Lionsgate Studios’ Earnings Call Contradictions: M&A Shifts, Leverage Timelines Clash

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $777 million, up 48% YOY
• EPS: Reported diluted loss per share: $0.10; Diluted adjusted earnings per share: $0.06

Guidance:

• Significant growth in adjusted OEBIDA and free cash flow expected in fiscal 2027 and beyond.
• TV segment profit expected to improve sequentially in Q2 and accelerate in the back half of the year.
• Expect strong earnings momentum to continue into fiscal 2028.

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Business Commentary:

Revenue and Profit Growth:

• Lionsgate Studios reported revenue of $777 million for the first quarter of fiscal 2027, showing a 48% year-over-year increase. Adjusted EBITDA improved to $79 million, and free cash flow was $129 million.
• The growth was driven by strong performance in the motion picture segment, particularly from the film "Michael," and ancillary contributions from "The Housemaid."

Motion Picture Segment Performance:

• The motion picture segment achieved a segment profit of $105 million, marking the highest first-quarter profit in the company's history. Revenue more than doubled year-over-year to $587 million.
• This was primarily due to the exceptional performance of "Michael" and continued strength in ancillary contributions from "The Housemaid."

Television Segment and Licensing Deals:

• The television segment reported revenue of $189 million, with a $10 million segment profit, although revenue and profit were down year-over-year due to timing of deliveries.
• Upcoming growth is expected from increased scripted episodic deliveries and the licensing deal of the "Power" series to Netflix, enhancing global reach and franchise value.

Library and Backlog Strength:

• Trailing 12-month library revenue was $987 million, consistent with the prior year, and the backlog grew to $1.5 billion, a 21% year-over-year increase.
• The strength in the library and growing backlog underscores the enduring value of their intellectual property, providing a stable source of recurring revenue.

Financial Health and Leverage:

• Lionsgate ended the quarter with net debt of approximately $1.5 billion, achieving a leverage ratio of 4.3 times, down nearly two turns since the previous quarter.
• This improvement was due to better-than-expected free cash flow from strong theatrical performance and ancillary revenues, positioning the company for continued growth and deleveraging.

Sentiment Analysis:

Overall Tone: Positive

• CEO reported "another quarter with strong financial results and growing momentum." "Pure play content strategy is working." "Balance sheet is strengthening faster than anticipated." "Portfolio of intellectual property is becoming ever more franchise-driven and valuable." "We continue to see encouraging signs in our operating environment."

Q&A:

• Question from Vikram Kasavabatla (Baird): Perspective on factors influencing success of IP in current market and confidence in slate of sequels/revivals.
  Response: Management evaluates IP based on direct fan demand and excitement for new or continued storylines, with robust fan communication. All slate projects have met high thresholds, giving management confidence.

• Question from Vikram Kasavabatla (Baird): Follow-up on the Power licensing deal with Netflix and broader library business health.
  Response: The deal provides transformative global exposure for the Power franchise and sets up future opportunities. Overall library business is strong, with many returning series expected to boost value.

• Question from Omar Mejias (Wells Fargo): Update on M&A front and Lionsgate's position in consolidated media environment.
  Response: No substantive M&A conversations; company remains a compelling asset in a consolidating market and has real strategic optionality.

• Question from Omar Mejias (Wells Fargo): Thoughts on earnings power for fiscal 27 and beyond.
  Response: Company is on track for a strong fiscal 2027 and expects momentum to continue into fiscal 2028, with potential for strong performance if key content does well.

• Question from Brent Penter (Raymond James): Update on strategic review and performance of the 3Arts business.
  Response: Focused on non-financial strategic transactions; operationally pleased with momentum in new verticals like sports and creator content, and strong collaboration with Lionsgate.

• Question from Brent Penter (Raymond James): Updates on the Michael sequel, including timing and economics.
  Response: Targeting production start late this year/early next, with release likely in late 2027 or early 2028. Will incorporate previously shot sequences to manage budget.

• Question from Brent Penter (Raymond James): View on the Paramount/Warner Bros. deal and its potential impact.
  Response: Favors certainty and a better-financed, competitive streamer, which would benefit Lionsgate's original programming and library sales.

• Question from Sean Diffley (Morgan Stanley): Elaboration on TV demand backdrop and Lionsgate's 'special sauce' resonating with streamers.
  Response: Success stems from nontraditional deals (e.g., sponsored series with Publicis), strategic partnerships, and a strong, cyclical library of over 100-episode series.

• Question from Sean Diffley (Morgan Stanley): How AI is being used to energize IP and the benefits envisioned.
  Response: AI is seen as a tool to grow revenue and lower costs across production and operations, with responsible deployment and creative collaboration.

• Question from David Joyce (Seaport Research Partners): Benefit of the Power deal to Starz and the construct of Michael's profitability.
  Response: Deal is good for Starz as a platform partner; Michael's profitability follows traditional models with shared upside, and it has a long tail across downstream windows.

• Question from Matthew Harrigan (Stonex): Potential for a step function lift in library OCF from billion-dollar films and technological advances.
  Response: Billion-dollar films and new tech (like AI, 8K) are expected to provide incremental benefits and lift for library revenue, with a strong content pipeline.

• Question from Vikram Kasavabatla (Baird) - Follow-up: Initial reception to Hunger Games marketing, library demand impact, and contribution to business.
  Response: Marketing for Hunger Games film is highly engaged, answering fan questions. Strategic windowing builds franchise value and supports strong trailing library revenue.

• Question from Vikram Kasavabatla (Baird) - Follow-up: Runway for ancillary performance from The Housemaid and Michael, and leverage trend.
  Response: Ancillary revenues from The Housemaid and Michael have significant remaining tailwinds. Leverage is expected to continue declining, targeting low-to-mid four times in fiscal 2027 and below three in fiscal 2028.