Q4 2024 Lions Gate Entertainment Corp Earnings Call

Operator: Investor Relations. Please go ahead.

Unnamed Speaker: Good afternoon. Thank you for joining us for the Lionsgate Studios Corp and Lionsgate Entertainment Corp Fiscal 24 fourth quarter conference call. We'll begin with opening remarks from our CEO, John Feldheimer, followed by remarks from vice chairman, Michael Burns, and remarks from CFO Jimmy Barge. After their remarks, we'll open the call for questions. Also joining us on the call today are our COO Brian Goldsmith, Chairman of the TV group Kevin Beggs, Chairman of the motion picture group Adam Foglson, and president of worldwide TV industry distribution Jim Packer. And from stars, we have President and CEO Jeffrey Hirsch, CFO Scott McDonald, and President of Domestic Networks Allison Hoffman.

<unk> ahead.

Speaker Change: Good afternoon. Thank you for joining us for the Lionsgate Studios Corp, and Lions Gate Entertainment Corp fiscal 2020 for fourth quarter Conference call will begin with opening remarks from our CEO, Jon Feltheimer, followed by remarks from Vice Chairman, Michael Burns and remarks from CFO Jimmy barge. After their remarks, we'll open the call for questions also joining us.

Speaker Change: On the call today, our COO, Brian Goldsmith Chairman of the television group, Kevin Beggs Chairman of the motion Picture Group, Adam Fogelson, and President of worldwide television distribution, Jim Packer and from Starz, We have president and CEO, Jeffrey Hirsch CFO, Scott Macdonald and president of domestic networks Allison Hoffman.

Unnamed Speaker: The matters discussed on the 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, including the risk factors set forth in our public filings for Lions Gate Studios Corp. and Lions Gate Entertainment Corp. The companies undertake no obligation to publicly release the result of any revision to these forward-looking statements that may be made to reflect any future events or circumstances. I'll now turn the call over to Jon.

Speaker Change: The matters discussed on the 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 our public filings.

Speaker Change: [noise] for Lionsgate Studios Corp, and Lions Gate Entertainment Corp.

John: Companies undertake no obligation to publicly release the result of any revision to these forward looking statements that may be made to reflect any future events or circumstances I will now turn the call over to John Thank you Neil and good afternoon, everyone. Thank you for joining us.

Jon Feltheimer: Thank you, Nilay, and good afternoon, everyone. Thank you for joining us. I'm speaking today as CEO of both the consolidated parent company Lions Gate Entertainment Corp. and Lions Gate Studios, as we now have two public companies trading in the market. When Jimmy presents the consolidated financial results of the parent company in a few minutes, he'll include the separate operating results of the Lions Gate Studios segment. Turning to my remarks, we had a great year.

John: Speaking today as CEO of both the consolidated parent company Lionsgate Entertainment Corp, and Lions Gate Studios as we now have two public companies trading in the market.

Speaker Change: When Jimmy presents our consolidated financial results of the parent company in a few minutes he'll include the separate operating result of the Lionsgate studio segments too.

Speaker Change: Turning to my remarks, we had a great year.

Speaker Change: We completed four major transactions moved closer to a value defining separation of our studio and stars exceeded our numbers strengthened our content pipelines and grew our library to record levels.

Speaker Change: We accomplished all of this in the face of two strikes and unprecedented industry disruption.

Jon Feltheimer: We completed four major transactions, moved closer to a value-defining separation of our studio and stars, exceeded our numbers, strengthened our content pipelines, and grew our library to record levels. We accomplished all of this in the face of two strikes and unprecedented industry disruption. Let's look at the fiscal year highlights. Last week, we launched Lions Gate Studios as a pure play, publicly traded company positioned right in the sweet spot of the entertainment business, creating, owning, and distributing great content. We believe that it has all of the ingredients to live up to its ticker symbol, Lion.

Speaker Change: Let's look at the fiscal year highlights.

Last week, we launched Lionsgate studios as a pure play publicly traded company positioned right in the sweet spot of the entertainment business, creating owning and distributing great content.

Speaker Change: We believe that it has all of the ingredients to live up to its ticker symbol Lion.

Jon Feltheimer: In December, we closed the acquisition of E1, and it is already deepening our library, strengthening our Canadian production initiatives, diversifying our television group, and allowing us to efficiently scale Lions Gate alternative television into an unscripted powerhouse. Our motion picture group reported its best segment profit in 10 years, driven by the latest installments of the Hunger Games, John Wick, and Saw franchises, a robust multi-platform release business, and a strong library performance Our ability to convert films to profitability in all parts of the business continued last weekend with the strong opening of The Strangers, Chapter One.

In December we closed the acquisition of <unk> and it is already deepening our library strengthening our Canadian production initiatives, diversifying our television group and allowing us to efficiently scale Lionsgate alternative TV into an unscripted powerhouse our motion picture group reported its best segment.

Speaker Change: <unk> in 10 years, driven by the latest installment of the hunger games, John Wick and saw franchises are robust multi platform release business and a strong library performance.

Speaker Change: Our ability to convert films to profitability in all parts of the business continued last weekend with the strong opening of the strangers chapter one.

Jon Feltheimer: Our television group has rebounded from the strike with seven series orders and renewals and 27 new shows sold into development in recent months. Earlier this week, we partnered with Amazon MGM Studios to announce the development of a Nurse Jackie sequel starring Edie Falco, an executive produced by Falco and Bob Greenblatt, the first of several franchise properties we're bringing to the market this spring.

Our television group has rebounded from the strike with seven series orders and renewals and 27, new shows sold into development in recent months earlier. This week, we partnered with Amazon MGM Studios to announced the development of a nurse Jackie sequel, starring Edie Falco and executive produced by.

Speaker Change: E D and Bob Greenblatt, the first of several franchise properties, we're bringing to the market. This spring.

Jon Feltheimer: Our film and television library reported a record $339 million revenue quarter, bringing trailing 12-month revenue to $886 million. This performance was driven by strength across the board, top properties from third-party creators like the Connors and the Chosen, as well as the SVOD syndication of our hit comedy Ghosts on CBS and evergreen titles from our deep library. S.T.A.R.S.

Speaker Change: Our film and TV Library reported a record $339 million revenue quarter, bringing trailing 12 month revenue to $886 million.

Speaker Change: This performance was driven by strength across the board top properties from third party creators like the corners and the chosen the escalade syndication of our hit comedy ghosts on CBS and evergreen titles from our deep library.

Jon Feltheimer: continues to drive its successful transition to digital, ending the fiscal year with 64% of its revenue coming from streaming, with 70% anticipated by the end of the fiscal year. It remains one of the only profitable pure play premium networks in the business. And finally, we ended the fiscal year on a strong financial note, raising three hundred and fifty million dollars in gross proceeds from our Lions Gate Studios transaction and completing our bond exchange agreement to help prepare the studio and stars balance sheets for full separation. Assuming we meet the financial targets to which we've previously guided, we expect to end the fiscal year with our studio leverage in the low threes.

Speaker Change: Starz continues to drive a successful transition to digital ending the fiscal year with 64% of its revenue coming from streaming with 70% anticipated by the end of the fiscal year at.

Speaker Change: It remains one of the only profitable pure play premium networks in the business and finally, we ended the fiscal year on a strong financial note raising $350 million in gross proceeds from our Lions Gate Studios transaction and completing our bond exchange agreement to help prepare the studio and Starz balance.

Speaker Change: Seats for full separation.

Speaker Change: Assuming we meet the financial targets to which we've previously guided we expect to end the fiscal year with our studio leverage in the low threes looking at our individual businesses coming out of a strike our motion picture group has been putting together one of our strongest production slates in years, driven by a roster of world class talent.

Jon Feltheimer: Looking at our individual businesses, coming out of the strike, our Motion Picture Group has been putting together one of our strongest production slates in years, driven by a roster of world-class talent, with Graham King producing and Antoine Fuqua directing Michael, the Michael Jackson biopic. Chad Stahelski directing Highlander while continuing to grow the John Wick franchise in both film and television. Blumhouse following up its partnership with Lions Gate on Imaginary with a multi-picture deal reimagining several of our horror classics. Hunger Games filmmaker Francis Lawrence follows up Ballad of Songbirds and Snakes by directing the film adaptation of Stephen King's The Long Walk.

Speaker Change: Graham King producing and Antoine Fuqua directing Michael the Michael Jackson biopic.

Speaker Change: <unk> directing Highlander, while continuing to grow the John Wick franchise in both film and television.

Speaker Change: Plum House following up its partnership with Lionsgate on imaginary with a multi picture deals re imagining several of our horror classics.

Speaker Change: Hunger games filmmaker Francis Lawrence following a ballad of songbirds and snakes by directing the film adaptation of Stephen King's The long walk.

