Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lions Gate Entertainment Corp (LGF.B, Financial) reported a strong library revenue of nearly $900 million in trailing 12 months, showcasing the strength of its diversified portfolio.
- The company is making progress in preparing a more diversified film slate for fiscal 2026, including major tentpole projects like 'Michael', 'Ballerina', and 'Now You See Me 3'.
- Starz is on track to achieve a $200 million segment profit for the fiscal year, supported by successful rate increases and strong programming performance.
- Lions Gate Entertainment Corp (LGF.B) is actively leveraging its IP through various channels, including stage plays and video games, to create additional revenue streams.
- The company has successfully integrated the E One library, contributing positively to its trailing 12-month library revenue and overall business performance.
Negative Points
- The company faced financial challenges due to disappointing theatrical box office performance, particularly with the film 'Borderlands'.
- Lions Gate Entertainment Corp (LGF.B) reported a consolidated revenue of $949 million but faced an adjusted EBITDA loss of $18 million and an operating income loss of $89 million.
- The television group is experiencing a market correction, impacting both scripted and unscripted segments, with buyers ordering fewer shows.
- The company had to offer voluntary severance and early retirement packages to U.S. employees, with approximately 8% of eligible employees opting in, indicating workforce restructuring.
- Lions Gate Entertainment Corp (LGF.B) revised its fiscal 2025 financial outlook for Lionsgate Studios, forecasting adjusted EBITDA between $300 million to $320 million, down from previous expectations.
Q & A Highlights
Q: How is Lions Gate redefining its film approach, particularly in balancing big swings with a measured approach?
A: Adam Fogelson, Chairman of the Motion Picture Group, explained that the company is focusing on financial discipline and risk-mitigated models while ensuring creative and production processes are aligned. They are leaning into existing franchises like John Wick and Hunger Games due to strong audience demand, while also being selective about new IP development and maintaining budget consciousness.
Q: Can you elaborate on the decision to streamline the US workforce and its impact on different business areas?
A: The company representative noted that the 8% reduction in workforce is part of aligning with shareholder interests and adjusting to current market conditions. The nonfiction business, in particular, is being restructured due to its overhead model. The company is rightsizing its business to be more efficient and prepared for future market cycles.
Q: How did the price increase at Starz affect churn, and what are the expectations for future growth and cash conversion?
A: Jeffrey Hirsch, President and CEO of Starz, stated that the price increase was executed well, with churn in line with expectations. They anticipate healthy OTT growth in the coming quarters, supported by strong content like Outlander and Raising Kanan. The company expects improved cash conversion, aiming for around 70% as they normalize post-strike and COVID disruptions.
Q: What is the status of the financing process for the separation of Lions Gate Studios and Starz?
A: James Barge, CFO, expressed confidence in establishing strong capital structures for both entities. They have completed over $1 billion in IP-backed facilities and are in discussions for a term loan for Starz. The financing is expected to be finalized in the coming weeks, aligning with the planned separation.
Q: How is the market correction in TV production affecting Lions Gate, and what strategies are being employed to address it?
A: Kevin Beggs, Chairman of the TV Group, explained that while demand remains, financial constraints are leading to shorter orders and cost reductions. Lions Gate is exploring new buyers and leveraging its library to provide programming solutions. They are also focusing on long-term partnerships and developing new IP to remain competitive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
