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LG

LIONS GATE ENTERTAINMENT CORP /CN/ (LGF-A)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 was a rebound quarter: revenue $970.5M, operating income $35.8M, adjusted OIBDA $144.2M, and adjusted diluted EPS $0.28; GAAP diluted EPS improved to $(0.09) from $(0.68) in Q2, driven by stronger Studio performance and record library monetization .
  • Studio momentum: TV Production revenue +63% YoY to $404.6M and segment profit $60.9M; Motion Picture segment profit $83.6M despite tough comps; media networks saw sequential OTT subscriber growth (+170K) though segment profit fell YoY on higher content amortization .
  • Management reiterated FY2025 guidance: Lionsgate Studios adjusted OIBDA $300–$320M; Starz North America adjusted OIBDA ~$200M; separation timing updated to a mid–late April shareholder meeting with financing commitments in place (Studio $800M ABL; Starz $300M TLA + $150M revolver) .
  • Strategic catalyst: extension of exclusive Pay-One deal with Starz through 2028 plus a new post-Starz pay deal with Amazon Prime Video, expected to “significantly increase” pay window contribution; library TTM revenue hit a record $954M (+22% YoY) .

What Went Well and What Went Wrong

What Went Well

  • Studio adjusted OIBDA rose 45% YoY to $112.0M; TV Production revenue +63% YoY to $404.6M with segment profit $60.9M, reflecting episodic deliveries and library licensing; Motion Picture maintained profitability on mid-budget films .
  • Record library monetization: trailing 12-month revenue reached $954M (+22% YoY); CEO: “record performance from our library … converting a number of midbudget films to profitability … STARZ returning to domestic OTT subscriber growth on a sequential basis” .
  • Separation readiness and distribution wins: confirmed financing structures; extended Starz Pay-One through 2028 and added an Amazon post-Starz pay deal; management expects “significantly increase the contribution from our pay television window” .

What Went Wrong

  • Media Networks segment profit fell to $24.9M from $85.5M YoY on higher content amortization; North American revenue was roughly flat YoY as OTT growth offset linear pressure .
  • Motion Picture revenue and segment profit declined vs. prior year’s Q3 due to exceptionally strong comps (Hunger Games: Ballad of Songbirds & Snakes; Saw X) .
  • Cash generation and leverage: net cash used in operations of $(118.9)M; consolidated leverage ~6.5x; Studio net debt expected around $1.65B at separation (about 5.5x), indicating the need for sustained deleveraging into FY2026 .

Financial Results

MetricQ3 FY2024Q2 FY2025Q3 FY2025
Revenue ($USD Millions)975.1 948.6 970.5
Operating Income ($USD Millions)(43.5) (88.6) 35.8
Adjusted OIBDA ($USD Millions)150.9 (17.7) 144.2
Net Income Attrib. to LGF Shareholders ($USD Millions)(106.6) (163.3) (21.9)
Diluted EPS (GAAP) ($)(0.45) (0.68) (0.09)
Adjusted Diluted EPS ($)0.27 (0.43) 0.28
Net Cash from Operations ($USD Millions)71.1 (82.0) (118.9)
Adjusted Free Cash Flow ($USD Millions)63.9 (132.4) 12.8
Operating Margin % (calc)(4.5%) (9.3%) 3.7%
Adjusted OIBDA Margin % (calc)15.5% (1.9%) 14.9%

Segment breakdown

Segment Revenues ($USD Millions)Q3 FY2024Q2 FY2025Q3 FY2025
Motion Picture443.2 407.1 309.2
Television Production248.4 416.6 404.6
Total Studio Business691.6 823.7 713.8
Media Networks417.2 346.9 344.5
Intersegment Eliminations(133.7) (222.0) (87.8)
Total Revenue975.1 948.6 970.5
Segment Profit ($USD Millions)Q3 FY2024Q2 FY2025Q3 FY2025
Motion Picture100.4 2.6 83.6
Television Production8.1 24.4 60.9
Total Studio Business108.5 27.0 144.5
Media Networks85.5 27.2 24.9
Total Segment Profit182.0 15.6 176.7