Jon Feltheimer: Ruben Fleischer is in pre-production on Now You See Me 3, Destin Daniel Cretton is prepping the adaptation of the blockbuster manga property, Naruto, and Margot Robbie and Lucky Chap Entertainment are developing Monopoly. Turning to television, we're witnessing the most profound industry disruption in recent memory, with shows being canceled or un-renewed, changes in buying patterns and buyer mix, the ad market abruptly transitioning from linear to digital, fewer network series pilots, and the after effects of the strikes changing the calculus of our business in ways that are continuing to unfold. Here's why we're a little less concerned about this disruption.

Speaker Change: Ruben Fleischer in preproduction on now you see me three desk.

Speaker Change: <unk> and Daniel Cretin Prepping, the adaptation of the blockbuster manga property, non auto and Margot Robbie and Lucky Chap entertainment developing monopoly.

Speaker Change: Turning to TV, we're witnessing the most profound industry disruption in recent memory shows being canceled or unwritten nude changes in buying patterns and buyer mix. The AD market abruptly transitioning from linear to digital fewer network series pilots and the after effects of the strikes changing the calculus.

Speaker Change: Our business in ways that are continuing to unfold.

Speaker Change: Here's why we're a little less concerned about this disruption.

Jon Feltheimer: First, we're taking advantage of our diversification with growing contributions from E1, 3Arts, and our newly restructured unscripted business, all helping us to weather pressure on any single part of the business. We're cultivating new buyers like MGM+, AMC+, Disney+, FX, and Amazon Prime, alongside our long-standing relationships with platforms like Apple TV+, Netflix, Hulu, Peacock, and broadcast. We're innovating new business models that draw upon our ability to create noisy, brand-defining series like Seth Rogen's half-hour comedy, The Studio, for Apple TV+, as well as cost-effective international acquisitions and co-productions like Son of a Critch and Population 11.

Speaker Change: First we're taking advantage of our diversification with growing contributions from E. One three arts and our newly restructured unscripted business, all helping us to weather pressure on any single part of the business were.

Speaker Change: We're cultivating new buyers like MGM, plus AMC, plus Disney plus FX and Amazon Prime alongside our long standing relationships with platforms like Apple TV, plus Netflix Hulu Peacock and the broadcasters, we're innovating new business models that draw upon our ability to create noisy brand defining.

Speaker Change: Winning series like Seth Rogen half hour comedy the studio for Apple TV, plus as well as cost effective international acquisitions and co productions like son of a krych and population 11.

Jon Feltheimer: And we remain a prolific supplier of premium scripted series to stars, with the reimagining of their hit series Spartacus, House of Asher going into production this week in New Zealand, and a sexy thriller, The Hunting Wives, currently shooting in North Carolina for a fiscal 26 network debut. We believe that Lions Gate Television's history of working closely with stars provides our television group with a unique understanding of the platform's specific programming needs and an unparalleled ability to collaborate with them in crafting efficient business models.

Speaker Change: And we remain a prolific supplier of premium scripted series to stars with the re imagining of their hit series Spartacus House of Ash are going into production. This week in New Zealand and the sexy thriller the hunting lives currently shooting in North Carolina for a fiscal 'twenty six network debut.

We believe that Lionsgate television history of working closely with stars provides our television group with a unique understanding of the platform specific programming needs and an unparalleled ability to collaborate with them in crafting efficient business models.

Jon Feltheimer: This will continue to drive our relationship with Starz after the separation. Turning to Starz, we had a solid quarter with OTT subscribers holding steady, churn down, revenue up for the third consecutive quarter, and continued profitability. At a time when the streaming world has shifted its preferred metric from subscriber growth to profitability, I want to remind everyone that Starz has always been profitable. In fact, S.T.A.R.S.

Speaker Change: This will continue to drive our relationship with stars after the separation.

Speaker Change: Turning to stars, we had a solid quarter with OTT subscribers holding steady churn down revenue up for the third consecutive quarter and continued profitability.

Speaker Change: At a time when the streaming world has shifted its preferred metric from subscriber growth to profitability I want to remind everyone that starz has always been profitable.

Jon Feltheimer: has executed a successful transformation to digital while holding overall revenue steady and remaining profitable, this in the face of a more than 60 percent decline in linear revenue over the past seven years. On the programming front, Star's core group of premium series, Ghost, Raising Canaan, Force, BMS, P-Valley, and Outlander, are performing at levels comparable to any group of shows on any network. Family Crime Drama BMF had a strong premiere in the quarter that drove a 15% increase in viewership and achieved its strongest subscriber growth of the series. Power Book 2 Ghost will close out the fiscal first quarter on a strong note, with its Season 4 debut on June 7th.

Speaker Change: In fact, Starz has executed a successful transformation to digital while holding overall revenue steady and remaining profitable. This in the face of a more than 60% decline in linear revenue over the past seven years.

On the programming front star's core group of premium series Ghosts, raising Kanan Force BMS P Valley and Outlander are performing at levels comparable to any group of shows on any network.

Family crime drama BMS had a strong premier in the quarter that drove a 15% increase in viewership and achieved its strongest subscriber growth of this series.

Speaker Change: Power book II Ghost will close out the fiscal first quarter on a strong note with its season four debut on June 7th.

Jon Feltheimer: Franchise extensions like the prequel series Power Origins and Outlander: Blood of My Blood are in the pipeline for next year, and the network continues to ramp up its offering of studio movies from its pay one and pay two output deals, helping to drive star subscriber acquisitions and retention. In closing, last week's launch of Lions Gate Studios is more than just an opportunity to shine a light on the tremendous value of the content we're creating, owning, and delivering.

Speaker Change: Franchise extensions like the prequel series power origins and Outlander blood of my blood or in the pipeline for next year and the network continues to ramp its offering of studio movies from its pay one and pay to output deals helping to drive stars subscriber acquisition and retention.

Speaker Change: In closing last week's launch of Lionsgate Studios is more than just an opportunity to shine a light on the tremendous value of the content, we're creating owning and delivering it.

Jon Feltheimer: It's also an important step forward in fully separating our studio and stars by the end of the calendar year in order to simplify our structure, unlock opportunities to scale our respective businesses, and create incremental value for our shareholders. Now, I'd like to turn things over to Michael to discuss our next steps in separating the two companies. Michael? Thank you, Jon.

Speaker Change: It's also an important step forward and fully separating our studio and stars by the end of the calendar year in order to simplify our structure unlock opportunities to scale, our respective businesses and create incremental value for our shareholders.

Speaker Change: Now I'd like to turn things over to Michael to discuss our next steps in separating the two companies Michael. Thank you John it's been a very busy 2024 as you noted we recently announced the closing of a transaction, which established Lionsgate studio Corp, now trading on NASDAQ under the ticker symbol Lion L. I O N as a pure play.

Michael R. Burns: Thank you, Jon. It's been a very busy 2024. As you noted, we recently announced the closing of a transaction which established Lions Gate Studios Corp., now trading on Nasdaq under the ticker symbol LION, L-I-O-N, as a pure play content company. We also closed the bond exchange, which provides us with greater flexibility in managing our corporate debt. These two transactions will help propel us towards a full separation of our studio and Starz businesses, which, as we've noted previously, we anticipate will occur before the end of the current calendar year.

Speaker Change: <unk> content company. We also closed the bond exchange, which provides us with greater flexibility in managing our corporate debt. These two transactions will help propel us towards the full separation of our studio on Starz businesses, which as we've noted previously we anticipate will occur before the end of the current calendar year.

Michael R. Burns: Relatedly, management has been working with outside advisors in assessing the collapse of our A and B shares, as well as the parameters for a premium in favor of the A shareholders in connection with a collapse. Management believes that a vote to collapse the shares should be undertaken in combination with an eventual vote to fully separate the Studio and Starz businesses. Earlier this week, the board of directors authorized the formation of a special committee of the board to work with management to further consider the share collapse and otherwise work with management and the entire board toward a full separation. I'd like to now turn things over to Jimmy. Thanks, Michael, and good day.

Speaker Change: Relatedly management has been working with outside advisors and necessity to collapse of our a and b shares as well as the parameters for a premium in favor of the shareholders in connection with a collapse management believes that a vote to collapse the share should be undertaken in combination with an eventual vote are fully CEP.

Speaker Change: The studio and Starz businesses.

Jimmy Barge: Earlier this week the board of directors authorized the formation of a special committee of the board to work with management to further consider the share collapse and otherwise work with management and the entire board towards the full separation I'd like to now turn things over to Jimmy Thanks, Michael and good afternoon, everyone.

