Filing identity and reporting period
Important metadata mismatch: The supplied filing is Lions Gate Entertainment Corp.’s Form 10-Q for the three months ended June 30, 2023 (fiscal Q1 2024), not a filing by STARZ Entertainment Corp. The summary below reflects the filing provided.
Lionsgate operates Motion Picture, Television Production and Media Networks businesses, including the STARZ platforms. Its businesses are supported by an approximately 18,000-title library.
Financial performance
| Metric | Quarter ended June 30, 2023 | Prior-year quarter |
|---|---|---|
| Revenue | $908.6 million | $893.9 million |
| Operating loss | $16.8 million | $68.2 million |
| Net loss | $71.5 million | $122.6 million |
| Net loss attributable to Lionsgate shareholders | $70.7 million; $0.31 per share | $119.0 million; $0.53 per share |
| Operating cash flow | $29.2 million provided | $0.2 million used |
- Total segment profit, a non-GAAP measure when presented outside segment disclosures, was $116.1 million, versus $28.0 million. GAAP operating results remained negative.
- Cash and cash equivalents were $322.7 million at June 30, 2023, up from $272.1 million at March 31. Cash, cash equivalents and restricted cash totaled $394.1 million.
- Current assets were $1.12 billion and current liabilities were $2.91 billion. The filing reports $1.93 billion of corporate debt, net, and $2.17 billion of film-related obligations, net; film-related obligations include $1.31 billion current.
- Interest expense rose to $62.0 million from $46.1 million, mainly reflecting higher average interest rates and balances. The company reported compliance with applicable debt covenants.
Material changes versus the prior-year quarter
- Revenue increased 1.6%, but Studio Business revenue declined 12.1% to $625.0 million. Motion Picture revenue rose 45.8% to $406.5 million, supported by theatrical and digital performance, including John Wick: Chapter 4. Television Production revenue fell 49.5% to $218.5 million, reflecting lower third-party and intersegment licensing revenue.
- Media Networks revenue was essentially unchanged at $381.1 million. Segment profit improved to $31.9 million from a $37.0 million loss, as programming and marketing expenses declined.
- Consolidated expenses fell 3.8% to $925.4 million. Distribution and marketing expense increased 15.5%, while restructuring and other costs rose to $32.0 million, including $28.0 million of content impairments.
- The company repurchased $85.0 million principal amount of 5.5% Senior Notes for $61.4 million and recorded a $21.2 million extinguishment gain. Corporate debt, net, decreased from $2.02 billion at March 31.
- Cash from operations improved year over year, but investment in film and television programs and program rights used $445.4 million of cash. Financing cash flow included $146.2 million of net proceeds from film-related obligations.
Outlook, risks and notable items
- Management said available operating cash flow, cash, revolver availability and financing sources were expected to cover known operating and debt-service needs for the next 12 months and beyond. It expected production cash requirements to be comparable and marketing spend to increase in fiscal 2024. This is management’s assessment, not a guarantee.
- The company estimated additional Media Networks restructuring charges of $5 million to $30 million and net future cash outlays of $60 million to $90 million. It had recorded $407.3 million of restructuring-related content impairments since the plan began. In July 2023, it decided to shut down LIONSGATE+ in Latin America, expected toward year-end 2023; further charges may arise.
- The Writers Guild strike began in May 2023 and the SAG-AFTRA strike in July. Production pauses may delay releases and receipts, increase costs, and potentially lead to impairments. WGA-strike costs incurred through June 30 were not material.
- The proposed separation of the Studio Business and STARZ/Media Networks remained subject to conditions; the board could decide not to proceed. The filing warns that timing, execution and expected benefits are uncertain.
- Term Loan B of $828.5 million was due March 2025. If more than $250 million remained outstanding without qualifying refinancing or extension, the revolving facility and Term Loan A could become due in December 2024. Management expected to refinance or extend Term Loan B before then.
- Subsequent to quarter-end, Lionsgate agreed to acquire Hasbro’s eOne film and television business for $375 million in cash, subject to purchase-price adjustments and assumption of certain production financing indebtedness. Closing conditions applied, and the agreement allowed termination if closing had not occurred by January 31, 2024.
- No material pending legal claims were identified in the filing. The company reported disclosure controls effective as of June 30, 2023 and no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Confirm the intended issuer and period: this is a Lions Gate Entertainment Corp. filing for the quarter ended June 30, 2023, not a STARZ Entertainment Corp. 2024 Q1 filing.
- Track cash generation against content investment, near-term film-related obligations and the $60 million to $90 million estimated restructuring cash outlay.
- Monitor subscriber trends: reported total domestic and international subscribers were 29.4 million, down from 37.3 million a year earlier; the prior-year figure included 8.0 million subscribers in exited international territories.
- Assess progress and costs for the STARZ separation, LIONSGATE+ territorial exits, and the eOne transaction, including closing conditions and assumed financing.
- Review refinancing progress on Term Loan B, variable-rate exposure and the effect of strikes on production schedules, release timing and content valuations.