Suzuki Motor Q4 2023 Earnings Call Transcript

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Provided by Quartr
May 25, 2023

There are 19 speakers on the call.

Operator

Day, and welcome to the Lionsgate Fiscal 2023 4th Quarter Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Neelay Shah, Investor Relations.

Operator

Please go ahead.

Speaker 1

Good afternoon. Thank you for joining us for the Lions Gate fiscal 2023 4th quarter conference call. We'll begin with opening remarks from our CEO, John Feltheimer followed by remarks Our CFO, Jimmy Barge. After their remarks, we'll open the call for questions. Also joining us on the call today are Vice Chairman, Michael Burns COO, Brian Goldsmith Chairman of the TV Group, Kevin Beggs Chairman of the Motion Picture Group, Joe Drake and President of the Worldwide Television Distribution Group, Jim Packer.

Speaker 1

And from Starz, we have President and CEO, Geoffrey Hirsch CFO, Scott McDonald and President of Domestic Networks, Alison Hoffman. The matters discussed on this Call include forward looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. Actual results could differ materially and adversely from those described in the forward looking statements as a result of various factors. This includes the risk factors set forth in Lionsgate's most recent annual report on Form 10 ks.

Speaker 1

The company undertakes no obligation to publicly release the result of any revisions to these forward looking statements that may be made to reflect any future events or circumstances. I'll now turn the call over to John.

Speaker 2

Thanks, Nilay. Good afternoon, everyone, and thank you for joining us. I'm pleased to report that we ended the fiscal year with another strong quarter. We entered fiscal 'twenty four with Strong earnings momentum and projected strong growth. To recap the quarter's highlights, in our Motion Picture Group, success came from many places, A franchise best performance from John Wick Chapter 4, the faith based hit Jesus Revolution, the action film, Plane And a record performance from our growing multi platform release business, showcasing our ability to build unique financial models for every kind of movie.

Speaker 2

In television, we relied on a similar portfolio strategy, continuing to launch new shows, renew current series Develop exciting new properties in our scripted business, while generating strong contributions from 3 Arts, Pilgrim Media and Debmar Mercury. Stars came back strongly in the quarter, growing subscribers, improving ARPU, completing bundle deals domestically and internationally, Streamlining its international operations to focus on key territories and maintaining its profitability. Our library continued its record performance with trailing 12 month revenue of $884,000,000 as it finished the fiscal year with its best 2 revenue quarters ever. Its performance also benefited from continued diversification as the long tail of our content grew longer, Generating nearly $150,000,000 in library revenue in the fiscal year from titles outside the top 500. And financially, we continue to prepare for the separation of Lions Gate and Starz by strengthening our balance sheet, Opportunistically buying back bonds, improving our leverage ratio and ending the fiscal year with an untapped revolving credit facility $1,522,000,000 in unrestricted available cash.

Speaker 2

Jimmy will provide more details in a few minutes. In an operating environment that is tougher than ever, our business models and our employees continue to be resilient, Navigating the headwinds, pivoting in order to seize even the smallest opportunities, unafraid of change in a changing world. Drilling down on each of our businesses, beginning with the Motion Picture Group. The success of John Wick Chapter 4 demonstrated our ability to deliver big IP comparable to Not only did John Wick 4 achieve our franchise best performance at the domestic box office, It improved its international box office performance by more than 50% over its predecessor, establishing John Wick as our 4th $1,000,000,000 franchise and a truly global phenomenon. Its success continues to drive the expansion of the John Wick universe As we complete production on the Ana de Armas spin off Ballerina for a June 2024 release, ready the launch of As we said before, our motion picture strategy is a little different.

Speaker 2

We surround our tentpoles with targeted original movies built around to capitalize on the enormous demand for studio movies across every kind of platform. Our upcoming slate reflects the same balance That led to our success last quarter, driven by tentpoles like The Hunger Games, Ballad of Songbird and Snakes, franchise extensions Built in fan bases such as Saw 10 and Expendables 4 bold, edgy and original fare like Tim Story's horror comedy The Blackening Adele Limb's effervescent and raunchy joyride and great new intellectual properties like the Michael Jackson event film to be produced by Graham King and directed by Anton Foucault. Turning to television. We had a busy quarter taking advantage of our ability to create and deliver Spoke content with unique business models to every platform. Ghosts led the CBS lineup as one of the top half hour comedies in television.