Jimmy Barge: Thanks, Michael, and good afternoon, everyone. I'll briefly discuss our fourth quarter and fiscal year 2024 financial results and provide an update on the balance sheet. In particular, as we've made significant strides toward execution of our strategic separation, I'll provide additional color on our Lions Gate Studio and STARS businesses. For the quarter, Q4 adjusted OEBDA was $140 million, and total revenue was $1.1 billion. Consolidated revenues were up 2.9%, and adjusted OEBDA was up 1.7% year-over-year due to the strength in television.

Jimmy Barge: Briefly discuss our fourth quarter and fiscal year 2024 financial results and provide an update on the balance sheet in particular as we've made significant strides towards execution of our strategic separation I'll provide additional color on our landscape studio and storage businesses.

Jimmy Barge: For the quarter Q4, adjusted OIBDA was $140 million in total revenue was $1 1 billion consolidated revenues was up two 9% and adjusted OIBDA was up one 7% year over year due to the strength in television.

Jimmy Barge: Reported fully diluted earnings per share was a loss of 22 cents per share, and fully diluted adjusted earnings per share was positive 27 cents per share. Adjusted free cash flow for the quarter was a $3 million use of cash for the full fiscal year 2024.

Jimmy Barge: Reported fully diluted earnings per share was a loss of 22 per share and fully diluted adjusted earnings per share was positive 27 per share.

Jimmy Barge: Adjusted free cash flow for the quarter was $3 million use of cash.

Jimmy Barge: For the full fiscal year 2024.

Jimmy Barge: You will notice we exceeded the high end of our fiscal 24 consolidated adjusted OEBDI outlook of $400 to $450 million, even after excluding the $30 million benefit from STARS International Territory. Adjusted OEBDA of $518 million was up 45%, total revenue of $4 billion was up 4%, and adjusted free cash flow was up fourfold to $230 million. As you can see, we also exceeded the Studio and STARS Domestic adjusted OEBDF figures shown in the roadshow deck associated with our recently completed equity rate.

Jimmy Barge: You will notice we exceeded the high end of our fiscal 'twenty four consolidated adjusted OIBDA outlook of $400 million to $450 million, even after excluding the $30 million benefit from Starz International territories.

Jimmy Barge: Adjusted EBITDA of $518 million was up 45% total revenue of $4 billion was up 4% and adjusted free cash flow was up four fold to $230 million.

Jimmy Barge: As you can see we also exceeded the studio and Starz domestic adjusted OIBDA figures shown in the road show deck associated with our recently completed equity raise.

Jimmy Barge: We are reiterating our previously announced fiscal year 2025 adjusted OEBDI outlook for the studio business. Specifically, we continue to forecast fiscal year 2025 adjusted to Wibbiton for Lions Gate Studios to be $430 million. Now, let me briefly discuss the fiscal fourth quarter and full year performance of our Studio and Media Networks businesses as well as the underlying segments compared to the previous year quarter. First, I'd like to talk about our studio business.

Jimmy Barge: We are reiterating our previously announced fiscal year 2025, adjusted OIBDA outlook for the studio business.

Jimmy Barge: Specifically, we continue to forecast fiscal year 'twenty five adjusted OIBDA for landscape Studios.

Jimmy Barge: To be $430 million.

Jimmy Barge: Now, let me briefly discuss the fiscal fourth quarter and full year performance of our studio and media networks businesses as well as the underlying segments compared to the previous year quarter.

Jimmy Barge: Quarterly revenue of 880 million dollars increased 6.8 percent year over year, while segment profit of 135 million dollars was up nearly 10 percent. Studio Adjusted Oebedi was $93 million, up 34% year over year. For the full year, studio revenue was approximately $3 billion, roughly flat year-over-year, while studio adjusted oebida of $330 million is up 15%. Trailing 12 months library revenue at the studio was $886 million, up slightly compared with fiscal year 2023's trailing 12 months library revenue. Quarterly library revenue was $339 million, representing the highest quarterly result in the company's history. Library strength in the period was driven by strength in both TV and motion pictures.

Jimmy Barge: First I'd like to talk about our studio business quarterly revenue of $880 million increased six 8% year over year, while segment profit of $135 million was up nearly 10%.

Jimmy Barge: Studio adjusted EBITDA was $93 million up 34% year over year.

Jimmy Barge: For the full year studio revenue was approximately $3 billion roughly flat year over year, while studio adjusted OIBDA of $330 million was up 15%.

Jimmy Barge: <unk> 12 months library revenue at the studio was $886 million up slightly compared with fiscal year 2020, threes trailing 12 months library revenue.

Jimmy Barge: Quarterly library revenue was $339 million, representing the highest quarterly result in the company's history.

Jimmy Barge: Library strength in the period was driven by strength in both TV and motion picture.

Jimmy Barge: Breaking down the studio businesses, let's start with motion pictures. Motion picture revenue for the quarter was $411 million, while segment profit was $82 million. However, revenue and segment profit expectedly declined due to difficult comparisons with last year's theatrical launches of John Wick 4, Jesus Revolution, and Plains.

Jimmy Barge: Breaking down the studio businesses, let's start with motion pictures.

Jimmy Barge: Motion picture revenue for the quarter was $411 million, while segment profit was $82 million.

Jimmy Barge: Revenue and segment profit expectedly declined due to difficult comparisons with last year's theatrical launches of John Wick, four Jesus Revolution and plane.

Jimmy Barge: For the year, Motion Picture Revenue was up 25% to $1.7 billion, while Segment Profit was up 16% to $319 million. Segment profit for fiscal year 24 was the highest in a decade, driven by franchise films such as Hunger Games, The Ballad of Songbirds and Snakes, and Saw 10, strength in slate carryover, growth in the multi-platform business, and strong library sales. Moving to TV, quarterly television revenue of $469 million and segment profit of $53 million were both up over 50% year-over-year due to strong library sales and an increase in post-strike content delivery.

Jimmy Barge: For the year motion picture revenue was up 25% to $1 $7 billion. While segment profit was up 16% to $319 million segment profit for fiscal year 'twenty four was the highest in a decade driven by franchise films such as hunger games the ballad of songs.

Jimmy Barge: And snakes and saw 10 strengthen slight carryover growth in multi platform business and strong library sales moving to TV quarterly television revenue was $469 million and segment profit of $53 million were both up over 50% year over year.

Jimmy Barge: <unk> due to strong library sales and an increase in post strike content deliveries.

Jimmy Barge: For the year, television revenue of $1.3 billion expectedly declined due to the impact of the strikes, while segment profit increased 10% to $147 million due to the performance of The Continentals. Media Network's quarterly revenue was $362 million, and segment profit was $53 million. Revenue was up 7% from fiscal 2023 due to the exit from our international markets, which we largely completed over the course of the fiscal 2024. With the exit from the UK now complete, Starz is exclusively focused on the strength of its North American business.

Jimmy Barge: For the year television revenue of $1 $3 billion expectedly declined due to the impact of the strikes while segment profit increased 10% to $147 million on performance of the continental.

Jimmy Barge: Media Networks' quarterly revenue was $362 million and segment profit was $53 million.

Jimmy Barge: Revenue was up 7% from fiscal 2023 due to the exit from our international markets, which we largely completed over the course of the fiscal 2024.

Speaker Change: With the exit from the UK now complete Starz is exclusively focused on the strength of its north American business with that in mind I'll focus my comments today on Starz domestic financials as well as its north American subscriber trends.

Jimmy Barge: With that in mind, I will focus my comments today on Starz domestic financials as well as its North American subscriber trends. Quarterly domestic revenue was down modestly year over year but was up sequentially as the impact of the June 2023 price increase continues to help Starz's top line. Star's domestic business has now grown revenue sequentially for three consecutive quarters. However, quarterly domestic segment profit was down year-over-year due to higher content amortization resulting from the timing of original series premieres.

Speaker Change: Quarterly domestic revenue was down modestly year over year, but was up sequentially as the impact of the June 2023 price increase continues to help storage topline.

Speaker Change: <unk> domestic business has now grown revenue sequentially for three consecutive quarters.

Speaker Change: Quarterly domestic segment profit was down year over year due to higher content amortization, resulting from the timing of original series premieres.

Speaker Change: For the year Starz domestic revenue was down two 2% as continued strong OTT revenue growth was more than offset by linear revenue declines.

Jimmy Barge: For the year, STARS domestic revenue was down 2.2% as continued strong OTT revenue growth was more than offset by linear revenue declines. Domestic segment profit was down 5.6% year-over-year due to the decline in revenue, partially offset by lower content amortization.

Speaker Change: Domestic segment profit was down five 6% year over year due to the decline in revenue, partially offset by lower content amortization now let me discuss our subscriber trends in North America. We ended the quarter with 21 8 million subscribers, which represented a sequential decline of 480000 subscribers.

