Lions Gate Entertainment Corp.

Good afternoon. Thank you for joining us for the Lionsgate Studios Corp.

and Lions Gate Entertainment Corp. Fiscal 2025 First Quarter Conference Call.

We'll begin with opening remarks from our CEO, Jon Feltheimer; 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 STARZ, we have President and CEO, Jeffrey Hirsch; CFO, Scott MacDonald; and President of Domestic Networks, Alison Hoffman.

The matters discussed on the call also 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 our public filings for Lionsgate Studios Corp.

and for Lions Gate Entertainment Corp. 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 Jon.

Thank you, Nilay, 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 backloaded year. Our Motion Picture Group exceeded financial expectations.

Our library turned in another strong performance. And STARZ 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 4 in particular. First, executing our strategic plan.

The separation of our Studio Business and STARZ will allow our 2 companies to pursue the strategic agendas that are right for them in the current environment, scale their respective businesses and focus investor intention 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 STARZ and studio balance sheets and closing a $340 million IP-backed facility that is primarily collateralized by the eOne library.

In addition, as we said on our last earnings call, a special committee of the Board was 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 2 classes into 1 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 3 to 4 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 20, 2026.

We are wrapping principal photography on Graham King and Antoine Fuqua's Michael Jackson biopic, putting the finishing touches on the John Wick spin-off, 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 deliveries 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 Ashur and The Hunting Wives for STARZ, 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, 2 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 premier week and achieving strong in-season growth. With Raising Kanan 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 '26 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 movie Sphere, 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 2 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 Studio's 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 complementary offering that pairs STARZ 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, 2 new series for Hallmark and an array of international coproductions, increasing our universe of potential buyers by as much as 50%. We announced during the quarter the former CAA and Bad Robot Executive, Brian Weinstein, had been named co-CEO of our leading talent management and production company, 3 Arts Entertainment, and Strategic Adviser to the Office of the CEO at Lionsgate.

He joins Co-CEO Michael Rotenberg and the other 3 Arts partners in executing a focused and accelerated growth strategy to extend 3 Arts 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 eOne producer deals by 70%, with $30 million in projected annual savings. As we complete the integration of eOne, 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 noncore 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 3-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 cost 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. 3 Arts 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 STARZ 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.

Thanks, Jon, and good afternoon, everyone. I'll briefly discuss our first quarter financial results and provide an update on the balance sheet.

For the quarter, Lionsgate's consolidated revenue was $835 million. Adjusted OIBDA was $105 million, and operating income was $19 million.

Revenue was down 8%, while adjusted OIBDA was up 22% year-over-year. Reported fully diluted earnings per share was a loss of $0.25 per share, and fully diluted adjusted earnings per share was a positive $0.09 per share.

Net cash flows used in operating activities was $159 million, while use of adjusted free cash flow for the quarter was $89 million. Notwithstanding some of the strong industry headwinds affecting television, we are reiterating our previously announced fiscal '25 adjusted OIBDA outlook for the Studio and STARZ.

Starting with Studio, we continue to forecast adjusted OIBDA, which we define as Studio segment profit less corporate G&A, to be $430 million. However, with a slower-than-anticipated post-strike recovery of our television business and inherent variability in our television releases over the remainder of the fiscal year, we recognize we have a larger task in front of us.

As Jon noted in his prepared remarks, we are already proactively taking several steps to adapt to the changing environment, and we will continue to provide updates on our Studio outlook as the year progresses. Regarding STARZ's outlook, we continue to anticipate that the North American business will generate $200 million plus of adjusted OIBDA in fiscal 2025.

Now let me briefly discuss the fiscal first quarter performance of our Studio and Media Networks businesses compared to the previous year quarter. Starting with the Studio Business, quarterly revenue declined 6% year-over-year to $588 million, while Studio adjusted OIBDA declined 6% to $58 million.

Trailing 12 months' library revenue of $882 million was largely in line with the past year's Q1 trailing 12 months revenue as organic library strength and 2 quarters of eOne library contribution largely offset the benefit of Schitt's Creek in last year's number. Breaking down the Studio Business.

Let's start with Motion Pictures. Motion Picture revenue for the quarter was $347 million, while segment profit was $86 million.