Speaker 2

Mythic Quest continued its standout performance in its 3rd season on Apple TV plus with a spin off series in the works. And the True Crime limited series Love and Death Starring Elizabeth Olsen and written by David E. Kelley was the most watched premier this year on HBO Max. Looking ahead, we delivered all three event installments The Continental to Peacock and Amazon for its September premiere, and Peacock launched the promotional trailer to record numbers On the heels of John Wick Chapter 4's opening at the box office. We started production on the new NBC multi camera comedy, Extended Family, Starring Jon Cryer and Donald Faison from creator and showrunner, Mike O'Malley and Executive Producer, Tom Werner.

Speaker 2

And we're preparing to begin fall production on Seth Rogen's new show for Apple TV plus to launch in 2024 from our Television and Motion Picture Group collaboration with Point Grey. Behind them, we have another strong development slate that includes extensions of Weeds, Nurse Jackie and some of our other major film and television brands. Our global expansion strategy in scripted television also continues to bear fruit. ABC recently picked up Lions Gate Television's Motherland to pilot, Adapted from the hit BBC series, Disney's Onyx collection picked up Queenie from our partnership with Channel 4 in the UK. And the Lionsgate CBC comedy Son of a Critch was renewed for a 3rd season in Canada and picked up for multiple seasons by The CW in the U.

Speaker 2

S. We are also partnering with Stan in Australia on the family drama Prosper and the comic crime thriller Population 11. And in the current quarter, we acquired the worldwide distribution rights to 2 very high profile intellectual properties. Earlier this week, we announced that we would be the global distributor for all seasons of the acclaimed event series, The Chosen From creator, director and producer, Dallas Jenkins. The 1st multi season series of its kind, A groundbreaking historical drama about the life of Jesus as seen through the eyes of his followers, The Chosen has grown from a crowdsourcing project Into a massive global phenomenon with over 110,000,000 viewers in 175 countries.

Speaker 2

It continues to deepen our faith based vertical that is already responsible for the hip films, Jesus Revolution and I Can Only Imagine. And this afternoon, I'm pleased to announce that Lionsgate has partnered with master filmmaker Quentin Tarantino for distribution rights to 3 of his most iconic films, Kill Bill Volumes 12 and Jackie Brown. Beginning with Reservoir Dogs, a Lions Gate library favorite for nearly 20 years, We've grown what is now Hollywood's largest portfolio of Tarantino films to include Inglourious Basterds, Django and Chain, The Hateful 8 Later this year with a new and remastered 4 ks edition. At Starz, we finished the year strong with 2 returning tentpoles. The 2nd season of the crime drama, BMF, was a standout performer in the quarter.

Speaker 2

And the 3rd season of PowerBook 2 Ghost Shattered multi platform viewership records with the platform's biggest premier weekend ever. The success of fan favorite Party Down rounded out a strong content quarter As Starz achieved robust subscriber growth with the addition of 1,300,000 global streaming subscribers, including 700,000 domestically and overall net growth of 1,000,000 global subscribers. And in the current quarter, we're We're excited to bring back one of our most popular and eagerly anticipated series, the 7th season of Outlander. Streaming services have discovered that properly marketed feature films that arrive on their platforms with built in awareness are powerful tools for driving subscriber acquisition and retention. In this regard, Starz enters the new fiscal year with a strong flow of movies From its Pay 1 and Pay 2 theatrical output deals that is nearly double the number of films from last year, including the Starz premiere of John Wick, Chapter 4.

Speaker 2

Perhaps the most important development for Starz is the emergence of bundling in the streaming space. With STAAR's transition to digital more than 60% complete, we're well positioned to execute on our core strategy, becoming a complementary premium add on service to every platform, and our efforts are gaining significant traction. In the quarter, Starz teamed with Amazon to enter a domestic bundling agreement with MGM followed by a domestic bundling deal with AMC Plus and a bundling agreement with Hiyu in the U. K, while completing our integration into the Disney We expect this momentum to continue as the industry evolves. Internationally, Our restructuring has significantly improved our financial profile, concentrating our resources on territories where we believe we can continue to scale our operations profitably.

Speaker 2

We entered the new fiscal year with a strong international slate, great partnerships and a compelling value proposition to drive subscriber growth and further improvement in our economics. In closing, we continue to execute on our strategy of separating Lions And we submitted our Form 10 with the SEC in March, and we're working through the organizational and governance issues accompanying the Separation, finalizing the intercompany agreement and taking the appropriate steps to strengthen both companies and their respective balance sheets, So they will be prepared to unlock the incremental value that the separation makes possible. Now I'll turn things over to Jimmy.

