LIONSGATE+ streaming to be shut down in seven territories

Lionsgate Reports Results For Second Quarter Fiscal 2023

SANTA MONICA, Calif., and VANCOUVER, BC — Lionsgate (NYSE: LGF.A, LGF.B) today reported second quarter (quarter ended September 30, 2022) revenue of $875.2 million, operating loss of $1.75 billion and net loss attributable to Lionsgate shareholders of $1.81 billion or $7.95 diluted net loss per share on 227.9 million diluted weighted average common shares outstanding. Adjusted net loss attributable to Lionsgate shareholders in the quarter was $28.0 million or $0.12 adjusted diluted net loss per share on 227.9 million diluted weighted average common shares outstanding, with adjusted OIBDA of $47.4 million. Net cash flows used in operating activities in the quarter was $139.2 million. Adjusted free cash flow in the quarter was a positive $123.5 million, bringing cash on the balance sheet at quarter end to $557.1 million.

The Company made a strategic decision to exit seven LIONSGATE+ (formerly STARZPLAY International) international territories, France, Germany, Italy, Spain, Benelux, the Nordics and Japan, to streamline the business. It took a $218.9 million restructuring charge in the quarter primarily driven by content impairment writedowns in the affected territories. Financial results in the quarter also include a $1.48 billion non-cash impairment charge related to goodwill from the STARZ acquisition. The goodwill impairment charge reflects changes to Media Networks’ future free cash flow projections as well as comparable company underlying valuations.

“We reported another strong library performance and continued growth in Lionsgate Television series deliveries as our studio businesses continued to perform in line with expectations in the quarter,” said Lionsgate CEO Jon Feltheimer. “Economic and industry headwinds are having the greatest impact at STARZ, where we are exiting seven international territories. This will allow us to streamline STARZ’s international business and return it to profitability more quickly while continuing to build on the opportunities created by a strong STARZ original series slate and focused content strategy domestically.”

Revenue from Lionsgate’s 17,000-title film and television library was $747 million for the trailing 12 months. The Company reported library revenue of $210 million in the quarter.

Second Quarter Results

Segment Results

Media Networks segment revenue of $396.1 million compared to $384.7 million in the prior year quarter. Media Networks segment revenue was impacted by lower domestic linear revenue, offset by growth in domestic streaming revenue and LIONSGATE+ revenue. Segment profit increased to $21.0 million compared to a profit of $5.5 million in the prior year quarter, driven by lower marketing both domestically and internationally, offset by the timing of programming cost amortization. Total Media Networks global subscribers increased to 37.8 million including STARZPLAY Arabia, a non-consolidated equity method investee, driven by growth in both international and domestic streaming subscribers. Global streaming subscribers increased 52% year-over-year to 27.3 million. LIONSGATE+ subscribers grew 97% year-over-year to 14.8 million (including Lionsgate Play in India & South Asia).

As discussed above, the Company made a strategic decision to exit its LIONSGATE+ streaming business in seven international territories and took a restructuring charge of $218.9 million. It also recorded a non-cash impairment charge related to goodwill totaling $1.48 billion.

The Studio Business, comprised of the Motion Picture and Television Production segments, reported revenue of $654.9 million compared to $666.9 million in the prior year quarter. Segment profit of $69.1 million compared to $130.3 million in the prior year quarter. The year-over-year decline in revenue was driven by decreased revenue at Motion Picture partially offset by increased revenue at Television Production, and the year-over-year segment profit decline was driven by declines at both Motion Picture and Television Production.

Motion Picture segment revenue decreased to $224.0 million compared to $330.9 million in the prior year quarter. Segment profit decreased to $55.5 million compared to $101.8 million in the prior year quarter. Motion Picture revenue and segment profit declines reflect a tough comparison with the second quarter of fiscal 2022, which benefited from strong carryover revenue from fiscal 2021 titles.

Television Production segment revenue increased to $430.9 million compared to $336.0 million in the prior year quarter. Segment profit decreased to $13.6 million compared to $28.5 million in the prior year quarter. The revenue increase was driven by continued growth in content deliveries, while segment profit declines reflect accelerated content amortization of a cancelled series.

Subscriber Data

The number of period-end service subscribers is a key metric which management uses to evaluate a non-ad supported subscription video service. We believe this key metric provides useful information to investors as a growing or decreasing subscriber base is a key indicator of the health of the overall business. Service subscribers may impact revenue differently depending on specific distribution agreements we have with our distributors which may include fixed fees, rates per basic video household or a rate per STARZ subscriber. The table below sets forth, for the periods presented, subscriptions to our Media Networks and STARZPLAY Arabia services.

                                                        As of             As of
                           ----------------------------------  ----------------
                           6/30/21  9/30/21 12/31/21  3/31/22  6/30/22  9/30/22
                           -------  -------  -------  -------  -------  -------
(Amounts in millions)
Starz Domestic
 Linear Subscribers           10.4     10.2      9.9      9.5      9.2      8.7
 OTT Subscribers               9.7     10.4     11.0     11.5     12.2     12.3
  Total                       20.1     20.6     20.9     21.0     21.4     21.0
LIONSGATE+
 Linear Subscribers            1.8      1.8      1.8      1.8      1.8      1.8
 OTT Subscribers               5.2      5.7      6.7     11.0     12.2     13.0
  Total                        7.0      7.5      8.5     12.8     14.0     14.8
Total Starz
 Linear Subscribers           12.2     12.0     11.7     11.3     11.0     10.5
 OTT Subscribers              14.9     16.1     17.7     22.5     24.4     25.3
  Total Starz                 27.1     28.1     29.4     33.8     35.4     35.8
STARZPLAY Arabia(1)            1.8      1.9      2.0      2.0      1.9      2.0

Total Domestic and
International Subscribers     28.9     30.0     31.4     35.8     37.3     37.8

Subscribers by Platform:
 Linear Subscribers           12.2     12.0      11.7    11.3     11.0     10.5
 OTT Subscribers(2)           16.7     18.0      19.7    24.5     26.3     27.3
Total Global Subscribers      28.9     30.0      31.4    35.8     37.3     37.8

1. Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee.
2. OTT subscribers includes subscribers of STARZPLAY Arabia, as presented above.