Filing summary
Entity and period: The supplied filing is a Lions Gate Entertainment Corp. Form 10-Q for the three months ended June 30, 2021, the first quarter of fiscal 2022. This does not match the request metadata identifying STARZ Entertainment Corp. Confirm the intended registrant and filing before relying on this summary.
Business context and results
Lionsgate operates Motion Picture, Television Production and Media Networks businesses, including the STARZ subscription services. For the quarter, consolidated revenue was $901.2 million, up 10.8% from $813.7 million a year earlier. The filing attributes growth mainly to Television Production; theaters and productions were recovering from pandemic-related disruption.
| Metric | Three months ended June 30, 2021 | Prior-year quarter |
|---|---|---|
| Revenue | $901.2 million | $813.7 million |
| Operating income | $20.3 million; 2.3% margin | $89.4 million; 11.0% margin |
| Net income (loss) attributable to shareholders | $(45.4) million; $(0.20) per share | $51.1 million; $0.23 per share |
| Cash from (used in) operating activities | $(348.7) million | $81.4 million |
| Cash and cash equivalents at quarter-end | $261.6 million | $528.7 million at March 31, 2021 |
| Corporate debt, net of issuance costs | $2,484.4 million | $2,630.9 million at March 31, 2021 |
| Film obligations, net | $858.4 million | $703.5 million at March 31, 2021 |
Operating income fell despite higher revenue as total expenses rose 21.6%, including higher content costs and theatrical marketing. The quarter also included a $26.6 million debt-extinguishment loss and $25.0 million of Television Production content impairments. Segment profit was $44.3 million for Motion Picture (down from $101.1 million), $3.0 million for Television Production (down from $34.9 million), and $88.2 million for Media Networks (up from $71.8 million). STARZ domestic and international OTT subscribers were reported at 9.7 million and 5.2 million, respectively; the company’s total global subscriber figure, including linear services and STARZPLAY Arabia, was 28.9 million.
Liquidity, debt and cash flow
Operating cash use of $348.7 million reflected increased investment in films, television programs and program rights, along with working-capital movements. Investing activities provided $115.7 million, including $123.6 million received for the Pantaya sale. Financing activities used $28.3 million. The cash-flow statement reports $267.4 million of ending cash, cash equivalents and restricted cash, including $5.8 million of restricted cash; the balance sheet reports $261.6 million of cash and cash equivalents.
During the quarter, Lionsgate issued $1.0 billion of 5.500% Senior Notes due 2029 and redeemed its 5.875% and 6.375% notes. It also extended $1.25 billion of revolving commitments and $444.9 million of Term Loan A to 2026, and repurchased $51.5 million principal of Term Loan B. The $1.5 billion revolving facility was undrawn and available at June 30, subject to covenants. The company reported compliance with applicable debt covenants. The Production Tax Credit Facility had $184.5 million outstanding and no additional availability.
Outlook, risks and unusual items
- Management expected Motion Picture and Television Production revenues to increase in fiscal 2022 versus fiscal 2021 if pandemic disruption continued to improve. These were conditional expectations, not quantified guidance.
- Management expected production and marketing cash requirements to rise as activity and theatrical releases increased, and said available operating cash flow, cash, credit availability and other financing sources were expected to meet foreseeable requirements.
- COVID-19 remained a significant uncertainty: theater reopening and audience returns, production interruptions, release timing, health protocols and new variants could affect revenue, costs, cash flows and asset valuations. Management said the full impact could not be estimated.
- Other notable items included the $25.0 million Television Production impairment, elevated share-based compensation expense ($34.6 million versus $14.4 million), and $1.9 million of reported incremental COVID-related costs. The filing said further insurance recoveries were being pursued but could not be estimated.
- After quarter-end, Lionsgate acquired most of Spyglass Media Group’s approximately 200-title film library and entered a related content partnership and television arrangement. It also entered a library-backed credit facility with a maximum principal amount of $100 million. July and August Term Loan B repurchases were subsequent events, not quarter-end transactions.
- The company disclosed pending insurance litigation and stated that a reasonably possible loss beyond accrued amounts could not be reasonably estimated. It reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm that the intended filing is Lions Gate Entertainment Corp.’s June 30, 2021 10-Q, rather than a filing for STARZ Entertainment Corp. or another period.
- Review the drivers and sustainability of the sharp operating-margin decline, particularly content impairments, production costs, theatrical marketing and share-based compensation.
- Assess the timing and funding of film and television investment, working-capital requirements, and the substantial quarter-end operating cash outflow.
- Review total leverage and upcoming debt and film-obligation payments, including the effect of production loans, the tax-credit facility and redeemable noncontrolling interests.
- Monitor pandemic-related operating assumptions, subscriber trends, and the execution and financing implications of the Spyglass library acquisition and related arrangements.