Revenue expectedly declined on a difficult comparison to last year's favorable theatrical release of John Wick 4, while segment profit was up 24% due to lower P&A spend and content amortization. Moving on to TV.

Quarterly television revenue of $241 million was up 10% year-over-year with contribution from eOne's The Rookie Season 6 and A Gentleman in Moscow. Segment profit of $11 million was down year-over-year due to the strike's lingering impact on both episodic deliveries in our scripted and unscripted businesses as well as commissions in our talent management business.

Media Networks quarterly revenue was $350 million, and segment profit was $58 million. Revenue was expectedly down year-over-year due to the exit from substantially all of our international markets, which was largely completed over the course of fiscal 2024.

With the exit from the U.K. complete, STARZ is exclusively focused on the strength of its North American business.

As such, I will focus my comments today on STARZ North American financial performance and subscriber trends. Quarterly North American revenue of $345 million was up 1% year-over-year on growth in OTT subscribers and an increase in ARPU.

STARZ will be implementing a $1 price increase across the U.S. subscriber base in the next few weeks, which we expect to further drive ARPU and revenue growth.

North American segment profit of $59 million was up 54% year-over-year, driven by lower original content amortization, partially offset by higher Pay 1 film costs. Looking briefly at subscriber trends.

STARZ ended the quarter with 13.2 million North American OTT subs, up 6% year-over-year. We ended the quarter with 21.3 million total North American subscribers, which represents a sequential decline of 500,000 primarily due to the decline in linear.

Now let's take a look at the balance sheet. We ended the quarter with $2 billion of net debt at the consolidated company, which reflects reductions in net debt to $1.4 billion at Studio and $625 million at STARZ.

The $2 billion net debt level includes the proceeds from the Lionsgate Studio's capital raise as well as the quarter's use of cash stemming from the post-strike increase in content spend. Excluding adjusted OIBDA from exited Lionsgate+ territories and inclusive of the $60 million of projected run rate contribution from eOne, both consolidated Lionsgate and stand-alone Lionsgate Studios leverage was 3.9x, while stand-alone STARZ leverage declined to 2.8x on positive adjusted free cash flow.

As we prepare for full separation by the end of calendar year 2024, we continue to make progress on establishing the stand-alone capital structures for both Lionsgate Studios and STARZ. Subsequent to the end of the quarter, we closed a $340 million IP-backed loan facility supported by the eOne library.

This facility is favorably priced at SOFR plus 225 basis points and travels with the Lionsgate Studios upon separation. Coupling this financing with our previously announced bond exchange further demonstrates that we can attractively round out the remaining refinancings at STARZ and Lionsgate Studios in conjunction with the full separation.

The bond exchange allows $325 million of 5.5% coupon bonds due in 2029 to stay at STARZ, while the remaining bonds will travel to the Studio at a 6% coupon with an extended maturity to 2030, creating a balanced allocation of attractively priced fixed-rate long-term bonds across both capital structures. Looking forward to the remainder of fiscal '25, as we noted before, we continue to forecast that the consolidated company's adjusted OIBDA and adjusted free cash flow will be second half weighted, driven by a significant increase in television deliveries, post-theatrical slate cash flows, STARZ price increase and a return to OTT subscriber growth.

However, the second quarter is expected to include 6 wide theatrical releases, which will result in an increase in P&A, while STARZ is expected to have higher content amortization related to the timing of Originals, Pay 1 and Pay 2 releases. As such, we expect leverage at both Lionsgate Studios and STARZ to increase in the second quarter before returning to levels closer to 3x by the end of the fiscal year.

Now I'd like to turn the call over to Nilay for Q&A.

Thanks, Jimmy. Operator, can we open the call up for Q&A?

I wanted to touch base on the television delivery comments. There's certainly been a lot of moving industry pieces from your buyers and then ongoing focus on rationalization.

I know there's a strike timing element to it as well. Is that -- is the former component of that driving anything in terms of how it's impacting your discussions?

And can you maybe just talk a little bit about what you're seeing in the industry landscape in terms of the buyer appetite from new orders?

Kevin Beggs speaking. That's a great question.