Speaker 3

Thanks, John, and good afternoon, everyone. I'll briefly discuss our Q4 financial results and update you on the balance sheet. Q4 adjusted OIBDA was $138,000,000 and total revenue was 1,100,000,000 Revenue grew 17% year over year, while adjusted OIBDA was up 67%. The year over year increases reflect revenue And adjust to EBITDA growth in both Motion Picture and Media Networks. Reported fully diluted earnings per share was a loss of $0.42 a share And fully diluted adjusted earnings per share was $0.21 a share.

Speaker 3

Adjusted free cash flow for the quarter Reflects a $37,000,000 use of cash. Fiscal 'twenty three adjusted OIBDA was $358,000,000 which exceeds the top end of our previously provided outlook of $275,000,000,000 to 325,000,000 The strength we saw as we closed the year reflects operational momentum heading into fiscal 'twenty four and gives us confidence in reiterating all components of our fiscal 2024 outlook, including our outlook for adjusted OIBDA of $400,000,000 to $450,000,000 which at the midpoint reflects nearly 19% year over year growth. Now let me briefly discuss the 4th quarter performance of our Studio and Media Networks businesses as well as the underlying segments as compared to the previous year quarter. Media Networks quarterly revenue was $389,000,000 And segment profit was $73,000,000 Revenue was up 2% year over year as the launch of Disney plus bundle in Latin America, Combined with the continued growth of OTT revenue was partially offset by domestic linear revenue pressure. Domestic revenue was down slightly, while international revenue was up 37%.

Speaker 3

Media Networks segment profit was up over 100% and was driven by growth in revenue, lower distribution and marketing expenses and lower landscape plus operating costs We ended the quarter with 29,700,000 total pro form a global subscribers, Including STARZPLAY Arabia. Pro form a global subscribers increased by 1,000,000, both sequentially and year over year. Focusing specifically on our OTT subscribers, we ended the quarter with 19,800,000 pro form a global OTT subscribers. This represents year over year global OTT subscriber growth of 14%, comprised of domestic OTT growth of 7% And international OTT growth of 27%. Now I'd like to talk about our studio business.

Speaker 3

Revenue of $824,000,000 was up 25% year over year, while segment profit of $123,000,000 was up 48%. On a trailing 12 month basis, library revenue at the studio was a record 8 $84,000,000 up 5% compared with the prior quarter's record trailing 12 month library revenue. In addition, the Motion Picture Group recorded its highest ever quarterly library revenue in the March quarter. Breaking down the Motion Picture and Television Studio Businesses, let's start with Motion Picture. Motion Picture revenue was up 85% year over year to $532,000,000 while segment profit of $94,000,000 was up 89% year over year on the strength of PLANE, Jesus Revolution and John Wick 4.

Speaker 3

The success of John Wick will drive strong carryover profit into fiscal 'twenty four and beyond, and we're Television revenue of $292,000,000 and segment profit of $29,000,000 expectedly declined on the timing and mix of content deliveries relative to a strong prior year quarter. On a full year basis, TV achieved record profit in fiscal 'twenty three, And we continue to project strong segment profit growth in fiscal 'twenty four on returning series and the release of The Continental this fall. Now let's talk about our balance sheet. Excluding the restructured Landscape Plus territories from trailing 12 months adjusted EBITDA, Leverage for the quarter improved to 4.5 times. We continue to retain significant liquidity with $272,000,000 of cash on hand at quarter end and $1,250,000,000 of an undrawn revolver.

Speaker 3

This level of liquidity is particularly strong after another quarter reducing the face amount of the unsecured bonds outstanding. In particular, We purchased $58,000,000 of our bonds in the quarter for $39,000,000 representing a $19,000,000 reduction in net debt. Subsequent to the end of the quarter, we purchased another $85,000,000 of our bonds for $61,000,000 Life to date, we have repurchased $285,000,000 of our bonds for $196,000,000 resulting in total net debt reduction of approximately $90,000,000 and significant future cash interest savings. In summary, we finished the year with a strong operational quarter and a further strengthening of the balance sheet, while looking forward to a year of solid double digit consolidated adjusted EBITDA growth in 2024. Now I'd like to turn the call over to Nilay for Q and A.

Speaker 4

Thanks, Jimmy. Operator, can we open the call up for Q and A?

Operator

Here. We will now begin the question and answer session. Our first question comes from Steven Cahall with Wells Fargo. Please go ahead.

Speaker 5

Hey, good evening. Sorry, I've got 3. So maybe first, just Jimmy on the guidance For AOIBDA, I think the midpoint is $425,000,000 for the year. Any change at the segment level? It sounds like motion picture is really strong.

Speaker 5

You talked about Strong performance at TV. So just curious how we think about that. And also on the timing, is it kind of front half weighted? Second question just around the spin, how are you thinking about allocating the debt between the two sides, STARZ and Studio? It Seems like Starz probably can't handle a lot of debt, so just want to make sure we're thinking about that right.

