Q3 2024 Lions Gate Entertainment Corp Earnings Call

Operator: and Screaming Eagle have filed with the SEC, including in our Form 8K filed on December 22, 2023 and a registration statement on Form S-4 filed with the SEC on January 5, 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.

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 materials and other documents filed with the SEC free of charge at the Sec's web.

Site, Www dot FCC dot Gov or on our Investor Relations website.

Operator: 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.

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 Lionsgate most recent.

Operator: 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.

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 result of any revisions to these forward looking statements that may be made to reflect any future events or circumstances. Moreover, lionsgate.

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.

A proxy statement and other relevant documents filed with the SEC as available no offer to sale or solicitation of an offer to buy securities will be made except pursuant to an effective form S four or an exemption.

Josh: I'll now turn the call over to Josh. Thank you, Neelay, 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 on the Lions Gate 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 Lions Gate and STARS by announcing Lions Gate 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 new 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.

Now I'll turn the call over to 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 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 three arts and took a significant step towards the separation of Lionsgate and Starz by announcing Lions Gate studios as an independent publicly traded pure play content company.

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.

We continue to develop and produce great new television properties with a half hour comedy extended family off to a good start on NBC.

Duction beginning on a Seth Rogen comedy for Apple TV, plus in March and Spartacus preparing to start shooting in New Zealand for Starz.

Operator: This makes 10 films and television series entering or resuming production in a quarter. Stars 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.

This makes 10 films and TV series entering or resuming production in the quarter.

Starz had another strong quarter, gaining 700000, North American OTT subscribers and more than 340000 overall net north American subscribers.

This subscriber growth coupled with Starz recent rate increase drove revenue and <unk> growth as well.

All of these gains rolled up into a strong financial quarter with our key financial metrics exceeding estimates with.

Operator: 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.

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.

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 in the quarter.

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.

<unk> gave to the library performance of previous hunger games titles strong ancillary market performances from John Wick Chapter four and saw 10 and a robust contribution from multi platform titles.

Operator: 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.

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 'twenty five.

Operator: 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. 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.

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.

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.

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.

Graham King and directed by Antoine Fuqua, the training day, an equalizer filmmaker.

Operator: I visited the set of Michael here in Los Angeles last week and came away more convinced than ever that it would be an exciting and important tentpole on our fiscal 26 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.

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 tent pole on our fiscal 2006 slate and a very special property.

Turning to TV the acquisition of <unk> continue 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.

Operator: 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.

The acquisition would be one 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.

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 surf and 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.

Strong growth year from three arts.

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.

Operator: 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 percent 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.

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.

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.

Operator: Its core series are performing strongly as part of a content offering supercharged by the addition of pay one and pay two movies, and its resources are 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 on SVOD services continues to grow, with a recent consumer survey citing movies as the most valuable part of the streaming experience by a wide margin, SARS 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.

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.

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 demand for movies on echelon services continues to grow with a recent consumer survey, citing movies as the most valuable part of the STREAMWAY experienced by a wide margin.

<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.

Operator: In the coming months, stars 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 S.T.A.R.S.

In the coming months Starz will offer a compelling mix of Tentpole originals like BMS.

Most 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 ballad of song burden snakes, as well as Universal's Oppenheimer fast turn and Megan.

Even as star's core series continue to excel and 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.

Operator: As its core series continue to excel, it is 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. STARS 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.

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.

Others it's.

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.

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.

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 significant G&A and revenue synergies and ongoing best of the best integration of our respective work.

Operator: 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.

Forces.

In closing we are continuing to execute our plan to launch Lionsgate Studios is one of the world's largest independent publicly traded pure play.

<unk> companies.

I am pleased to report that we expect to be launching on NASDAQ under the ticker symbol lion in the spring.

Jimmy: 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 will help unlock the value that we've created. Now, I'll turn things over to Jimmy.

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.

Created.

Now I'll turn things over to Jimmy.

Jimmy: Thanks, John, and good afternoon, everyone. I'll briefly discuss our third quarter financial results and provide an update on the balance sheet. Q3 Adjusted Oebida was $151 million, and total revenue was $975 million. Consolidated revenue and adjusted OEBD 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 45 cents per share, and fully diluted adjusted earnings per share was a positive 27 cents per share. Adjusted free cash flow for the quarter was $64 million.

