Q3 2025 Lions Gate Entertainment Corp Earnings Call
Good day and welcome to the Lionsgate third quarter 2025 earnings call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
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Speaker Change: I would now like to turn the conference over to Neal Shah EVP of Investor Relations. Please go ahead.
Michael Burns: Good afternoon. Thank you for joining us for the Lionsgate Studios Corporation, and Lionsgate Entertainment Corporation fiscal 2025 third quarter conference call will begin with opening remarks from our CEO, Jon Feltheimer, followed by remarks from our CFO Jimmy barge. After their remarks, we'll open the call for questions also joining us on the call today are Vice Chairman Michael Burns.
Michael Burns: C O O Brian Goldsmith Chairman of the television group, Kevin Beggs Chairman of the motion Picture Group, Adam Fogelson, and President of worldwide television and digital distribution, Jim Packer and from Starz, We have president and CEO, Jeffrey Hirsch CFO, Scott Macdonald and president of domestic networks Allison Hoffman the matters discussed on the call also.
Speaker Change: So 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 for Lionsgate students Corporation and.
Speaker Change: Mine's Gate Entertainment Corporation the companies undertake 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 I'll now turn the call over to John.
John: Thank you Neil and good afternoon, everyone. Thank you for joining us.
John: I'm pleased to report a solid quarter in which our business has performed well in a challenging environment.
John: Our motion picture business is back on track.
John: Converting our last three mid budget films to significant profitability with solid box office performance strong business models and steady execution.
John: Our television business continues to find its way through the market correction leaning into an extensive portfolio of content shifting its business models diversifying its buyer mix and cutting costs.
John: Together they contributed to a very busy quarter with a total of 16 scripted television series thirty-six unscripted series and nine films in production.
John: Starz returned to domestic OTT subscriber growth on a sequential basis and continued to expand its distribution footprint with key partner renewals and new bundling deals.
John: And our library turned in another stellar performance with a record $954 million in trailing 12 month revenue as we continue to pivot to new buyers utilize innovative windowing strategies and incorporate advanced technologies.
John: Now, let me update you on each of our businesses.
John: Within our motion picture group Best Christmas pageant ever Dennis thieves to Pantera and flight risk all demonstrated our strength in the mid budget space.
John: Last week, we announced plans to develop data feeds three.
John: And we're already looking forward to our terrific fiscal twenty-six slate.
John: The response to our early materials on ballerina. The first film spinoff of our John Wick franchise indicates that it delivers the level of action and excitement John Wick fans have come to expect.
John: Ballerina opens on June six.
John: Ruben Fleischer Jess showed us in exciting new directors kind of the third installment of now you see me extending a franchise, whose first two films gross nearly 700 million at the worldwide box office and.
John: And we're well on our way to completing production on our highly anticipated event movie Michael.
John: Rounding out our returned to a strong balanced and diversified physical twenty-six slate.
John: Francis Lawrence has completed the long walk adapted from the classic Stephen King thriller.
John: As these and saris rag to Rich's comedy good Fortune, starring Keanu Reeves, Seth Rogen and an sorry is set for an October 17th release.
John: And Paul Feig is shooting the thriller the housemaid adapted from the runaway best seller and starring Sydney, Sweeney and Amanda Seyfried for a Christmas day release.
John: In addition, we continue to welcome incredible new talent to the Lionsgate family, including Margot Robbie Who's Lucky chat banner is developing monopoly.
John: Acclaimed filmmaker Luca Gwadar Nino directing the remake of American Psycho.
John: And Grammy winning recording Superstar, the weekend, whose trailer for hurry up tomorrow opened to a huge response this week.
Speaker Change: And as the demand for movies increases the post theatrical window becomes more valuable and our slate is poised to benefit.
Speaker Change: Last week, we announced the extension through calendar year, 'twenty 28 of our exclusive pay one deal with stars and a new exclusive pay deal with Amazon Prime video immediately following the stars window.
Speaker Change: The new agreements are a win win for everyone with stars getting our films closer to their initial theatrical release and Amazon Prime video securing an early window for several films from our 'twenty twenty-five sleep and the full lineup of our 2026 through 2028 slates. The combination of these two deals will.