Speaker 5

And maybe just lastly for Jim Packard, Can you talk at all about what some of the drivers were of the big motion picture library sales that you saw in the quarter? Was this like a big delivery? Or did you just see a lot of home entertainment spend? Would love to kind of get some context there. Thank you.

Speaker 6

Thanks, Stephen. Yes, with regard to the guidance, so we're reiterating guidance across all of our business segments. As you've seen in the quarter, we In the fiscal year, we closed strong and exceeded expectations across all of our business units. So we feel well poised going into Fiscal 'twenty four with that guidance. I would say on the cadence, interestingly, it's back end loaded a lot like last year.

Speaker 6

So similar to fiscal 2023 with perhaps a stronger second quarter. And this is because in the Q1, it's going to be impacted by P and A spend in the Motion Picture Group. We have 3 wide theatrical leases in the quarter compared to 1 in the prior year quarter. We also are going to have likely some pre spend on Joyride, which releases on July 7. And then in Starz, there's going to be carryover amortization From Ghost, which premiered mid March.

Speaker 6

So that's the impact in Q1. And then in Q2, TV will benefit from the release of the Continental. I would just add too that the free cash flow would similarly be back end loaded, but overall Positive for full year as we continue to fund our investment content and marketing from positive free cash flow. Regarding the financing, in terms of separation, you can see that we Significantly reduce the amount of unsecured bonds. I'll reiterate that they do remain at Starz as we've spoken to in the past.

Speaker 6

We've taken this opportunity to strengthen our balance sheet as you've seen and to manage our capital structure as we move towards separation. On the studio side, we will refi the term loan A and term loan B upon separation. We have significant amount of assets within the studio as you know including unsold library rights and we Return more likely to an asset backed facility, which is similar to what we had prior to the acquisition of Starz. And then on the Starz side rounding out beyond the bonds, it's very possible that we would layer in some secured financing more traditional term loan and term loan B. So Separation will allow us to put in the best suited capital structure for each of these businesses.

Speaker 7

Hi, Stephen. First of all, I think it's really great that Motion picture group is back into releasing movies again. That's obviously helped for us. We had a 24 month bit of a drought. Now we're back into 8 to 10 slate, which is great.

Speaker 7

Also, we all get a great halo off of the John Wick and the Hunger Games dynamics, having new movies come out. John Wick was a particular driver for us given the release and we have Hunger Games coming up obviously in the fall. And then lastly, it really was a great coup for us to get the 3 Quentin Tarantino movies. We now have 8, which really gives our library a unique Situation in Hollywood and we're going to take advantage of that.

Speaker 5

Thank you very much.

Speaker 4

Thanks, Stephen. Operator, could we get the next question, please?

Operator

Sure. Our next question comes from Thomas Yeh with Morgan Stanley. Please go ahead.

Speaker 8

Thanks so much. One on the studio side, I was wondering if you could opine on how we should think about The potential impact of a prolonged writer's strike, if that would impact our fiscal 2024 outlook at all on that side of the business. And then Starz, I think I've seen some notification about a price increase on Starz in the U. S. Any help thinking about the execution of that and how many subscribers that affects, is it just 10 year subscribers or are new subscribers going to see that as well?

Speaker 8

And then maybe squeezing one last one in on Starz's ARPU. As we move more into the streaming frontal world, Jeff, can you talk about the potential impact that you might see on ARPU? Are you sacrificing any ARPU for better retention? It looked like it was pretty healthy in the quarter, so particularly on the international side. So any help there would be helpful.

Speaker 8

Thank you so much.

Speaker 9

Why don't you start?

Speaker 10

Sure. So yes, we have notified customers this week that we are adjusting their rate. This is existing and to new customers, Our standard retail rate will go up $1 It will affect start going to effect June 26. We really looked at the business And did a lot of analysis around the business. We haven't changed the rate since we launched into the digital side of the world in 7 years.

Speaker 10

And In that time, some of our peers have done 1 and some have done 2 rate increases. And so we feel pretty good that with increasing our slate from 6 to 11 originals, Plus all the great movies from Lionsgate and Universal that at sub-ten dollars though it's a great value for the consumer. While there will be some short term sub pressure, we think net net is a positive for

Speaker 6

And Thomas in terms of your question relative to the strike, we've not factored a prolonged strike into our guidance. But In terms of Motion Picture Group, I don't think you're going to see a significant impact. I think if looking at 2,008 precedent of 3 months. Up to that point, I think the financial impact for us would be, if any, would be modest. We've, of course, been preparing for the strike And we've got a significant content pipeline, completed projects and with our film and television library, our businesses are very resilient.