Thanks, John and good afternoon, everyone I'll briefly discuss our third quarter financial results and provide an update on the balance sheet Q.

Q3, adjusted OIBDA was $151 million in total revenue was $975 million.

<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.

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 Fiscal Year 25 adjusted OEBDOF for Lions Gate Studios, which we define as the studio segment profit less all corporate G&A, to be $370 million.

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.

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.

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 OEBDI, inclusive of the projected $60 million of post synergies run rate adjusted OEBDI 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.

This moves up to $430 million.

Pro forma adjusted EBITDA inclusive of the projected $60 million of post synergies run rate adjusted OIBDA from E. One.

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.

Media Networks' quarterly revenue was $417 million in segment profit was $86 million total.

<unk> 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 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 STARS' 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 US and Canada.

Total domestic revenue grew modestly both year over year and <unk>.

<unk> as the impact of the June 2023 price increase continues to help stars topline.

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.

Similar to Q2 as part of stars 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 Lat am.

Finally with stores 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 subbase, 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%.

Now, let me discuss our subscriber trends in North America, which will be the market for stores 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.

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.

OTT subscribers now represent 60% of the subbase and exiting fiscal year 'twenty five 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%.

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.

On a trailing 12 month basis library revenue of the studio was $784 million down 7% compared to the prior year quarters trailing 12 month library revenue.

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.

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.

Up 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 oebida from previously exited or soon to be exited Lions Gate Plus territories and including 60 million dollars of projected run rate adjusted oebida 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.

Revenue and segment profit growth was driven by strength in hunger games Ballard of songbirds and snakes theatrical performance.

Library performance of power hungry game titles, and the carryover effect of prior quarter performances of John Wick, four and saw 10 and.

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 compare.

Ericsson to last year's licensing of Shits Creek.

Now, let's talk about our balance sheet.

Including 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.

This includes a $375 million use of our revolver to close a one 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.

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, this implies FY25 pro forma leverage of 3.3 times for the standalone studio.

Looking forward I want to remind everyone that we purchased an incremental 25% or three arts 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 landscape Studios and stars is trending below three five times fiscal year 'twenty five adjusted a webinar for.

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.

Including Standalone studio adjusted OIBDA of $370 million in fiscal year, 'twenty, five and $60 million of annual run rate adjusted EBITDA for E. One this implies fiscal 'twenty five pro forma leverage of three three times for the Standalone studio.

Neelay: 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. 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. Thank you for using the speakerphone. We do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality; to draw your questions, you may press star.

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.

Now I'd like to turn the call over to <unk> for Q&A.

Operator can we open the call up for Q&A.

Ladies and gentlemen at this time well begin the question and answer session.

To ask a question you May press Star and then one on your question on telephones.

You're using a speaker phone will do asking please pick up your walls.

Prior to passing the key is to ensure the best sound quality.

Draw your questions you May press star two.

Neelay: Again, that is the star and then one to join it. 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.

Once again that is star and then one other.

Our question queue.

Our first question today comes from.

Barton Crockett from Rosenblatt. Please go ahead with your question.

Okay. Thanks for taking the question.

I wanted to maybe try and understand a little bit better.

Barton Crockett: What you're envisioning when you talk about the studio separation happening here in a few months and trading under 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 two is, would the Studio Lion, would there still also at that time be a separate kind of SPAC vehicle?

What youre envisioning when you talk about the studio separation happening here in a few months and trading under the ticker Lion.

Are you anticipating at that point that therapy.

Public stars or is the thought that stars might be bought by some iron ore that unclear.

Why is that.

Two is what the law the studio Lion.

Where there still also at that time.

Jack vehicle trading with the stub interest or is the thought that those could be consolidated at that point.

Operator: , , , , , , , , , , , , , , So, yeah, if you could clarify that, I'd appreciate it. Sure. Hi, Barton.

So yes, if you could clarify that I'd appreciate it.

Alright, Michael can answer that.

Operator: 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 own 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 24, 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. Was that, you know, it sounds like from your guide that you see this as a pretty short kind of down draft here that we just saw in the quarter. Is that correct?

Sure Hi, Barton, what I'll say is that our film for a second 13% to 15% is in the public.

