Lions Gate Entertainment Corporation

Good day and welcome to the Lionsgate's first quarter 2025 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 a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Neelay Shah, Head of Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us for the Lionsgate Studios Corp and Lionsgate Entertainment Corp Fiscal 2025 First Quarter Conference Call. We'll begin with opening remarks from our CEO, John Feldtheimer, 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 Adam Fogelson, and President of Worldwide TV and Digital Distribution Jim Packer. And from STARS, we have President and CEO Jeffrey Hirsch, CFO Scott McDonald, and President of Domestic Networks Allison Hoffman. Thank you for listening. The companies undertake 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. I'll now turn the call over to John.

Thank you, Nealey, and good afternoon, everyone. Thank you for joining us. In an operating environment of unprecedented industry disruption that touches every part of our business, we delivered a solid quarter in spite of soft results from our television segment, primarily due to some residual impact from the strikes, as well as a heavily back-loaded year. Our motion picture group exceeded financial expectations, our library turned in another strong performance, and stars achieved domestic OTT revenue and subscriber growth over the prior year quarter. There are things in our environment over which we have little control. The impact of disruption on our buyers and distributors, market volatility, and the long tail of the strikes and the pandemic. But there are also a number of things we can control, and today I want to talk about four in particular. First, executing our strategic plan. The separation of our studio business and stars will allow our two companies to pursue the strategic agendas that are right for them in the current environment, scale their respective businesses, and focus investor attention on what makes them special and unique within their own ecosystems. Over the past several months, we've generated strong momentum towards full separation, raising over $300 million in gross proceeds from equity financing, completing a bond exchange agreement to strengthen the respective stars and studio balance sheets, and closing a $340 million IP-backed facility that is primarily collateralized by the E1 Library. In addition, as we said on our last earnings call, a special committee of the board is formed to evaluate and recommend to the full board whether a collapse of the company's dual class share structure would be in the best interest of our shareholders, and if so, advise on the appropriate structure for putting it into effect. Special Committee concluded that a single class of stock is in our shareholders' best interest and recommended collapsing our two classes into one with a 12% exchange premium for the A shareholders. This board-approved proposal, which will be included in the proxy statement that will be filed in connection with the separation and voted on by the shareholders of both classes of stock, is another critical milestone in achieving full separation by calendar year-end, subject to the timing of normal regulatory approvals. Second, creating great content and adapting our portfolio of world-class IP and franchises. We continue to put together theatrical release slates driven by three to four tentpoles a year beginning in fiscal 26. In the quarter, we announced that we will adapt Suzanne Collins' next Hunger Games book, Sunrise on the Reaping, into a major motion picture for release on November 20th, 2026. We're wrapping principal photography on Graham King and Antoine Fuqua's Michael Jackson biopic, putting the finishing touches on the John Wick spinoff, Ballerina, starting production on Ruben Fleischer's new installment of the Now You See Me franchise and Francis Lawrence's adaptation of Stephen King's The Long Walk, and readying Chad Stahelski's Highlander for a production start early next year. In television, in a year with 70% of scripted delivery scheduled for the third and fourth quarters, the good news is that nearly all of these series are already ordered, in production, and on schedule. These shows include signature big shows like Spartacus, House of Asher, and The Hunting Wives for stars, Seth Rogen's The Studio for Apple TV+, and the seventh season of The Rookie for ABC. And new business has picked up significantly, with a total of 15 new series ordered and current series renewed, two network pilots picked up, and more than 30 projects sold into development. At Starz, our content performed well in the quarter with Ghost Season 4 opening to over 6.5 million multi-platform viewers in its premiere week and achieving strong in-season growth. With Raising Canaan and Outlander engaging both of our audience cohorts in the back half of the year, and with a rate increase rolling out in Q2, we expect to resume sequential quarter North American OTT subscriber growth in