Speaker Change: <unk> increase the contribution from our pay TV window.
Speaker Change: We continued to capitalize on ancillary opportunities for our franchises with a number of exciting developments in the quarter.
Speaker Change: We're opening the John Wick experience in Las Vegas later, this month, which we expect to be very successful and serve as the model for similar John Wick experience around the country.
Speaker Change: The hunger games stage play debuts in London This fall.
Speaker Change: Dirty dancing in La La land lead a lineup of stage plays targeted for Broadway beginning in 'twenty 'twenty, six and we're making great progress on the John with Triple a videogame.
Speaker Change: Together I expect these ancillary opportunities to deliver significant incremental contribution to our business as they come online.
Speaker Change: Turning to television our current series ghosts and the rookie continue to be network leaders in their fourth and seventh season on C. B S. N. A b C respectively, with a rookie spinoff and development at a B C from series creator Alexei Holly Holly has another new series, the envoy and fast track developed.
Speaker Change: And then at Hulu.
Speaker Change: We ramp production in the quarter on three highly anticipated series Spartacus and the hunting lives for stars and Seth Rogen is comedy the studio debuted on Apple TV plus on March 26.
Speaker Change: Pivoting to fresh business models for new buyers. We're currently shooting the rainmaker in partnership with Bluhm House for USA network and preparing to start production on a new version of Robinhood for M. G M plus.
Speaker Change: And our Lionsgate alternative unscripted business led by Craig Collegian.
Speaker Change: We're coming off a very successful first season of Martin Scorsese's a claim Darkies series, the Saints for Fox Nation, and Scamander, a four part Darkey series based on Lionsgate sounds number one true crime podcasts recently launched on a B C and Hulu.
Speaker Change: And we've been refilling, our television pipeline with a strong development slate led by Stephanie Meyer's Twilight animated TV series Midnight Sun for Netflix the power Universe prequel power origins for stars nurse, Jackie at Amazon, The John Wick under the high table T V series.
Speaker Change: The TD remake of our hit draft, a movie with Lebaron James in Maverick Carter Springhill Ah.
Speaker Change: A T V series adaptation of Oldboy led by creator Park can look.
Speaker Change: And a limited series chronicling the Shanghai Otani interpreter gambling story.
Speaker Change: Bolstering our television group performance, we expect a strong growth year in fiscal 'twenty six from three arts, a leader in the talent management and production space.
The hit TV series Mythic Quest from our three Arts Lionsgate production partnership is performing well in its fourth season on Apple TV plus.
Speaker Change: The hunting wives is being prepared for at Starz debut and behind them, we have a strong pipeline of scripted series development.
Speaker Change: We intend to diversify the business into new areas of representation through a combination of organic growth and M&A to further cement three or its leading position in one of the hottest sectors in the business.
Speaker Change: Turning to stars are returned to domestic OTT subscriber growth in the quarter was driven by the strong performances of the seventh season of Outlander. The drama series three women based on the New York Times Best seller and a strong slate of first run movies from the Lionsgate theatrical output deal.
Speaker Change: On the distribution front Starz has closed several new deals in the past few weeks, including two with Prime video for Max N B T plus bundles with vizio for an a M C plus bundle and with Youtube TV for a strategic offer time to Super Bowl weekend.
Speaker Change: Starz also secured three key linear partner renewals in the quarter.
Speaker Change: As stars prepares for the separation, it's instructive to recap how the platform has evolved over the past five years.
Speaker Change: Successfully converting its revenue from 70% linear to 70% digital more than doubling its domestic OTT subscriber base achieving leadership in its two key demos with a strong core group of original hit series.
Speaker Change: Ramping up a slate of world class studio movies.
Speaker Change: And establishing itself as a bundling partner of choice.
Speaker Change: All while remaining consistently profitable.
Speaker Change: Now the industry has reached an inflection point and the next phase of streaming pleased to start strange.
Speaker Change: More bundles the ability to provide digital services to linear platforms and the opportunity to capitalize on the shifting and disruptive environment to scale its business.
