Lionsgate Studios Q1 Earnings Call Highlights

Key Points

• Strong quarterly performance: Lionsgate Studios’ fiscal first-quarter revenue rose 48% year over year to $777 million, driven by motion-picture results. Free cash flow reached $129 million, while motion-picture segment profit hit a record $105 million, led by Michael and The Housemaid.
• Growth expected from films and television: Management anticipates significant adjusted OIBDA and free-cash-flow growth in fiscal 2027, supported by upcoming releases such as The Hunger Games: Sunrise on the Reaping, doubled scripted-episode deliveries and a new international Netflix licensing agreement for the Power franchise.
• Balance sheet improved while strategic flexibility remains: Net debt declined by $121 million to approximately $1.5 billion, reducing leverage to 4.3 times. Lionsgate said it has not held substantive M&A discussions despite market speculation, but emphasized the strategic value of its franchise portfolio and intellectual property.

Lionsgate Studios NYSE: LION reported fiscal first-quarter revenue growth of 48% year over year to $777 million, driven by strong motion-picture performance and contributions from recent releases, while management said it expects significant adjusted OIBDA and free-cash-flow growth for fiscal 2027.

The company posted adjusted OIBDA of $79 million and operating income of $26 million for the quarter. Reported diluted loss per share was $0.10, while diluted adjusted earnings per share was $0.06. Free cash flow totaled $129 million, which Chief Financial Officer Jimmy Barge said reflected operating performance including the April release of Michael.

“Our pure-play content strategy is working,” Chief Executive Officer Jon Feltheimer said, citing a strengthening balance sheet, expanding franchise portfolio and continuing library monetization. He said Lionsgate ended the first half of the calendar year with domestic box-office market share above 10% after launching Michael and The Housemaid.

Motion Picture Results Lead the Quarter

Motion-picture revenue more than doubled from the prior-year period to $587 million, while segment profit reached $105 million, the highest first-quarter motion-picture segment profit in Lionsgate’s history. Barge said results were driven primarily by Michael and continued ancillary revenue from The Housemaid.

The company said it expects further downstream revenue from both films during the remainder of fiscal 2027. Barge noted that Michael made a major contribution in the first quarter and has additional revenue expected over the following three quarters. Lionsgate also expects the third-quarter release of The Hunger Games: Sunrise on the Reaping to support results later in the year.

Feltheimer said Lionsgate has more than a dozen branded and repeatable properties planned over the next three years, with four films already wrapped and preparing for release. He said early indicators suggest The Hunger Games: Sunrise on the Reaping could become one of the biggest films in the franchise.

The studio also said production has wrapped on John Rambo, directed by Jalmari Helander and starring Noah Centineo, with a release planned for next June. Production has also concluded on Caine, directed by and starring Donnie Yen and centered on a character from the John Wick universe. The company is also preparing projects including The Housemaid Secrets, a new Blair Witch installment with Blumhouse and Atomic Monster, and an adaptation of Naruto.

Motion Picture Group Chairman Adam Fogelson said Lionsgate evaluates franchise projects based on whether they address audience interest in particular characters and storylines, as well as whether films can be made with appropriate budgets and creative teams. He said the studio actively communicates with fan bases through its digital operations.

Regarding a potential Michael sequel, Fogelson said Lionsgate is targeting production around the end of calendar 2027 or early 2028. He said the current expectation is for release between the end of calendar 2027 and the first half of calendar 2028, though the company has not provided budget guidance. Some musical sequences previously filmed are expected to be incorporated, he said.

Television Deliveries and Power Licensing

Television revenue was $189 million and segment profit was $10 million. Barge said the year-over-year decline reflected the timing of episodic deliveries, but Lionsgate expects significant television growth in fiscal 2027 as it doubles scripted episodic deliveries and recognizes contributions from a new Netflix licensing agreement for the Power franchise.

Feltheimer said Lionsgate is nearing a perfect 13-for-13 renewal record for its current scripted series, with renewals spread among 12 buyers. The company recently secured pickups for DINKS, an Amazon comedy from Friends co-creator Marta Kauffman developed through a partnership with Publicis Groupe, and Trauma, a medical action thriller starring Richard Madden that will stream on Prime Video in the United Kingdom and Paramount+ in the U.S. and other markets.

Lionsgate licensed the first four Power series to Netflix internationally, while the original Power series will stream worldwide on Netflix for three years beginning in November. Jim Packer, president of worldwide television distribution, said the deal could expand the franchise’s international reach and create future licensing opportunities as additional series become available.

“It’s just a really great time right now to have library series, especially high-profile signature franchises in the marketplace,” Packer said. He also pointed to future opportunities for titles including Orange Is the New Black, Mythic Quest and Mad Men after its HBO availability ends.

Library, Cash Flow and Deleveraging

Trailing 12-month library revenue was $987 million, roughly unchanged from the prior year, while film and television backlog rose 21% to $1.5 billion. Feltheimer said the largest individual library contributor during the quarter was the 38-year-old film Dirty Dancing.

Barge said the growing backlog should support future library revenue and cash flow. Management also said it is strategically planning franchise windows around the upcoming Hunger Games release in an effort to build audience interest across transactional and licensing platforms.

Net debt fell $121 million sequentially to approximately $1.5 billion. Leverage improved to 4.3 times, reaching Lionsgate’s mid-four-times target earlier than anticipated. The company ended the quarter with $426 million in unrestricted cash and $800 million of available revolver capacity.

Barge said Lionsgate expects leverage to remain in the low-to-mid-four-times range through fiscal 2027. He said a potential 3 Arts-related put in the fourth quarter could add roughly half a turn of leverage, but management expects the company to deleverage afterward, targeting three to three-and-a-half times leverage in fiscal 2028 and below three times thereafter.

Strategic Options and AI Initiatives

Vice Chairman Michael Burns said Lionsgate had not engaged in substantive merger-and-acquisition discussions despite media reports about possible interest in the company. He said the company does not comment on M&A speculation but views its franchise portfolio and intellectual property as valuable assets in an increasingly consolidating media market.

“We believe we have real strategic optionality,” Burns said.

Management also highlighted artificial intelligence as an area for cost reduction, production efficiency and potential revenue growth. Feltheimer said Lionsgate is using AI in preproduction and postproduction, while emphasizing the need to work closely with creative talent on generative-AI applications. He said approximately 95% of employees are using AI tools across the business.

Feltheimer said new technology historically has created incremental revenue opportunities for strong library content, while Packer said Lionsgate expects demand for new home-entertainment formats to provide additional opportunities for its film catalog.

About Lionsgate Studios (NYSE:LION)

Lionsgate Studios, operating under the ticker NYSE:LION, is a leading global entertainment company specializing in the production, acquisition and distribution of motion pictures, television programming and digital content. Headquartered in Santa Monica, California, and with additional operations in Vancouver, the company develops, finances and markets feature films that span a wide range of genres—from major franchise hits like The Hunger Games and John Wick to independent and specialty titles.

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