60 million of annual run rate adjusted OEBDA for E1.
Speaker Change: Looking forward I want to remind everyone that we purchased an incremental 25% of <unk> for approximately $200 million in cash in January and we expect to close our equity raise in the spring.
Speaker Change: Finally, as we prepare for separation and look out to the next fiscal year implied standalone leverage for both landscape Studios and stars is trending below three five times fiscal year 'twenty five adjusted a webinar for.
Speaker Change: For the studio as previously outlined on January 4th Investor call, including the $350 million of gross proceeds from the Lionsgate Studios transaction. We project the studio will exit fiscal 2024 with net debt of approximately $1 4 billion in.
Speaker Change: Including Standalone studio adjusted OIBDA of $370 million in fiscal year, 'twenty, five and $60 million of annual run rate adjusted OIBDA for E. One this implies fiscal 'twenty five pro forma leverage of three three times for the Standalone studio.
Neelay: This implies FY25 pro forma leverage of 3.3 times for the standalone studio. For STARS, with our previously outlined net debt exiting fiscal 24 at $700 million, this implies fiscal year 25 leverage under three and a half times, assuming STARS continues to generate in excess of $200 million of adjusted OEBNA in North America. Now, I'd like to turn the call over to Neelay for Q&A.
Speaker Change: For Starz with our previously outlined net debt exiting fiscal 'twenty four of 700 million. This implies fiscal year 'twenty five leverage under three and a half times assuming stars continues to generate in excess of $200 million of adjusted a webinar in North America.
Speaker Change: Now I'd like to turn the call over to <unk> for Q&A.
Operator: Can we operate, can we open the call up for Q&A? Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on your touch-tone telephone, or use a speakerphone. We do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality.
Speaker Change: Operator can we open the call up for Q&A.
Ladies and gentlemen at this time well begin the question and answer session.
Speaker Change: To ask a question you May press Star and then one on your question on telephones.
Speaker Change: You're using a speaker funnel velocity. Please pick up your walls that prior to passing the key is to ensure the best sound quality.
Barton Crockett: To draw your questions, you may press the star. Again, that is star and then one to join the question. Our first question today comes from... Barton Crockett from Rosenblatt. Okay. Thanks for taking the question. I wanted to maybe try and understand a little bit better what you're envisioning when you talk about the studio separation happening here in a few months and trading at the ticker LION. Are you anticipating, at that point, that there'd be a separate public STARS, or is the thought that STARS might be bought by someone, or is that unclear? part of this, and part two is, you know, would the studio lion still be, would there still also at that time be a separate kind of stack vehicle?
Speaker Change: Draw your questions you May press star two.
Speaker Change: Once again that is star and then one other.
Speaker Change: Question for you.
Speaker Change: Our first question today comes from.
Speaker Change: Barton Crockett from Rosenblatt. Please go ahead with your question.
Barton Crockett: Okay. Thanks for taking the question.
Barton Crockett: I wanted to maybe try and understand a little bit better.
Barton Crockett: What youre envisioning when you talk about the studio separation happening here in a few months and trading under the ticker Lion.
Barton Crockett: Hum.
Barton Crockett: Are you anticipating at that point the therapy.
Barton Crockett: Public stars or is the thought that stars might be bought by somebody that unclear.
Barton Crockett: Or why is that.
Barton Crockett: Our choice.
Barton Crockett: The studio Lion.
Barton Crockett: Where there still also at that time.
Unnamed Speaker: Trading with a stub interest or the thought that those could be consolidated at that point. So, yeah, if you could clarify that, I'd appreciate it. Sure. Hi Barton.
Barton Crockett: Back vehicle trading with a stub interest or is the thought that those could be consolidated at that point.
Speaker Change: So yes, if you could clarify that I'd appreciate it.
Speaker Change: Alright, Michael can answer that.
Michael Burns: Sure Hi, Barton, what I'll say is that our film for a second 13% to 15% is in the public under.
Unnamed Speaker: What I'll say is that, assume for a second, 13 to 15% is in the public under the symbol Lion, L-I-O-N, and the other 85, 87% is retained at, call it, RemainCo, which will loan 100% of the stars and 87-85% of the students. So there'll be two public companies until, as we've said before, until the end of 2024 when we're anticipating the full separation Okay, so thanks for clarifying on that, and then. Switching gears a little bit in terms of the strike impacts on TV production. That sounds like from your guide, you see this is a pretty short kind of down draft here that we just saw in the quarter.
Michael Burns: Under this under the symbol Lion.
Michael Burns: And the other 80, 587% is retained at call at remain co, which will own 100% of stars and 80, 785% of the studio so there'll be two public companies.
Michael Burns: Kill.
Michael Burns: As we've said before until the end of 'twenty forward, when we're anticipating the full separation.
Speaker Change: Okay. So thanks for clarifying on that and then.
