Good day, and welcome to the Lionsgate First Quarter 2022 Earnings 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 Nelay Shah.
Please go ahead.
Good afternoon. Thank you for joining us for the Lions Gate fiscal 2022 Q1 conference We'll begin with opening remarks from our CEO, John Feldheimer followed by remarks from 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 and Chairman of the Motion Picture Group, Joe Drake. And from Starz, we have President and CEO, Geoffrey Hirsch CFO, Scott McDonald President of Domestic Networks, Alison Hoffman and President of International Networks, 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 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 as amended in our most recent Quarterly report on Form 10 Q filed with the SEC. The company undertakes no obligation to publicly release the result 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.
Thank you, Nilay, and good afternoon, everyone. Thank you for joining us. I'd like to begin with a few highlights from a strong financial quarter and then drill down in each of our businesses. We acquired the SpyGlass Media Group library while investing in SpyGlass' go forward business and entering to a 1st look television deal between SpyGlass and Lionsgate Television. In the past 6 months, we've actually acquired 3 libraries with a total of nearly 400 titles and more than $2,500,000,000 of underlying domestic box office as we continue to grow our stockpile of valuable Premium content.
We announced the theatrical output agreement with Universal, giving Starz an exclusive 18 month post pay 1 window For Universal's live action theatrical titles, coupled with the Lionsgate Pay 1 theatrical output agreement announced with Starz last quarter, The Universal deal completes our strategy for establishing a strong and reliable pipeline of 1st run features for Starz. Our television group is taking advantage of unprecedented demand by producing a record 34 scripted series this year, 15 of them for Starz, while maintaining our leadership as a top independent third party supplier of premium scripted content. We're coming off one of our strongest years with 13 new series orders, all 7 of our pilots picked up the series and all of last Freshman series renewed for their 2nd season. In our Motion Picture business, we continue to assemble a strong and diversified film slate for theaters, streamers, Multi platform distribution and stars. And despite the pandemic, we've set up a total of 26 films in the past 12 months for delivery in fiscal 2023 and fiscal 2024.
And as we continue to execute our business plan, we're also executing our strong commitment It's a greater diversity, equity and inclusiveness in our workforce, talent relationships and content. Turning to our individual businesses. It was a strong financial quarter for Starz, but like the rest of the industry, we were impacted by a reduction in at home viewership and importantly, a light content quarter due to COVID driven production delays. We continued to grow our base of international subscribers in the quarter, but domestic subscribers declined, a temporary drop that we have already reversed since the end of the quarter. In fact, 2 weeks after the quarter ended, Power Book III Raising Kanan debuted to the 2nd biggest Starz original series premier ever, driving over 800,000 global subscriber gross adds in the 1st week alone and an 80% spike in viewership on the app.
As a result, we are again growing our domestic over the top subscriber base, which is already back to the March quarter's record levels. And with our biggest and strongest Starz original series slate ever this year, with 12 scripted series compared to 7 last year and a building cadence A 5 tentpole series over the next three quarters, we continue to expect Starz global subscriber growth this year to outpace Subscriber growth last year. Our confidence is buttressed by a very strong slate that following Raising Kanan Includes wrestling drama Heels, starring Stephen Amell and Alexander Ludwig getting great early reviews. The 2nd season of the hit series Power Book II Ghost, The 6th season, a fan favorite Outlander Curtis 50 Cent Jackson's crime family drama BMF The horror comedy Shining Vale starring Courtney Cox and the debut of PowerBook 4: Force. These will be followed next season By high end properties such as the Watergate drama Gaslit, starring Julia Roberts and Sean Penn, the John Wick prequel, The Continental And the Surfin' Queen based on the dark legend of Catherine de Medici.
Internationally, Core audiences in the United States attracts a global audience as well. Combined with Lionsgate feature films and library titles that are driving our theatrical content Offering and best in class third party acquisitions of the Great, Gangs of London and the international premiere of Doctor. Death later this quarter. Our best of global SVOD programming continues to set us apart as a home for original adult fiercely premium content, complementary to every platform and a compelling value proposition for every bundle. Turning to television, we continue to execute our strategy, supplying Starz with a bumper crop of premium scripted series, while delivering high end programming to an expanding array of new buyers in the quarter.