Speaker Change: Turning to the separation, we're still in regulatory review of our joint proxy registration statement with the S. E C.
Speaker Change: Given this timing, we will need to update the proxy with financials as of December 31, 2024, which will take a few additional weeks.
Speaker Change: Pending further FCC review, we expect this would lead to a shareholder meeting in mid to late April with separation shortly thereafter.
Speaker Change: In closing.
Speaker Change: Our hearts go out to the thousands of people and businesses impacted by the recent L. A wildfires.
Speaker Change: A number of our employees talent and business partners lost their homes and many more were affected.
Speaker Change: But I'm very proud of how our employees came together in this time of crisis.
Speaker Change: Not only to help their colleagues, but with an employee driven grassroots initiatives, serving the community with clothes and other basic goods benefiting more than 500 people impacted by the fires.
Speaker Change: It's this aspect of our culture resilience innovation compassion and teamwork.
Speaker Change: That gives me confidence that we will continue to rise to the occasion and.
Speaker Change: And thrive in the year ahead.
Jimmy: Now I'd like to 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.
Jimmy: For the quarter landscapes consolidated revenue was $971 million adjusted OIBDA was $144 million and operating income was $36 million reported fully diluted earnings per share was a loss of nine cents per share and fully diluted adjusted earnings per share was a prop.
Speaker Change: <unk> of 28 cents per share.
Speaker Change: Net cash flow used in operating activities was 119 million, while adjusted free cash flow for the quarter was a positive $13 million.
Speaker Change: We are reiterating our fiscal 'twenty twenty-five outlook for both landscape Studios and stars.
Speaker Change: Specifically, we continue to forecast at Lions Gate studios will generate between $300 million to $320 million of adjusted a webinar. This fiscal year, while stars North American business is expected to generate approximately $200 million of adjusted OIBDA.
Speaker Change: Now, let me briefly discuss in detail the fiscal third quarter performance of our studio and media networks businesses compared to the previous year quarter <unk>.
Speaker Change: Starting with the studio business quarterly revenue grew 3.2% year over year to $714 million, while studio adjusted OIBDA grew 45% to $112 million as John mentioned trailing 12 month library revenue for the quarter was 954 million.
Speaker Change: And this represents an increase of 22% relative to last year's Q3 trailing 12 months revenue.
Speaker Change: Breaking down the studio businesses, let's start with motion picture.
Speaker Change: Motion picture revenue and segment profit for the quarter came in at $309 million and $84 million respectively.
Speaker Change: Revenue and segment profit expectedly declined as the previous years third quarter benefited from the release of hunger games ballad of songbirds, and snakes and saw a 10.
Speaker Change: On a sequential basis the motion picture group has rebounded nicely with strength in both wide theatrical and library distribution.
Speaker Change: We are particularly encouraged by the recent successes of our mid size budget releases in particular, the performance of the best Christmas pageant ever which nicely outperformed our internal estimates as well as the more recent releases of denim thieves to in flight risk reaffirm the strength of our.
Speaker Change: Risk mitigated film release model.
Speaker Change: Moving to T V quarterly TV revenue of $405 billion was up 63% year over year, while segment profit of $61 million was up significantly as we rebounded from last year's strike with strong growth in episodic deliveries, including the studio.
Speaker Change: Which airs on Apple TV and March.
Speaker Change: Seasoned seven of the rookie.
Speaker Change: And season four goes among others.
Speaker Change: Media Networks' quarterly revenue was $345 million and segment profit was $25 million revenue was expectedly down year over year due to the exit from substantially all of our international markets.
Speaker Change: Quarterly North American revenue of $342 million was essentially flat year over year.
Speaker Change: As OTT revenue growth was all set by linear pressure.
Speaker Change: North American segment profit of $26 million was down year over year, reflecting higher content amortization and increased film output, partially offset by lower marketing spin.
Speaker Change: Looking briefly at subscriber trends Starz ended the quarter with 12.6 million North American OTT subs, which represented sequential growth of 170000 subscribers. We ended the quarter with 20 million total North American subscribers, a modest sequential decrease reflecting continued.
Speaker Change: Linear pressure.
Speaker Change: Now, let's take a look at the balance sheet.
