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Title of the Call Lionsgate Entertainment Corp. 2Q Fiscal 2018 Earnings Conference Call November 9, 2017, 5:30 PM Eastern CORPORATE PARTICIPANTS Jon Feltheimer - Chief Executive Officer Michael Burns – Vice Chairman Jimmy Barge - Chief Financial Officer Chris Albrecht – Starz, President & CEO Joe Drake – Motion Picture Group Co-Chairman Kevin Beggs – Chairman of Television Group James Marsh - Head of Investor Relations 1 PRESENTATION Operator Ladies and gentlemen, thanks for standing by and welcome to the Lionsgate Fiscal 2018 Second Quarter Earnings Call. At this time, all lines are in a listen-only mode. And later, we will conduct a question-and-answer session with instructions being given at that time. And if you should required assistance during the call, please press “*”, then “0” and an operator will assist you offline. And as a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Head of Investor Relations, James Marsh. Please go ahead sir. James Marsh Thanks Kerry, and good afternoon everyone. Thank you for joining us today for the Lionsgate’s Fiscal 2018 Second Quarter Earnings Conference Call. We'll begin with opening remarks from our CEO, Jon Feltheimer followed by remarks from our CFO, Jimmy Barge. After their remarks, we'll open up the call for your questions. Also, joining us on the call today are Vice Chairman, Michael Burns; Starz' President and CEO, Chris Albrecht; Starz' COO, Jeff Hirsch; Starz' CFO, Scott MacDonald; Co-Chief Operating Officer, Brian Goldsmith; Motion Picture Group Co-Chairmen, Joe Drake and Patrick Wachsberger; Co-Chief Operating Officer and President of Motion Picture Group, Steve Beeks; Co-President of Motion Picture Group, Erik Feig; Chairman of TV Group, Kevin Beggs; Chief Operating Officer of the TV Group, Laura Kennedy; and Chief Accounting Officer, Rick Prell. 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 materially differ from these and adversely from those described in the forward-looking statements as a result of various factors, including the risk factors set forth in the Lionsgate's Annual Report on Form 10-K filed with the SEC on May 25, 2017, as amended in the Lionsgate's quarterly call on Form 10-Q filed with the SEC on November 9, 2017. The company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. With that, I'll turn it over to Jon. Jon? Jon Feltheimer Thanks James, and thank you all for joining us today. Our strong performance in the quarter keeps us on track for our fiscal year expectations. And our robust free cash flow is enabling us to continue our consistent deleveraging ahead of schedule. In today's dynamic content environment, audience fragmentation, distance remediation, industry consolidation, and the ramp in content spending by the major digital platforms touch every part of our company. We believe that we’re very well positioned to benefit from these trends, leveraging our strengths, mitigating risk and focusing on segments where we can continue to win. You'll see the evidence of this as I take you through the performance of our business segments in the quarter. At Starz, our programming strategy is working, in terms of ratings, subscribers and rights monetization. The latest seasons of Power, Outlander, and the Girlfriend Experience, are all Lionsgate Entertainment Corp. Thursday, November 09, 2017, 5:30 PM Eastern 2 achieving record viewership and deep engagement with their fans. Focusing on targeted core audiences is resulting in strong brand loyalty among women and African American viewers. And the recently green lit new series, Vida, will continue to expand our Lionsgate and Starz outreach to Hispanic audiences as well. Starz subscribers grew sequentially by 400,000 in the quarter, driven by the rapid growth of the networks over the top offering, which has crossed the 2 million subscriber mark. The data we’re collecting in the digital world on subscriber acquisition, retention, and churn is making our business more predictable and our success more repeatable. The Starz distribution footprint continues to grow in digital and linear platforms alike. And today, I am pleased to announce that Starz has entered into an agreement in principal to launch on Hulu, as it continues to become a great value proposition for all platforms. On the international front, STARZ PLAY Arabia is performing well and continuing to grow its subscriber base across the Middle East and North Africa. Our success at STARZ PLAY Arabia, coupled with our strong programming and rights retention, will allow us to expand selectively into other international territories. To close on Starz, the combination of our companies is everything we hoped for and more, and we’re going to continue to invest in its success. Turning to our film business, The Hitman’s Bodyguard, The Big Sick, and Boot 2 released in October, all connected with their target audiences. The Hitman’s Bodyguard, the kind of