Home Economics debuted on ABC in April with the strongest live plus 3 retention of any new comedy this season. The new comedy Ghosts debuts on CBS in the fall and Welcome to Flash premieres on Fox mid season. The growth of the nearly $10,000,000,000 AVOD market has created opportunities for us to license existing television series with Avon revenues up 104% from last year, to sell original new television series, an area where we've always been a first mover, and to extend the revenue food chain for shows entering syndication. In fact, AVOD accounted for nearly 2 thirds of our recent syndication sales to the hit comedy Weeds. With a diverse portfolio of television businesses that includes our collaboration with 3 Arts, 1 of the world's foremost talent management and production companies, a partnership that has already generated 3 series orders including the Apple hit Mythic Quest, BBC Studios with 2 series picked up by the networks Pilgrim Media Group with more than 20 unscripted series for leading platform partners Debmar Mercury, home to the Evergreen Properties Wendy Williams and Family Feud with Nick Cannon launching in the fall and a roster of world class production partnerships.
The growth of our television slate is driven by our A List talent relationships And future proof against headwinds in any one part of the business. Despite the challenge of making films during a pandemic, We continued to fill our pipeline during the quarter, completing production on Borderlands, starring Cate Blanchett, Kevin Hart, Jamie Lee Curtis and Jack Black, The Kelly Fremont Craig directed adaptation of the Judy Blume classic, Are You There, God? It's Me, Margaret, produced by Academy Award winner, James L. Brooks White Bird: A Wonder Story, the follow-up to our breakout hit, Wonder the faith based American underdog, the Kurt Warner story Shotgun Wedding starring Jennifer Lopez and Roland Emmerich's sci fi epic Moonfall. And we couldn't be more Excited about returning to the set with the incomparable Keanu Reeves as we began shooting John Wick: Chapter 4 in June.
We also have 3 big brands that continue to move towards production: the Hunger Games prequel, The Ballad of Songbirds and Snakes The nostalgic reimagining of the classic Dirty Dancing and Monopoly based on the iconic Hasbro game rounding out a strong and diverse slate that can navigate the twists and turns of today's motion picture landscape by appealing to every platform. Last month, we announced an agreement to anchor the entertainment vertical for the NFT platform Autograph, Bringing the Hunger Games, Twilight, John Wick, Mad Men and other top properties into the world of digital collectibles. It's the latest in a series of franchise extensions that provides us with a high margin annuity from branded theme parks, Exhibitions and Escape Rooms live to take global concert tours and adaptations of iconic Lionsgate film and television properties Headed for the Broadway stage. In closing, if the media consolidation of the past year has taught us anything, It's that the global appetite for content is greater than ever. And to paraphrase Keanu Reeves and John Wick 3, We have that content, lots of content in our world class library, our deep film and television pipelines and throughout our global streaming platform at Starz.
We live right in the sweet spot of global consumer demand, Bold, original, high end's premium scripted television and film and with our talented and entrepreneurial employees working across Every
part of our company, every single day to identify ways to create, own and monetize this content, we are well positioned to Create outsized value for our partners, consumers and shareholders. Thank you. Now I'll turn things over to Jimmy. Thanks, John, and good afternoon, everyone. I'll briefly discuss our fiscal Q1 financial results and update you on our balance sheet.
Fiscal first quarter adjusted OIBDA was $120,000,000 with total revenue coming in at 901,000,000 driven by new TV series deliveries and continued demand for library content. Reported fully diluted earnings per share was a loss of $0.20 a share and fully diluted adjusted earnings per share came in at $0.18 a share. Adjusted free cash flow for the quarter was $192,000,000 use of cash. Now let me briefly discuss the fiscal Q1 performance of the underlying segments compared to the prior year quarter. You can follow along in our trending schedules that have been posted to our website and show greater detail around our Global Media Networks subscribers.