Q3. Looking ahead to our fiscal 26th slate, we'll continue to execute on a focused content strategy in which we are complementing our returning tentpole series with high-profile new series like The Hunting Wives, Spartacus, the Outlander prequel Blood of My Blood, an array of female-focused third-party acquisitions, and a strong slate of studio features. Third, creating business models that generate new areas of growth. By rolling out a suite of Lionsgate fast channels, including Moviesphere, the first fast channel to be rated by Nielsen, and 50 Cent Action, in partnership with Curtis 50 Cent Jackson, we're controlling and monetizing opportunistic windows that, together with our AVOD business, generate over $100 million in annual revenue. Starz, two strong core demos, make it a bundling partner of choice in its wholesale and direct-to-consumer businesses. This afternoon, I'm pleased to announce that Starz and BritBox, the BBC Studios' owned streaming service, are launching a new bundle next quarter to offer their respective apps directly through Starz.com. By leveraging its advanced tech stack, Starz is enabling the creation of a compelling and complimentary offering that pairs stars hits like outlander and the serpent queen with britbox's unmatched collection of original series such as vera shetland and blue lights alongside iconic library classics like Downton Abbey and killing eve at a time when our traditional buyers are being disciplined around their budgets Our television group is pivoting to shows with efficient business models and production for new buyers, like the Rainmaker for USA, two new series for Hallmark, and an array of international co-productions, increasing our universe of potential buyers by as much as 50%. We announced during the quarter that former CAA and Bad Robot executive Brian Weinstein had been named co-CEO of our leading talent management and production company, 3Arts Entertainment, and strategic advisor to the office of the CEO at Lionsgate. He joins co-CEO Michael Rotenberg and the other 3Arts partners in executing a focused and accelerated growth strategy to extend 3Arts into new areas of representation. Under our new Motion Picture Group leadership, our Global Products and Experiences Group is expanding its portfolio of properties and accelerating the monetization of ancillary and derivative opportunities for our franchise properties. With 13 Broadway shows in the pipeline, including adaptations of some of our most important IP, exciting progress towards the launch of our John Wick AAA game, a new John Wick experience opening soon in Las Vegas, and a number of high-profile licensing initiatives in the works, we expect to begin seeing a meaningful uptick in revenue later this year. And finally, cutting costs. Lionsgate is already one of the leanest companies at scale in the media business. But here are just a few of the things we're doing to become even leaner. In television, we're reducing the number of combined Lionsgate and E1 producer deals by 70%, with $30 million in projected annual savings. As we complete the integration of E1, we're reducing G&A and remain on track for our operational and financial targets. Within our motion picture group, we have flattened the organizational structure and reallocated overhead from non-core activities to support the ramp of our film output with a laser focus on marketing and distribution expenses. In our real estate operations, we've consolidated offices and expect to reduce lease expenses by 30% on a pro forma basis over a three-year period. And we're currently analyzing AI applications to our business in everything from more efficient library utilization and production and marketing benefits to broader G&A efficiencies in order to continue to take costs out of the business. In closing, there are many reasons why I remain bullish about the long-term prospects of our business. The domestic box office is rebounding just as we prepare one of our strongest film slates for fiscal 26. Our television group continues to lean into its portfolio of companies to generate content for old and new buyers alike. Starz has grown its North American OTT subscribers and revenue from the prior year quarter. increased ARPU, decreased churn, and remained profitable as it continues its transition to a predominantly digital future. 3Arts is a talent management and production leader with a strong growth trajectory ahead of it, and we are continuing to put together all of the pieces for a value-defining separation of the studio and stars by the end of the calendar year. I would note that in terms of our financial projections for the year, we have some ground to make up after the first quarter, and our backloaded slates leave us less margin for error than usual. However, amidst this disruptive environment, the one thing you can be sure of is that we will continue to adapt, pivot, and innovate in order to meet our challenges and create value for our shareholders. Now I'll turn things over to Jimmy.