hip edgy film that we know how to make and deliver, topped the box office three weeks in a row. The Big Sick, one of several films we released with our partners in Amazon Studios, became the biggest Hindi hit of the year. While the industry suffered through a tough summer at the box office, our domestic slate was up 20% year-over-year. Moving forward, our slate will continue to focus on our core strengths. It includes tent pole properties, like Chaos Walking and the Kingkiller Chronicle. Our third movie in the John Wick franchise, Starz driven films like the Seth Rogen and Charlize Theron comedy from good universe, and films targeted to Hispanic and African-American moviegoers, such as Pantelion and MGM's Overboard, Uncle Drew, and the next to Tyler Perry films. Next Friday, we’ll release Wonder, starring Julia Roberts, Owen Wilson, and Jacob Tremblay. And it’s a great example of what we look for as we assemble our slate, bold original content based on a great property and driven by AAA talent. The highest testing film in our history, it's tracking well and it’s choose kind promotional campaign has resonated in schools and communities across the country. Our exhibition presales are very strong, audience reaction from early screenings has been exceptional, and we expect the film to play all through the lucrative Thanksgiving and Christmas holidays. Part of our ability to continue scaling our platform and mitigating risk, lies in the quality of our relationships with many of the leading content companies in the world. During the quarter, we renewed and expanded our theatrical distribution agreements with StudioCanal and CBS Films to elite partners, who are dependable suppliers of premium quality films. Lionsgate Entertainment Corp. Thursday, November 09, 2017, 5:30 PM Eastern 3 Last month, we acquired the production and distribution company, Good Universe, bringing Joe Drake and Nathan Kahane back to Lionsgate, adding a pair of respected entrepreneurs to our leadership team, and continuing to diversify our content platform. Joe and Nathan are adept is creating business models partnering with high-end talent, like Seth Rogen and Fede Alvarez, enhancing one of our greatest strengths unique, repeatable, long- term talent relationships. I want to remind everyone that our film business is more diverse than just our wide-release slate. Our specialty and targeted releases and managed brands had another strong quarter with a full-year contribution expected to increase by 20%. Let me turn to television, where our focus is clear: creating premium quality content in the most profitable genres, leveraging our platform agnostic ability to sell to everyone, and collaborating with our platform partners to create win-win business models. That strategy was evident during the quarter as high-end Lionsgate television properties were green lit at Starz, acquired by Showtime, and readied for launch at YouTube. The Rook, our first series for Starz since the acquisition, begins production in February. Co- produced with our friends at Liberty Global, Executive produced by Twilight-creator, Stephenie Meyer, and with acclaimed producer Steven Garret serving as show runner. It heads a Lionsgate television roster of high end properties for Starz. We're also excited about the continued progress of our Kingkiller Chronicle franchise. Showtime announced last month that it's developing a premium television series adaptation of Kingkiller. The series will be a subversive origin story that leads up to the events of the trilogy to first novel, which will frame our Kingkiller feature film. We’re continuing to assemble a world class creative team for the films as we move our unprecedented film, television and interactive game franchise forward under the direction of producer and creative mastermind, Lin-Manuel Miranda. We’re looking forward to premiering two new series on YouTube early next year. The first is Step Up, the television adaptation of our dance film franchise. The second is Kevin Hart’s What the Fit? Just one of several television series and other initiatives on which we’re partnered with Kevin. What you might see that’s a little different for us this year is that we're now also focusing on broadcast procedurals, where we believe we can achieve outsized returns. We've taken five network procedurals to market this season, selling all five in competitive bidding situations. One of them was an ABC pilot order from Get Christie Love, the first series developed by Power show runner, Courtney Kemp, under her expanded development deal with Lionsgate and Starz. Finally, our strategy of pairing our shows with the right network partners has enabled us to create a core of long-running series that includes Orange Is the New Black, Nashville, The Royals, Greenleaf, and Dear White People--all building evergreen value for our worldwide distribution team in our library.
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