Speaker 6

So we're nicely poised for growth as we go into 2024 and manage through the challenges.

Speaker 10

And Thomas on the ARPU question, As we talked about and John talked about in his prepared remarks, we're starting to see the bundling of the or the re bundling of the business really start to come into in a bigger way. And To remind you, we've got great really connectivity into our 2 core demos, really hard to replicate and so it's better for To bundle with us to get access to those demos, ultimately what that means is that you're going to see some lower ARPU, but ultimately that should result in lower churn, Longer lifetime value and less marketing spend. So ARPU will move around a little bit based on the number of bundles that we have in the business. But we still think long term it will help us overall in terms of segment profit. In terms of international, you see a jump quarter to quarter.

Speaker 10

A lot of that is We had a lot of large bundle deals and some of the shutdown territories and so that's normalizing to that long term $2 range that we've talked about in the past.

Speaker 8

Got it. Thank you so much.

Speaker 4

Thanks, Thomas. Operator, could we get the next question, please?

Operator

Our next question comes from Barton Crockett with Rosenblatt Securities. Please go ahead.

Speaker 11

Okay, great. Thanks for taking the question. I was wondering if you could About the health of the market for selling your content to other services. We've obviously seen a lot Pruning by streamers from Max to Disney Plus to Netflix. And are you feeling that in the market generally

Speaker 12

Thank you. Kevin, that's a great question. Look, there's no question that there's Some more fiscal discipline being deployed across the entire business, and you're seeing that with some of the pruning that you mentioned in some of platforms. It's a hit driven business and there was a 4 year push toward huge volume and hoping to find some hits. And what's happening now is hits are just as important, but the middling shows that may not be performing as well are being winnowed out.

Speaker 12

The interesting dynamic about a show that is not a giant hit or an immediate loss or loser is that it's not great kind of for the platform or the Or the studio. So it's not a terrible thing as much as we love all of our children. If some don't get promoted to the 5th grade, It's all right. And we take our lumps and we focus on the hits. So when you think about things like Ghost and PowerBook 2 Ghost and BMF and Surfing Queen and Mythic Quest, these are

Speaker 8

the shows that we're spending a lot

Speaker 12

of our time on and focusing and getting them into later seasons where the Profitability really rises. So we look at that. Of course, you want as many buyers as possible buying as much as possible, But a targeted buyer is helpful for a studio. So we are very positive about how it's all looking right now.

Speaker 13

Barton, this is Joe. Barton, in the film business, we're seeing as voracious demand as we have seen for the last couple of years. And I think it's There's still going to continue to be a demand, as Kevin alluded to, to real to true premier content. We're currently the largest provider of Wide Theat Square leases that's available for sale. Other studios are obviously distributing their own in every territory.

Speaker 13

And so in addition to traditional theatrical buyers, You have all of the platforms. You have other studios trying to fill their pipelines internationally. And we just came back from market, and it was as Robust as it has ever been. And I think we'll see it continue to be competitive. And I think Jim probably has a few thoughts about the library.

Speaker 6

Yes, Barton, I think

Speaker 7

you can see from our trailing 12 months, we really have had a great run here and it's continuing. I think part of it has to do with Motion Picture Group News slate. Part of it has to do with a lot more clients. I mean, we have about 10 to 15 different AVODs that we do business with. The FAST market has really We actually have 10 fast channels in market right now.

Speaker 7

So we're able to take advantage of this amazing library in a lot of different ways, which Has not stopped and I still feel very bullish. Okay.

Speaker 11

And then if I could ask kind of a related question. So, I wonder if you could give us a little bit more kind of background on Free Arts. Obviously, there's some discussion there and obviously, that's not resolved. But I think There's some question in the market contribution to your business from 3Rs and What this kind of discussion about what they do with their remaining minority stake, what the materiality is of that to Lions Gate? If you could clarify, that would be nice.

Speaker 9

Yes. Thanks, Martin. I'm not, of course, going to give you any specifics about the discussions, but I would say That I'm sure that the 3 Arts partners would agree this has been a great partnership. And so right now what we're doing is pursuing a number of paths To extend that partnership and most importantly, to grow our joint business together. So It's all good.

Speaker 9

We're going to move forward with them. As I say, there's a number of different ways we're going to do that, but it's all positive.

Speaker 11

Okay. But can you give us any sense of how meaningful that is and where it hits the P and L or not really at this

Speaker 9

I think you know I won't because if I was going to, we'd have done that already. Thank you.