Under this under the symbol Lion.

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.

Kill.

As we've said before until the end of 'twenty forward, when we're anticipating the full separation.

Okay. So thanks for clarifying on that and then.

Yes.

Hi.

Switching gears, a little bit in terms of.

The strike impacts on the TV production.

Is that.

It sounds like from your guide you see this as a pretty short kind of downdraft here that we just saw in the quarter.

Operator: 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. Yeah, 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 cycled 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.

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.

Yes, Thanks Barton.

As noted and we said on the last call.

We've pegged what we thought the strike impact was around $30 million in fiscal 2004, so that cycled 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 are.

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. Ghosts, 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.

Dancing back strong in our fourth quarter, we have a really good.

Full fiscal year 2004 to even a better year in fiscal 'twenty five.

Just to build on that it's Kevin speaking.

We're bouncing back, particularly on the broadcast shows goes extended family the rookie which is part of the <unk> transaction. 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 providing 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 IP premium elements. We think about our three arts relationship, the best production management company in the And our new series with Seth Rogen and Evan Goldberg at Apple, the studio show, those are the kinds of things that are kind of striking, even in a corrections environment. 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; thank you.

A lot about our great IP when you think about the John Wick universe in the Continental U one acquisition, which we talked about really strong for scripted and providing a nice new platform for unscripted business.

Looking at every level that you won business in Canada, which we're super excited about our international productions in the Apex group and also just high end IP premium element when we think about our three arts relationship the best production management company in the World.

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.

How I would characterize it going forward at Barton is strong fourth quarter for TV, finishing 24 off with a really good year and moving into 'twenty five we'll be having a great year in television.

Okay. That's great. Thank you.

Steven Cahall: Our next question comes from Steven Cahall from Wells Fargo. Please go ahead with your question. Thank you.

Our next question comes from Steven Cahall from Wells Fargo. Please go ahead with your question.

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>.

Operator: So first on the 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? 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.

<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.

And then Jimmy Thanks for confirming a lot of that information pro forma for the spin.

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.

Operator: 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. Now, first, I'll take the last one first on minority interest. I think, you know, fairly similar. We'll true that minority interest up as we get, you know, 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. It will be a tax-free spend with regard to our U.S. shareholders, and there are no real corporate tax impediments there.

Three arts. Thank you.

Yes.

The first I'll take the last one first one minority interest I think fairly similar well true that minority interest up as we get.

And to the ultimate separation, which will be this spring with regards to the spin.

This transaction.

Action is not going to drive it.

A significant cash outlay whatsoever, it would be a tax free spin with regards to our U S shareholders and no.

Real corporate tax impediments there so.

Operator: 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. We rotated out of Schitt's Creek, as I noted, and we've had two quarters of sequential increases, and we expect further increases as we layer in E1, 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.

It's all 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.

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.

Great. Thank you.

Yeah.

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.

David Joyce: 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, 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 soon? That would be my first question. Sure, it's Kevin speaking.

Update us with the landscape of.

The TV product sales like how quickly you are ramping up to capacity where do you.

Do you think the industry gets the capacity are you seeing any.

The new buyer trends given some of the studios and streamers are trying to achieve profitability sooner that would be our first question. Please.

Sure. It's Kevin speaking just in the larger environment, obviously, there right now theyre ordering fewer shows and Theres a lot of focus on the budget levels of those shows in a little more financial discipline compared to the.

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,

The the bake off streaming wars that we saw leading up into the Covid era.

But there is still a big demand for shelf the need originals original build subs build awareness drive advertising.

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.

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 from original programming or at least a new suite of things that are not their internal titles. We had a big title there.

And shooting.

And tax friendly state tax friendly countries or other approaches, which we pioneered whether it's the $10 90 comedy model.

Our other approaches block shooting just different strategies to try to accomplish what everyone needs, which is a premium show.

At a more reasonable price.

And 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.

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 to yes. Thanks.

Selling begins with now and we've heard it a lot and we persevere and we find ways to get to yes.

Thanks.

Jeff: And on the STARS side, can you please remind me what your pay-per-view 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 STARS is a distributor of choice, but, you know, what do you do to retain those relationships going forward? Hey, it's Jeff.

On the Starz side could you. Please remind me what your.

