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Lionsgate Trims Quarterly Loss on Strong Revenue Gain

Lionsgate has released its fourth quarter financial results while continuing talks with multiple bidders on a possible sale or spinoff of the premium cable and streaming platform Starz or its studio business.

The Hollywood studio trimmed its fourth quarter net loss attributable to shareholder to $96.8 million, against a year-earlier loss of $104.6 million, on overall revenue rising 17 percent to 1.08 billion, compared to a year-earlier $929.9 million, which beat a Wall Street analyst estimate by $92 million for the latest quarter.

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Lionsgate posted an earnings per-share loss of 42 cents, compared to a year-earlier per-share loss of 46 cents. The adjusted earnings per-share of 21 cents, against a year-earlier 1 cent per-share profit. beat an analyst estimate for a 9 cents-per share loss by 30 cents.

The studio also reported record trailing 12-month library revenue of $884 million in the quarter from a mix of film and TV content. During the fourth quarter, the studio gained from the industry’s box office rebound as John Wick: Chapter 4, the faith-based pic Jesus Revolution and the action flick Plane performed at the multiplex.

And Lionsgate Television’s strong slate secured renewals with Ghosts for CBS and Acapulco for Apple TV+, ahead a rookie series launch set for Love and Death, starring Elizabeth Olsen, on HBO Max. And the Lionsgate/CBC comedy Son of Critch was picked up for multiple seasons at The CW Network in the U.S. after getting a third season renewal on the CBC north of the border.

Lionsgate is exploring its options for Starz, including a possible separation of the pay TV and streaming business and its studio operations. The goal appears to be creating two standalone companies so investors can value the Starz and studio assets separately.

“Financially, we continued to prepare for the separation of Lionsgate and Starz by strengthening our balance sheet, opportunistically buying back bonds, improving our leverage ratio and ending the fiscal year with an untapped revolving credit facility of $1.25 billion and $272 million in unrestricted available cash,” Lionsgate CEO Jon Feltheimer told analysts during a call following the release of the fourth quarter results.

The Lionsgate boss added the studio continued to move towards possibly separating Lionsgate and Starz by the end of the Sept. 2023, as planned.  “We submitted our Form 10 with the SEC in March, and we’re working through the organizational and governance issues accompanying the separation, finalizing the intercompany agreement, and taking the appropriate steps to strengthen both companies and their respective balance sheets so they will be prepared to unlock the incremental value that the separation makes possible,” Feltheimer told analysts.

During the latest quarter, Lionsgate said it added 1.3 million global streaming subscribers to get 20.4 million customers in all at the end of the fourth quarter, and had 30.3 million total global TV subscribers, which includes linear TV and over-the-top subscribers, at the end of the same period.

During the latest quarter, media networks revenue, which is mostly Starz, grew revenue by 2.3 percent to $389 million, while motion picture group revenue increased 85 percent to $532.1 million on the strength of John Wick: Chapter 4 box office. And television production revenue fell to $291.5 million during the fourth quarter, compared to a year-earlier $370.2 million, due to the timing and mix of content deliveries.

Ahead of a possible separation of Starz and Lionsgate, the studio has continued to restructure the premium linear TV and streaming business, having taken an expected $85.5 million impairment charge during the fourth quarter to March 31, 2023. That reflects the previously-announced exit of Lionsgate+ (formerly STARZPLAY International) from seven international territories, including in Europe and Japan, and removing certain TV titles from the Starz platform.

The studio is touting its 17,000-strong programming library as difficult to replicate and an appealing target for a bigger media player looking to bolt on an indie studio. And despite volatile financial markets, the entertainment industry has seen a recent spate of mergers and acquisitions as major players dive into the streaming space and indie studios get bought up for scale and content.

During the analyst call, Lionsgate CFO Jimmy Barge talked about WGA strike and how that may reshape his studio’s film and TV production strategies. “We’ve not factored in a prolonged strike into our guidance, but in terms of the Motion Picture Group, I don’t think you’re going to see a significant impact. If looking at the 2008 precedent of three months, up to that point the financial impact for us would be modest,” he said.

Barge added Lionsgate had prepared for the screenwriters strike by stockpiling content to be exploited alongside the studio’s film and TV library. Kevin Beggs, Lionsgate’s Television Group chairman, addressed the impact on his division of major streamers tightening their belts when it came to content development and acquisitions and adapting their spending as a consequence.

“It’s a hit-driven business, and there was a four year push towards huge volume to find some hits. What’s happening now is the hits are just as important, but the middling shows that may not be performing as well are being winnowed out,” Beggs said as the studio adjusts to evolving appetites for major studios and streamers by putting a focus on hit TV shows and getting them into later seasons where their profitability climbs.

“So it’s not a terrible thing, as much as we’d love all of our children. If some don’t get promoted to the fifth grade, it’s all right. And we take our lumps and we focus on the hits,” the TV Group head added.

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