Speaker Change: Just Scott.
Speaker Change: Switching gears, a little bit in terms of the.
Speaker Change: The strike impacts on the TV production.
Speaker Change: Is that something you know.
Speaker Change: It sounds like from your guide you see there.
Speaker Change: This is a pretty short kind of downdraft here that we just saw in the quarter.
Unnamed Speaker: Is that correct? I mean, do you think that the strike impacts are basically behind us next quarter, or how quickly before that's kind of in the rearview mirror? Yeah, thanks, Barton. As noted, and we said on the last call, we pegged what we thought the strike impact would be around $30 million in fiscal 24. So that cycle through this quarter, you see the impact of that, right? It affected episodic deliveries, as we noted, as well as our talent management business. But we're bouncing back strong in our fourth quarter.
Speaker Change: That correct I mean, do you think that the strike impacts are basically behind us next quarter or how quickly before that's kind of in the rearview mirror.
Speaker Change: Yes, Thanks Barton yes.
Speaker Change: As noted and we said on the last call we were.
Speaker Change: Pegged, what we thought the strike impact was around $30 million in fiscal 2004, so that cycled through this quarter.
Speaker Change: You'll see the impact of that right. It affected episodic deliveries as we noted as well as our talent management business, but.
Kevin: We're gonna have a really good full fiscal year 24 and even a better year in fiscal 25. Just to build on that, this is Kevin speaking. Yeah, we're bouncing back, particularly on the broadcast shows, Ghost, Extended Family, The Rookie, which is part of the E1 transaction. All of those are swinging back into production for an abbreviated season. And as they move into their next seasons, they'll go to a full cycle of annual production, which will be great. You know, a lot of shows are renewing. Certainly, there have been victims of the strike.
Speaker Change: Bouncing back strong in our fourth quarter, we have a really good.
Speaker Change: Full fiscal year 2040, even better year in fiscal 'twenty five.
Speaker Change: Just to build on that it's Kevin speaking.
Speaker Change: Bouncing back, particularly on the broadcast shows goes extended family the rookie which is part of the <unk> transaction.
Speaker Change: All of those are swinging back into production in an abbreviated season and as they move into their next season's I'll go to a full cadence of annual production, which will be great.
A lot of shows are renewing certainly there have been victims of the strike we have a full complement of levers to kind of adjust to the new dynamics of the post strike world.
Kevin: We have a full complement of levers to kind of adjust to the new dynamics of the post-strike world. It's a lot about our great IP. When you think about the John Wick universe and the Continental, the E1 acquisition, which we talked about, and is really strong for scripted and provides a nice new platform for our unscripted business, producing at every level, the E1 business in Canada, which we're super excited about, our international productions and the Apex Group, and also just high-end, you know, IP premium elements. We think about our three arts relationships, the best production Those are the kinds of things that are kind of striking, even in a corrections environment. Yeah, how I would characterize it going forward, Barton, is a strong fourth quarter for television, finishing 24 off with a really good year, and moving into 25, we'll be having a great year on television. That's great!
Speaker Change: A lot about our great IP, when you're thinking about the John Wick universe in the Continental U one acquisition, which we talked about really.
Speaker Change: Really strong for scripted and providing a nice new platform for unscripted business.
Speaker Change: At every level.
Speaker Change: <unk> business in Canada, which we're super excited about our international productions in the Apex group and also just high end.
Speaker Change: Premium element when we think about our three arts relationship the best production management company in the World.
Speaker Change: And our new series with Seth Rogen, and Evan Goldberg at Apple studio show those are the kinds of things that are kind of strike and even a correction environment resistant.
Speaker Change: How I would characterize it going forward at Barton is strong fourth quarter for TV, finishing 24 off with it.
Speaker Change: Really good year and moving into 'twenty, five we'll be having a great year in television.
Okay. That's great. Thank you.
Stephen Cahill: Thank you. The next question comes from Stephen Cahill from Wells Fargo. Please go ahead with your question. Thank you. So, first on library revenue, is the number you gave pro forma for any trailing 12-month contribution from E1? Or should we think about E1's library that you're stepping into as an addition to that?
Speaker Change: Our next question comes from Steven <unk>.
Steven: Wells Fargo. Please go ahead with your question.
Steven: Thank you. So first on the library revenue is the number you gave pro forma for any trailing 12 months' contribution from E. One or should we think about <unk> <unk>.
Steven: <unk> that you are stepping into his additional to that and curious if there is any way to think about your library in terms of splitting it between the motion picture contribution and the TV contribution.
Stephen Cahill: I'm curious if there's any way to think about your library in terms of splitting it between the motion picture contribution and the television contribution. And then, Jimmy, thanks for confirming a lot of that information pro forma for the spin. Just to ask a couple more questions around that: does that debt level that you expect to be at for studios or stars include the necessary corporate tax payments? Because I think this is not a tax-free spin.