KPIs

KPIQ1 FY2025Q2 FY2025Q3 FY2025
Library Revenue (TTM, $USD Millions)882 892 954
Starz North America OTT Subs (M)13.20 (as of 6/30/24) 12.40 (as of 9/30/24) 12.57 (as of 12/31/24)
Starz North America Linear Subs (M)8.10 (as of 6/30/24) 7.75 (as of 9/30/24) 7.36 (as of 12/31/24)
Starz North America Total Subs (M)21.30 (as of 6/30/24) 20.15 (as of 9/30/24) 19.93 (as of 12/31/24)
Sequential Change: NA OTT (M)——+0.17 (170K)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Lionsgate Studios Adjusted OIBDA ($USD Millions)FY2025$300–$320 $300–$320 Maintained
Starz North America Adjusted OIBDA ($USD Millions)FY2025~$200 ~$200 Maintained
Separation TimingCalendar 2024 target (prior)Target year-end 2024 subject to approvals Shareholder meeting mid–late April; separation shortly thereafter Deferred/updated timeline
Financing Structures (post-separation)N/AN/AStudio $800M ABL; Starz $300M TLA + $150M revolver (avg tenure 5 years) New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 FY2025)Trend
Separation timeline/regulatoryAiming for full separation by calendar year-end, subject to regulatory approvals Regulatory review ongoing; update proxy with Dec 31 financials; mid–late April shareholder meeting; separation shortly thereafter Timing clarified; slight delay
Streaming bundling/digital platformQ1: price increase; OTT down sequentially; Q2: OTT declined due to price hike; expected Q3 recovery Bundling wins (Prime Video for Max and BET+ bundles; VIZIO AMC+; YouTube TV promo); strategy to reduce churn and marketing costs Accelerating bundling
Pay window dealsNot highlightedExtended Starz Pay-One through 2028; new exclusive pay deal with Amazon after Starz window; “significantly increase” pay TV contribution Strengthened window economics
Library monetization$882M (Q1) → $892M (Q2) TTM Record $954M TTM (+22% YoY), leveraging new buyers and innovative windowing Improving
Content pipelineQ1: mid-budget films profitable; Q2: Borderlands underperformed Mid-budget successes (Best Christmas Pageant Ever, Den of Thieves 2, Flight Risk); upcoming Ballerina, NYSM3, Michael Rebound
Subscriber trajectoryQ1: NA OTT −180K; Q2: −800K from price increase NA OTT +170K sequential (12.57M); total NA subs ~20M with linear pressure Stabilizing OTT, linear declines
Capital structure/leverageLG IP facility amendment; term loan repayment Post-separation facilities set; consolidated leverage 6.5x; Studio leverage to ~5.5x at separation; delever expected Improved clarity; delever expected
Cost controls/severance~8% of eligible U.S. employees opted for voluntary packages post-Q2 $26.1M severance expected; $14.6M recognized in Q3; continued restructuring Executing
AI/tech efficiencyNot materialManagement focused on smarter production costs, tax credits, back-end participation; no specific AI programs disclosed Neutral

Management Commentary

  • CEO Jon Feltheimer: “Our businesses performed well in a challenging environment … record performance from our library … Motion Picture Group converting a number of midbudget films to profitability … Television Group shepherding an extensive portfolio … STARZ returning to domestic OTT subscriber growth on a sequential basis.”
  • On distribution: “The combination of [Starz Pay-One extension] and [Amazon deal] will significantly increase the contribution from our pay television window.”
  • CFO James Barge: “For the quarter, revenue was $971M, adjusted OIBDA $144M, operating income $36M; reported EPS a loss of $0.09, adjusted EPS a profit of $0.28; net cash flow used in operating activities was $119M; adjusted free cash flow positive $13M. We are reiterating our fiscal 2025 outlook: Studios $300–$320M adjusted OIBDA; Starz North America ~$200M.”
  • Starz CEO Jeffrey Hirsch on Amazon/Starz windows: “Getting [Lionsgate titles] earlier … creating space to bring in another partner … really helps everybody overall … impactful for us as we separate.”

Q&A Highlights

  • Q4 cadence and Studio trajectory: Management expects a “very strong fourth quarter” driven by carryover from midsize films, TV deliveries (Ghost, The Rookie, Acapulco, Hunting Wives, Spartacus, Yellowjackets), OTT growth, and price increases; Studio leverage to improve as TTM performance rises and FCF strengthens .
  • Separation timing: SEC comments and the need to update financials to Dec 31 push separation to immediately after a mid–late April shareholder meeting; financing ready to fund at separation .
  • Pay window economics: Clarified Amazon will take four calendar 2025 films with flexibility for others; full slate for 2026–2028; expected margin uplift but no numeric disclosure .
  • Ancillary monetization strategy: Location-based entertainment (John Wick Experience), stage plays (Hunger Games, Dirty Dancing, La La Land), AAA video game for John Wick; licensing upfront plus optional equity (up to ~50%), potential EBITDA contribution soon .
  • Cost discipline: Focus on smarter production spending, tax incentives (e.g., New Jersey), and back-end participation for talent; Borderlands learning on execution, aligning screenplay/talent/budget to risk-reward .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 FY2025 EPS and revenue was unavailable due to missing CIQ mapping for LGF-A; therefore, we cannot provide a beat/miss vs consensus for this quarter. Values retrieved from S&P Global could not be accessed due to a mapping error.

Key Takeaways for Investors

  • Studio recovery is real: adjusted OIBDA rose 45% YoY to $112M with TV Production strength and mid-budget film profitability; expect strong Q4 cadence into FY2026 slate .
  • OTT stabilization is a positive inflection: NA OTT subs +170K sequential to 12.57M; bundling strategy (Prime Video, VIZIO, YouTube TV) should reduce churn and marketing intensity over time .
  • Window economics improving: Starz Pay-One extension and Amazon post-Starz deal likely support margin and cash flow from theatrical slate in 2026–2028; a clear near/mid-term catalyst set .
  • Record library monetization ($954M TTM, +22% YoY) continues to underpin cash generation across cycles; management emphasizing innovative windowing and new buyers .
  • Separation path de-risked: financing commitments in place; timeline clarified to post mid–late April meeting; expect Studio leverage ~5.5x at separation and deleveraging thereafter .
  • Watch Media Networks profitability: segment profit compressed to $24.9M on higher content amortization; near-term mix shift and pay window contribution plus bundling could mitigate .
  • Near-term trading lens: catalysts include separation execution, Q4 strength, window deal disclosures, and OTT momentum; risks include linear declines, content amortization drag, and execution on fiscal ’26 slate .