Speaker 11

Okay. All right. Thank you.

Speaker 4

Thanks, Barton. Operator, could we get the next question, please?

Operator

Sure. The next question comes from Matthew Thornton with Truist. Please go ahead.

Speaker 14

Hey, good afternoon everybody. Most of mine have been asked, but I have 2 quick ones here I guess. First, Shotgun wedding, I think most of the proceeds came in 3 cubic, but I just want to see if there was any debt that fell into 4Q. Any color there? And then just with the Of John Wick at the box office, I'm just kind of curious if that's changed the prospects for partnering on a AAA video game, which I think you guys have alluded to a couple of times in the past.

Speaker 14

Any update there would be great as well. Thanks, everyone.

Speaker 6

Yes. The Shotgun Wedding is in Q3, so that's the primary impact, so not really contributing significantly to Q4. And

Speaker 9

Joe is going to answer the question.

Speaker 14

Joe, thanks for joining us.

Speaker 13

As it relates to the video game, we are continuing to have those conversations. There's a ton of energy around it. What I would say It's with the success of a John Wick 4 that actually you see growth from 3 to 4, which is very rare in any franchise, much Quest and action franchise creates a lot of energy and excitement in the company. It does the same with the filmmakers and we're now moving Across that franchise, not just in the AAA video game space, looking at what the regular cadence of spin offs Television really growing that universe, so that there is a steady cadence of a franchise That there is clear appetite by the audience.

Speaker 14

And maybe can you just remind us, is John Wick 5 Official, I think it was scheduled initially to be about a year later and then there were some back and forth as to whether that was still the case. Is that still

Speaker 13

What is official is that, as you know, Ballerina is the 1st spin off that comes out next year. We're in development on 3 others, including 5 and including television series, the Continental will be airing soon. And so We're building out the world. And when those that 5 movie comes, we'll be in organic we'll be organically grown out of We're starting to tell those stories, but you can rely on a regular cadence of John Witt.

Speaker 14

Terrific. Thanks, everyone.

Speaker 4

Thanks, Matt. Operator, could we get the next question, please?

Operator

The next question comes from Jim Goss with Barrington Research. Please go ahead.

Speaker 15

Hi. I had a couple of questions. First one, I'd ask if there are certain elements that will remain with Stars as a surviving company, if you will, that the new landscape will be free of. I'm sure Jimmy will Remember, the Westinghouse assets have stayed with CBS after the Viacom spun itself out of itself.

Speaker 6

Jim, I think the segregation of the assets is pretty straightforward in the context of this particular separation. So I would remind you though that the intercompany eliminations, they're self eliminating upon separation and it's just math. So currently they're masking the strength of our standalone businesses. So anywhere from $36,000,000 of intercompany eliminations in fiscal 2023 to the low point of the guidance range of $24,000,000 to $750,000,000 so Or $75,000,000 So just at a 10 times multiple that's masking close to $500,000,000 of enterprise value. And then on the leverage side, likewise Mask the leverage, which affects trailing 12 months and that's about a half a turn of leverage being masked.

Speaker 6

And I would say just to remind you that There is Starplay Arabia. We sold about half of our interest last quarter for $45,000,000 And we still retain about a 14% stake and that is expected to travel with Starz.

Speaker 15

Okay. Thank you. 2 others. The faith based audience is Sort of an interesting development. I wonder if you can talk about how if it's affecting basically continued development on the studio.

Speaker 15

And I assume it's not that part is not really affecting Starz so much given the nature of the programming at Starz.

Speaker 13

Thanks for the question. Yes, on

Speaker 16

the faith based side, we made

Speaker 13

a commitment to this business Right before COVID happened and it's finally come into fruition that audiences are coming back into theaters. You saw the performance of Jesus Revolution, which wasn't a real surprise to us. We just needed audiences back. We always felt that we should have 2 premier faith based movies a year, 1 spring, 1 fall, and we're working with the best brands in the entire business, Kingdom Story Company, the Jesus Revolution, I can only imagine. And Dallas Jenkins, we're doing the best Christmas pageant ever, Which is a big brand in the space.

Speaker 13

Dallas is the creator of The Chosen, which we spoke about earlier. And so our plan is to have 2 movies a year with the best teams in the business and branded stories in the space. And right now, we have lined up a movie in October. We have a movie the following March and then we have our fall movie already in place. So important space for us.

Speaker 13

Last thing I would say about that space, it's an incredibly Efficient space as well. That audience is super efficient to target from a marketing perspective. And so we love that space and we're going to

Speaker 6

stay in it. And Jim, I would just add that with regards to SPA, we may retain that investment stake as Part of the studio. To

Speaker 14

be determined.