The post-strike hangover was longer than I think anyone expected. And in the scripted side, particularly, once the strike was over, then you have -- then you start writing.

So there's another 2-month lag behind. But what we're seeing in the development side is a pretty robust demand for product.

There is more financial discipline about the budgets that are going to be commissioned, but we sold 37 new projects subsequent to the strike. That's a record for us and I think indicative of demand.

But we're also shooting all over the world, finding variable price points to help manage the profitability aspects, which all the streamers are really focusing on in this kind of post-strike correction era. What it points to, I think, is going to be ongoing demand, but for a lot of flexibility about pricing, budget, and above all, great creative because it has to stand out in a crowded market.

Okay. That's helpful.

And for Jeff, I think Jon mentioned an expectation for a return to STARZ sequential OTT subscriber growth. Given the current landscape and the maturity of the streaming market and price increase in the works, what gives you confidence in that?

Maybe talk a little bit about the slate and what you're seeing to date in the month of August.

Yes. Thanks for the question, Thomas.

As Jon talked about, we have implemented a rate increase this quarter, so there'll be continued pressure on subs this quarter. But as we turn to the back half of the year in quarters 3 and quarter 4, it's our strongest slate in terms of originals.

We've got Outlander 7B coming back. We've got Kanan coming back on.

We've got a really robust slate of Pay 1 movies from Lionsgate and Pay 2 from Universal. And so it's probably our strongest slate part of the year.

We also have the holiday period in there, which our partners are really working with us in terms of offers together. And so it's a really robust opportunity to grow the business in the back half of the year.

So we feel very confident that we'll have healthy OTT growth in quarters 3 and quarter 4. And we also will come out of the year with revenue growth for the year.

So Jon and Jimmy, you both mentioned some of the fiscal first quarter softness that you need to recover from. First, could you just be a little more clear about what didn't come together in the quarter that you expected?

I know some of the TV deliveries were lighter. I suspect that was timing.

But maybe there's some bigger kind of industry trends that you're seeing. And you both mentioned some adaptations that the company is making.

Could you be a little more clear about what sort of benefits from those adaptations we can see to help you get to the Studio guidance that you've given for the year? And then, Jimmy, could you just spend a little more time on the IP-backed loan facility with the eOne content?

Do you have an opportunity to do something with the rest of the library that would be attractive vis-a-vis some of your other debt structures? And why not consider that?

And then lastly, anything in particular that you're seeing on the library side? A pretty good library revenue number, but just curious on any longer-term trends in licensing and library.

Sure. Look, in terms of the quarter, we are feeling the impact, as noted, of kind of more extended, a little deeper impact of the strike.

So definitely affected deliveries. That's timing.

We had some cancellations. That's more than just timing, right?

So a little deeper impact. We feel good about where we are in our path to getting back to our number.

We got our work cut out for us over the next 3 quarters. And the second quarter, in particular, we got a great film release coming up.

So we got 6 releases coming up. It will be heavy up on P&A.

So you'd expect trailing 12 months and OIBDA to be impacted by that. STARZ has some increased content amortization based on the timing of originals and the Pay 1 and Pay 2 window.

And so as you go to the cadence and you move into the back half of the year, into Q3 and Q4, you'll start to see the bounce back coming off the strike. Episodic delivery is increasing.

We have almost doubled the number of scripted episodic orders in the second half of this year coming up in TV relative to the prior year. And obviously, then we get the benefit of the second quarter film releases coming forward as well as on the STARZ side, returning to the OTT growth, as Jeff mentioned, as well as strong content in the back part of the year and the benefit of increased ARPU and a price increase.

So there we go. We execute and head towards these numbers.

Your second part of your question was with regards to the IP facility.

I'm going to let actually Jim Packer answer the question about library and talk about sort of the environment for library and our library specifically.

Yes. Steven, we are experiencing, as you can see with our [ 886 ] trailing 12-month, continued strength.

The portfolio has gotten much better with eOne. We have The Rookie.

We really didn't have a great procedural in our library. Now we do.

We also, as Jon mentioned, have a really robust, fast and kind of AVOD self-directed publishing business that's well over $100 million now. So we're -- I think we're finding that this portfolio approach is really working.