Jimmy Barge: Now let me discuss our subscriber trends in North America. We ended the quarter with 21.8 million subscribers, which represented a sequential decline of 480,000 subscribers, primarily due to the decline in linear subscribers. Focusing specifically on OTT subscribers, Stars ended the quarter with 13.4 million North American subscribers, which is flat quarter-over-quarter and up 3.3% year-over-year. OTT subscribers now represent 61% of the sub-base, and exiting fiscal year 2025, we continue to expect OTT revenue to account for 70% of Stars revenue.

Speaker Change: Primarily due to the decline in linear subs, focusing specifically on OTT subscribers Starz ended the quarter with $13 4 million North American subscribers, which is flat quarter over quarter and up three 3% year over year.

Speaker Change: OTT subscribers now represent 61% of the subbase and exiting fiscal year 'twenty five we continue to expect OTT revenue to account for 70% of Starz revenue.

Jimmy Barge: Now let's move on to the balance sheet. Given the number of moving parts that are in play as we approach full separation, I will provide some additional color to help you better understand what our Lions Gate Studios and STARS businesses look like post-separation. We ended the quarter with net debt at the consolidated company of $2.2 billion.

Speaker Change: Now, let's move on to the balance sheet.

Jimmy Barge: Pro forma for the Lions Gate studio capital raise, consolidated net debt was $1.9 billion, excluding the adjusted OEBDA from exited Lions Gate Plus territories and inclusive of both the capital raise and the $60 million or projected run rate adjusted OEBDA from E1. consolidated trailing 12 months pro forma leverage was 3.6 times. Looking forward to fiscal 2025, both Lions Gate Studios and Stars Net Debt, upon the closing of the equity raise, was in line with our previous projections. Specifically, the studio's net debt on May 13th was approximately $1.4 billion, leaving a corresponding level of net debt attributable to stars of $700 million.

Speaker Change: Given the number of moving parts that are in play as we approach full separation I will provide some additional color to help you better understand what our landscape studios and Starz businesses look like post separation.

Speaker Change: We ended the quarter with net debt at the consolidated company of $2.2 billion.

Speaker Change: Pro forma for the Lionsgate studio capital raise consolidated net debt was $1 9 billion.

Speaker Change: Excluding the adjusted OIBDA from exited landscape plus territories and inclusive of both the capital raise and the $60 million of projected run rate adjusted OIBDA for me one consolidated trailing 12 months pro forma leverage was three six times.

Speaker Change: Looking forward to fiscal 2025, both Lions Gate Studios and stars net debt upon closing of the equity raise was in line with our previous projections specifically the studios net debt on May 13th was approximately one.

Speaker Change: One $4 billion, leaving a corresponding level of net debt attributable stars of $700 million.

Jimmy Barge: This reflects going in leverage of less than three and a half times using projected fiscal year 2025 adjusted webinar revenue of $430 million and over $200 million for Lions Gate Studios and STARS, respectively. Along with the equity capital raise, we recently announced another important step toward full separation when we completed a bond exchange representing a majority of our $715 million of 5.5% bonds. Specifically, $390 million of newly established exchange bonds will travel with the studio and, at the time of full separation, will adjust to an annual coupon of 6% with a one-year extension of maturity to 2030.

Speaker Change: This reflects going in leverage of less than three and a half times using projected fiscal year 2025, adjusted OIBDA of $430 million and over 200 million for Lionsgate Studios and stars respectively.

Speaker Change: Along with the equity capital raise we recently announced another important step towards full separation when we completed our bond exchange, representing a majority of our $715 million of five 5% bonds.

Specifically $390 million of newly established exchange bonds will travel with the studio and at the time, a full separation will adjust to an annual coupon of 6% with a one year extension of maturity to 2030.

Jimmy Barge: As we previously noted, the remaining $325 million of the bonds will remain at STARS with an existing 5.5% coupon and 2029 maturity. In this regard, I'd also add that yesterday, Fitch initiated ratings on the newly issued exchange bonds at B+, with a stable outlook and superior recovery rating. Additionally, Fitch similarly upgraded the rating on the remaining $325 million of bonds from B to B+, with a stable outlook and superior recovery rating.

Speaker Change: As we've previously noted the remaining $325 million of the bonds will remain at Starz with an existing five 5% coupon and 2029 maturity.

Speaker Change: In this regard I'd also add that yesterday Fitch initiated ratings on the newly issued exchange bonds at B plus.

Speaker Change: With a stable outlook and superior recovery rating.

Speaker Change: Additionally.

Speaker Change: <unk> Similarly upgraded the rating on the remaining 325 million of bonds from B to B, plus with a stable outlook and superior recovery rating.

Jimmy Barge: We believe these parallel ratings are indicative of the thoughtful and balanced capital structure we are establishing at both businesses, along with the operational success we are having as we approach full separation. Finally, I want to provide some color on how to think about the shape of content spend and quarterly adjusted OEBDI in fiscal 2025. As such, we expect leverage at both Lions Gate Studios and S.T.A.R.S. to rise in the near term, but ultimately, leverage at both businesses should fall by the end of the fiscal year to levels closer to three times. Now, I'd like to turn the call over to Nilay for Q&A.

Speaker Change: We believe these parallel ratings are indicative of the thoughtful and balanced capital structure, we were establishing at both businesses along with the operational success, we're having as we approach full separation.

Speaker Change: Finally, I want to provide some color on how to think about the shape of content spend and quarterly adjusted OIBDA in fiscal 2025.

Speaker Change: As such we expect leverage at both landscape Studios and stars to rise in the near term, but ultimately leverage at both businesses should fall by the end of the fiscal year to levels closer to three times.

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

<unk>: Thanks, Jami operator can you open the call up for Q&A.

Nilay Shah: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then 2. The first question is from Steven Cahall with Wells Fargo. Please go ahead.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: The first question is from Steven Cahall with Wells Fargo. Please go ahead.

Steven Cahall: Thank you. So, Jon and Jeff, you've highlighted the profitability of STARS. Maybe the market hasn't necessarily shifted from subs to profitability so much as to profitability while also wanting to see subscriber growth. We've seen that in a lot of peers where there are putative valuations until we do see net sub growth. So, as you get to that 70% level of OTT, when do you think that subscribers can be positive on a net basis, kind of on a go-forward run rate basis?

Thank you, so John and Jeff you've highlighted the profitability at Starz, maybe the market hasn't necessarily shifted from subs to profitability. So much as profitability. While also wanting to see subscriber growth we've seen that in a lot of peers, where there is punitive valuations until we do see net sub growth.

Speaker Change: Did you get to that 70% level of OTT. When do you think that subscribers can be positive on a net basis kind of on a go forward run rate basis, and Jeff is do you have any expected shifts in how youre going to program. The service post separation to help achieve that aim.

Steven Cahall: And Jeff, do you have any expected shifts in how you're going to program the service post-separation to help achieve that aim? And then, Jimmy, just wanted to dig into the studio EBITDA guidance a little bit. Can you help us think about what's assumed in there in terms of library revenue and also how that breaks out between motion picture and TV segments? Thank you.

Speaker Change: And then Jimmy just wanted to dig into the studio EBITDA guidance, a little bit can you help us think about what's assumed in there in terms of library revenue and also how that breaks out between motion picture and television segments. Thank you.

Speaker Change: Jeff. Thanks for the question, Yeah look I think the move away from.

Jeffrey A. Hirsch: Look, I think the move away from, you know, for us about driving consistent revenue growth and profitability really came on the heels of putting the first rate increase in the business last year. And you know, look, we saw great success with that rate increase. We've seen our peer group continue to raise their rates, which gives us a lot of headroom to continue to raise rates over the next couple of years.

Speaker Change: For us about driving.

Jeff: <unk> revenue growth and profitability is really came on the heels of putting the first rate increase in that business. This last year and look we saw great success in that rate increase we've seen our peer group continue to raise their rates, which gives us a lot of headroom to continue to raise rate over the next couple of years, but when you put rate increases into the business you have to be very.

Jeffrey A. Hirsch: But when you put rate increases into the business, you have to be very disciplined about going after and achieving great subscriber growth in the short term that are not as what I'd call stable customers long term because you want to make sure that you capture as much of that rate without giving it away in the retail and business long term. And so I do think, based on what we saw last quarter, we actually had net growth across both OTT and linear. This was a little hangover quarter from that.

Jeff: <unk> about going after and achieving great subscriber growth in the short term that are not what I would call stable customers long term because you want to make sure that you capture as much of that rate without giving it away in the retailing the business long term and so I do think based on what we've seen last quarter, we actually had net growth across both OTT and linear.