Steven: And then Jimmy Thanks for confirming a lot of that information pro forma for the spin.
Steven: Just to ask a couple more around that does that that level that you expect to be at for studio or stars include the necessary corporate tax payments because I think this is not a tax free spin and then the last deck had minority interests of about $175 million, but I'm curious if that's going to be lower now that you've bought and more.
Jimmy: And then the last deck had minority interests of about $175 million. But I'm curious if that's going to be lower now that you've bought in more of three yards. Thank you, www.larryweaver.com Now, first, I'll take the last one first on minority interest. I think it will be fairly similar; we'll true that minority interest up as we get into the ultimate separation, which will be this spring. With regard to the spin, this transaction is not going to drive any significant cash outlay whatsoever.
Speaker Change: <unk>. Thank you.
Speaker Change: Yes.
The first I'll take the last one first one minority interest I think fairly similar we'll true that minority interest up as we get.
Speaker Change: And to the ultimate separation, which will be this spring with regards to the.
Speaker Change: The spin.
Speaker Change: This transaction.
Speaker Change: <unk> not going to drive any significant cash outlay whatsoever. It would be a tax free spin with regards to our U S shareholders and no.
Jimmy: It will be a tax-free spin with regard to our U.S. shareholders, and there are no real corporate tax impediments there. So, it's all in. And in terms of the library's trailing 12 months, that's not pro forma; that's the historical trailing 12 months.
Speaker Change: Real corporate tax impediments there so.
Speaker Change: It's all in and in terms of the library trailing 12 months, that's not pro forma that's a historical trailing 12 months.
Jimmy: We rotated out of Schitt's Creek, as I noted, and we've had two consecutive quarterly increases, and we expect further increases as we layer NE1, but that'll be a prospect. Great, thank you. Our next question comes from David Joyce from Seaport Research Partners. Please go ahead with your question. Thank you. I was wondering if you could update us on the landscape of TV product sales, like how quickly you're ramping up to capacity, you know, where do you, at what point do you think the industry will reach capacity? Are you seeing any new buyer trends given some of the studios and streamers are trying to achieve profitability since? That would be the first question. Sure, it's Kevin speaking.
Speaker Change: We rotated out of <unk> Creek as I noted, we've had two quarters sequential increase and we expect further increases as we layer anyone but that'll be prospective.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from David Joyce from Seaport Research Partners. Please go ahead with your question.
David Joyce: Thank you I was wondering if you could.
David Joyce: Update us with the landscape of.
David Joyce: The TV product sales like how quickly you are ramping up to capacity.
David Joyce: Do you think the industry gets the capacity are you seeing any.
David Joyce: New buyer trends given some of the studios and streamers are trying to achieve profitability sooner that would be our first question. Please.
David Joyce: Sure. It's Kevin speaking just to the larger environment, obviously, there right now theyre ordering fewer shows and there is a lot of focus on the budget levels of those shows and add a little more financial discipline compared to the the bake off streaming wars that we saw leading up into the Covid era.
Kevin: Just in the larger environment, obviously, they're, right now, ordering fewer shows, and there's a lot of focus on the budget levels of those shows and a little more financial discipline compared to the bake-off streaming wars that we saw leading up to the COVID era. But there's still a big demand for shows. They, you know, they need originals. Originals build subs, build awareness, and drive advertising. But the bar is a little higher. They need them to be packaged. They need to be noisy,
David Joyce: But there is still a big demand for shelf the knee.
David Joyce: Originals original build subs build awareness drive advertising.
David Joyce: But the bar is a little higher they need them to be package they need to be noisy. It really speaks to our strengths putting together great packages and also delivering on various budget levels and.
Kevin: It really speaks to our strengths of putting together great packages and also delivering on various budget levels and, you know, shooting in tax-friendly states, tax-friendly countries, or other approaches which we've pioneered, whether it's the 1090 comedy model, or other approaches, block shooting, just different strategies to try to accomplish what everyone needs, which is a premium show at a more reasonable price. So, you're seeing some things migrate from one network to another. You know, Showtime is kind of backing off of original programming or at least a new suite of things that are not their internal titles. We had a big title there.
David Joyce: <unk>.
David Joyce: And tax friendly state tax friendly countries or other approaches, which we pioneered whether it's the $10 90 comedy model.
David Joyce: Our other approaches block shooting just different strategies to try to accomplish what everyone needs, which is a premium show.
David Joyce: At a more reasonable price so youre seeing some things migrate from one network to another Showtime has kind of backed off of original programming or at least a new suite of things that are not their internal titles. We havent been title there it's going to move to another streamer. So selling begins with now and we've learned a lot and we.
