8-K: Lionsgate and Lionsgate Studios Report Mixed Results for First Quarter Fiscal 2025 Amid Industry Disruption

Lionsgate and Lionsgate Studios reported first quarter fiscal 2025 results, showing a revenue of $834.7 million for Lionsgate, and a net loss of $59.4 million, while the studio business saw a revenue decrease of 5.9% year-over-year.

Summary

• Lions Gate Entertainment Corp. and Lionsgate Studios Corp. have released their financial results for the first quarter of fiscal year 2025, ending June 30, 2024.
• Lionsgate reported a revenue of $834.7 million, an operating income of $18.8 million, and a net loss attributable to shareholders of $59.4 million, or $0.25 diluted net loss per share.
• Adjusted net income for Lionsgate was $20.9 million, or $0.09 adjusted diluted earnings per share.
• Lionsgate's adjusted OIBDA was $104.5 million for the quarter.
• The Studio Business, which includes Motion Picture and Television Production segments, reported a revenue of $588.4 million, a 5.9% decrease from the prior year quarter.
• Studio Adjusted OIBDA decreased by 5.5% to $58.3 million.
• The Motion Picture segment saw a 15% revenue decrease to $347.3 million, but a 24% increase in segment profit to $86.1 million.
• The Television Production segment's revenue increased by 10% to $241.1 million, while segment profit decreased by 53% to $10.7 million.
• North American Media Networks revenue grew by 1% to $345.3 million, with segment profit increasing by 54% to $58.5 million.
• North American OTT subscribers increased by 5.5% year-over-year to 13.2 million, but decreased by 180,000 sequentially, with overall North American subscribers decreasing by 500,000 sequentially.
• Trailing 12-month library revenue was $882 million.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the reported net loss and declines in key segments, despite some positive aspects like the growth in Media Networks profit and the progress towards separation. The mixed results and ongoing industry challenges contribute to the lower score.

Positives

• Motion Picture segment profit increased by 24% year-over-year.
• North American Media Networks segment profit increased by 54% year-over-year.
• North American OTT subscribers increased by 5.5% year-over-year.
• Trailing 12-month library revenue was $882 million.
• The company is making progress towards full separation by calendar year-end.

Negatives

• Lionsgate reported a net loss of $59.4 million.
• The Studio Business revenue decreased by 5.9% year-over-year.
• Studio Adjusted OIBDA decreased by 5.5% year-over-year.
• Motion Picture segment revenue decreased by 15% year-over-year.
• Television Production segment profit decreased by 53% year-over-year.
• North American OTT subscribers decreased by 180,000 sequentially.
• Overall North American subscribers decreased by 500,000 sequentially.

Risks

• The company is facing unprecedented industry disruption and the aftereffects of strikes.
• The television segment's financial results reflect a heavily backloaded year.
• The Motion Picture segment's revenue decline is due to a difficult comparison with the prior year's first quarter, which included carryover theatrical revenue from John Wick: Chapter Four.
• The company is subject to risks and uncertainties related to the separation of the studio business and STARZ business.
• The company is subject to risks related to the substantial investment of capital required to produce and market films and television series.
• The company is subject to risks related to the unpredictability of the commercial success of motion pictures and television programming.
• The company is subject to risks related to labor disruptions and strikes.

Future Outlook

The company is working towards full separation by calendar year-end, subject to regulatory approvals, and is navigating industry disruption and the aftereffects of strikes. The company has also announced a $1.00 rate increase to the STARZ monthly cost.

Management Comments

• Lionsgate and Lionsgate Studios CEO Jon Feltheimer stated that they were pleased to report a solid quarter despite unprecedented industry disruption and the aftereffects of the strikes.
• He noted that the Motion Picture Group, STARZ, and the library performed well, while the television segment's financial results reflected a heavily backloaded year.
• He also mentioned that the company generated great momentum during and after the quarter by taking a number of steps toward full separation by calendar year-end.

Industry Context

The results reflect the ongoing challenges in the entertainment industry, including the impact of strikes and shifting consumer preferences towards streaming. The performance of the Motion Picture segment highlights the volatility of theatrical releases, while the growth in Media Networks profit indicates the importance of subscription services. The company's move towards separation is a significant strategic shift in response to these industry trends.

Comparison to Industry Standards

• Lionsgate's performance is mixed compared to other entertainment companies.
• While the increase in Media Networks profit is positive, the decline in Studio Business revenue and profit is concerning.
• Companies like Netflix and Disney have also faced challenges in subscriber growth and profitability in their streaming divisions, but have seen success in other areas.
• The performance of the Motion Picture segment is comparable to other studios that have seen fluctuations in theatrical revenue due to the timing of major releases.
• The company's library revenue is a strong asset, similar to other studios with large content libraries like Warner Bros. Discovery.
• The planned separation of the studio and STARZ businesses is a strategic move similar to other media companies that have restructured to focus on core competencies.

Stakeholder Impact

• Shareholders will be concerned about the reported net loss and the decline in the Studio Business's performance.
• Employees may be affected by the ongoing restructuring and cost-saving initiatives.
• Customers of STARZ may be impacted by the announced $1.00 rate increase.
• Suppliers and creditors may be impacted by the company's financial performance and restructuring efforts.

Next Steps

• Lionsgate and Lionsgate Studios senior management will hold an analyst and investor conference call to discuss fiscal 2025 first quarter results on August 8th.
• The company will continue to work towards full separation by calendar year-end, subject to regulatory approvals.
• The company will continue to evaluate the Media Networks business and its current restructuring plan.

Key Dates

Keywords

Lionsgate, Lionsgate Studios, Motion Picture, Television Production, Media Networks, STARZ, OTT, OIBDA, Revenue, Net Loss, Earnings, Film, Television, Subscriber, Library