Lionsgate TV Sees Sales, Profit Jump On Library Sales, Post-Strike Content Deliveries In March Quarter

Lionsgate's LA headquarters Smith Collection/Gado/Getty Images

Lionsgate blew past Wall Street’s expectations for the March quarter, its fiscal fourth, on a few key metrics from revenue to adjusted EPS and operating income as library sales and ramped up content deliveries helped propel TV profits up by 83%. The numbers are the last to land this earnings season.

The studio business (motion picture and television production) saw revenue of close to $880 million, up 6.8% from the year earlier. Profit of about $135 million rose 10%.

Television production revenue surged 61% to $469 million on profit of $52.6 million – both driven by strength in library sales and an increase in post-strike content deliveries. The improvement was solid but a surprise.

Media Networks led by Starz saw domestic revenue up on a sequential basis for the third quarter in a row. Domestic OTT subscribers were flat sequentially and overall North American net subscribers decreased by 480K. Revenue fell by 7.1% year-on-year to $361.5 million. Domestic streaming revenue growth was offset by declines in domestic linear and Lionsgate+ revenue. Profit fell 28% to $52.5 million.

“We reported strong financial results in the fourth quarter to wrap up a great year in which we completed four major transactions, moved closer to a value-defining separation of our studio and STARZ businesses, grossed over a billion dollars at the global box office and grew our film and TV library to record levels,” said Lionsgate and Lionsgate Studios CEO Jon Feltheimer.  “With the launch of Lionsgate Studios as a pure play, publicly-traded company earlier this month, we have an opportunity to shine a light on the value of the content we are creating, owning and delivering while taking an important step forward in preparing for the anticipated full separation of our studio and STARZ businesses by the end of the calendar year.”

He’s referring to a major, ongoing restructuring that will end with the studio business trading independently from Starz.

Overall, Lionsgate saw total revenue of $1.1 billion, an operating loss of $60.9 million, and a net loss of $39.5 million or $0.22 per share. Adjusted net income was $63.4 million or $0.27 a share. Adjusted OIBDA was $140.3 million in the quarter.

Library revenue in the quarter was a record $339 million.

Lionsgate reported $397 million of net cash flow provided by operating activities and $230 million in adjusted free cash flow in the full year, ending the quarter with $314 million in unrestricted cash. Backlog from the Motion Picture and Television Production segments was $1.5 billion as of March 31.

On the separation. LION, or Lionsgate Studios, a new public entity created by merging the studio with a SPAC, started trading on the Nasdaq last week. The longstanding LGF stock symbol trading on the NYSE reps a company that includes the studio plus Starz. Investors in the SPAC (called Screaming Eagle Acquisition Corp.) hold about 13% of the studio. A second step in the split anticipated by year end will see a standalone Starz.

The idea is that it investors found it hard to value the businesses (especially the studio) in a combined company. Separately, both pieces will be in play. Execs will likely weigh in on a call at 5 ET.

In a note yesterday, ratings agency Fitch assigned the company a first-time long-term default rating of B- and rated its senior unsecured bonds a ‘B+, both with a stable outlook.  The agency said the ‘B- rating reflects “heightened credit risk from increased leverage and Fitch’s expectation that the company will stay outside ratings sensitivities for longer than previously anticipated.” The stable outlook reflects the film library, which expanded with the eOne acquisition; scale as well as “leadership in film and television content production; and the Starz-branded premium subscription video services, along with the relative stability of the company’s media networks business.”