Speaker Change: This was a little hangover quarter from that we had one of our big partners changed the way they deal with their onboarding process to move credit scoring to the front end and the backend that put a little pressure on there, but we still feel pretty good about the subscriber trajectory long term for the business in terms of programming and the network I think.

Jeffrey A. Hirsch: We had one of our big partners change the way they do with their onboarding process to move credit scoring from the front end to the back end. That put a little pressure on them, but we still feel pretty good about the subscriber trajectory long term for the business. In terms of programming the network, I think, you know, we've always talked about programming for these two core demos and using content as a way to drive lifetime value and reduce churn.

Speaker Change: We've always talked about programming for these two core demos and using content as a way to drive lifetime value and reduce churn I think we will continue to focus on that we like the way that the tent poles are lined up for 25, and 26, and we think that will continue to help drive lifetime value for our subscriber base and ultimately prop.

Jeffrey A. Hirsch: I think we'll continue to focus on that. We like the way that the tempos are lined up for 25 and 26, and we think that will continue to help drive lifetime value for our subscriber base and ultimately profitability, and Steven, uh, with

Speaker Change: Stability.

Jimmy Barge: Steven, with respect to the guidance, look at the drivers across both motion picture and TV, so I would expect both businesses to be growing from 24 to 25 and contributing to that growth. We feel good about that.

Speaker Change: And Stephen with respect to the guidance look the drivers coming across both motion picture and TV. So I would expect both both businesses to be growing.

Speaker Change: 24% to 25 and contributing to that growth we feel good about that the motion pictures slate in particular.

Unnamed Speaker: The motion picture slate, in particular, great carryover coming from the 24 slate, a lot of mid-releases, mid-size releases. It's our bread and butter really providing carryover, and then we're off to a great start in 25 as well with Ministry, Unsung Heroes, and Strangers that just hit, and then we go to a solid, you know, solid release schedule in the summer and the fall. Libraries are obviously contributing to that as well, also across TV, and a strong pipeline in TV, you know, Rookie Season 7, Ghosts, and then across all of that is E1, right, which is helping drive business in both motion picture and TV as we go to 25.

Speaker Change: Great carryover coming from.

Speaker Change: 24 slate a lot of mid mid releases midsize releases, it's our bread and butter really providing carryover and then we're off to a great start in 'twenty five as well with Ministry Unsung Heroes Strangers that just hit and then we go to a solid.

Speaker Change: Solid release schedule in the summer and the fall libraries, obviously contributing to that as well also across TV and a strong pipeline in TV rookie season seven goes.

Speaker Change: And then across all of that is E. One integration right, which is helping drive our business in both motion picture and TV as we go to 25.

Speaker Change: Thank you.

Speaker Change: Thanks, Stephen operator can we get the next question. Please. The next question is from Barton Crockett with Rosenblatt. Please go ahead.

Barton Crockett: The next question is from Barton Crockett with Rosenblatt. Please go ahead.

Barton Crockett: Hi, thanks for taking the question. Let me see.

Barton Crockett: Hi, Thanks for taking the question.

Barton Crockett: Let me say one of the things I was just wanted to understand a little bit better is.

Jimmy Barge: One of the things I was just wanting to understand a little bit better is, you know, the EBITDA strength. Was any of that attributable to E1? Because your guide was for 400 to 450, excluding the international benefits and E1. And so I'm just wondering how much E1 there was in there. And then, you know, just kind of stepping back on this whole separation process that you expect to finish by the end of the calendar year. You know, you talked about some board-type processes, but can you walk us through step by step what needs to happen between here and there for this to actually be completed?

Barton Crockett: The EBITA strength.

Barton Crockett: Was any of that attributable to <unk> because your guide had been for 400 to 450, excluding the international benefits and <unk>, one and so I'm just wondering how much E. One there wasn't there.

Speaker Change: And then just kind of stepping back on the full separation process.

Speaker Change: That you expect to finish by the end of the calendar year.

Speaker Change: You talked about some board kind of processes, but can you walk us through step by step what needs to happen between here and there for this to actually be completed.

Jimmy Barge: So in terms of the quarter E1, the revenue contribution from E1 in the Q4 was about $100 million, and segment profit was less than $10. And I would say the mix on the revenue side is about 80% TV, 20% motion picture. And that's probably a good way to think about it going forward as well.

Speaker Change: So in terms of the quarter a one.

The revenue contribution from me, one and the Q4 was about $100 million.

Speaker Change: Segment profit was less than 10.

Speaker Change: And I would say the mix on the revenue side is about 80% motion sorry, 80% TV, 20% motion picture and that's probably a good way to think about it going forward as well.

Michael R. Burns: Michael, do you want to answer the second question? Sure, I'd be happy to do it.

Speaker Change: Michael do you want to answer the second question.

Michael: Sure happy to do it.

Michael R. Burns: We're taking a thoughtful, methodical approach to the separation, as I outlined in my opening remarks. The board has authorized a special committee. The special committee is discussing with a variety of experts what the ratio should be, the premium for the A's. And then once that's established, and obviously you're going to have a board for the studio and a board for the holding company and then a board for STARS on full separation, we're going to have a shareholder vote.

Speaker Change: And we're taking a thoughtful and methodical approach to the separation as I outlined in my opening remarks.

Speaker Change: The board authorized a special committee.

Speaker Change: Special Committee is.

Speaker Change: Discussing with a variety of experts.

Speaker Change: Ratio should be at a premium for the A's and then once thats established and obviously youre going to have a board for the studio and our board for the holding company and then our board for Starz on full separation, we're going to have a shareholder vote and both under the extraordinary transaction, both the shareholders and be sure shareholders will.

Michael R. Burns: And in this extraordinary transaction, both the A shareholders and the B shareholders will vote. And obviously, a lot of that's going to be about the ratio between the A's and the B's and what percentage of the studio they own. Remember that we're doing this by when we pay the 87% out on a tax-free basis to the shareholders.

Speaker Change: Vote.

Speaker Change: And obviously a lot of that is going to be about the ratio between the eyes in the base and what percentage of the studio they own remember that we're doing this.

Speaker Change: But when we spend the 87% out on a tax free.

Speaker Change: As to the shareholders.

Michael R. Burns: Okay, that's helpful. And then just one other thing on the bond transaction. Could you provide a little bit more clarity? There's been some discussion about, you know, some of the bondholders ending up with the studio, some staying with stars, and some discussion about how that happened. And whether everyone's completely happy, you know, with where they sit on the bondholder side, is there anything you can say about that to kind of clarify what's happening there? Yeah.

Speaker Change: Okay. That's helpful. And then just one other thing on the bond transaction.

Speaker Change: Could you provide a little bit more clarity there has been some discussion about.

Speaker Change: Some of the bondholders that up with the studio thumb stay with Starz and.

Speaker Change: Some discussion about how that happened and whether everyone's completely happy with where they sit on the bondholder side is there anything you can say about that and kind of.

Speaker Change: Clarify what's happening there.

Michael R. Burns: Yeah, we're not gonna go through how the sausage was made, but I would say very simply, I think the rating upgrade on the STARS bond, and Jimmy laid it out pretty clearly, we think overall, all of the bondholders have been benefited by this transaction, and, you know, we're gonna just move forward assuming everyone will realize that once they really do the math.

Speaker Change: Yes, we're not going to we're going to not going to go through how the sausage was made that I would say very simply I think the rating upgrade on a star is born and Jim laid it out pretty clearly we think.

Speaker Change: We think overall all of the bond holders have been benefited by this transaction.

Speaker Change: And.

Speaker Change: We're going to just move forward, assuming everyone will realize that once they really do the math.

Michael R. Burns: Okay, that's great. Thank you.

Speaker Change: Okay. That's great. Thank you.

David Joyce: The next question is from David Joyce with Seaport Research Partners. Please go ahead.

Speaker Change: The next question.

Speaker Change: <unk> is from David Joyce with Seaport Research partners. Please go ahead.

David Joyce: Thank you. A couple of questions. First, on E1, what sort of seasonality should we be expecting that to be contributing, given that you just let us know what it did in the March quarter? And also, Michael, could you kind of tighten up the time frames on when we would expect the voting to take place?

David Joyce: Thank you.

David Joyce: Couple of questions first spun E. One.

Speaker Change: What sort of seasonality should be expecting that to be contributing none given that you just let us know what it did in the March quarter.

Speaker Change: And then also what are some.

Michael: Michael could you kind of tighten up the timeframes on when we would expect.

Michael: The voting to take place.

Michael R. Burns: I'm happy to talk to you. Take care. Second one, but however you want to do it, Jon. Go ahead, Michael.

I'm sorry.

Speaker Change: Got it.

Speaker Change: Second one, but how are they going to go John and Michael.

