Release Date: May 29, 2025
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 strong operating and financial results, achieving $92 million of adjusted OIBDA in the quarter.
- The company experienced a 2% increase in OTT subscriber growth in the US, driven by the premiere of Raising Kanan Season 4.
- Lions Gate Entertainment Corp (LGF.B) plans to expand margins from 15% to 20% and convert 70% of adjusted OIBDA into unlevered free cash flow by calendar '26.
- The company is focused on rebuilding its library and reclaiming ownership economics, with plans for half of the calendar '27 slate to be owned and controlled by Starz.
- Lions Gate Entertainment Corp (LGF.B) has a strong lineup of upcoming content, including five big tempo series and proven hits like BMF and Power spinoffs, which are expected to drive subscriber and revenue growth.
Negative Points
- North American revenue was down year over year and sequentially, impacted by a strike-affected year with only three tempo series.
- The company experienced a sequential decrease of 330,000 subscribers in North America due to a carriage dispute in Canada.
- Revenue was down 6.8% year over year due to lower total subscribers and continued pressure on linear subscribers.
- The company recorded a restructuring charge of $177.4 million related to the reassessment of its content portfolio.
- Lions Gate Entertainment Corp (LGF.B) expects revenue growth to remain negative on a year-over-year basis for calendar '25 due to the drag from lower subscribers in prior quarters.
Q & A Highlights
Q: What is different about Starz 3.0 as a standalone company compared to when it was part of Lionsgate?
A: Jeffrey Hirsch, CEO, explained that Starz 3.0 is fundamentally different from its earlier iterations. Previously, Starz was a 100% linear, wholesale business with no consumer data. Now, 70% of its revenue is digital, and 80% of customers are a la carte or RevShare. As a standalone company, Starz can focus on unwinding cost pressures and rebuilding its IP library, allowing for greater control over costs and a focus on its core demographics of women and underrepresented audiences.
Q: How much of the US OTT growth came from new bundling strategies, and why was revenue lighter than expected?
A: Jeffrey Hirsch noted that the majority of subscriber growth was driven by the premiere of "Raising Kanan" in the last three weeks of the quarter. While bundling strategies like the Max Starz and BET Starz bundles on Amazon were successful, the revenue was impacted by the carryover effects of a strike-affected year and the timing of the "Raising Kanan" premiere, which did not contribute a full quarter of revenue.
Q: What is the strategy for shifting to owned IP, and what are the expected cost savings?
A: Hirsch stated that Starz plans to have half of its calendar 2027 slate be Starz-owned shows. The shift to owned IP is expected to result in cost savings of $1 million to $2 million per hour, with additional savings from international sales. This strategy is part of a broader goal to achieve a 20% margin by calendar 2028.
Q: How does Starz plan to manage its content spending and leverage in the future?
A: Scott Macdonald, CFO, mentioned that Starz expects cash content spending to decrease to about $700 million in calendar 2026, with a long-term goal of $650 million. The company aims to reduce leverage to 2.5 times and will assess capital allocation strategies, such as expanding the content portfolio, once this target is achieved.
Q: How does Starz view potential consolidation opportunities in the industry?
A: Jeffrey Hirsch indicated that while Starz is not currently discussing specific M&A opportunities, the company sees potential in partnerships with brands focused on women and underrepresented audiences. These partnerships could involve commercial deals or other arrangements to grow the business together.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
