8-K: Lionsgate and Lionsgate Studios Report Mixed Q3 Fiscal 2025 Results Amidst Strategic Separation

Lionsgate reports Q3 fiscal 2025 results with revenue at $970.5 million, a net loss of $21.9 million, and progress on the separation of its studio and STARZ businesses.

Summary

• Lionsgate reported third quarter revenue of $970.5 million.
• The net loss attributable to Lionsgate shareholders was $21.9 million, or $0.09 diluted net loss per share.
• Adjusted net income attributable to Lionsgate shareholders was $68.4 million, or $0.28 adjusted diluted net income per share.
• Lionsgate's operating income was $35.8 million.
• Lionsgate's Adjusted OIBDA was $144.2 million.
• Trailing 12-month library revenue grew 22% to a record $954 million.
• The Studio Business reported revenue of $713.8 million, a 3% increase from the prior year quarter.
• Studio Adjusted OIBDA was $112.0 million, up 45% compared to $77.4 million in the prior year quarter.
• Motion Picture segment revenue decreased to $309.2 million.
• Television Production segment revenue increased 63% to $404.6 million.
• Media Networks North American revenue was down slightly to $341.9 million.
• North American OTT subscribers grew by 170K sequentially.

Sentiment

Score: 6

Explanation: The sentiment is mixed. While there are positives like library revenue growth and Studio Adjusted OIBDA increase, the net loss and decline in Motion Picture revenue temper the overall outlook. The strategic separation adds uncertainty.

Positives

• Trailing 12-month library revenue reached a record $954 million, up 22%.
• Studio Adjusted OIBDA increased by 45% to $112.0 million.
• Television Production segment revenue increased 63% to $404.6 million.
• North American OTT subscribers grew by 170K sequentially.

Negatives

• Net loss attributable to Lionsgate shareholders was $21.9 million, or $0.09 diluted net loss per share.
• Motion Picture segment revenue decreased to $309.2 million.
• Media Networks North American revenue was down slightly to $341.9 million.

Risks

• The document mentions risks and uncertainties related to forward-looking statements, including the ability to effectuate the proposed separation of Lionsgate's Studios Business and STARZ Business.
• The document mentions risks related to the substantial investment of capital required to produce and market films and television series, budget overruns, and the unpredictability of the commercial success of motion pictures and television programming.
• The document mentions risks related to acquisition and integration of acquired businesses, the effects of dispositions of businesses or assets, the cost of defending intellectual property, technological changes, potential adverse reactions or changes to business or employee relationships, the impact of global pandemics, weakness in the global economy and financial markets, wars, terrorism, labor disruptions, and strikes.

Future Outlook

The document includes forward-looking statements regarding the performance of future fiscal years and the proposed separation of Lionsgate's Studios Business and STARZ Business, which are subject to risks and uncertainties.

Management Comments

• I'm pleased to report a strong quarter in which our businesses performed well in a challenging environment, said Lionsgate and Lionsgate Studios CEO Jon Feltheimer.
• We approach the separation of the studio and STARZ with a record performance from our library, our Motion Picture Group converting a number of midbudget films to profitability, our Television Group shepherding an extensive portfolio of premium properties and STARZ returning to domestic OTT subscriber growth on a sequential basis.

Industry Context

The announcement reflects the ongoing shifts in the entertainment industry, with a focus on library content, streaming growth, and strategic realignments through business separations.

Comparison to Industry Standards

• It is difficult to compare Lionsgate directly to other companies without detailed knowledge of their specific segments and accounting practices.
• However, companies like Paramount, Warner Bros Discovery, and Disney also have diversified media businesses with film, television, and streaming components.
• Lionsgate's focus on library revenue is similar to strategies employed by other media companies to monetize their content libraries in the streaming era.
• The growth in OTT subscribers is a key metric for all streaming services, and Lionsgate's sequential growth indicates positive momentum in this area.

Stakeholder Impact

• Shareholders will be interested in the strategic direction of the company, particularly the separation of the studio and STARZ businesses.
• Employees may be affected by restructuring and cost-saving initiatives.
• Customers of STARZ will be interested in the growth of OTT subscribers and the content available on the platform.
• Suppliers and creditors will be interested in the financial stability of the company and its ability to meet its obligations.

Next Steps

• Lionsgate and Lionsgate Studios senior management will hold an analyst and investor conference call to discuss fiscal 2025 third quarter results on February 6th.

Key Dates