Speaker Change: We ended the quarter with $2.4 billion of net debt at the consolidated company, which reflects 1.8 billion at the studio and 568 million at Starz.
Speaker Change: The increase in studio net debt reflects the expected use of cash associated with both the timing of post write content spend and theatrical releases.
Speaker Change: Stars net debt continued to meaningfully decline representing $132 million reduction since the initial debt allocation last may.
Speaker Change: On a trailing 12 month basis consolidated Lionsgate leverage at the end of the quarter was 6.5 times, while Standalone stars leverage in its North American business was 3.3 times as we prepare for full separation, we're pleased to announce that the standalone capital structure for both Lionsgate Studios.
Speaker Change: And stars have been set.
Speaker Change: In this regard we have obtained bank commitments for an 800 million dollar asset back revolver at the studio as well as a $300 million term loan a and $150 million revolver at Starz.
Speaker Change: These facilities are poised to fund upon separation with proceeds used to extinguish all of our remaining Lionsgate bank debt.
Speaker Change: The finance structures for both landscape studios and stores have an average tenor of five years and provide both companies with efficient capital and significant flexibility for the foreseeable future.
Speaker Change: Now I'd like to turn the call over to knee life for Q&A.
Speaker Change: We will now begin the question.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Speaker Change: And your first question today will come from Stephen Chahal with Wells Fargo. Please go ahead.
Stephen Chahal: Thank you.
Speaker Change: Jimmy maybe two for you.
Speaker Change: So first I think the studio EBITDA guide for twenty-five implies a pretty big quarter in the fiscal fourth quarter, maybe around 180 million and segment profit a big a big step up.
Speaker Change: Year on year quarter on quarter kind of historically I think there was also a recent library deal with Amazon Prime that was subsequent to the end of last quarter. So just wondering if you could help us put the big step up in segment profit at studio and Q4 in the context of it driven by felt performance carryover or is it driven by TV driven by library.
Speaker Change: All of the above that would be really helpful. And then if you could just address the leverage as well so studio leverage was pretty elevated at the quarter I know the physical second quarter was a tough one at studio in and that's part of it plus the production allowance.
But as he prepared a separate I guess in April where do you think you can get leverage to its studio in the relative near term. Thank you.
Speaker Change: I think Stephen a lot of good questions. There. So I'll just take it from the top.
Speaker Change: First in terms of the fourth quarter, you're right I mean, as we said at the beginning of the year. It was going to be back in weighted year, and probably even more so than.
Speaker Change: We we envisioned at the very beginning of the year and it's a very strong fourth quarter. Okay. We feel good about that we have it's really coming from strength in and the film side of the business as well really all sectors TV as well as stars on the studio side right. We got great. We have some really good carryover from some of the mid <unk>.
Speaker Change: <unk> films, right and slate, that's finishing out in the third quarter performance in the fourth quarter as well that'll provide benefit there we have.
Speaker Change: Likewise in T V continuing post strike lift that's coming with both scripted series. We have go seasoned board rookie season, seven which delivering remaining episodes were delivering season for about cocoa hunting wise as far as it goes to starz.
And season three of yellow jacket, so really a strong lineup there and then in stars we have you know continuing.
Speaker Change: Positive growth in OTT subscriber growth as well as a full quarter, a context of the price increases as well as cost controls as.
Speaker Change: As well so overall you know looking strong on our fourth quarter cadence.
Speaker Change: In terms of the Amazon Prime transaction. This is or calendar year releases 2025, so it's not a fourth quarter matter for fiscal 'twenty five and in fact it starts in the back end of 'twenty six, but then mostly into fiscal 'twenty. Seven we're excited about that I think it's a win win for both.
Starz as well as for the studio segment.
Speaker Change: In terms of leverage.
Speaker Change: We think you know.
Speaker Change: As I as I noted on the call when we get separation and Youre right. This particular quarter.
Speaker Change: The studio leverage was higher than than it might have otherwise been it's really a factor of trailing 12 months leverage which will nicely increase as we go into the fourth quarter that we just spoke too right. So you're going to have a trailing 12 months, increasing it'll naturally obviously de lever as well and.