Kevin: It's going to move to another streamer. So selling begins with no, and we've heard that a lot, and we persevere, and we find ways to get there yet. Thanks. And on the STARS side, can you please remind me what your pay-one-window contracts are like in terms of, you know, any expirations and how you expect to keep those going forward? I know you talked, John, you talked about a few ways that new STARS is a distributor of choice, but, you know, how, you know, what do you do to retain those relationships going forward? Hey, it's Jeff.
David Joyce: Persevere and we find ways to get to yes.
Speaker Change: Thanks, and on the Starz side could you. Please remind me what your.
Speaker Change: The pay one window the contracts.
Speaker Change: And then in terms of any explorations and how you expect to keep those going forward I know you did talking John I need to talk about the future.
Speaker Change: Is that.
Speaker Change: Stars is a distributor of choice but.
Speaker Change: Whether you do to retain those relationships going forward.
Jeff: Thanks for the question. So, you know, we have paid one with Lions Gate that we've got a couple of years left on that. We don't actually go out and talk about the expiration date, but we have movies in a partnership with Lions Gate locked up for a long period of time.
Speaker Change: Hey, it's Jeff. Thanks for the question. So we are paying one with Lionsgate that we've got it.
Couple of years left on that we don't actually go out and talk about the exploration dates, but we are moving with partnership with Lionsgate locked up for a long period of time.
Jeff: We're really excited about that partnership. So you can see on the service, all the movies performed really well in the last two quarters, helping to drive the sub growth that you saw in the last two quarters. So we're excited about that. We're excited about a hundred games coming on in the next quarter, quarter and a half.
Speaker Change: Really excited about that partnership so you can see on the service all of the movies performed really well in the last two quarters, helping to drive to the sub growth that you saw in the last two quarters. So we're excited about that we're excited about hunger games coming on.
Speaker Change: And the next quarter quarter and a half we also have a patriot with universal It again thats a locked up for a long period of time so.
Jeff: We also have a pay-per-view deal with Universal that, again, is locked up for a long period of time. So, as John said in his prepared remarks, movies really help drive business on both linear and streaming in a big way. And so we have great titles from two big studios and a big pay one with Lions Gate locked up for a long period of time. Great. Thank you, Jeff, and others. Thank you. Thank you. The next question comes from Alan Gould from Loop Capital. Alan, you may be on mute. Mr. Gould, is it possible your phone is on mute?
Speaker Change: As John said in his prepared remarks, moving has really helped drive the business on both linear and streaming.
Speaker Change: Anyway. So we have great titles from two Big Studios and a big pay one with Lions gate locked up for a long period of time.
Speaker Change: Great. Thank you Dave.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Alan Gould from Loop capital. Please go ahead with your question.
Alan Gould: Ellen you may be on mute.
Speaker Change: Mr. Ghosn is it possible your phone is on mute.
Alan Gould: Thank you. For more information, visit the Office of the President's Office for Budget Responsibility at the Office of the President. The Office of the President's Office for Budget Responsibility at the Office of the, Sorry about that. I'm here. Okay. First question for Kevin: Kevin, now that you're separating, I was wondering what kind of reaction you're getting in the industry. Is it opening up more opportunities for you to sell programming? And a second question for Jimmy. You know, once we're post the strike era, the strike era, you know, how much do you see spending or investment in content? Are we going to go back to the pre-strike era of, say, fiscal 23? And I guess the third question: should we be worried about NIAC? Hey, it's Kevin.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Andrea.
Andrea: Okay. Thank you.
First question for Kevin Kevin now that you're separating was wondering what kind of reaction you're getting in the industry is it opening up more opportunities for you to sell programming.
Andrea: And then second question for Jimmy once where post the strike air strike era.
Andrea: How much do you see spending or investment in content are we going to go back to the pre pre strike era of say fiscal 'twenty three and I guess the third question should be should we be worried about in ISP strike.
Kevin: I'll start with the first part, and thank you for the good question. No, there's really been no change. Just to remind everyone, the way that John and Michael set up the relationship with Starz that Jeff and I interact with every day is what I would call an enhanced arm's-length arrangement. They are a buyer amongst many, and we are a supplier that I think knows their needs maybe more than others based on all our communication, and we've tailored many of our deals and other things to try to make them the first stop, but it's always been an open market and a free market both ways, so there was never a perception that somehow the best product wasn't available to the wider market.
Andrea: Hey, its Kevin I'll start with the first part.
Speaker Change: And thank you for your question no. There is really no change because just to remind everyone. The way that John and Michael set up the relationship with stars that Jeff and I interact with every day with what I would call an enhanced arm's length arrangement.
Speaker Change: They are a buyer amongst many and we are a supplier that I think knows their needs maybe more than others based on all of our communication and we've tailored much of our deals and other things to try to make them. The first stop but it's always been an open market in a free market. Both ways. So there was never a perception that somehow.