I think if you look at any of the top streamers, you'll see 1 or 2 of our titles in the top 10 on every single platform. And I think that's the key to the diversity of our library and the fact that everybody is really continuing to do business with us and want to do business with us.

Yes. And in terms of adaptation, I'm not sure what you're referring to.

There certainly are -- Kevin and his television team are out in the marketplace right now. I think you can expect to see some pretty exciting announcements about adaptations, the word you used, in terms of our television business in regard to our franchises.

But I would also add that Adam Fogelson has really taken charge of our games product and experience group. And that's an area, I think, Adam, you might talk a little about and how we're pushing earlier monetization and what we're doing in that area.

Yes. I mean the group has been doing -- thanks so much, Jon.

The group has been doing a lot of great development work over the last few years, but it's time to put the pedal down and start monetizing. And the only reason to do that is because the content deserves it.

I think Jon mentioned in his remarks 13 shows that are preparing for Broadway. A number of them should be coming in the next 12 to 18 months.

We're seeing huge momentum on the game side. We mentioned the John Wick AAA game specifically, but a number of our properties, the fans are asking us to interact with those properties in much more significant ways.

And on the gaming side, both in the console world and in the online world, there are a lot of opportunities there. So we do think that there's going to be meaningful increases in revenue and contribution coming starting in this fiscal year and then growing over the course of the coming years.

Did that, Steven, answer your questions?

Well, coming back to your question on the IP facility, Steven. Yes, thanks for noting.

We did $340 million primarily off the eOne library and very efficient pricing, as I noted. So yes, you should expect us to see continuing that.

As you know, the benefit of that is it travels with the Studio. So you put that next to the bond exchange, and a significant amount of the debt and capital structure are already established for both Studio and STARZ.

So I'm highly confident we can come back and take the asset-rich aspect of the Studio balance sheet and do more IP facilities and ABL ultimately to take out the bank lines at the time of full separation. And then on STARZ, a misunderstood asset.

There's significant cash flows, very visible there. You've got $325 million of bonds.

You have $625 million net debt. You put another $300 million to $350 million Term Loan A against that, and you're -- as I said in my remarks, you're closer to 3x leverage.

And you got significant cash flow coming out of that over time with effectively no cash taxes, with NOL carryovers, minimal cash interest of maybe $50 million a year and minimal CapEx. So you got a really strong business to finance there.

I wanted to understand a little bit more precisely, if I can, what you're saying about your expectation for OIBDA near term. So are you saying with the spending in the Studio segment that Studio OIBDA will be less in the second quarter than it was in the first quarter?

Is that what you're trying to indicate? That's one question.

And then the second question is just wanting to understand a little bit more precisely the process for the split from here. Do you -- is it simply just a matter of completing some filings and getting them past the SEC or is there -- and then getting a vote?

Or is there something else that has to happen?

Yes. Thanks, Barton.

Yes, I'll take the OIBDA question first. Yes, we would expect, and you would, too, the Studio OIBDA to be less in the second quarter because we have, again, 6 releases, which is really heavy up, but we're excited about that on the film side.

So that P&A is going to hit immediately, but then obviously, that puts a very strong recovery back into Q3 and Q4. The TV business will be up beyond -- and build throughout the year but not enough to overcome the 6 -- the releases on the film side.

And then we have the spend. So as we've said from the beginning, the back end -- this year is back-end loaded into the Q3 and Q4.

So it is playing out like that. And we feel great about second half, and we're prepared that in Q2 we will have an increase in leverage, some use of cash flow.

Again, it's the cadence of the content business on the Studio side. And then your last question in terms of the timing of the spend.

What we would expect is our next steps will be to file a preliminary proxy in September, okay? It will be subject to SEC review.

Once we clear the SEC, then we would be mailing the definitive proxy and going for Canadian regulatory review and ultimate shareholder votes in mid- to late fall as we approach and stay on track for a tax-efficient spend within calendar year 2024.

Two questions. First, if you could just provide a little bit more clarity on the remaining financings for both Studios and STARZ in terms of how that's progressing, when you expect to close on them, any price talk yet, that sort of thing.

Then I've got a second question.