Speaker 15

Okay. All right. Thank you. Last one. I noticed in your Just description, you said Lionsgate brand stands for bold, original, relatable.

Speaker 15

A lot of companies will Make statements like that and that actually fits pretty well. But usually movie company brands Aside from maybe Marvel or Pixar or Disney, they tend to own most of them, don't really resonate. Nobody really goes to see the movie because of the brand. Maybe Lions Gate is different. I'm wondering if you can talk about how you're using that and to what advantage can you put it?

Speaker 13

I think at a consumer level, I think there's aspects of our business. So as an example, I just Speaking about the faith space, I think Kingdom stands for something in that space. I think that within the industry, Lions Gate Stands for bold. We make original movies. There aren't many companies still doing that.

Speaker 13

So I think that we are it certainly has Brand value within the industry, because we have such a diverse slate, we're making action movies, we're making Faith based movies, we're making horror movies, doing all kinds of things. I don't think that like a Disney perhaps, Lionsgate is a specific brand to the consumer.

Speaker 9

Yes. I would add, when Michael and I started in January 2000, We made culture important. We made being entrepreneurial important. And when we started doing movies And television shows that everybody else passed on, Mike Saw and Monster's Ball and Fahrenheit 911 and sort of extends To Hunger Games and now sort of really edgy movies like Joyride, I think about the culture inside the company, our ability to pivot quickly, particularly in a difficult environment like we're in right now and frankly to take chances with movies. Look at Sisu, where Sisu is a super profitable A movie for us and nobody else would have done that movie.

Speaker 9

And so the way we market, the way that we look at Acquiring content, the way we look at green lighting content, I think, whether that's something for the consumer or sort of that's a message we're sending to the business And to the creators that we do business with and who say, this is something we should take to Lionsgate because they will take a chance on it. I think it's meaningful and significantly meaningful for our business. And frankly, I would say it's the reason we're the only Studio that has started what in the last 70, 80 years that really is still standing at this point in time because I think we did build a different mousetrap. It's not necessarily a better mousetrap, But it's our mousetrap and we're really consistent about how we operate this business. We're really efficient about how we operate this business.

Speaker 9

And so I think brand in that respect, even if it's not a consumer brand like Disney, Disney certainly is, We think that brand is really effective and it's a rallying cry for all of our business partners here at Lionsgate.

Speaker 15

Okay. Thanks, John. Appreciate

Speaker 4

it. Thanks, Jim. Operator, can we get the next question, please?

Operator

Our next question comes from Matthew Harrigan with Benchmark. Please go ahead.

Speaker 17

Thank you. Could you comment further, I mean, now that you have Even more prominent brands, John Wick has really taken off. I know we have a number of other things in the hopper on the interactive entertainment and particularly The video game potential there. And also Joyride has been a tremendous amount of buzz, but it feels like the Asian market is still Very remarkably underserved at this point. Do you have anything else in development there?

Speaker 17

And I assume you would probably agree with that

Speaker 13

So on the video game side, I don't think there's much more to say. The Conversations continue and hopefully we'll have something more specific to announce soon on John Wick. As it relates to Joyride, Sure. Part of what we always talk about is we have our tentpole pillar brands. We have really extraordinary economics given the way our international operation works and What's happening here domestically in the efficiency of P and A that we also have the ability to do a handful of super interesting exciting original movies that have the chance To explode, we took Joyride to South by Southwest, and it got the kind of energy underneath it One would hope and we think it's going to do great business for us.

Speaker 13

We acquired a movie at Toronto called The Blackening That we're incredibly excited about, same kind of situation where you've got an original movie that we think we can turn into a real event for an audience. And we continue to populate our slate every year with 2 to 3, 4 of those movies a year because If you actually look at the history of Lions Gate, there was a time when John Wick was just an original story medium budget film The Hunger Games, same thing. I was here when we bought that book. There were 40,000 copies sold at the time. And so Most of these things at Lions Gate start out as those as original movies.

Speaker 13

We happen to have economics that allow us to do that and continue to mine that As well as really monetize those big brands competitively with any other studio in the marketplace.

Speaker 15

Great. Thank you.

Speaker 11

Thanks,

Operator

The next question comes from Alan Gould with Loop Capital. Please go ahead.

Speaker 16

Hi. Thanks for taking the question. First for Joe, is are a dozen films a year your sweet spot? Is that where you want to be? And can you unpack a little more on what your expectations might be for the Hunger Games Creek Bowl?

