Filing identity and reporting period
Important identification note: The supplied filing is for Lions Gate Entertainment Corp., not STARZ Entertainment Corp. It is a Form 10-Q for the quarter ended December 31, 2021 (Lionsgate fiscal 2022 third quarter), with nine-month results through that date. Amounts are in U.S. dollars; financial-statement amounts are in millions unless stated otherwise.
Lionsgate operates Motion Picture, Television Production and Media Networks businesses, including the STARZ premium subscription services. The filing describes a 17,000-title content library.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2021 | Prior-year comparable |
|---|---|---|---|
| Revenue | $885.4 | $2,674.4 | $836.4; $2,395.0 |
| Operating income | $9.3 | $59.4 | $37.1; $156.3 |
| Net income (loss) attributable to Lionsgate shareholders | $(45.6) | $(83.5) | $(13.9); $18.8 |
| Basic and diluted EPS | $(0.20) | $(0.37) | $(0.06); $0.09 |
| Cash from (used in) operating activities | Not separately stated in the provided text | $(489.8) | $159.3 for nine months |
For the quarter, operating margin was approximately 1.1% versus 4.4% a year earlier; the shareholder net-loss margin was approximately 5.1% versus 1.7%. For the nine months, operating margin was approximately 2.2% versus 6.5%. These percentages are calculated from reported revenue and income figures.
At December 31, 2021, cash and cash equivalents were $314.4; including restricted cash, cash-flow-statement cash totaled $319.3. Current assets were $918.9 and current liabilities $1,975.3. Corporate debt, net of issuance costs, was $2,430.6, including $45.6 current and $2,385.0 non-current. Separate film-related and other obligations, net, were $1,381.6, including $671.4 current. The $1.25 billion revolving facility was undrawn and available, subject to covenants; Lionsgate reported covenant compliance.
Nine-month investing cash use was $75.1 and financing cash provided was $357.7. Cash and restricted cash declined $207.2 before foreign-exchange effects. Film and television program investment used $1,735.4 of operating cash in the period.
Changes versus prior comparable periods
- Quarterly revenue rose 5.9%, but operating income fell 74.9% and shareholder net loss widened to $45.6 from $13.9. Higher direct operating and marketing costs, including increased programming amortization and theatrical promotion, weighed on results.
- Nine-month revenue rose 11.7%, while operating income declined 62.0%; results moved from $18.8 of shareholder net income to an $83.5 loss. Increased production and content investment, higher marketing costs, and a $28.2 debt-extinguishment loss were significant factors.
- Television Production revenue increased sharply, but segment profit fell: to $19.3 from $29.5 for the quarter and to $50.8 from $74.3 for nine months. Management cited the mix and higher cost of newer show deliveries; nine-month television content impairments were $28.1.
- Media Networks segment profit declined to $28.5 from $81.7 for the quarter and to $122.1 from $246.3 for nine months. Higher programming and subscriber-acquisition spending reduced contribution. STARZPLAY International revenue grew, while domestic traditional linear revenue declined.
- Motion Picture segment profit increased to $67.5 from $50.0 for the quarter, but declined to $213.5 from $234.1 for nine months, as higher theatrical marketing spend offset revenue growth.
- At December 31, STARZ domestic linear subscribers were 9.9 million versus 11.5 million a year earlier, while domestic OTT subscribers were 11.0 million versus 9.5 million. Total global STARZ subscribers, including STARZPLAY Arabia, were 31.4 million versus 27.1 million; the comparison excludes Pantaya from the prior-year total.
Outlook, commentary, risks and unusual items
- Management expected Motion Picture and Television Production segment revenues to increase in fiscal 2022 if pandemic-related disruptions improved. This was conditional commentary, not quantified consolidated earnings or revenue guidance.
- Management said cash, operating cash flow, undrawn revolver capacity, receivables monetization and production-related financing were expected to meet foreseeable operating and debt-service needs. It also expected production and marketing cash requirements to rise as activity resumed.
- COVID-19 continued to create uncertainty around theatrical releases, production schedules, costs, consumer attendance and future STARZ viewing. The nine-month 2021 results included a $2.3 net benefit in direct operating expense from insurance recoveries, while additional recoveries remained uncertain.
- Unusual and non-recurring items included a $22.7 net insurance-litigation settlement recorded in interest and other income for the nine months, a $28.2 loss on extinguishment of debt, and $29.3 of film and television program impairments. Purchase-accounting adjustments were $144.8 for nine months.
- Redeemable noncontrolling interests were $255.0 at period-end; future repurchase amounts and timing were uncertain. The company also cited potential litigation losses beyond accrued amounts as reasonably possible, but said a reasonable estimate or range could not be made.
- Other risks include content performance and impairment estimates, leverage and covenant restrictions, variable-rate debt and the transition away from LIBOR, streaming competition and subscriber trends, and the substantial cash investment required for production and content rights.
Key facts for investors to verify
- Confirm the intended issuer: this source is Lions Gate Entertainment Corp., not STARZ Entertainment Corp.
- Review the drivers and expected timing of operating cash recovery, given $489.8 of nine-month operating cash use and elevated content investment.
- Assess total financing exposure and maturities, including corporate debt, production loans, the IP Credit Facility, and film-related obligations.
- Track whether STARZ OTT growth can offset continued traditional linear subscriber and revenue declines, and whether international expansion improves segment profitability.
- Verify subsequent updates to pandemic-related production and theatrical schedules, insurance recoveries, content impairment assumptions, and the contingent noncontrolling-interest obligations.
- Distinguish conditional fiscal 2022 segment commentary from formal numerical guidance; the filing text provides no clear consolidated forecast.