Yes. Sure, David.

Yes. The next steps, we are definitely having conversations with the banks.

Those are going very well. Again, we just closed the eOne IP facility the Friday after 4th of July weekend.

And yes, we're moving ahead. We can do another IP facility just off of a slice of Lionsgate libraries, for example, in the same way we just did, pay down some existing debt that does not move forward, and the new IP facility would move forward and travel with the Studio.

At the end of the day, you've got significant unsold rights valuation on the Lionsgate library, okay, over and beyond the eOne valuation. And that provides plenty of assets with which to fully refinance probably $1.2 billion if you look at our outstanding debt at the end of June 30, the Term Loan As, the Bs and the revolver, which is effectively what you'd be refinancing.

And again, we've already done the bonds, so those have already been split. We've already done $340 million of this IP facility.

So really you got $1.2 billion left on the Studio side with plenty of assets to finance that. And then you need maybe $300 to $350 million of Term Loan A on the STARZ side.

And again, that's a very strong business. We've had conversations with the banks.

I'm very confident. I don't want to get out in front of things in terms of price talk, but I'll tell you it is very favorable.

And if one was so inclined, you could swap variable back to fixed right now and 2-year swap and pick up over 100 basis points. So I feel good about where we are.

And then you had a second question, David.

This was a quarter with a lot of content spend catch-up after the strike. Is this about the maximum level of spend that you can handle in your system?

And I was wondering -- and I think this kind of dovetails with another question earlier, but what would the timing be on the deliveries from this content spending we just saw this quarter?

Yes. Well, that starts to inform the third and fourth quarter and then pushing on into '26 in terms of just strong results, how we're back-end loaded.

We can always manage more content spend for the right content, okay? But this was pretty peak.

Expect a little bit of the same in Q2. And then it starts to mitigate through the back end of the year, settles out right around $500 million a quarter, if you will, over Q3 and Q4.

And at the same time, then you start to see the cash generation from the television deliveries, okay, and from the theatrical releases in Q2, you start to see that cash flow flowing through. So it's a very strong cash flow in the back end.

I just had 2 quick questions. First, I guess it's been about 8 months since you closed on eOne.

And I was just curious, has that gone about as you expected, better? Any surprises to the downside?

And then my second question, I know it's not the largest business for you, but there's sort of a big debate in the industry about whether theatrical in the U.S. is ever going to get back to this $11-ish billion number pre-COVID.

Do you guys have a house view on, given everything that's going on in the industry and changes in windows and all that, where we ultimately settle out on the U.S. theatrical box receipts?

It's Adam. Happy to answer the second question first, and then I'll pass the ball.

I'm not sure that anyone is necessarily predicting that the overall box office will climb back to that $11 billion number. However, I would also say that a lot of conversation 2, 3, 4, 5 months ago about the possibility that people weren't interested in going to movie theaters anymore has been pretty radically disproven by great content over the course of the last summer.

And not only has it been -- not only has it been sort of tentpoles and franchises that have been working but smaller films as well and even films that don't necessarily make it on to everyone's radar from a publicity standpoint. We had 3 theatrical releases in the last quarter, all of which performed exceptionally well.

The Ministry, Unsung Hero and Strangers were all really, really profitable and all delivered really significant margins, well north of that 20% number everyone was talking about last year. So we are really bullish about what the theatrical business can do, especially because we have the benefit of an incredibly careful and precise and small overhead relative to the competition and are managing both the production costs and the marketing costs in a very different way.

And so our ability to continue to generate profits not only on the big tentpole films like the John Wick and the Hunger Games of the world but also on small and midsized films that, again, may not generate great press headlines but are certainly generating great returns for the company.

And I want to add one thing there, it's Jon, that what we don't know or haven't seen yet is that the part of the consumer base that always drove a lot of the theatrical business, which was the frequent moviegoer, the moviegoer that went once a month was about 28% of the business. And I think there is a possibility if we start getting that frequent moviegoer back, I mean, the sky is the limit.

This thing could really work. But it is exciting to see the overperformance of so many movies in the marketplace right now.

And Adam and his team really are right now in a great position, particularly going into '26 with all of the franchises to take advantage of that. In terms of eOne, I would say, we are very pleased with eOne.