Pay one window contracts.

And in terms of any explorations and how you expect to keep those going forward I know you did talking Joe I need to talk about.

If you look at ways that Starz is a distributor of choice but.

Whether you do to retain those relationships going forward.

Jeff: Thanks for the question. So, you know, we have PAY1 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 partnership with Lions Gate locked up for a long period of time.

Hey, it's Jeff. Thanks for the question. So we have paid one with Lionsgate that we've got a couple of years left on that we don't actually go out and talk about the exploration date, but we have movies 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 of 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 Hunger Games coming on in the next quarter, quarter and a half.

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.

In the next quarter quarter, and a half we also have to pay to the universal that again, that's a locked up for a long period of time. So as John said in his prepared remarks, moving has really helped drive the business on both linear and streaming in a big way. So we have great titles from two Big Studios and a big pay one with Lionsgate locked up for a long period of time.

Jeff: We also have a PAY2 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 PAY1 with Lions Gate locked up for a long period of time. Great. Thank you, Jeff. Our 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?

Great. Thank you Dave.

Yeah.

Our next question comes from Alan <unk> from Loop capital. Please go ahead with your question.

Ellen you may be on mute.

Mr. <unk> is it possible your phone is on mute.

Okay.

Alan Gould: Sorry about that. I'm here. 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, 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.

Alright.

I'm here.

Okay. Thanks.

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 and a second question for Jimmy.

Once we're post the strike air strike era.

How much do you see spending or investment in content or 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 IFC strike.

Kevin: I'll start with the first part, and thank you for the good question. No, there's really no change. Just to remind everyone, the way that John and Michael set up the relationship with STARS that Jeff and I interact with every day was 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 much 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.

Hi, it's Kevin I'll start with the first part.

And thank you for your question no. There's really no change just to remind everyone. The way there.

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. They are a buyer amongst many and we are a supplier that I think knows their needs may be 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.

Our first stop but it's always been an open market in a free market. Both ways. So there was never a perception that somehow.

And 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 quail 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 rare.

Kevin: So that's not changing. The second thing I would say is that we have a huge amount of 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.

Save to the book of business, we have right now and every day I'm trying to fit chef something 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 span, 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.

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.

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 I'm. The CEO of a public company I worry about everything every day I do think.

Jimmy: Remember too, we're onboarding E1 and integrating that into our business. We're very excited about it, so there'll be some content span 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, 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.

That.

Nobody really wins in a strike honestly.

And.

We're hoping that.

This strike won't happen the iam 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 is there is a fair shake so I'm crossing my fingers.

And hopeful that there won't be.

Jimmy: Thanks, guys. Our next question comes from Thomas Yeh from Morgan Stanley. Please go ahead with your question. Thanks.

Okay. Thanks, Scott.

Okay.

Our next question comes from Thomas <unk> from Morgan Stanley. Please go ahead with your question.

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.

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.

As the volume opportunity is still about managing churn I feel like Jeff has mentioned that in the past and Jimmy maybe expect rate increases that become 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 are really three components to driving the top line of the business. Obviously, one is the rate of increasing. Our strategy and thought have 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 can ultimately 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.

Hey, it's Jeff 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 ad.

<unk> are a bundle so it's important to keep a price gap.

Size between the two is to the consumer understands that we are complementary and so we will 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.

Jeff: But I think the second piece is obviously 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 hadn't had before, and we saw significant subscriber growth with access to those for the first time and then some holiday promotions. So, I think, you know, those are the two really key drivers there.

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 that was 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.

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 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.

Jeff: 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.

And those three things added up to.

Great <unk> and an acceleration in revenue growth quarter to quarter.

Got it and Jimmy mentioned the goal of expanding margins domestically at Starz I wanted to ask a little bit just about the cost.

Thomas Yeh: 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.

Cost structure it looks like it's held pretty steady through the last year, even quarter to quarter. I know you took some pain.

Operator: 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 the leverage to show through? And would the film output deals maybe be an incremental additive cost to the original program? It's a great question.

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 cost 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 increase 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 one, the pay two 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, 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.

It's a great question. So we currently are coming.

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.

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 pay 1% peso and original <unk>. There is 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 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 are going to be really it's a little bit like going into the NFL draft when youre looking to bring in.