Michael R. Burns: The second one, we've said that we expect the full separation by this calendar year, the end of this calendar year, which is obviously December 31st. We are going through the processes that we have to do. There are, you know, regulatory, shareholder votes, notices, all of that. So we, I think we all believe that the sooner, the better. But we're putting that external target by the end of the year and have to follow all these different processes. And remember, also, there's a Canadian aspect to us, and all those I's and all those T's have to be crossed.

Speaker Change: The second one.

Speaker Change: <unk> said that we expect the full separation by this calendar year at the end of this calendar year, which is obviously at December 31.

Speaker Change: We are going through the processes that we rapidly.

Speaker Change: Regulatory.

Speaker Change: Shareholder votes notices all of that so we I think we all believe that.

Speaker Change: The sooner the better, but we're putting that outside target by the end of the year and have to follow all these different processes and I remember also there's a Canadian aspect to us and all of that has all of the eyes and all of those <unk> have to be crossed.

Jimmy Barge: Yeah, and David, with regard to your question about E1, look, I think the seasonality is pretty much very similar to our studio and our content business, right, in terms of just going to be based on deliveries and things like that. Obviously, we're integrating a very strong library, and we've just gotten started. So clearly, you know, we've talked about a 60 million contribution and a 25 run rate, and so from E1, and if there were less than 10 in the first, in this fourth quarter, we'd expect that to be ramping up.

Speaker Change: Yes, and David with regards to your question about <unk>, one look I think the seasonality is pretty much very similar to our studio and our content business right in terms of Jessica can be based on deliveries and things like that obviously, we're integrating a very strong library and we've just gotten started so clearly.

Speaker Change: We've talked about a 60 million contribution in 'twenty five run rate and so from each one and if there is less than 10 in the first in this fourth quarter, we would expect that to be ramping up. So we feel good but that's going to be integrated completely into both motion picture and TV business going forward. So that's.

Jimmy Barge: So we feel good, but that's going to be integrated completely into both the motion picture and TV business going forward. So that's all encompassed in the new guide that we gave or the guide we gave with respect to 430 million.

Speaker Change: All encompassed in the New guide that we gave or the guide we gave with respect to $430 million.

David Joyce: Thanks. And if I could extend the thoughts about content production, given that a lot of your buyers also have their own studios and they're ramping up production, how should we think about a year over a year the comparisons for orders and deliveries on the episodic side? Great. I'll let Kevin answer that question.

Speaker Change: Thanks, and if I could extend the thoughts about the content production given that.

Speaker Change: A lot of your buyers also have their own studios and they're ramping up production.

Speaker Change: How should we think about on a year over year comparisons for orders and deliveries.

On the TV Don on the episodic side.

Speaker Change: I'll, let Kevin answer that question.

Kevin Beggs: Sure, thank you. Well, look, year over year, compared to a strike environment, as Jimmy touched on, it's already bouncing back in a significant way, and, you know, with the renewal of something as big as The Rookie, which is, you know, a full season order, along with other new shows, I think it'll be a significant growth on the revenue line. What we are finding in the market, you know, the buyers are back. We, after the strike ended,

Kevin Beggs: Sure. Thank you well look year over year compared to it strike environment.

As Jimmy touched on it's already bouncing back in a significant way.

Speaker Change: And what's the renewal or something.

Speaker Change: I guess, the rookie which as you know a full season order along with other new shows going I think it will.

Speaker Change: The significant growth.

Speaker Change: Revenue line.

Speaker Change: What we are finding in the market the buyers are back.

Speaker Change: After the strike ended.

Kevin Beggs: In the ensuing two months, we've sold two or three, maybe four projects into development. In the intervening time, let's say from March to now, we've sold another 23. So people are getting back to business, and the pipelines are filling up. There is pressure to be financially disciplined to start shooting shows at different price points that sometimes take you to tax-friendly locations or out of the country.

Speaker Change: And assuming two months, we sold two or three maybe four projects into development in the intervening time, let's say from March to now we've sold another 23.

So people are getting back to business and the pipelines are filling up there is pressure to be financially disciplined to start shooting shows at different price points.

Speaker Change: That's sometimes take you to tax friendly locations or out of the country I think youre going to see that more and more obviously, it's in the feature business all the time.

Kevin Beggs: I think you're going to see that more and more. Obviously, it's in the feature business all the time. And we sell to everyone and can produce at multiple price points, so I feel bullish. Obviously, converting development into production is the key. We have a huge book of business together with Jeff and the S.A.R.S. team, and we're excited about getting a Canem renewal, and Hunting Wives is shooting in Charlotte. Those are just three examples of things that we couldn't have done. All right.

Speaker Change: And we sell to everyone and can produce at multiple price points. So I feel bullish obviously converting development into production is the key.

Speaker Change: We have a huge book of business together with Jeff and the stores team.

Speaker Change: And we're excited about getting a <unk> renewal, we started shooting Spartacus and New Zealand this week the spin off.

Speaker Change: And our hunting wines are shooting in Charlotte those are just three examples of things that we couldnt have done you know six months ago on the strike environment. So we're feeling very good.

Speaker Change: Alright, thank you.

Nilay Shah: Thank you. Thanks, David. Operator, could we get the next question, please? And the next question is from Jason Bazinet with Citi. Please go ahead.

Speaker Change: Thanks, David operator, because we get the next question. Please.

Jason Bazinet: Next question, please. And the next question is from Jason Bazinet with Citi. Please go ahead. I just, thanks. I just had two quick questions.

Jason Bazinet: Yeah, Jason. Yeah, that's correct. There's $700 million of net debt going in as of May 13th, right? We'd expect that to de-lever over the course of the year. Keep in mind, full separation has not occurred yet, okay? So the 715 bonds effectively are attributable to stars at the moment, along with the small revolver draw, along with $50 million of cash, so to speak, so you're at $700 net debt, all right? Yeah,

Speaker Change: Next question is from Jason Bazinet with Citi. Please go ahead.

Jimmy Barge: As that de-levers and as we get to full separation, it's not until full separation that the exchanged bonds, which are still at 5.5% today and at 2029 maturity, are not until full separation that they travel with the studio. And then the 325, which is relative to STARS, is going to be remaining with STARS, the way we've always said, but it's 325 instead of 715. We'll backfill that with some Term Loan A, obviously.

Jason Bazinet: Thanks, I just had two quick questions. I think you said on the separation Starz is going to have $700 million of debt and maybe erroneously I just always assumed that those five five.

Speaker Change: Coupon senior notes, we just move over but.

Speaker Change: This bond exchange or there is only $3 25 for that left I just want to confirm there is still $700 million of debt that is going to be attributed to starz is that right.

Speaker Change: Yes, Jason.

Jason Bazinet: Yes, that's correct, there's 700 million of net debt going in as of May 13th right. We would expect that to de lever over the course of the year keep in mind full separation has not occurred yet okay. So 715 of bonds effectively are attributable to stock stars at the moment, along with a small revolver draw along.

Jason Bazinet: With $50 million of cash so to speak so you're at 700 net debt alright, as that de levers and as we get the full separation, it's not until full separation that the exchange bonds, which are still at five 5% today in 2029.

Jason Bazinet: Maturity.

Jason Bazinet: Not until full separation that they travel with the studio.

Jason Bazinet: And then the $3 25, which is relative to starz is going to be remaining with stores. The way, we've always said, but its $3 25, instead of the 715 will backfill that with some term loan a obviously very financeable starz has a very strong free cash flows. Let me remind you of 200 million plus of adjusted EBITDA.

Jimmy Barge: Very financeable. STARS has very strong free cash flows. Let me remind you, $200 million plus of adjusted EBITDA, okay, very little CapEx, okay, no appreciable cash taxes at all. They'll have carryover NOLs, okay, and 5.5% coupons with some Term Loans, not a lot of interest relative to the size of that business, so they're in a very good position to deliver.

Jason Bazinet: Okay, very little Capex, Okay, no appreciable cash taxes at all they'll have carryover Nols okay.

Jason Bazinet: And five 5% coupons with some term loans not a lot of interest relative to the size of that business. So they're in a very good position to delever.

Speaker Change: That's fantastic. Thank you for the answer.

Alan Gould: The next question is from Alan Gould with Loop Capital. Please go ahead.

Speaker Change: The next question is from Alan Gould with loop capital. Please go ahead.

Alan Gould: Thanks for taking the question. I've got a few. First of all, conceptually, this one's for Adam.

Alan Gould: Hi, Thanks for taking the question.

Adam Fogelson: The studio has had great margins since the pandemic, as you've had, haven't had a full slate, didn't have all the P&A and expenses, and the library was a bigger percentage of the studio revenue. Going forward, when you have a full slate, should we expect the margins to stay here, as opposed to being at the long-term rate, which was about half of what they've been the last four years?

