Lionsgate Entertainment Corporation
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Lionsgate Entertainment Corporation Q1 2021 Earnings Conference Call Thursday, August 6, 2020, 5:00 PM Eastern CORPORATE PARTICIPANTS Jon Feltheimer - Chief Executive Officer Jimmy Barge - Chief Financial Officer Michael Burns - Vice Chairman Brian Goldsmith - Chief Operating Officer Kevin Beggs - Chairman, TV Group Joe Drake - Chairman, Motion Picture Group Jeff Hirsch - President, Chief Executive Officer, Starz Scott Macdonald - Chief Financial Officer, Starz Superna Kalle - Executive Vice President, International James Marsh - Executive Vice President and Head of Investor Relations 1 PRESENTATION Operator Ladies and gentlemen, thank you for standing by. Welcome to the Lionsgate Entertainment First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session; instructions will be given at that time. If you should require assistance during the call, please press "*" then "0." As a reminder, this conference is being recorded. I will now turn the conference over to our host, Executive Vice President and Head of Investor Relations, James Marsh. Please go ahead. James Marsh Good afternoon. Thank you for joining us for the Lion Gate’s Fiscal 2021 First Quarter 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 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, Jeff Hirsch, CFO, Scott Macdonald and EVP of International, Superna Kalle. 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 a variety of factors. This includes the risk factors set forth in Lions Gate’s most recent Annual Report on Form 10-K, as amended and our most recent Quarterly Report on Form 10-Q filed with the SEC. 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. I’ll now turn the call over to Jon. Jon. Jon Feltheimer Good afternoon. Thank you, James and thank you all for joining us. I hope everyone is staying safe and healthy. We completed the quarter with strong financial results in an extraordinary environment, in which our priorities were evident, monetizing our film and television library, embracing innovative distribution strategies for our films, and acquiring new properties while renewing others. Most importantly, it was a quarter in which we continued to use our content engine to create a unique, valuable and scalable global streaming platform at Starz. As I go through a recap of the quarter, one message stands out; our programming in Starz is working. The identity of the Starz brand is resonating. The growth of its domestic over-the-top business is robust, its international platform is successfully differentiating itself at a critical inflection point in the marketplaces. And the proposition of bringing Lions Gate and Starz together allows us to accelerate the growth of our direct-to-consumer offering by using the full portfolio of our resources is fulfilling its promise. Let’s start with the quarter’s highlights. Starz programming drove domestic streaming paid subscribers to an all time high of 7.4 million in the quarter. Internationally, Starz continues to Lionsgate Entertainment Corporation Thursday, August 6, 2020, 5:00 PM Eastern 2 establish itself as a must-have service with continued subscriber growth and expanding distribution footprint and a best of global effort content strategy that is resonating with consumers and platform partners alike. Globally we reached 11.4 million over-the-top subscribers in the quarter and our growth trajectory is on target for 13 to 15 million over-the-top subscribers by the end of the fiscal year. It was a productive quarterly for our line pay television group as all five of our new series were renewed, with Love Life becoming the second most watched series on HBO Max. We entered a lucrative multi-faceted syndication deal from Mad Men with Amazon Prime internationally, Amazon’s IMDb TV domestically, AMC, and STARZPLAY. We’re readying our next big property Weeds for syndication in the fall. And on the heels of last year’s record revenue, our library continued its outsized performance in the quarter as we continue to capitalize on demand for content. Turning to our individual businesses, Starz continues to differentiate itself as the home for programming for women, African-American and Latin mix audiences who have been underserved in the premium TV landscape. The Outlander franchise is stronger than ever, rallying at its fifth season with record multi-platform viewing as it became the number one original series on Premium for women. We also successfully launched two new series in the quarter; the crime drama "Hightown" from creator Rebecca Cutter and producer Jerry Bruckheimer premiered to an all time high for a new series on the Starz app and grew 33% from its series premier to its final episode. Its record was broken just a few weeks later, when Katori Hall’s P-Valley launched to rave reviews that propelled audience growth week-over-week since its premier, a rare feat among new shows. Both series are squarely in our wheelhouse of bold, provocative programming that is unique within the premium space, and both have been renewed for second seasons where our research shows that we often see outsized subscriber growth. Understanding the importance of the Tower franchise, our Lions Gate Television Group is doing a great job getting the next two power series ‘Ghost’ and ‘Raising Kanan’ ready for their scheduled launches as our vertical integration gives us an important element of control over the production of our shows. We’re also expanding the ‘World of Outlander’ with the new docu series, ‘Men in Kilts’ starring Sam Heughan and Graham McTavish. Going forward, we’re continuing to open the creative aperture with a combination of exciting new series including the comedy ‘Run the World’ from ‘Dear White People’ Yvette Lee Bowser. And returning favorites ‘The Girlfriend Experience’ from Steven Soderbergh and ‘The Spanish Princess’, which follows in the footsteps of critically acclaimed ‘The White Queen’ and ‘The White Princess’. It was also a strong quarter internationally. Planting our flag early in many countries gave Starzplay the opportunity to develop relationships with a growing list of established distribution partners and secure an enviable pipeline of exclusive world class content to deliver on our best of global S1 strategy. We've positioned ourselves as a destination for premium programming by curating a portfolio of provocative, edgy series, including ‘Normal People’, ‘The Great”, ROMI and ‘Killing Eve’, shows that have garnered a total of 17 Emmy nominations, along with iconic library series such as ‘Mad men’ and our full slate of Starz originals, with Starzplay now becoming the exclusive worldwide home of the Power Universe. Lionsgate Entertainment Corporation Thursday, August 6, 2020, 5:00 PM Eastern 3 Earlier this week, Starzplay announced its partnership with a sister company leading Spanish language streaming service PANTAYA for a slate of original, local language titles that reflects our focused premium approach. Exciting new series ranging from the thriller crime drama ‘Express’ from renowned storyteller Ivan Escobar, to addictive period pieces such as ‘Senorita Mexico’, and an unfiltered look at the life of international porn star Nacho Vidal. With a track record of success at Pantelion films, strong subscriber growth at PANTAYA and the ability to create the best in Spanish language programming, as evidenced by our 11 recent Imaan award nominations. This is a vertical where we can create exceptional value as a true market leader. Starzplay’s content strength has made it a must-have service on third-party platforms, as evidenced by the most recent launches on Roku, Apple TV plus and Rakuten and its fueling the growth on our own Starzplay App which we launched in three additional countries. Our bespoke relationships now encompass 58 different international partners who have recognized the appeal of our offering and whose collaboration will continue to serve as an enduring competitive advantage. To sum up, the transition to digital at Starz continues to accelerate. The majority of revenue from our traditional business is migrated to à la carte. We've executed a successful content strategy and we are continuing to grow a valuable, scalable, global streaming platform with unique characteristics that set us apart. Turning to our Motion Picture Group, it was an active quarter where we moved major franchises forward, resumed theatrical production, and demonstrated the flexibility and optionality of our slate. There's good news on ‘The Hunger Games’ front Suzanne Collins’ ‘Ballad of Songbirds and Snakes’ has been a smash success, selling more copies than any other book released in the United States in the first six months of the year. With all of the excitement around the franchise, sales of ‘The Hunger Games’ titles in our library are experiencing growth beyond expectations. And we're working closely with Suzanne and the rest of the ‘Hunger Games’ team to get the movie ready for production. We're also busy preparing scripts for the next two installments of our John Wick action franchise. With John Wick 4 is slated to hit theaters Memorial Day weekend 2022. We hope to shoot both John Wick 4 and 5 back to back when Keanu becomes available early next year.