Jeff: 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, at a minimum, that is a good athlete. 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 of story, and a different kind of cost perspective. Thanks, Thomas.

<unk> linebacker on a rookie deal versus having somebody who is a veteran at a minimum it is a good athlete 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 on much fresher type story and a different kind of cost perspective.

Okay.

Yeah.

Thomas Yeh: Operator, could we get the next question, please? Our next question comes from Jim Goss from Barrington Research. Please go ahead with your question.

Thanks, Thomas operator, because we get the next question. Please.

Last question, guys, Ron and Jim Goss from Barrington Research. Please go ahead with your question.

Jim Goss: Hi, just to stay on the STARS topic for a little bit more, you know, 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.

Hi, just to stay on Starz topic for a little bit more.

And with the increased streaming share and the increased focus on movies, including the types of movies you talked about.

And the nation.

Notion of partnerships are you looking at or broaden appeal beyond the core demo you folks out in the past several years.

And could you talk a little more about the partnerships in terms of how farmer they might there or are they basically just implied as a complementary.

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 Stars and Netflix as a formalized partnership. It'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.

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 and we are in <unk>.

<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. We're 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 great volume and all the 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, it makes it really a great complementary service. And as you've seen in a lot of different reports, the more services you put together, everybody's turn comes down.

Both formalized partnerships that are actually generating great volume and are in conversations to come I think we've really because of the uniqueness and the value of our two core demos that have been hard to replicate and out of our price point. It makes it really a great complementary service and as you've seen in a lot of the different reports the Morris.

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.

Jeff: 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. 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 that, 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.

This year and next year that we haven't seen before.

So we're excited about that in terms of your question around movies.

Have multiple different distribution platforms, whether it's on the linear side.

Supported services.

Avon.

Sitting on top of.

Amazon Avon and so 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 against all of our different distribution partners and so we look we like the movies there.

Jeff: 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. One other one.

Kind of a third leg to the pull to try to drive incremental Tam outside of the two core demos.

Okay. Thanks, one other one in terms of.

Jim Goss: 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 the change? Cost Notions. Adam? Hey, it's Adam.

The reference to maybe a lighter film slate this year in general and the ability to gain share or are there any.

Genre as you're able to target that you have your eye on.

Now you've talked about a couple of forms.

Some recent calls and is there some redefinition of what a blockbuster is in terms of the cost and value.

Maybe with the <unk>.

Yes.

Costs notions.

Adam It's Adam Thanks for the question.

Adam: Thanks for the question. In terms of genres, the truth is, if you look 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.

In terms of genres. The truth is if you look over the last five six months.

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.

Adam: 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. Beat Keeper is doing spectacular business in January.

But you and the romantic comedy space, which is a genre 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 <unk>.

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.

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 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.

For considerably less than what the industry standard would be and 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 has developed over the last few years.

Adam: And ultimately, the return on and the profitability of 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 Against Prequel drove the library sale. I assume that's a somewhat unique situation, or maybe it's not.

And are now lined up to start creating real value for the company.

Okay, and maybe one follow up to that so I'll, let it go.

You mentioned that the hunger games prequel drove library sale.

I assume that's somewhat unique.

Situation or maybe it's not.

Jim Goss: And I wonder if you might give any quantification of that or also talk about whether there are any intellectual property rights, plans you might have for that intellectual property, either on film or TV. I'm Jim Packer, head of Worldwide Distribution, Amsterdam. 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.

I Wonder if you might give any quantification of that or also talk about whether there are any intellectual property.

Plant or plans you might have for that intellectual property is around film or television.

Yeah, Jim Packer head of worldwide distribution answer that.

So, yes, we've see drafting opportunities whenever these big franchises come out.

The transactional team.

Ron Schwartz has done a great job with I think we were up eight times versus the previous quarter at almost 17 times the.

The year ago quarter, So we see very big drafting on the transactional side, but we also you.

You may 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 Goss: So we take advantage of that. We make sure that we maximize it, and it's good for the whole ecosystem of the brand. All right, 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, and that is star and then one to join the question.

Alright, Thank you very much.

Once again, if he would like to ask a question. Please press star and then one withdraw your question you May press Star and two <unk>.

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. And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining us. You may now disconnect your lines.

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.

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.

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.