Lions Gate Entertainment Corporation

Good day and welcome to the Lionsgate first quarter of fiscal year 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Neal A. Shaw, head of investor relations. Please go ahead.

Good afternoon. Thank you for joining us for the Lionsgate Fiscal 2024 Conference Call. We'll begin with opening remarks from our CEO, John Feldheimer, followed by remarks from our CFO, Jimmy Barge. After their remarks, we'll open the call for questions. Also joining us on the call today are Vice Chairman Michael Burns, COO Brian Goldsmith, Chairman of the TV Group, Kevin Beggs, Chairman of the Motion Picture Group, Joe Drake, and President of Worldwide TV and Distribution, Jim Packer. And from STARS, we have President and CEO Jeffrey Hirsch, CFO Scott McDonald, and President of Domestic Networks Allison Hoffman. The matters discussed on this call include forward-looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. Actual results could differ materially and adversely from those described in the forward looking statements as a result of various factors. This includes the risk factors set forth in Lionsgate's most recent annual report on Form 10-K as amended and also as amended in our most recent quarterly report on Form 10-Q filed with the SEC. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. The matters discussed on this call also include the proposed separation of our television and movie production business from our media networks business. We urge you to read the relevant materials that we and our subsidiary, LG Orion Holdings, have and will file with the SEC, including a registration statement on Form 10, which was filed on July 12, 2023, that includes a preliminary joint information proxy statement. The information on the joint information proxy statement will not be complete and may be changed. You can find these materials and other documents filed with the SEC free of charge at the SEC's website, www.sec.gov, or on our Investor Relations website. Lionsgate, LG Orion, and our directors, executive officers, and certain other employees and other persons may be deemed to be participants in the solicitation of proxies from the shareholders in favor of the proposed separation under SEC rules. Information about participants and their direct and indirect interests will be included in in the joint information proxy statement and the other relevant documents filed with the SEC as available. I'll now turn the call over to John.