Speaker 16

What kind of response it's gotten so far? And then a question for Jimmy. As you increase production, how should we think of the investment in content? It looks like for Past year, the studio was about $1,500,000,000 and Media Networks $1,200,000,000 should the studio grow from that level? So

Speaker 13

I would say on the dozen films a year, that's what our slates look like at a planning stage and in terms of what we have currently calendared. What John, we look we continue to look for opportunities, though. John mentioned a very interesting movie we released in the last quarter that wasn't on the schedule 3 months ago called SISU. We're seeing a new model. We did something like this last year with a movie called Fall.

Speaker 13

On that multi platform business, we're seeing movies that have the actual potential that we can leverage our infrastructure without spending a lot of P and A that can be incremental to that slate and wildly improve those segment 2 economics. And so Sisu is an example. We nearly quadrupled the return on that movie by just leveraging our infrastructure with very Limited media dollars and we think that we're one of the we think that's a real differentiator for us. There aren't really other studios playing in that game. And so there is the potential, as we source the content to add 2, 3, 4 of those a year and duplicate that model.

Speaker 6

And Alan, with regard to your question on the investment in production and programming spend, This year was lower relative to the prior year, mostly timing. We're still seeing we're not pulling back. We're still seeing strong demand. So I would expect things to move up just a little bit in 2024, but I'd expect likewise we continue to fund all of our investment in Content as well as marketing behind that from positive free cash flow.

Speaker 13

On the Hunger Games, I forgot to answer that Question for you. We're seeing some really interesting things. The team did something really smart. They planned it about a year ago. We lined up all the 4 original movies to play on Netflix so that they would get very wide viewership and we could start to ignite a conversation digitally.

Speaker 13

And what we had hoped to be a conversation

Speaker 11

We turned into a bit

Speaker 13

of a revolution actually where the fans took it over on their own and what we saw was very exciting, not unlike what we saw with week 4, which is that you could see in the data prior to week 4 that there was the potential that the audience had expanded. And what's happening on the Hunger Games side is the original lovers Hunger Games have really energized and are super excited and picked this movie up and kind of put it on their back and created a lot of chatter. What we've also seen is a new generation. The kids of those fans who are now taking mom and dad's books, book sales are going up because those That next generation is finding the franchise, devouring the first four movies and want to see the next one. So between the research and data that came out of That initiative coupled with we've seen the movie and it is just a spectacular piece of cinema.

Speaker 13

And so those things have us very, very excited about what's going to happen for us this fall.

Speaker 6

I'll give you a little more color, Martin, on the Alan, sorry, in terms of the increased production spend. You see that mostly on the studio side, right, as you ramp up on your theatrical slate and filling demand on television production and a little more modest settling of Production spend on Starz side as they manage your portfolio programming.

Speaker 16

Thanks, Jimmy.

Speaker 4

Thanks, Alan. Operator, could we get the last question, please?

Operator

Yes. The last question comes from Devin Briscoe with Wolfe Research. Please go ahead.

Speaker 18

Thanks for the question. I have a follow-up really on the last A Typically, the domestic business, how do you think about managing profit and free cash flow Growth versus further investment in scaling the sub base.

Speaker 10

Hi, it's Jeff. I'll start and Jimmy can Jump in.

Speaker 11

Like we said, we've got

Speaker 10

2 really, really valuable core demos that I said are hard to replicate, really makes us a great complementary service So almost anybody out there. We do think there's a lot of opportunity domestically. TAM is somewhere between $70,000,000 to $80,000,000 So we've got a long way to go to driving that business. And we do think that long term margin should hover approximately around 20%. And so we're on a path to get there.

Speaker 10

And so we'll start to manage toward that long term goal.

Speaker 9

Yes. And I would note that this was a year where we expanded our programming from 6 To 11 original. So obviously, to get to that sort of run rate position, we actually spent a fair amount of more free cash and made a bigger investment in that business. We expect that to turn around, get the benefits of that going forward. I wouldn't expect to actually expand that programming much beyond that for at least a year, maybe even a little bit more than that We manage with that amount of original programming plus as Jeff mentioned, we have the Lions Gate Pay 1 movies coming down, the Universal So we're going to have a really full motion picture slate, which actually all the streamers are starting to realize that these well marketed movies They go into the marketplace with a lot of recognition don't require nearly as much marketing spend from the streamers.

Speaker 9

We think we're in really good shape from the perspective of free cash flow and sort of where that business is and sort of getting to a position of financing itself.

Speaker 4

Thanks, Devin, and thanks, everyone. Please refer to the Press Releases and Events tab under the Investor Relations section of the company's website for a discussion of certain non GAAP forward looking measures discussed on this call. Thanks all.

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Suzuki Motor Q4 2023
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