Speaker Change: Likewise, we've got a very strong fourth quarter free cash flow a context, because we're kind of lapping some of the heavy content spend that we've had in a post strike world.
Speaker Change: That has hit the first nine months as you've seen year to date.
Speaker Change: And our free cash flow, so I expect to come in a billion 650 of net debt plus or minus on the studio at the time of separation is probably around five and a half times leverage and then they will continue to delever quickly over that as we move into fiscal 'twenty, six which we feel good about our fiscal two.
Speaker Change: Six slate as well and on the Starz side.
Speaker Change: That $600 million of net debt will be about a three times leverage and again the team expects and are poised to.
Speaker Change: De lever as we go into fiscal 'twenty six.
Speaker Change: Thank you.
Speaker Change: Thanks, Steven operator can we get the next question. Please.
Speaker Change: Your next question today will come from Thomas <unk> with Morgan Stanley. Please go ahead.
Speaker Change: Thanks, So much I just wanted to follow up on the update on the separation. John I think you said April which is a little bit of a delay from the initial December January time frame, what still needs to happen between now and then for the transaction to close I noticed a few amendments being filed and yes on the S. Four so well illegal outerwear.
Speaker Change: What are we still waiting for and what's the path from here to get to to close and then as just a follow up on the Amazon film output deal announcement in the context of home video window Wang.
Speaker Change: In aggregate, how should we think about the uplift that we would be expecting on the studio profits from the deal.
Speaker Change: And it made more meaningfully kicks in and the kind of 2026 timeframe.
Speaker Change: Thank you.
Speaker Change: Okay, Yeah, I'll take Oh, and the FCC timetable or this is the last really remaining item of substance here. We're ready to go as you said the financing is all are primed and ready to fund upon separation we.
Speaker Change: Yeah, we have a few comments back from the S. E C. We're actually hoping to be as you would imagine a effective well before today.
Speaker Change: We just heard from the SEC really this morning, there are a few more comments, but having quickly reviewed those I'm confident that we can provide appropriate responses to this and in a timely manner.
Speaker Change: And as we've noted and as you know Unfortunately, the financial statements go stale today, it's just the timetable so we need to update those will take us a few weeks to update they update those through the December financials, and we will re file that and that should line us up as John noted for a.
Speaker Change: Mid to late April shareholder meeting and separation almost immediately thereafter.
Speaker Change: Yeah, I'm not going to give you a number on the increased margin from the new pay TV combination I can tell you its significantly more it was just to clarify Jimmy statement.
Speaker Change: Amazon will have four films from our calendar 'twenty five slate, we do have the ability to potentially replace them for the other pictures and twenty-five slate with.
Speaker Change: Another platform and then they will have our full slate of films.
Speaker Change: <unk> for our calendar 'twenty six 'twenty seven and 28.
Speaker Change: Thank you so much helpful.
Speaker Change: Okay.
And your next question today will come from Barton Crockett with Rosenblatt. Please go ahead.
Barton Crockett: Okay, great. Thanks for taking the question.
Barton Crockett: Wanted to ask a little bit more detail about the Amazon relationship in terms of just to be clear that the windows that theyre, taking where those windows that were formerly part of the stars Library.
Barton Crockett: And is there a benefit to starz, perhaps from a cost reduction that's.
Barton Crockett: Interesting are notable and into their spend.
Barton Crockett: Hi, Barton, it's Jeff. So I think this is a really good deal for the overall for the Corporation, we were able to get title and the and the and the slate earlier and so we're getting them closer to the Premier and then really leveraging off the PNA and as you know as a foundation of Primo.
Barton Crockett: Premium stream or pay one has always been a very valuable component the lionsgate movies really actually super form for us and for the first federal streams, and so getting them earlier and creating space to bring in.
Barton Crockett: Another partner in that window, I think really helps everybody overall, obviously I'm getting it earlier and extending out another year into 28 was a big benefit for us as we separate and so that was really impactful for us.
Barton Crockett: And while I won't go into too many details I would say, it's a very clear win win win it's a it's a win for Starz. It's a win for the studio after separation.