And not just the -- really the thesis around eOne was mostly about a library and integrating a huge library, 7,000 titles, which going back to sort of the overhead question, that always comes up. We've added a total, between Lionsgate and eOne, to handle 7,000 titles with 7 people.

That would be unheard of at any of the other studios. And so that part of the deal looks very solid.

But there's a strategic value to this integration that we're finding right now. I'm going to let Jim Packer talk a little about it.

Yes. I think there were 3 things that were really set out early on as really proving out the right way.

One is Lionsgate Canada. We are now a really significant presence up there.

Our Canadian content licensing business has really skyrocketed. It's been really great for us.

Second, some of our franchises, Hunger Games, Wick, Twilight, were controlled by eOne in major territories, Canada, U.K., Spain and others. We now control those.

And that's a big deal for us in our licensing business. In a market -- in a country like Spain, we actually are having a record year through our Motion Picture Group because we're controlling these franchises.

And then lastly, there was one soft spot in our library. It was procedurals, as I said earlier.

But in addition to The Rookie, which is kind of a global phenomenon as far as procedural, we got 20 other procedurals as part of this library. So that aspect is really strong for the group and playing out nicely.

I've got 2, please. One for Jeff and one for Jimmy.

Jeff, I realized that STARZ is priced a lot less, lower priced to the consumer than most of the other services. But everybody seems to be raising price these days.

Any thought of how much customers can handle? And for Jimmy, just I'm curious, I saw a $200-plus million increase in deferred revenue at The Studio this quarter.

It seems like an individual item. Can you just tell me what that is?

Alan, thanks for the question. As you look at the industry, as we've said, STARZ has always been a very complementary service, whether it's been on the linear business or in the new kind of digital business in terms of trying to be that add-on or that bundled partner for all of these broad-based streaming services.

And what we've seen over the last couple of years, and you've seen it this week, that the broad-based streamers continue to raise their rates at significant levels, which gives us room to continue to raise our rate. We just executed our second rate increase this past Monday.

We look at engagement on the service in terms of our consumers with the big originals in the Pay 1 and Pay 2, and we're seeing record engagement. And so we felt like we still had room to go.

And so we just raised rates again. And we'll continue to watch that.

But as long as the broad-based streamers continue to raise rate, it gives us room to maintain our strategic position as complementary. We'll continue to look at rate as a way to grow revenue.

And the deferred revenue represents content sales that -- whose -- like library, et cetera, whose avail dates are not ready yet. So you've not been able to recognize revenue.

So effectively, it represents future revenue.

Was there one big package or something, Jimmy? Because you never had $200 million in a quarter before.

That was more of a combination of things. Remember, we also have the eOne integration as well, so we're selling eOne content as well.

Lionsgate has always been very diverse in terms of its output, size, type and distribution, and now you have eOne and other acquisitions. I'm wondering if you might characterize the fiscal '25 and fiscal '26 output by theatrical versus TV versus direct to streaming and possibly by a mix of titles by size and genre.

Any sort of global characteristics you might provide?

Is that related to eOne, Jim, in terms of just...

No. I mean all of your output.

I just meant that added into it. Is it tilted more to television now and maybe possible also just some streaming?

Just looking at the overall output of releases on an annual basis for this year and next year.

Yes. I think we pretty much have a -- when you look at the kind of Studio side of things, $3 billion plus of revenue, it's fairly well mixed.

It will bounce period-to-period, depending on the number of theatrical releases. So it's pretty well mixed.

On the eOne side, it's going to be more heavily weighted towards TV. I would say probably 80% in fiscal '25 would be TV related, more like less than 20% on the Motion Picture side.

Motion Picture was a little heavier on the percentage in Q1 because we had Arthur. We had some other things we were integrating.

But really, the bigger piece of eOne is going to be their television product and library sales related to that.

And also in terms of the total film releases, for example, do you probably have maybe as many as a dozen 1 year or the next in terms of theatrical, but you'd also have a lot of others that go maybe direct to streaming or just some other output?

It's Adam. I'm happy to try to answer that question.

