Lionsgate takes $1.8bn hit, cuts territories
November 4, 2022
Lionsgate has reported second quarter (to September 30th 2022) revenue of $875.2 million (€893.7m), operating loss of $1.75 billion and net loss attributable to Lionsgate shareholders of $1.81 billion.
The company made a strategic decision to exit seven Lionsgate+ (formerly Starzplay International) international territories, France, Germany, Italy, Spain, Benelux, the Nordics and Japan, to streamline the business. It took a $218.9 million restructuring charge in the quarter primarily driven by content impairment write-downs in the affected territories.
Financial results in the quarter also include a $1.48 billion non-cash impairment charge related to goodwill from the Starz acquisition. The goodwill impairment charge reflects changes to Media Networks’ future free cash flow projections as well as comparable company underlying valuations.
“We reported another strong library performance and continued growth in Lionsgate Television series deliveries as our studio businesses continued to perform in line with expectations in the quarter,” said Lionsgate CEO Jon Feltheimer. “Economic and industry headwinds are having the greatest impact at Starz, where we are exiting seven international territories. This will allow us to streamline Starz’s international business and return it to profitability more quickly while continuing to build on the opportunities created by a strong Starz original series slate and focused content strategy domestically.”
Revenue from Lionsgate’s 17,000-title film and television library was $747 million for the trailing 12 months. The company reported library revenue of $210 million in the quarter.
Second Quarter Results
Segment Results
Media Networks segment revenue of $396.1 million compared to $384.7 million in the prior year quarter. Media Networks segment revenue was impacted by lower domestic linear revenue, offset by growth in domestic streaming revenue and Lionsgate+ revenue. Segment profit increased to $21 million compared to a profit of $5.5 million in the prior year quarter, driven by lower marketing both domestically and internationally, offset by the timing of programming cost amortisation. Total Media Networks global subscribers increased to 37.8 million including Starzplay Arabia, a non-consolidated equity method investee, driven by growth in both international and domestic streaming subscribers. Global streaming subscribers increased 52 per cent year-over-year to 27.3 million. Lionsgate+ subscribers grew 97 per cent year-over-year to 14.8 million (including Lionsgate Play in India & South Asia).
As aforementioned, the Company made a strategic decision to exit its Lionsgate+ streaming business in seven international territories and took a restructuring charge of $218.9 million. It also recorded a non-cash impairment charge related to goodwill totaling $1.48 billion.
The Studio Business, comprised of the Motion Picture and Television Production segments, reported revenue of $654.9 million compared to $666.9 million in the prior year quarter. Segment profit of $69.1 million compared to $130.3 million in the prior year quarter. The year-over-year decline in revenue was driven by decreased revenue at Motion Picture partially offset by increased revenue at Television Production, and the year-over-year segment profit decline was driven by declines at both Motion Picture and Television Production.
Motion Picture segment revenue decreased to $224 million compared to $330.9 million in the prior year quarter. Segment profit decreased to $55.5 million compared to $101.8 million in the prior year quarter. Motion Picture revenue and segment profit declines reflect a tough comparison with the second quarter of fiscal 2022, which benefited from strong carryover revenue from fiscal 2021 titles.
Television Production segment revenue increased to $430.9 million compared to $336 million in the prior year quarter. Segment profit decreased to $13.6 million compared to $28.5 million in the prior year quarter. The revenue increase was driven by continued growth in content deliveries, while segment profit declines reflect accelerated content amortisation of a cancelled series.