Barton Crockett: And it's a win for Amazon.
Speaker Change: Okay. That's helpful. And then just one other question.
Barton Crockett: As you move into these.
Speaker Change: These experiences to John what you experienced.
Speaker Change: Production the hunger games production of all other than production just remind us what are these deals when you'll be getting license fees upon.
Speaker Change: Release or is it sort of an ongoing revenue relationship.
Speaker Change: And any thoughts about you know how meaningful this could be for you guys over time.
Speaker Change: Great question.
Speaker Change: Is that the exciting thing about this is we've been working on these projects now for really quite some time and there really were looking now at them coming to fruition. Each of the deals is primarily a deal that starts with a a license which is sort of the typical way that that content owners. Our work in these kind of.
Speaker Change: Areas, but almost in every one of the circumstances, including the 13 Broadway shows that we're doing we announced dirty dancing, we've got la La land.
Speaker Change: In almost every single case, we have the right to invest up to around 50% in the equity.
Speaker Change: Good news about that is the right that were getting to invest.
Speaker Change: Is typically down the road far enough that we can really look at the development. We can look at the development of the AAA John Wick game, we can look at the development and what we're putting together in terms of cast in music for a dirty dancing in La La land, we can make that decision late in the game, which is really a huge benefit so.
Speaker Change: With a combination of the licensing fees.
Speaker Change: And the potential equity you know we're looking at really.
Speaker Change: Really really a strong contribution potentially.
Speaker Change: And and I would say, particularly when you look at some of the videogame returns that you can get.
Speaker Change: The the returns when its success were significantly more than our motion picture. So we're really excited about what we've seen so far with the John with AAA game.
Speaker Change: We're just we're doing a whole lot of other stuff across all of that location based entertainment that John Wick experience that I just noted it looks amazing and start opening in Vegas later this month so.
Speaker Change: We see this as a real incremental growth four four EBITDA that should start hitting reasonably soon.
Speaker Change: Okay. Thank you very much for that.
Speaker Change: And your next question and your next question today will come from David Joyce with Seaport Research Partners. Please go ahead.
David Joyce: Thank you I was wondering if you could provide some color on where you are on the industry getting back to normalcy in terms of no.
David Joyce: Content production and deliveries and how should we think about the volume of the film and episode deliveries and they're pacing over the next year.
David Joyce: And I guess related to that if you could speak to what the E. One contribution was to the trailing 12 month library revenue and.
David Joyce: And what you are producing based upon that IP into next year. Thanks.
Speaker Change: And I'm going to let Kevin Beggs and Jim Packer to talk about what the.
Speaker Change: Outlook isn't the demand in the TV and library space.
Speaker Change: Thanks, Sean.
Speaker Change: The TV the TV market remains.
Speaker Change: Content market scripted and unscripted.
Speaker Change: Under some pressure things we've spoken about in the past pandemics strikes the fires and been a setback because it's such a deep impact on the creative community.
Speaker Change: So things are slowly.
Speaker Change: Coming back, but not as fast as we would like.
Speaker Change: We here, we're seeing that and just the amount of commissions in the amount of production orders. So it's really about how we address that and pivot to that new normal some of that is cost controls finding great locations to shoot around the world for less money.
Part of it is leading into our terrific IP, when we think about Twilight and John Wick and other titles that we're moving into development and eventually into production. That's a strength across divisional collaboration between ourselves three art are shared book of business with stars our unscripted and feature film collaboration.
Speaker Change: Scamander stands out as an ADC as a Doc began as a podcast that set up as a streamer.
Speaker Change: And then really leaning into hits because hits are always work and doubling down. So you touched on the E. One and Jim will talk about the distribution side of that but we inherited a fine series called the rookie on ABC that was hoping for a sixth season order we secured the sixth season, we secured the seventh season, we're in early talks about <unk>.
Speaker Change: <unk> season, and Alexia Holly the show runner.
Speaker Change: <unk> is working with us on a spin off he has Netflix is number two global drama headed after eight days of releases and recruit and it's something we're doubling down on to do more with him and he continues to deliver similarly goes is in season. Four remains CBS is number one or number two comedy every week one of the top comedies on all television we're hoping.