Speaker Change: The best product wasn't available to the wider market. So that's not changing in the second thing I would say is that we have a huge amount of a big book of business together and the power versus BMS universe surfing quaint hunting wise multiple shows were all super excited about the sequence of Spartacus, we're going to be in business together for years to come if not decades.
Kevin: So that's not changing. The second thing I would say is that we have a huge amount of, a big book of business together, the Powerverse, the BMF universe, Serpent Queen, Hunting Wives, multiple shows. We're all super excited about the sequel to Spartacus. We're going to be in business together for years to come, if not decades, relative to the book of business we have right now, and every day, I'm trying to pitch Jeff something new. He's sick of taking my calls because we always have something else to talk about.
Speaker Change: Give to the book of business, we have right now and every day I'm trying to fit chef something new we've taken taking my calls because we always have something else to pitch.
Kevin: So that's not changing. And Alan, with regard to your question about content spend, yeah, I would expect that to ramp up. I mean, there's some inflation, obviously, you know, over the years, but I look back to like fiscal 22 for a good level.
Speaker Change: That's not changing.
And Alan with regards to your question about content spend yes, I would expect that to ramp up I mean, there is some inflation obviously.
Speaker Change: Over the years, but I look back to like fiscal 'twenty two for a good level remember too we're onboarding E. One and integrating net in our business very excited about it so that'll be some content spend to support those that great IP as well and on your last question.
Jimmy: Remember, too, we're onboarding E1 and integrating that into our business. Very excited about it. So there'll be some content spend to support that great IP as well. And on your last question, I'm the CEO of a public company. I worry about everything, every day. I do think that, you know, nobody really wins in a strike, honestly.
Speaker Change: Public company I worry about everything every day I do think that.
Speaker Change: Nobody really wins in a strike honestly.
Jimmy: And we're hoping that this, you know, this strike won't happen, the IA strike won't happen, because we've got to keep growing this business and innovating, and everyone deserves a fair shake. And we think everybody who works below the line deserves a fair shake. So I'm crossing my fingers and hopeful that there won't be any. Thank you, guys. Our next question comes from Thomas Yeh from Morgan Stanley. Please go ahead with your question. Thanks.
Speaker Change: And.
Speaker Change: We're hoping that.
Speaker Change: This strike won't happen the IAA strike won't happen.
Speaker Change: Because.
Speaker Change: We've got to keep growing this business and innovating and everyone deserves a fair shake and we think everybody who works below the line deserves a fair shake so I'm crossing my fingers.
Speaker Change: And hopeful that there won't be.
Speaker Change: Okay. Thanks, Scott.
Speaker Change: Okay.
Speaker Change: Our next question comes from Thomas <unk> from Morgan Stanley. Please go ahead with your question.
Thomas: Thanks, Seth back on the Starz business now that you've digested the first digital price increased and Youre seeing a return back to growth can you maybe just talk a little bit about your philosophy on what you see as maybe the primary revenue growth drivers going forward.
Thomas Yeh: Back on the STARS business. Now that you've digested the first digital price increase and you're seeing a return to growth, can you maybe just talk a little bit about your philosophy on what you see as maybe the primary revenue growth drivers going forward? Is the volume opportunity still about managing churn? I feel like Jeff has mentioned that in the past.
Thomas: As the volume opportunity is still about managing churn and I feel like Jeff has mentioned that in the past and Jimmy maybe expect rate increases that they kind of are a little bit more of a normal course driver of the business as well.
Jeff: And should we maybe expect rate increases to become a little bit more of a normal course driver? Hey, it's Jeff.
Jeff: I think there's really three components to driving the top line of the business. Obviously, one is rate increase, and our strategy and thought has always been, you know, with our two very valuable and profitable core demos, we're always looking to be the complementary service to these broad-based streaming services that are out there so that we ultimately can be either the cherry on top in terms of the add-on or a bundle, so it's important to keep a price gap of size between the two so the consumer understands that we are complementary, and so we'll always look at the broad-based set, see what they're doing on price to see if that gives us room to continue to drive price in an opportunistic way.
Seth Rogen: Yes, I think there's really three components that drive the top line of the business. Obviously, one is rate increase in our strategy and thought has always been with our two very valuable and profitable core demos, we're always looking to be the complimentary service to these broad based streaming services that are out there. So that we ultimately can be that the cherry on top in terms of add on.
Seth Rogen: On our our bundled so it's important to keep a price gap.
Seth Rogen: Of size between the two so the consumer understands that we are complementary and so we'll always look at the broad based set see what theyre doing on price to see if that gives us room to continue to drive price.
Seth Rogen: In an opportunistic way, but I think the second piece, obviously is subscriber growth as you saw in the last quarter, we had very strong subscriber growth.