Thanks for taking the question I've got a few of them first of all conceptually this one for Adam.

Speaker Change: <unk> has had great margins since the pandemic as you haven't had a full slate didn't have all of the P&A and expense in and library was a bigger percentage of the of the studio revenue.

Speaker Change: Going forward, we have a full slate.

Speaker Change: Should we expect the margin to stay here as opposed to being at the long term rate, which was about half of what it's been in the last four years.

Adam Fogelson: I mean, I'll let Jimmy expand on it a little bit if he needs or wants to, but I would just tell you that we're very confident that we're going to be able to maintain exceptional margins going forward. The films that were mentioned before in Q1 of 25 have collected and blended, and delivered a 40% return on invested capital. We are running an incredibly efficient operation, and even our smaller films that may not generate the sexiest headlines are delivering an incredible return for the company.

I mean, I'll, let Jimmy expand on it a little bit if he needs or wants to but I would just tell you that we're very confident.

Speaker Change: We're going to be able to maintain exceptional margins going forward.

Speaker Change: The films that were mentioned before in Q1 of 'twenty five have collected in blended delivered a 40% return on invested capital we are running an incredibly efficient operation and even our smaller films that may not generate the sexiest headlines are delivering an incredible return for the company.

Adam Fogelson: And that, coupled with an exceptional lineup of franchises, both existing within the studio and new ones that we're building, gives me incredible confidence in our ability to not only deliver growing returns but to make those margins really solid.

Alan Gould: That coupled with an exceptional lineup of franchises both existing within the studio and new ones that we're building give me incredible confidence in our ability to not only deliver growing returns, but to make those margins really solid and Alan I'd just add the 19% margins you are seeing here.

Jimmy Barge: And Alan, I'd just add, the 19% margins you're seeing here rolling out of 24, I'd expect that to carry right on into 25. And Adam and his team are just. Masters at P&A Efficient.

Speaker Change: <unk> out of 24, I would expect that to carry right on into 'twenty, five and Adam and his team are just.

Speaker Change: Masters at P&A efficiency.

Jimmy Barge: Thanks, Jimmy. And if I could follow up with one more, just trying to figure out what your investment in content should be at both Starz and the studio business. Next year, I think you spent about $1.1 billion at the studio and about $850 million at Starz last year. Yeah, those are the numbers for 24.

Jimmy Barge: Thanks, Jimmy and if I can follow up with one more just trying to figure out what your investment in content should be at fault stars in the studio business next year. I think you spent about $1 1 billion at the studio and about 850 it started last year.

Speaker Change: Yes, those are the numbers for 'twenty four I mean look it's increasing we're coming off after strike, obviously and you saw we popped a pretty big free cash flow number in the quarter and finished the year very well and Thats why in my remarks, I talked about the cadence is more backend loaded so you're going to have some carryover spin.

Jimmy Barge: Yeah, those are the numbers for 24. I mean, look, it's increasing. We're coming off the strike, obviously, and you saw we popped a pretty big free cash flow number in the quarter and finished the year very well. And that's why, in my remarks, I talked about the cadence being more back-end loaded, so you're gonna have some carryover spin.

Jimmy Barge: Look, I'd expect, if you go back to earlier years, that was closer to a 2 billion combined company spend. And that goes, we'll be back at those levels, maybe slightly more, depending upon what the balance is coming back. But most of that, I would add, is in the studio, right? TV, as it scales up, and a little less so, but also in motion pictures, less so on the ramp. On the star side, keep in mind, we've effectively closed the international business. Canada's folded in with a North American focus, so you'll see savings there and less of a modest increase at first.

Speaker Change: Look I would expect.

Speaker Change: If you go back to earlier years.

Speaker Change: That was closer to a 2 billion combined company.

Speaker Change: Spin and that goes well be back at those levels, maybe slightly more depending upon what the balance is coming back but.

Speaker Change: Most of that I would add is in the studio right.

Speaker Change: <unk> as it scales up and a little less so but also in motion picture less so of a ramp and the star side keep in mind, we've effectively closed the international business, Canada is folded in with a north American focus so youll see savings there and less of a modest increase in stores.

Speaker Change: Okay. Thanks, Kevin.

Alan: Thanks, Alan operator, because we get the next question. Please. The next question is from Jim Goss with Barrington Research. Please go ahead.

Jim Goss: Next question, please. The next question is from Jim Goss with Barrington Research. Please go ahead.

Jim Goss: Alright, thank you. I was wondering if you feel that... The move to become a pure play studio, once again, despite the existing and continuing relationship with stars, will influence either numbers of films, types of films, or anything else in terms of the monetization opportunities you might have? Does being a pure play make a difference in that regard?

Jim Goss: Alright, thank you.

Jim Goss: I was wondering if you feel that.

Jim Goss: The move to become a pure play studio once again.

Jim Goss: The existing in continuing our relationship with <unk>.

Speaker Change: Stars will influence.

Speaker Change: Either numbers that films types of films.

Speaker Change: Or anything else in terms of the monetization opportunities you might have.

Speaker Change: Does being a pure play <unk>.

Speaker Change: A difference in that regard.

Michael R. Burns: Yeah, no, not at all, and you'd be surprised at some of the movies that work really well for stars, and probably not the ones you think of, and other ones that you would say are right down the middle are not as good. At the end of the day, we're a huge diversified entertainment company, and whether it's television, and Kevin addressed this relationship we have already, and we'll be producing six, I think, shows, franchise shows for stars, and these are shows that have a lot of spinoffs, and sequels, and prequels, and so that relationship will remain the same, but Kevin has 30 other buyers between the scripted and unscripted So we have to be diversified in that respect. And again, in terms of the movies, Adam has got to make great movies, movies that he and his team believe in and with a great profile.

Speaker Change: Yeah, no not not at all in and you'd be surprised at some of the movies that work really well for Starz and probably not the ones you think of and other ones that you would say are right down the middle there.

Speaker Change: There are not as good at the end of the day, we're a huge diversified entertainment company and whether it's TV and Kevin addressed already of this relationship we have and we will be producing.

Speaker Change: Six I think shows.

Speaker Change: Franchise shows four stars and these are shows that have a lot of spinoffs and sequels and prequels and so that relationship will remain the same but Kevin has 30 other buyers between a scripted and unscripted.

Business, so we have to be diversified in that respect.

Speaker Change: Again in terms of the movies, Adam It's got to make a great movies movies that he and his team I believe in and with a great profile again, Thats, a really a great business for us.

Michael R. Burns: Again, that's a really great business for us, and the margins will remain very strong. For our international presales, we're really the only ones who go to the market with big movies. The percentage of presales that we're getting out of the international market is higher, not lower.

Speaker Change: The margins will remain very strong our international pre sales, we're really the only ones who go to the market with a big movies the percentage of presale that we're getting out of the international market is higher not lower.

Michael R. Burns: The return we're getting, 90 percent of our smaller movies are profitable and highly profitable. And so we're going to make a diversified slate that I think is going to work really well. I wouldn't be surprised if we also made some lower-budget movies specifically for stars.

Speaker Change: The return, we're getting 90 something percent of our smaller movies are profit upon highly profitable.

Speaker Change: And so so we're going to make a diversified slate that I think it's going to work really well I wouldn't be surprised if we also made some lower budget movies, specifically for Starz and we're talking about that and thinking about the calculus for for how that works and at the end of the day, we would take all of that product all that product and all that huge investment and it goes.

Michael R. Burns: And we're talking about that and thinking about the calculus for how that works. And at the end of the day, we take all that product, all that product and all that huge investment, and it goes into the library, and the new stuff drives the old stuff, as we've talked about before. So we've got a really great ecosystem, whether we're the same company or whether we're two companies. I think you can expect those mutual benefits to continue.

Speaker Change: All into the library and the new stuff drives the old stuff.

Speaker Change: As we've talked about before.

Speaker Change: So we've got really a great ecosystem, whether we're the same company or whether were two companies I think you can expect those mutual benefits to continue.

Jim Packer: My second question involves the library. Do you feel the process of building the library will primarily come from current production, or do you think you'll consider allocating funds to separately build out the film and TV library as you've occasionally done in recent years?

Speaker Change: Okay. Thanks, and my second question involves just.

Speaker Change: Just that the library do you feel.

Speaker Change: The process of building the library will primarily come from current production or do you think you will consider allocating funds to separately build out the film and TV library as you've occasionally done.

Speaker Change: In recent years.

Jim Packer: Hi. Hi Jim. It's Jim. How are you?

Jim: Hi, Hi, Jeff It's Jim how are you.