Media Networks quarterly revenue was up 4% to $382,000,000 and segment profit of $88,000,000 was up 23% driven by lighter content spend on a lower quarterly cadence of programming. We ended the quarter with 28,900,000 total global subscribers. Global linear subscribers declined to 12,200,000 while total Global Media Networks OTT subscribers remained flat sequentially at $16,700,000 representing year over year growth of 58%. As John noted, given the success we saw in the early launch numbers of raising Kanan, we are again growing our domestic OTT subscriber base, which is already back to the record levels reported last quarter. Furthermore, we continue to believe that we will add more subscribers in fiscal 2022 relative to fiscal 2021 in both our domestic and international markets.
Turning to motion pictures, Revenue was up 4% to $291,000,000 while segment profit of $44,000,000 reflects higher P and A spend from the theatrical releases of Spiral and Hitman's Wife's Bodyguard versus the prior year quarter, which had no theatrical releases due to theater closures. This was partially offset by continuing strength in library revenue. And finally, television revenue nearly doubled to $386,000,000 driven by new series deliveries including Raising Kanan, Blindspotting and Hills, while segment profit came in at $3,000,000 reflecting the delivery of freshman series and a tough comp against the prior year quarter, which included licensing of MadVenn. Our total library revenue across our motion picture and TV businesses was $740,000,000 on a trailing 12 month basis, which compares to $711,000,000 reported this time last year and demonstrates the resiliency of our library in all economic cycles. On the balance We ended the quarter with leverage of 4.7 times or 3.6 times excluding our investment in STARZPLAY International, which as expected reflects the timing of P and A spend on trailing 12 months adjusted OIBDA.
We continue to retain significant liquidity With $262,000,000 of cash on hand and a $1,500,000,000 of undrawn revolver, We remain committed to strengthening our balance sheet and paying down debt. Now, I'd like to turn the call over to Nilay for Q and A.
Thanks, Jimmy. Operator, can you open up the call for Q and A?
Certainly. Thank you. We will now begin the question and answer session. And the first question will be from Katgun Marl with RBC Capital Markets. Please go ahead.
Great. Thank you for taking the question. I wanted to ask about television production. It's great to see the very strong results. I realize some of that Includes sales to Starz, but still I think it may have actually been a record for quarterly domestic TV revenue.
You called out 13 new series orders, 7 pilots being picked up and all the Freshman series being renewed, it just seems like a very Healthy pipeline that should not only help fiscal 2022, but perhaps 2023 beyond. So just two questions. First, are we approaching an inflection point for that business where there's maybe more visibility into a step function increase in revenue And maybe eventually profits or is this more a function of a post COVID catch up that will eventually normalize? And second, the traction you called out with AVOD is very interesting. Just any more color you could provide on the opportunity you see ahead there would be very helpful.
Thank you.
I'll let Kevin answer that question.
Yes, this is Kevin speaking. Just in reverse order, we're seeing in this AVOD space, it's an exciting time. It's Reminiscent of really the emergence of originals in the basic programming, basic cable space when we were doing that and then in shows like Those revenues and those ad dollars are moving and they're moving into AVOD and Roku is Getting into originals, IMDb TV is well into originals. Tubi, we're in conversations with about various shows. So I see this as a trend.
I think there will be more. And within each of these verticals, they will dig into more originals as a point of differentiation from all the others. They're not as focused on Exclusivity as SVOD players, so they're often sharing similar windows on other products. So what makes them different will be the originals, which has always been the secret sauce in the cable space before which they're inheriting. So on the inflection point, I can just say that This surplus of buyers moving into the space needing great high quality premium content is really beneficial to us as a studio supplier.
