Lions Gate Entertainment Corp (LGF.B) Q1 2025 Earnings Call Highlights: Navigating Challenges ...

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  • Consolidated Revenue: $835 million, down 8% year over year.

  • Adjusted EBITDA: $105 million, up 22% year over year.

  • Operating Income: $19 million.

  • Reported EPS: Loss of $0.25 per share.

  • Adjusted EPS: Positive $0.09 per share.

  • Net Cash Flows Used in Operating Activities: $159 million.

  • Adjusted Free Cash Flow: Use of $89 million for the quarter.

  • Studio Revenue: $588 million, down 6% year over year.

  • Studio Adjusted EBITDA: $58 million, down 6% year over year.

  • Motion Picture Revenue: $347 million.

  • Motion Picture Segment Profit: $86 million, up 24% year over year.

  • Television Revenue: $241 million, up 10% year over year.

  • Television Segment Profit: $11 million, down year over year.

  • Media Networks Revenue: $350 million.

  • Media Networks Segment Profit: $58 million.

  • North American OTT Subscribers: 13.2 million, up 6% year over year.

  • Total North American Subscribers: 21.3 million, down 500,000 sequentially.

  • Net Debt: $2 billion at the consolidated company.

  • Standalone Starz Leverage: 2.8 times.

  • Standalone Lionsgate Studios Leverage: 3.9 times.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Lions Gate Entertainment Corp (NYSE:LGF.B) reported a strong performance in its Motion Picture Group, exceeding financial expectations.

  • The company achieved domestic OTT revenue and subscriber growth for Starz over the prior year quarter.

  • Lions Gate Entertainment Corp (NYSE:LGF.B) raised over $300 million in gross proceeds from equity financing and completed a bond exchange agreement to strengthen balance sheets.

  • The company is executing a strategic plan to separate its studio business and Starz, allowing each to focus on their unique strategic agendas.

  • Lions Gate Entertainment Corp (NYSE:LGF.B) is expanding its portfolio with new content, including adaptations of popular franchises and new series orders, indicating robust demand for its content.

Negative Points

  • The television segment experienced soft results due to residual impacts from industry strikes and a heavily back-loaded year.

  • The company faces challenges from market volatility and the long tail of strikes and the pandemic, impacting its buyers and distributors.

  • Lions Gate Entertainment Corp (NYSE:LGF.B) has some ground to make up after the first quarter, with less margin for error due to a loaded slate.

  • The company reported a decline in consolidated revenue by 8% year over year.

  • There was a sequential decline of 500,000 total North American subscribers for Starz, primarily due to a decline in linear subscribers.

Q & A Highlights

Q: Can you discuss the impact of the post-strike environment on television deliveries and buyer appetite for new orders? A: Kevin Beggs, Chairman, noted that the post-strike hangover was longer than expected, particularly in scripted content. However, there is robust demand for new projects, with 37 new projects sold post-strike, indicating strong buyer interest despite financial discipline on budgets.

Q: What gives you confidence in Starz's return to OTT subscriber growth, especially with the upcoming price increase? A: Jeffrey Hirsch, President & CEO of STARZ, highlighted a strong slate of originals and movies in the back half of the year, including Outlander and Kane, as well as strategic partnerships and offers during the holiday period, which are expected to drive subscriber growth and revenue.

Q: Could you elaborate on the fiscal first quarter softness and the adaptations Lionsgate is making to meet its guidance? A: James Barge, CFO, explained that the quarter was impacted by extended strike effects, affecting deliveries and causing some cancellations. However, the company is taking steps to recover, including a strong film release slate and increased episodic deliveries in the second half of the year.

Q: Can you provide more details on the IP-backed loan facility with E1 content and its implications for your debt structure? A: James Barge, CFO, stated that the $340 million IP facility is efficiently priced and travels with the studios upon separation. The company plans to continue leveraging its asset-rich balance sheet to refinance remaining debt, ensuring a balanced capital structure for both studios and Starz.

Q: How is the E1 acquisition performing, and what are your views on the US theatrical box office returning to pre-COVID levels? A: Jon Feltheimer, CEO, expressed satisfaction with the E1 acquisition, particularly in integrating its library and strategic value. Regarding the box office, Adam Fogelson, Incoming Motion Picture Group Chairman, noted that while the $11 billion pre-COVID level may not be reached, recent successes indicate strong consumer interest in theatrical releases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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