Jim Packer: Yeah, I would say that if you look at our trailing 12 months for this fiscal year, it was a record for us. Even the quarter was great. And you're starting to see the real engines of all these years of buying libraries and what it actually means for us. In addition, we are really a premier third-party content distributor with the Connors, with the Chosen, with Kill Bill, and Jackie Brown. We have some of the best products in the marketplace that come to us for our distribution acumen.

I would say that.

Speaker Change: If you look at our trailing 12 months for this fiscal it was a record for us.

Speaker Change: Even the core was great and Youre starting to see the real engines of all these years of buying libraries and what it actually means for US. In addition, we are really a premier third party content distributor with the corners with the chosen with cable Bill and Jackie Brown, we have some of the best product in the marketplace comes to us for our <unk>.

Speaker Change: Distribution acumen, and I'd say overall I feel really good we have 30 40 films that flowed through some multi platform. Some theatrical 400 episodes of television and every time you see something like a spartacus reboot. We have four seasons of library to go along with it so I feel very good about it and overall I think it's going to continue.

Jim Packer: And I'd say overall, I feel really good. We have 30, 40 films that flow through, some multi-platform, some theatrical, 400 episodes of TV. And every time you see something like a Spartacus reboot, we have four seasons of library that go along with it. So I feel very good about it. And overall, I think it's going to continue.

Michael R. Burns: I'd like to answer it a little differently. Whether it's a TV show or whether it's a movie, when we do our analysis of greenlighting that, we basically do a 10-year ultimate, and basically, we don't consider the value after 10 years, nor do we really consider the value of whether it's a prequel sequel and how much uplift it's going to give to the library, even though any prequel sequel will actually create a tremendous amount.

Speaker Change: Let me answer it a little differently, whether it's a TV show or whether it's a movie.

Speaker Change: When we do our analysis green lighting that we basically do a 10 year ultimate and basically we don't consider the value. After 10 years, nor do we really consider the value of whether it's a prequel sequel, and how much uplift is going to give to the library, even though any prequel sequel.

Speaker Change: We will actually create a tremendous we need to live and die and make money on 10 year ultimate and we need to get a return of 15% to 20% IRR on each and every one of those the great News is we've been able to put together. This incredible portfolio. This year and looking into next year, our slate for motion Pictures is incredible.

Michael R. Burns: We need to live and die and make money on 10-year ultimates, and we need to get a return of 15% to 20% IRR on each and every one of those. The great news is we've been able to put together this incredible portfolio this year, and looking into next year, our slate for motion pictures is incredible. We're able to do it, be profitable in the first 10-year cycle, and then build the library beyond that. Again, we like how that's all playing out.

Speaker Change: We're able to do it would be profitable in the first 10 year cycle and then build the library beyond it so.

Speaker Change: Again, we like how that's all playing out.

Jim Goss: Okay, thanks very much.

Speaker Change: Okay. Thanks, so much.

Jim: Thanks, Jim operator can we take the last question. Please.

Thomas Yeh: And that question comes from Thomas Yeh with Morgan Stanley. Please go ahead.

Speaker Change: That question comes from Thomas <unk> with Morgan Stanley. Please go ahead.

Thomas Yeh: Thanks so much. I wanted to follow up on the leverage point. You mentioned, Jimmy, that both the studio and STARS see leverage rising in the near term before falling, I think, closer to 3x, you said, by the year end. Should we think about that largely being driven by the cadence of EBITDA contribution over the course of the year? Any help on how to think about studio lumpiness and how that might be impacting that cadence would be helpful. I just wanted to get your sense also on just what you see as a comfortable range going past that for both of those assets.

Thomas: Thanks, So much I wanted to follow up on the leverage point, you mentioned Jimmy that both the studio and stars these leverage rising in the near term before falling I think closer to three <unk>. He said by the year end should we think about that largely being driven by the cadence of EBITDA contribution over the course of the year. So any help on how to think about it.

Speaker Change: Do you have lumpiness.

Speaker Change: That might be impacting that.

Speaker Change: <unk> would be helpful. And then I just wanted to get your stands also on what you see is a comfortable range going past that for both of those assets.

Jimmy Barge: Sure. Look, it's both trading for 12 months and free cash flow. We plan on both businesses being positive after fully funding their content needs, as we have always on a consolidated basis. So I see the net debt absolute balances going down. I also see trading 12 months improving. I think it's really the midterm leverage before reducing, you know, to those three levels at the end of the year is probably more trailing 12 months than it is cash, but cash is a factor there.

Speaker Change: Sure.

Speaker Change: Look as both trailing 12 months and free cash flow, we plan on both businesses being positive after fully funding their their content needs.

Speaker Change: We have been always on a consolidated basis, so I see the net debt absolute balances.

Speaker Change: Going down and also see trailing 12 months, improving I think its really the mid term.

Speaker Change: Leverage before reducing those three levels at the end of the year is probably more trailing 12 months and it is cash but cash is a factor there and I think youll see stores I'd say stores very much. After if you go into 2006. When you look ahead low below a three times leverage.

Jimmy Barge: And I think, you know, you see stars. I see stars very much after, you know, if you go into 26 and you look ahead below, you know, below a three times leverage. And I see the studio, you know, three times and moving below as well.

Speaker Change: And I'd say the studio.

Jimmy Barge: So, really strong profiles for both.

Speaker Change: Three times and moving below as well so.

Speaker Change: Strong profiles for both.

Thomas Yeh: Okay, understood. Back on S.T.A.R.S., I mean, last quarter, Jeff, I think you mentioned leaning more into pay-per-view as a content strategy. As we think about how to get to that 20% margin you laid out, what needs to happen on the cost side? Should we expect there to be greater content efficiencies, or how should we think about content spending overall on the S.T.A.R.S. side of things? And whether or not, you know, maybe on the non-content piece, there's still efficiencies to be had as well. Yeah, thanks for the question. There are a couple components on

Speaker Change: Okay understood back on Starz, I mean last quarter, Jeff I think he mentioned leaning more into pay too as a content strategy as we think about how to get to that 20% margin you laid out what needs to happen on the cost side should we expect there to be greater content efficiencies or.

Speaker Change: How should we think about content spending overall on that.

Speaker Change: Far side of things and whether or not maybe on the non content piece that there's still efficiencies to be had as well.

Jeffrey A. Hirsch: Yeah, thanks for the question. There are a couple of components on the cost side. One, you know, if you look at our slate, we've got some shows that are coming up that are later in their arcs that are obviously more expensive, and so we've announced, working closely with Kevin and the team, Power Origins, which is a new story that will reset that economics to that show that was the economics of season one. That coupled with the fact that we're no longer an international company, we're focusing on domestic, brings some of the cost down because we don't have to cover the international cost anymore.

Speaker Change: Yeah. Thanks for the question, there's a couple of components on the cost side wondering if you look at our slate we've got.

Some shows that are coming up that are later in their arcs that are obviously more expensive and so we've announced are working closely with Kevin and team.

Speaker Change: Our origins, which is a new story, which we'll reset that economics to that shoulder season, when economics that coupled with the fact that we're no longer in international we're focusing on domestic bring some other costs down because we don't have to cover the international cost anymore and so as you look at turning over the slate over the next two to three years in terms of pressure content new seasons.

Jeffrey A. Hirsch: And so as you look at turning over the slate over the next two to three years, in terms of fresher content, new seasons, and season one economics that are domestic, you can bring a lot of cost out of the business. I also think we will look at all of our other non-original costs as we go forward, whether it's the library, you know, an extension of a paid tour, an extension of paid one.

Jeffrey A. Hirsch: We'll look at that in the coming years as well, based on the data that we have to make sure they're performing and that cost is actually adding value to the business, not just cost on the books. Thank you.

Speaker Change: In season, one economics that are domestic you can bring a lot of cost out of the business. I also think we will look.

Speaker Change: At all of our other non original cost as we go forward whether its library.

Speaker Change: An extension of a paid two or an extension of phase one we will look at that in the outer years as well based on the data that we have to make sure. They are performing and that cost is actually.

Speaker Change: Adding value to the business just bidding costs on the books.

Speaker Change: Thank you.

Nilay Shah: This concludes our question and answer session. I would like to turn the conference back over to Nilay Shah for any closing remarks. Hey everyone, please refer to the Press Releases and Events tab under the Investor Relations section of each of our company's websites for a discussion of certain non-GAAP forward-looking measures discussed on this call.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Neal Shah for any closing remarks.

Nilay Shah: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change #100: Hey, everyone. Please refer to the press releases and events tab under the Investor Relations section of each of our company's website for a discussion of certain non-GAAP forward looking measures discussed on this call. Thank you.

Speaker Change #101: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change #101: Okay.

Speaker Change #101: [music].

Speaker Change #101: Yes.

Speaker Change #101: [music].

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