There's no greater priority than our partnership with Starz. We're thrilled that 15 of that roster Are together with them in either sole production or co production. But things that aren't exactly right for them can travel elsewhere. We have 5 shows with HBO Max. We have a big project with Showtime and the First Lady and are getting jumping into business with Peacock and have had a long history with Hulu, 2 on Apple, they're all digging in to do more and that bodes well for us as an independent that can work everywhere and have a really I finally own creative machine, turning out great development with terrific producer and pod deals and frankly great taste.
Jimmy, maybe take
a shot at sort of the trajectory or the CAGR for the TV business over the next couple of years.
Without giving specific numbers, I mean, I think you're right in terms of an inflection point, in terms of coming out of this with the development pipeline Going through and getting deeper and deeper beyond those freshman series that you just noted and going to those back seasons where the margins are better You're going to really see some nice continuation is what we foresee relative to segment profit going into from 2022 to 2023, 2024.
That's perfect. Thank you, Josh.
Thanks, Cook. And operator, could we get the next question, please?
Certainly. And that question comes from Alan Gould with Loop Capital. Please go ahead. Thanks. I've got 2.
Hi there. Excuse me.
Do we need to send somebody over, Alan? I've got 2 questions here. One for Jimmy and if Joe is on the line, one for Joe. Jimmy, can you just refresh our memory? How much are you planning on spending on content production this year?
And can you break that down a little bit between the divisions. And the question for Joe is the box office seems to be having a real tough time. I think Barry Diller It was just quoted saying that we need there's 90% too many 90% of screens are going to close down. What are your thoughts on box office and alternative ways of releasing your films?
Yes, Alan, I'll take the first one there. In terms of content spend, we had $1,600,000,000 of content Last year and what we said on the previous calls is we're expecting 50% kind of increases from there, so call it in the mid-2s, dollars 2,500,000,000 ish. And I would just say that is on a kind of a net basis, meaning after we've eliminated the intercompany payments coming from Starz to TV. So if you really gross it up to look at it more comparable to maybe other companies, you're really talking about closer or tipping over 3,000,000,000 But for us, it's a pretty cash efficient spend as we have that intercompany element, so we could put more on the screen with less cash. And you saw in the quarter, we're more heavily weighted in Q1 as we had, as you'll see in the trending schedules, Over $575,000,000 of content spend in the Q1 and that was up about $400,000,000 versus The prior year quarter.
So ramping into that spend early, it will continue the cadence into the 2nd quarter. And then again, we'll top out at somewhere around $2,500,000,000 $3,000,000,000 on a gross basis.
Joe? Yes. Hi, Alan. Thank you for the question. Well, first I would say I don't fully agree with Mr.
Dillard. We actually have found this period of late, this period of change really more as a place to look for opportunity than to see challenges, Certainly some challenges with the marketplace, but when you look at the theatrical market, even though it's not all the way back, certainly brands are working, Big brands are working. There's an audience that want to come back. I think we've got a ways before we can talk about what normalized Box offices with the variance coming into the market and such, but I was really pleased to see the way certain brands played in the market. Equally, we've certainly spent a lot of energy and done a lot of work in the last year Working with different distribution strategies, bespoke distribution strategies for each film, great examples of this are Hitman's Bodyguard And Spiral, both of which we were able to reach our green light ultimates just with slightly different patterns, Spends different approaches to the market, when we spent media, where we put our media.
And so I believe that the market is going to come back. What full percentage of theaters will be there when it's over or when it's fully back? I think there'll be a strong robust platform for us to monetize our movies in the theatrical market. And at the same time, we have certainly explored and found some other really interesting ways to monetize the value of our content. And I think that I know you hear this theme over and over and over, which is that the value of content is just getting greater.
I think we're seeing Everywhere in the marketplace, it's really just a function of being nimble enough and Lionsgate is in a very unique position in that regard for us to take advantage of all the opportunities out there, including a robust Seattle marketplace as it comes back. And Joe, just a follow-up, speaking of brands, when is the next John Wick film again and when is the prequel to Hunger Games? Mentioned we're deep in production, super, super, super excited. It is definitely going to be bigger and better. In terms of when we're going Dave, the movie, we're having those conversations now.