I mean what I would say is this. Jon and I have gone over the development slate and looked at the strength of the franchises that we have, both franchises that we have already been thriving with like John Wick and Hunger Games and also franchises that we're building.

Jon mentioned Highlander, really evolving. Now You See Me to the next level developing.

Monopoly with Margot Robbie and her terrific company working on Naruto, all of those projects. So I think that you're going to see 3 to 4 tentpoles per year starting in fiscal '26 where probably it was 1 or 2 in prior years.

I think the balance of the slate, and we will have 12, 15 or more wide releases of various kinds, will be made up of the types of films that you've seen over the course of the last year, small and midsized films in genres that the company has thrived in in the past, continuing to work with top flight filmmakers. Francis Lawrence is excited to be working with us on the next Hunger Games movie as he has the prior 3, but he's also excited to be developing a much smaller film but one that we're really excited about, The Long Walk, which Jon mentioned in his remarks.

So we're really thrilled with the quality of talent both in front of and behind the camera that want to work here and our ability to deliver both on tentpole films but also on those small and midsized films that can be incredibly artistically satisfying but also generate a real return for the company is something that I think we're uniquely positioned to be able to do.

Yes. I think, again, if you're trying to get sort of a broader perspective, I would say, as we get past all of the strike-related delays, you'll start looking at what has been a typical Lionsgate Studio portfolio of motion pictures, so around 10 to 12 live releases, another 30-plus direct-to-video, multi-platform, et cetera.

Between television and film, I think you're going to see actually growth of both of the revenues of both of those businesses, and they're actually pretty equivalent. They'll be very close to each other this year.

They'll be very close to each other with growth in both areas next year. So if that's the kind of thing you're looking for, that's what it will look like from a macro level.

Okay. Yes.

And one other thing, the STARZ and BritBox deal you mentioned, I thought sounded interesting. Are they basically trading content to some of the U.S.

content going to their platform and vice versa? And is that a template STARZ might use to expand its franchise without actually having those international businesses that it started to go into and then backed out of?

It's Jeff. I mean we're really excited about this partnership.

Obviously, we focus on 2 core demos. And BritBox and STARZ really overlap in their programming in those 2 core demos.

And we've been able to use, I would say, a world-class tech out of our group in Denver and our tech stack and our app to actually build this offering through the STARZ app, through starz.com, in a very simple and frictionless way for the consumer to put both products together. It's also a way to get more content that both of our consumers want together.

And so we will look to do more of that with our technology. We're having conversations with other players that align with our programming strategy to really build out the portfolio and to drive churn down and make the whole business better for both of us.

Operator, could we get the last question, please?

It's great that you got so much content that's readily adaptable and even had some built-in pull demand for video games and maybe even AR over a period of time. And it's certainly one of the growth businesses within media.

But it could be a difficult business. I know some studios, Star Wars, for example, have had issues working with publishers.

How engaged are you in the creative process for the Hunger Games game to make sure that it's at Lionsgate quality? And are you also looking more at mobile games and free games?

Because there's also a lot of interest in that area. I'd just like to get your observations on the learning curve so far and what you're finding.

Sure. No, happy to.

This is Adam. I appreciate the question.

I would say, importantly, our creative team is deeply involved in the creative process. More importantly, the filmmakers that we've worked with to generate these great franchises are completely involved and partnered with us in making sure that we are delivering games and experiences that reflect the true creative essence of the franchises that we've built.

So this is not something we're doing without those partners. It's something we're doing with them.

And we've got in literally every case across every platform, and yes, we're absolutely working with mobile games as well. The John Wick franchise lends itself to experiences and opportunities across the broadest possible spectrum.

In each and every case, we have the ability to make decisions, whether they're licensing deals or investment deals, so that we are making sure that we're using our capital where we believe it fits with our expertise and where it makes the most sense fitting into the overall portfolio of how we're spending our money. But our creative partners are fully engaged with us.

And I will tell you that the things we've seen across games, across stage and across live experiences from a creative standpoint are really exciting to us and to the filmmaking partners that we're working with.

Thanks, everyone. Please refer to the Press Releases and Events tab under the Investor Relations section of each company's website for a discussion of certain non-GAAP forward-looking measures discussed on this call.

Thank you.