Lionsgate Studios’ Earnings Call: Record Revenue Amid Challenges

Lionsgate Studios Corp. ((LION)) has held its Q2 earnings call. Read on for the main highlights of the call.

Lionsgate Studios Corp. recently held its earnings call, presenting a mixed sentiment of optimism and caution. The company celebrated record-breaking library revenue and a robust TV and film slate, signaling a positive outlook. However, challenges such as operating losses, headcount reductions, and significant debt levels were also acknowledged, indicating areas that require strategic attention.

Record-Breaking Library Revenue

Lionsgate announced a milestone achievement with its library revenue reaching $1 billion over the trailing 12 months, marking a record performance with a 13% year-over-year growth. This accomplishment underscores the enduring value and appeal of Lionsgate’s extensive content catalog.

Successful TV Business and Renewals

The television segment of Lionsgate shone brightly, winning a record 13 Emmy Awards and securing renewals for popular shows such as “The Hunting Wives,” “Rainmaker,” and “Ghosts.” This success is expected to drive a doubling of scripted series deliveries from fiscal 2026 to fiscal 2027, promising continued growth in the TV division.

Strong Motion Picture Slate

Lionsgate’s Motion Picture Group is poised for success with a strong lineup of films, including three major holiday releases and upcoming tentpoles like “Michael,” “Hunger Games,” and “Resurrection.” These releases are anticipated to contribute significantly to the company’s growth trajectory.

3 Arts Diversification and Growth

3 Arts, a subsidiary of Lionsgate, is diversifying its portfolio by expanding into sports, signing NFL stars like Travis Kelce and Miles Garrett. This move, along with continued growth in talent management and production, highlights Lionsgate’s strategic expansion efforts.

Increased Use of AI for Efficiency

Lionsgate is leveraging artificial intelligence to enhance productivity, generate cost savings, and expand creative capabilities. The company is also taking measures to protect its intellectual property from unauthorized AI use, ensuring the integrity of its content.

Operating Losses and Cash Flow Challenges

Despite the positive highlights, Lionsgate reported an operating loss of $46 million and a net cash flow used in operating activities of $104 million. The adjusted free cash flow use was $129 million, indicating financial challenges that the company needs to address.

Headcount Reductions

In response to market realities, Lionsgate reduced its headcount by approximately 5% this quarter, bringing the overall reduction to more than 20% over the past 18 months. This move is part of the company’s efforts to align its operations with current market conditions.

Leverage and Debt Concerns

Lionsgate’s net debt stands at $1.7 billion with a leverage ratio of 6.4x, reflecting the timing of content spending. This highlights the need for future deleveraging to ensure financial stability and flexibility.

Forward-Looking Guidance

Looking ahead, Lionsgate provided optimistic guidance for significant growth in the upcoming quarters and fiscal year 2027. The company anticipates strong adjusted OIBDA growth, supported by a robust slate of tentpole films and an expected doubling of scripted TV series deliveries. Additionally, Lionsgate is exploring M&A opportunities and expects continued investment in its library to yield substantial returns.

In conclusion, Lionsgate Studios Corp.’s earnings call painted a picture of both achievement and challenge. While the company celebrates record revenues and a promising content slate, it must also navigate financial hurdles and strategic adjustments. Investors and stakeholders will be keenly watching how Lionsgate balances these dynamics in the coming quarters.