We're not quite ready to put it to put our flag in the ground, but you'll be hearing something soon. As soon as we're ready, we will let you know. But that is in production as we speak. And Chad and Keanu are doing incredible work. On the Hunger Games, our plan is to I'd have to actually go back and look and see whether it's late 'twenty three or early 'twenty four fiscal when we're going to We're currently targeting to put that movie in the market, but both are moving along really, really well.
I would say again too Borderlands is looking great. Super excited to see that. And Dirty Dancing, I think, is going to be special. So, a lot of brands coming back into the marketplace for us. Okay.
Thanks a lot, Joe.
Thanks, Alan. Thanks, operator. Yes, thanks. The
next question will come from Stephen Cahall with Wells Fargo. Please go ahead.
Thanks. Maybe a couple for Jeff. So on Starz, could you just unpack that subscriber forecast a little bit about adding more subscribers this year than last? I know you have A big content pipeline coming in the rest of the fiscal year. It just seems like a lot of what we've seen in streaming is that the pandemic might have Provided some pull forward.
So just curious what gives you the confidence that now that we're coming out of the pandemic, you'll be able to have a strong year for net adds As you did last year. And then related on SARs International, how should we just think about Segment profit for that segment this year, I think maybe you've talked about it on a profitability basis looking similar to last year. Just didn't know if there was any update to that outlook. Thanks.
Hey, Steve. How are you? Yes, great. As John and Jimmy talked in our remarks, it was a very light content quarter for us. We premiered 2 half hour comedies that were great shows that I think that coupled with the world opening back up, It was not our strongest quarter as we had guided on the last call.
But as they said also in their prepared remarks, we're very confident that this year will be stronger than last year. We're going from 7 originals to 12 originals. We have 5, 10 pulls in the next 3 quarters that drive large, large growth of subscriber acquisition. We also saw our churn at a historic low in this quarter. So those two things coupled together give us great confidence That we can we will accelerate growth this year.
K and N obviously premiered, as John said in his premier remarks, to huge numbers, huge viewership. And simply put, if Canon was 6 weeks earlier, we will be having a different sequential conversation than we're having right now.
And on the Segment profit portion of things, Stephen. Yes, you're right, plus or minus in line with the prior year investment. And That's really based off the timing of content, etcetera. We like what we're doing there. We like the market share we're capturing.
We're moving into it.
Great. Thank you. Operator, can we get the
next question please?
The next question is from Thomas Yeah with Morgan Stanley. Please go ahead.
Thanks. Thanks for taking my questions. Two quick ones for Jeff. On STAAR's ARPU, the domestic ARPU appeared to be relatively stable sequentially with last quarter, Which is a little lower than the historical trend. I think you had cited some heavier promotional activity happening then.
Did that continue into the quarter? And then a related kind of question, if you can give us an update on the unit economics across linear and U. S. OTT, and whether or not The mix of direct versus retail partners kind of impacts ARPU going forward, but the outlook is there, that'd be helpful. Thank you.
So on the ARPU basis for the quarter sequentially, we've said that ARPU will fluctuate around 5.75 to 610 Depending on when subs come in, in the quarter and some of the promotional parts of the business, again, churn was really low in the quarter, a historic low. And so that Stabilized it a little bit, but we didn't have as much coming in the front door. So it was actually pretty flat sequentially. When you look at ARPU linear versus domestic, remind everybody that over the last couple of years, we've moved most of our linear deals So over 82 percent of our linear deals are a la carte. And so over time that a la carte ARPU has actually started Collide with the OTT ARPU because in essence, it's a rev share deal.
And so you actually see those numbers coming together Quickly, long term, we think that, again, like I said, somewhere between $580,000,000 $610,000,000 for the domestic business.
Great. Thank you.
Thanks, Thomas. Operator, could we get the next question, please?
Actually, this concludes the question and answer session. So I'd like to turn conference back over to Nilay Shah for any closing remarks.
Thanks, everyone. Please refer to the Press Releases and Events tab under the Investor Relations
And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.