Thank you, Neelay, and good afternoon, everyone. Thank you for joining us. It's been only two months since we spoke with you last, but it's been a busy period, culminating in our signing a definitive agreement with Hasbro last week to acquire global entertainment platform E1. The E1 deal allows us to do what we do best, adding 6,500 titles to one of the largest and most valuable libraries in the world, growing our portfolio of brands with properties like The Rookie, Yellow Jackets, Naked and Afraid, and film development rights to Monopoly, continuing to strengthen our scripted and unscripted television business, and scaling our operations in Canada and the UK. On closing, we expect the transaction to be immediately and highly accretive. Jimmy will provide more color on that in a few minutes. Taking a look at each of our businesses, beginning with motion pictures, our feature film group reported strong profits in the quarter thanks to the overperformance of library titles, multi-platform releases like the thriller Sisu, theatrical carryover from John Wick Chapter 4, and the home entertainment performance of Plane. This strong financial performance, even with three releases that opened softer than anticipated in the quarter, speak to the resilience and diversification of our film business. With The Expendables 4, Saw X, and the long-awaited return of The Hunger Games coming up, we're bullish about our slate for the rest of the year. Looking ahead, we've completed principal photography on Ballerina, the first of what we expect will be several movie spinoffs from the John Wick universe, and we're readying the Michael Jackson film from producer Graham King. Beyond that, we have a strong roster of branded world-class properties, including Dirty Dancing, Now You See Me 3 from director Ruben Fleischer, and Highlander from John Wick director Chad Stahelski. In the faith-based vertical, Our partnership with the Kingdom Story Company has already produced the box office hits I Can Only Imagine and Jesus Revolution. In October, we'll release the next film from Kingdom, the inspirational drama Ordinary Angels, starring two-time Academy Award winner Hilary Swank. And Kingdom's unsung hero will hit screens next April in time for Easter. Turning to television, we have a robust slate of content at all stages of production, Acapulco, Manhunt Lincoln, and the Seth Rogen comedy, all for Apple TV+, the John Cryer comedy Extended Family for NBC, Son of a Critch for The CW, and Ghost, Raising Canaan, and The Serpent Queen for Starz, to name a few. And we've completed and delivered one of our biggest and most eagerly anticipated properties, the John Wick prequel event series The Continental, launching on Peacock and Amazon Prime. on September 22nd. As a number of our series move into later seasons, our scripted series slate continues to drive growing profit contributions that are expected to reach record levels this year with continued growth into fiscal 25 and fiscal 26. Ghosts, one of TV's highest-rated comedies for CBS, Mythic Quest for Apple, and BMF for Stars had a roster of 10 Lionsgate television series in their third or fourth seasons. On the distribution front, with platforms now selling some of their best content to third parties, there's more supply than ever in the marketplace. In response... Our aggressive approach to fast channels has created distribution opportunities with a whole new generation of MVPDs like Roku, Pluto, Vizio, LG, and Freevi. And we're driving substantial and growing incremental revenue using our existing infrastructure through Lionsgate's own fast channels, Moviesphere, HerSphere, Outersphere, Nashville, and more than a dozen others. We anticipate this revenue stream will double next year. We've also become a leading distributor of great third-party content. Our television group was chosen by creator, director, and producer Dallas Jenkins to distribute the acclaimed event series, The Chosen, which has grown from a crowdsourcing project to a massive global phenomenon with over 110 million viewers. Within a few weeks of our securing global distribution rights, the series was picked up for multiple seasons by the CW Network in the U.S., The Quentin Tarantino films, Kill Bill Volumes 1 and 2 and Jackie Brown, have become great recent additions to our library, giving us distribution rights to the industry's largest portfolio of Tarantino films. And as you read yesterday, our worldwide television distribution group and Deb Marmercury have partnered with the Carsey-Werner team to license their hit television series, The Conners, ABC's number one comedy for five straight seasons, to SVOD Avon. basic cable and fast platforms worldwide, along with domestic syndication. This growing slate of third-party properties reaffirms Lionsgate's stature as a place that the world's leading IP creators entrust with their big brands. And all content roads lead to our film and television library, which achieved yet another record performance in the quarter, reporting nearly $900 million in trailing 12-month revenue. I want to make an important point about our library. Ten years ago, over 60% of our library revenue still came from acquired and managed third-party content. By contrast, nearly 80% of higher-margin library revenue today is driven by Lionsgate films, television shows, and Starz original series that we have created many in the past few years as we continue to grow our crown jewel asset organically and through acquisitions. Turning to Starz, The service continues to take steps to strengthen its business in preparation for becoming an independent standalone public company after the separation. During the quarter, it streamlined its distribution footprint, executed a rate increase across its platforms, and began a ramp up of first-run studio movies to complement its original series. Though the rate increase may have impacted subscriber growth in the short term, we continue to be profitable. and expect the financial benefits of that increase to become apparent in terms of revenue and contribution growth in the next few quarters. Combined with new efficiencies in content and marketing spend, it will be an important contributor to the growth of Star's domestic margins. On the international front, after being approached by a key distributor in Latin America, We transacted a favorable agreement that motivated us to exit the territory by December 31st as we moved towards focusing the service on the U.S. and other English-speaking territories, the U.K., Canada, and Australia, while also continuing to take significant costs out of the business. As movies play a large and growing role in shaping what streamers offer their consumers, Starz continues to ramp its roster of hit films alongside its original series. In that regard, I'm pleased to note that the theatrical output agreement between Lionsgate and Starz has been extended through 2027. The Lionsgate pay-one and Universal pay-two slates will take Starz from 14 movies last year to 28 films this year and more than 40 next year, with the eagerly anticipated Starz launch of John Wick Chapter 4 on September 26th. In closing... We remain committed to the separation of Lionsgate and STARS. We filed a Form 10 with the SEC last month as the next step in the process. With the impact of the E1 acquisition on regulatory approvals, uncertainty surrounding the strike, and our efforts to create the most efficient capital structure within a disruptive marketplace, we anticipate that the separation will now take place in the first quarter of calendar 2024. Now I'll turn things over to Jimmy.