Speaker Change: Well to do many more seasons and thinking about other iterations of it goes those are the kinds of things we focus on and in laser.
Speaker Change: Focus are our thoughts around as opposed to a more of a shotgun approach during the streaming wars to catch as much as you could bring in.
Speaker Change: Yes, I would say on the on the one library youre starting to see the benefit of our trailing 12 months.
I think youll continue to see that.
Speaker Change: By fiscal year. This is my first fiscal year with E. One, we're trending 10% to 15% above our budget the.
Speaker Change: The rookie and all the procedural that we've got in that library really filled a void for us and really have helped our international group tremendously.
Speaker Change: <unk> taken a little bit longer to kind of maximize that we've had to renegotiate some deals, but overall youre starting to see the benefit and that library is going to be quite helpful. As we go forward and I would say in terms of just the overall environment as you suggested our strikes.
Speaker Change: Even including the fire the slate of movies that Adam and his team have put together finally in terms of incredible directors repeat directors.
Speaker Change: Stars attached.
Speaker Change: By far this is the best pipeline of films that we've ever had at this company coupled with releasing three tent poles in fiscal 'twenty six I think the future as you move into 'twenty seven is going to be.
Speaker Change: Amazing and I think people are starting to come back to to the movies, including my My four kids, who certainly have played a whole lot of video games and social media in this period of time, but.
Speaker Change: I really believe the experience of people going back to the theaters as we put more and more movies into the marketplace. I think that's going to continue to just noble in the right direction.
Speaker Change: Alright, Thank you very much.
Speaker Change: Again, if you have a question. Please press star and then one and your next question today will come from Matthew Harrigan with benchmark. Please go ahead.
Matthew Harrigan: Oh, Thank you you've always been famously lean on the cost side I know you touched on a peripherally with David Barden and also you know the unfortunately the effects of the tragic fires, but is there anything you you see obviously the Sec's gives you more time to look at things even more closely on the cost side.
Speaker Change: Are you seeing more rational behavior.
Speaker Change: Cross all level of hotel for the industry on compensation.
Speaker Change: I guess, a little cringe here or is there anything happening with with AI that.
Speaker Change: That's also helpful on the cost side.
Speaker Change: And then secondly on borderlands, but I know you you tweak your green lighting process somewhat.
Speaker Change: Give us a few specifics as to what the learnings were there and how how the unfortunate experience can maybe even help you help you moving forward and obviously some of the cost savings might be the innovative marketing that you've you've always been good at particularly on the social side. Thank you and congratulations on the quarter.
Speaker Change: <unk>.
Speaker Change: You know from a cost side.
Speaker Change: Speaking out of infrastructure, but sort of talent costs I think.
Speaker Change: Talent is getting paid very well right now I don't know that necessarily that's.
Speaker Change: Going down a whole lot but.
Speaker Change: But I would say in general as Kevin said, we are looking at all kinds of ways to be smarter about the overall production cost and I think something we've always done pretty well with talent has actually tried to cut them in significantly from Tyler Perry and real co productions real back end participation and I think they appreciate when we keep our other.
Speaker Change: Costs down that theyre going to get more on the backend so being a little innovative about the kinds of deals that we're doing being smarter about the overall production cost making deals like we did with the Governor Murphy and in New Jersey, having and that's why we're shooting a movie there right. Now is we've got a fantastic premium tax credit deal.
Speaker Change: And even before we have any stages, there were shooting practical and taking a huge advantage of.
Speaker Change: A movie that we probably would have had to take out of the country and so the talent to improve.
Speaker Change: <unk> female stars.
Speaker Change: You know and doing this housemaid.
Speaker Change: And then we're doing something that's really positive for them. So again I think we can be smart overall about production costs, but as I say talent expects to be paid in terms of the borderlands I'm going to let Adam answer that question.
Adam: Hey, Thanks for thanks for the question look I think that execution has never been more important the audience knows almost immediately whether or not a motion picture is something they are willing to pay to leave the house to see I'm thrilled that borderlands has found a really significant audience on stars, but they weren't willing to go out and see it in the movie theater.