Jeff: But I think the second piece, obviously, is subscriber growth. As you saw in the last quarter, we had very strong subscriber growth that was, you know, driven by a couple things. One, obviously, churn mitigation based on the way that we've lined up the content that we've talked about in the past as well as continuing to have big movies going on, you know, week to week around that, but we also had access to some new distribution platforms that we haven't had before, and we saw significant subscriber growth with access to those in the first time, and then some holiday promotion, so I think, you know, those are the two really key drivers there, and then it's obviously lifetime value extension and really driving churn down and keeping consumers on the platform longer, and those three things you saw added up to, you know, great ARPU and acceleration of revenue growth quarter to quarter. Got it.
Seth Rogen: Driven by a couple of things one obviously churn mitigation based on the way that we've lined up the content that we've talked about in the past as well as continuing to have big movies going on.
Seth Rogen: The week around that.
Seth Rogen: But we also had access to some new distribution platforms that we haven't had before and we saw significant subscriber growth with access to those in the first time and then some holiday promotion. So I think those are the two really two key drivers there and then it's obviously lifetime value extension and really driving churn down and keeping consumers on the platform longer than.
Seth Rogen: Those three things you sort of added up to.
Seth Rogen: Great <unk> and an acceleration in revenue growth quarter to quarter.
Speaker Change: Got it and Jimmy mentioned the goal of expanding margins domestically at Starz I wanted to ask a little bit to talk about the cost structure. It looks like it's held pretty steady through the last year even quarter to quarter.
Jeff: Jimmy mentioned the goal of expanding margins domestically at STARS. I wanted to ask a little bit about the cost structure. It looks like it's held pretty steady through the last year, even quarter to quarter.
Jeff: I know you took some pain last year when you were aligning your organization towards some of the growth areas of the business. But any way to think about when and where we might see some of the opportunities for leverage to show through? And with the film output deals, maybe it could be an incremental additive cost to the original program. It's a great question.
Speaker Change: You took some pain.
Speaker Change: When you were aligning our organization towards at some of the growth areas of the business, but any way to think about how we should think about when and where we might see some of the opportunities for the leverage to show through and with the film output deals maybe be an incremental additive costs to the original programming lineup.
Jeff: So we, you know, currently we're coming out, you know, the last couple quarters around mid-teens in terms of margin. We've talked previously about long-term steady state, around 20% margin. And really, you know, as you said, there's a little bit of top-line growth there with rate increases and subscriber growth, but it's also managing costs on the bottom, on the backside. And part of that is really looking at the slate of programming, both the pay 1, the pay 2, and originals. You know, there's a lot of other companies that are cutting back. We're actually looking at trying to lessen the tenure of our slate so that we have newer shows put on the service that are at a cheaper cost than we currently have today.
Speaker Change: It's a great question. So we currently are coming.
Speaker Change: Last couple of quarters around mid teens in terms of margin. We've talked previously about long term steady state around 20% margin and really.
Speaker Change: As you said there is a little bit of top line growth there with rate increase in subscriber growth, but it's also managing costs on the bottom on the backside and part of that is really looking at the slate of programming both the.
Speaker Change: <unk> original <unk> there is a lot of other companies that are cutting back we're actually looking at China.
Speaker Change: Less than the tenure of our slate. So that we have newer shows put on this service that are at a cheaper cost and we currently have today working very closely with Kevin around trying to develop more spin offs around the power universe that are newer in tenure, which brings the cost of the programming down and so we're going to be really.
Jeff: Working very closely with Kevin on trying to develop more spinoffs around the power universe that are newer in tenure, which brings the cost of the programming down. And so we're going to be really, you know, it's a little bit like going into the NFL draft when you're looking to bring in, you know, a rookie linebacker on a rookie deal versus having somebody who's a veteran on a minimum that is a good athlete.
Speaker Change: A little bit like going into the NFL draft. When you are looking to bring in <unk>.
Speaker Change: Linebacker on a rookie deal versus having somebody who's a veteran at a minimum it is.
Jeff: And so we're working with Kevin to try to turn the slate over so that we can serve the two core demos with the components of shows that we know work for those demos, but on a much fresher type story and a different kind of cost perspective. Thanks, Thomas. Operator, could we get the next question, please? Our next question comes from Jim Goss from Barrington Research. Please go ahead with your question. Hi.
Speaker Change: A good assay and so we're working with Kevin to try to turn the slate over so that we can serve the two core demos with the components of shows that we know work for those demos put an unmatched pressure type story and a different kind of cost perspective.
Speaker Change: Okay.
Speaker Change: Thanks, Thomas operator, because we get the next question. Please.
Speaker Change: Last question, guys, Ron and Jim Goss from Barrington Research. Please go ahead with your question.
Speaker Change: Hi, just to stay on Starz topic for a little bit more.
