Lionsgate's Earnings Signal Turnaround as Studio Split Nears

Lionsgate (NASDAQ: LGF.A) is set to report its fourth-quarter and full-year fiscal 2025 earnings after market close on May 22, 2025, alongside a conference call with management. The release will mark a pivotal moment for the media giant, which has been navigating a strategic overhaul, including its planned separation into two entities: Lionsgate Studios (content production) and STARZ (streaming and networks). Analysts will scrutinize whether Lionsgate’s operational adjustments and content pipeline are delivering on its promise of “disciplined growth.”

Key Financial Drivers and Recent Performance

Lionsgate’s third-quarter fiscal 2025 results, released in December 2024, offered a glimpse of stabilization amid challenges. Revenue totaled $971 million, while adjusted OIBDA reached $144 million, driven by record library revenue ($954 million over 12 months) and cost discipline in its television division. The studio’s mid-budget film strategy bore fruit, with titles like Den of Thieves 2 and Flight Risk outperforming internally. Meanwhile, the STARZ division saw North American OTT subscribers rise sequentially to 12.6 million, though linear declines persisted.

The separation of Lionsgate’s businesses—expected to be finalized by late 2024—remains a focal point. Management has emphasized that the split will allow each entity to focus on core strengths: Lionsgate Studios on content creation, and STARZ on subscription streaming and bundling.

Segments to Watch in Q4 Earnings

1. Studio Business (Motion Picture & Television):
2. Film Carryover: The Q3 slate’s success (e.g., Den of Thieves 2) is expected to boost Q4 library revenue. Upcoming releases like Ballerina (a John Wick spin-off) and The Housemaid (holiday 2025) could drive momentum.

3. TV Deliveries: Final episodes of Ghost and The Rookie will contribute to Q4 revenue, while Spartacus (STARZ) and The Studio (Apple TV+) aim to expand Lionsgate’s scripted footprint.

4. STARZ Division:

5. Subscriber Growth: Sequential gains in North American OTT subscriptions (now 12.6 million) should continue, supported by bundling deals with Prime Video and VIZIO. Management aims to meet its $200 million adjusted OIBDA target for fiscal 2025.

6. Cost Controls: STARZ’s focus on reducing content amortization and operational expenses will be under the microscope.

7. Library and Ancillary Revenue:

8. Lionsgate’s 20,000-title library, including franchises like The Hunger Games and John Wick, is a cash cow. The company’s advanced windowing strategies (e.g., delaying streaming releases to maximize pay-TV windows) and new tech-driven sales tools are key to sustaining growth.

Debt and Capital Structure

Lionsgate’s total debt stood at $2.4 billion as of March 2025, with leverage ratios at 6.5x (consolidated). Post-separation, management targets a 5.5x leverage ratio for Lionsgate Studios and 3.3x for STARZ, signaling confidence in their ability to reduce debt through free cash flow.

Strategic Initiatives and Risks

• Amazon Pay 1 Deal: Lionsgate’s output pact with Amazon Prime Video, which secures exclusive access to its films starting 2026, could significantly boost Pay TV revenue.
• Ancillary Ventures: The John Wick immersive experience (launching in Las Vegas, October 2024) and stage adaptations like Hunger Games (London 2025) aim to monetize IP beyond traditional releases.
• Risks: Subscriber retention in a crowded streaming market, integration costs post-separation, and potential content underperformance (e.g., Borderlands’ disappointing 2024 box office).

Analysts’ Outlook and Valuation

Analysts are split on Lionsgate’s near-term prospects. Bulls argue that the separation and library strength position the company for long-term growth, while bears cite high debt and macroeconomic headwinds. The stock’s forward P/E multiple of ~15x is in line with peers, but upside hinges on execution of the separation and content performance.

Conclusion

Lionsgate’s Q4 earnings will test its ability to execute on its turnaround strategy. With a record library, mid-budget film successes, and STARZ’s subscriber momentum, the company is positioned to deliver a resilient performance. Key metrics to watch include:
- Studio segment profit: Expected to hit ~$180 million in Q4 (up from $112 million in Q3).
- STARZ’s OIBDA: Must meet the $200 million annual target.
- Debt reduction: Progress toward the 5.5x leverage target post-separation.

If Lionsgate delivers on these fronts, its stock could rally, reflecting investor confidence in its dual-entity future. The separation, once complete, may unlock value by isolating growth drivers in each division. For now, the focus is on whether Q4 earnings signal a sustained turnaround—or if Lionsgate remains a work in progress.