Adam: Matching the right screen play with the right talent at the right budget, so that the risk reward profile of the movie makes sense has never been more important and how we choose to analyze each of those criteria has definitely evolved from where we were on borderlands I don't want to get more specific and let me be clear the talent, we work with on that movie.
Adam: Our top notch across the board, but we're talking about a game that was in a different place in 2019, when the movie was greenlit than it was by the time. The movie finally came out in the marketplace and a lot of other things had changed I do not think we benefited from the amount of time. It took from the original greenlight to the time the movie came out but.
Adam: But I can assure you that how we're assessing each of those individual criteria I laid out has absolutely evolved and I think when you look at the films were making and you and you look at the budgets of those films that were making.
Adam: We are still going to be in the movie business in the movie business still comes with some degree of risk, but we're excited about the kinds of projects, we're putting together.
Adam: Thanks, John Thanks, Adam.
Speaker Change: Your next question today will come from Brent <unk> with Raymond James. Please go ahead.
Speaker Change: Hey, everyone and first our thoughts are with you and your employees and everyone impacted by the fires.
Speaker Change: A couple for me on Onstar.
Speaker Change: I want to hit on the comment about providing digital services to linear platform.
Speaker Change: Can you expand on that comment you've obviously invested a lot in digitizing starts what benefits cause the star's digital platform provide other linear network in terms of digitizing them and how does that play into how you think about M&A.
Speaker Change: Hi, it's Jeff. Thanks for the question look we've built a very robust digital product with a really robust data stack that sits around that that allows us to really has allowed us to convert stars from linear to digital as John said in his prepared remarks over the last five years from 70% linear to 70% digital and sat back.
Speaker Change: And platform and data that has allowed us to really make that transition profitably.
Speaker Change: Lot of our peer groups that are our size don't have the technical infrastructure capabilities that we have and so whether it's on a commercial relationship like youre seeing with the bread box and stars bombed out where we are helping a great box bundled into the starz app and growing helping that product grow with our product are.
Speaker Change: Taking our infrastructure, but in the other way it gives us an opportunity to do a lot of commercial deals with partners that don't have the infrastructure or bigger deals and broader deals broader relationships and I don't think I'll leave it at that.
Speaker Change: Okay and then on the.
Speaker Change: Our <unk> subscriber outlook should we expect OTT subscriber growth to continue at a similar pace as three Q any puts and takes there in terms of the content lineup from here and then any change in the trajectory of linear subs there is a flight.
Speaker Change: Sequential uptick in losses, albeit not dramatic, but any any moving pieces to think about there.
Speaker Change: So I'll start with the linear side I think we continue to see a consistent decline in the linear business I know that we have that forecasted out for the future.
Speaker Change: So.
Speaker Change: That's how the business continues to transition to the linear side. So I expect that to be kind of a slow consistent decline that you've seen over the last four to six quarters.
Speaker Change: There's a little noise here and there but for the most part it's been a pretty consistent decline.
Speaker Change: On the OTT side, we have as you've seen over the last couple of weeks the the velocity around bundling announcements and launches has picked up I think we've been talking about being a bundling partner of choice a lot over the last four or five years I think it's finally really starting to come into fruition and you'll start to see more and more of the revenue base.
Speaker Change: He tied into bundles, which ultimately means less marketing cost on the front end, it's because it's shared longer lifetime value, which ultimately leaves less churns youll see a much more stable revenue base as it starts to become a bigger percentage of our revenue over the next call. It two to five years and so I expect that to continue we've got a great.
Speaker Change: Great late quarter slate coming back this quarter with Kayne and it's one of our bigger shows are really excited about bringing it back onto the platform and so I think youre going to see really strong subscriber growth in the back half of the quarter.
Speaker Change: Thanks, Jeff.
Speaker Change: Thank you.
Speaker Change: Fluids, our question and answer session I would like to turn the conference back over to Neal Shah for any closing remarks.
Speaker Change: Hi, everyone. Please refer to the press releases and events tab under the Investor Relations section of each company's website for a discussion of certain non-GAAP forward looking measures discussed on this call. Thank you all.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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