James Charles Goss: Just to stay on the STARS topic for a little bit more, with the increased streaming share and the increased focus on movies, including the types of movies you've talked about and the notion of partnerships, are you looking at a broadened appeal beyond the core demo you've focused on the past several years? And could you talk a little more about the partnerships in terms of how formal they might be, or are they basically just implied as a complementary option for a larger service, and how are they being promoted? So, I'll start with the second part first and then go back to the first part.
Speaker Change: With the increased streaming share and the increased focus on movies, including the types of movies you talked about.
Speaker Change: And the nation.
Speaker Change: Notion of partnerships are you looking at to broaden appeal beyond the core demo you focused on in the past several years.
And could you talk a little bit more about the partnerships in terms of how far will they might there or are they basically just implied as a complementary.
Speaker Change: Option for for a larger service and how are they being promoted.
Jeff: So, if you look within the quarter, we had Verizon announce a bundle with Starz and Netflix. It's a formalized partnership that's really, you know, we've seen a great incremental lift on subscriber add on that partnership with Verizon. We are in a bundle with MGM Plus on Amazon, and we are in conversations with multiple different broad-based streamers about bundling as well. And even our linear partners, like Charter and Comcast, moved to Xumo, which gives them the ability to kind of bundle some more services through a digital platform. We're looking at talking to them about bundling there.
Speaker Change: So I'll start with the second part first and go back to the first part. So if you look within the quarter, we had Verizon announced the bundle with Starz and Netflix at the formalized partnership it's really we've seen great incremental lift on subscriber add on that partnership on Verizon we are in a bundle with MGM plus on Amazon we are in <unk>.
Speaker Change: <unk> with multiple different broad based streamers about bundling as well and even our linear partners as charter and Comcast moved zummo, which gives them the ability to kind of bundle some more services through a digital platform or looking at talking to them about bundling their and so these are.
Jeff: And so, these are both, you know, formalized partnerships that are actually generating a great volume of conversations to come. I think we've really, because of the uniqueness and the value of our two core demos, which have been hard to replicate at our price point, make it really a great complementary service. And as you've seen in a lot of the different reports, the more services you put together, everybody's churn comes down. And so, I think you're starting to see a big move toward that in a way this year and next year that we haven't seen before. So, we're excited about that.
Speaker Change: Both formalized partnerships that are actually generating great volume and are in.
Speaker Change: In conversations to come I think we've really because of the uniqueness and the value of our two core demos.
Been hard to replicate and have our price point. It makes it really a great complementary service and as you've seen in a lot of the different reports the more services you put together everybody's churn comes down and so I think youre starting to see a big move toward that in a way.
Speaker Change: This year and next year that we haven't seen before.
Speaker Change: So we're excited about that in terms of your question around movies, we have multiple different distribution platforms, whether it's on the linear side.
Jeff: In terms of your question around movies, you know, we have multiple different distribution platforms, whether it's on the linear side, Avon-supported services, but, you know, linear Avon, sitting on top of, you know, Amazon Avon. And so, we have consumers that go to look at these services that are broader than just our two core demos. And so, the combination of broader, big-title movies coupled with our two core demos and originals expands, you know, our ability to grow TAM against all of our different distribution partners. And so, we look at the movies as kind of a third leg to the pole to try to drive incremental TAM outside of the two core demos. Okay, thanks. Here's one more one.
Speaker Change: <unk> supported services.
Speaker Change: Linear Avon.
Speaker Change: Sitting on top of.
Speaker Change: Amazon Avon and so.
Speaker Change: We have consumers that go to look at these services are broader than just our two core demos and so the combination of broader big title movies, coupled with our two core demos on original expands our ability to grow Tam again to all of our different distribution partners and so we look we like the movies is kind of a third leg to the poll to try to drive.
Speaker Change: <unk> incremental Tam outside of the two core demos.
Speaker Change: Okay. Thanks, one other one in terms of.
Adam: In terms of the reference to maybe a lighter film slate this year in general and the ability to gain share, are there any genres you're able to target that you have your eye on? And I know you've talked about a couple in some recent calls. And is there some redefinition of what a blockbuster is in terms of cost and value, maybe with Cost Notions? Hey, it's Adam. Thanks for the question.
Speaker Change: Reference to maybe a lighter film slate this year in general and the ability to gain share or are there any.
Speaker Change: Genre as you're able to target that you have your eye on.
Speaker Change: Talked about a couple in.
Speaker Change: Some recent calls and is there some redefinition of what a blockbuster is in terms of the cost and value.
Speaker Change: Maybe with the <unk>.
Thanks.
Speaker Change: Costs notions.
Speaker Change: Adam.
Speaker Change: Adam Thanks for the question.
Adam: In terms of genres, the truth is that over the last five, six months, a bunch of films that fit into a variety of categories in the low and mid-budget space have performed exceptionally well, in fact, probably better than we've seen in the last four or five years. From our own Saw film to Five Nights at Freddy's, horror continues to be terrific. Anyone But You in the romantic comedy space, which is a genre that people were concerned about, performed exceptionally well. Beekeeper is doing spectacular business in January.
Speaker Change: In terms of genres. The truth is if you look over the last five six months.
Speaker Change: A bunch of films that fit into a variety of categories and the low end mid budget space have performed exceptionally well in fact, probably better than we've seen in the last four or five years from our own saw fell to five nights at Freddy's horror continues to be terrific.
Speaker Change: Anyone, but you and the romantic comedy space, which is a.
Speaker Change: Andre that people were concerned about performed exceptionally well beekeeper is doing spectacular business in January mean girls is doing spectacular business in January so I think that all of the genres that lionsgate has historically performed in our not only doing well, but probably better than they have in many many years with respect to blockbusters I think.
Adam: Mean Girls is doing spectacular business in January, so I think that all of the genres that Lions Gate has historically performed in are not only doing well, but probably better than they have in many, many years. With respect to blockbusters, I think it's less for us about what the specific cost of the movie is and more about what the profitability of a movie can be. We made both John Wick and Hunger Games at prices that are considerably less than what the industry standard definition of a blockbuster might be. We marketed them for considerably less than what the industry standard would be.
Speaker Change: It's less for us about what the specific cost of the movie is and more about what the profitability of our movie can be and we made both John Wick and hunger games at prices that are considerably less than what the industry sort of standard definition of a blockbuster might be we marketed them for considerably less than what the industry standard would be and ulta.
Adam: Ultimately, the return and the profitability on those films, that for us is a blockbuster all day long, and we have a lot of great opportunities going forward with the John Wick franchise, with the Saw franchise, we believe with the Hunger Games franchise, and with a bunch of new IP that Joe and everybody here have developed over the last few years and are now lined up to start creating real value for the company. Okay, maybe one follow-up to that, and I'll let it go. You mentioned that the Hunger Games prequel drove the library sale. I assume that's a somewhat unique situation, or maybe it's not.
Speaker Change: Lately, the return and the profitability on those films that for US is a blockbuster all day long and we have a lot of great opportunities going forward with the John Wick franchise with the saw franchise, we believe with the hunger games franchise and with a bunch of new IP that Joe and everybody here has developed over the last few years and are now lined up to start creating real value for the company.
Speaker Change: Okay, maybe one follow up to that so I'll, let it go.
Speaker Change: You mentioned that the hunger games prequel drove library sale I assume that's somewhat unique.
Speaker Change: Situation or maybe it's not.
Jim Packer: And I wonder if you might give any quantification of that or also talk about whether there are any intellectual property plans you might have for that intellectual property, either on film or TV. I'll have Jim Packer, head of worldwide distribution, answer that question. So yeah, we see drafting opportunities whenever these big franchises come out. The transactional team under Ron Schwartz has done a great job with. I think we were up eight times versus the previous quarter and almost 17 times the year ago quarter. So we see very big drafting on the transactional side, but we also, you may have seen the movies on a number of different S5 platforms. A lot of that was driven by the interest in the new movie.
Speaker Change: I Wonder if you might give any quantification of that or also talk about whether there are any intellectual property.
Speaker Change: Plant or plans you might have for that intellectual property is around film or television.
Speaker Change: Yeah, Jim Packer.
Speaker Change: Worldwide distribution answer that.
Jim Packer: So, yes, we've see drafting opportunities whenever these big franchises come out.
Jim Packer: The transactional team under Ron Schwartz has done a great job with I think we were up eight times versus the previous quarter at almost 17 times.
Jim Packer: The year ago quarter, So we see very big drafty on the transactional side, but we also.
Jim Packer: They have seen the movies on a number of different escalade platforms. A lot of that was driven by the interest in the new movie. So we take advantage of that we make sure that we maximize it and it's good for the whole ecosystem of the brand.
Jim Packer: So we take advantage of that. We make sure that we maximize it, and it's good for the whole ecosystem of the brand. Thank you very much. Once again, if you would like to ask a question, please press star and then 1. To withdraw your question, you may press star and two. Again, that is star and then one to join the question.
Speaker Change: Alright, Thank you very much.
Speaker Change: Once again, if he would like to ask a question. Please press star and then one.
Speaker Change: Draw your questions you May press Star and two Star and then wanted to join the question queue.
Operator: And everyone, at this time, if there are no additional questions, I'd like to turn the floor back over to management for any closing 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-4 looking measures discussed on this call today. Thank you. Have a good evening, and ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Speaker Change: And everyone at this time in showing no additional questions I'd like to turn the floor back over to management for any closing remarks.
Speaker Change: 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 today. Thank you have a good evening.
Speaker Change: Hello, Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.