Good afternoon, and welcome to the Lionsgate Second Quarter 2023 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nilay Shah, Investor Relations. Please go ahead. Good afternoon. Thank you for joining us for the Lionsgate Fiscal 2023 Second 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. From Starz, we have President and CEO Jeffrey Hirsch, CFO Scott MacDonald, and President of Domestic Networks Alison Hoffman. 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 various factors. This includes the risk factors set forth in Lionsgate's most recent annual report on Form 10-K, as amended in our most recent quarterly report on Form 10-Q filed with the SEC. The company undertakes no obligation to publicly release the result 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. Thank you, Nilay. Good afternoon, everyone, and thank you for joining us. I want to start with a few words about the charges we just announced, and then I'll talk about the quarter and close with an update on our strategic process. As you saw, we're taking a non-cash goodwill write-down at Starz, as well as a charge primarily related to the restructuring of our Starzplay international business, now called Lionsgate+. We've made a strategic decision to exit seven international territories, six markets in continental Europe, as well as Japan. This process has already begun and will be completed by the end of the fiscal year. Though this was a tough decision, the restructuring leaves Starz with a streamlined international business positioned to compete in places where we can win with a strong and scalable presence in the U.K., Canada, and Latin America. Domestically, we're facing equally challenging headwinds, which I will talk about from an operational perspective and Jimmy will discuss in financial terms. Starz remains a unique premium platform with a focused content strategy, a robust slate of hit series, and significant upside as bundling and packaging opportunities come to fruition. These charges are an acknowledgment of current market conditions and the challenges in our environment, but they also represent an opportunity to stabilize our Starz business, reset expectations, and drive higher adjusted OIBDA as we move forward. Now let's turn to the quarter beginning with Starz. During the quarter, there was continued degradation of the linear ecosystem, but Starz continued to grow both international and domestic streaming subscribers. Even more importantly, Starz continues its successful transition to digital. Streaming now accounts for 71% of Starz subscribers and 62% of its revenues, and the platform has remained profitable throughout this transition. Starz's continued digital transformation helps to insulate us from further erosion in the linear space while positioning us to benefit from new marketing and distribution opportunities when the overall streaming ecosystem becomes more robust. On the programming front, the critically acclaimed P-Valley emerged as a breakout success in its second season, becoming Starz's most watched show with an average of 10.3 million multi-platform viewers per episode. All three of the quarter standout performers, P-Valley, Raising Kanan and The Serpent Queen, have been picked up for additional seasons. Starz now has five shows each with more than 8.5 million multi-platform viewers, an impressive track record for a streamer of any size. Given this level of viewership and with a focus on two valuable and scalable core demos, we are well-positioned to be part of every conversation as the business evolves into a bundled direct-to-consumer world. Turning to our studio businesses. Our upcoming film slate is filled with new installments of nearly all of our major franchises. John Wick: Chapter 4, The Hunger Games: The Ballad of Songbirds & Snakes, Dirty Dancing, Now You See Me 3, Expend4bles, Saw, and the John Wick spin-off Ballerina starring Ana de Armas, which begins production next week. With tentpoles in every quarter, we're putting together a lineup reminiscent of the slate that performed strongly in 2019, the last pre-pandemic year. Our film business is about more than tentpoles. With Prey for the Devil, our most recent wide release, and Fall, a smaller opportunistic release, we show that we can create successful business models for every kind of film. Upcoming releases like the Gerard Butler thriller Plane, prestige films like Are You There God? It's Me, Margaret, the action thriller Shadow Force, and Alice, Darling starring Anna Kendrick. Round out one of our most balanced slates in years, a slate that speaks to our optionality and ability to play in every part of the movie ecosystem. I would also note that in a highly competitive bidding situation, we moved quickly to acquire director Tim Story's horror parody, The Blackening, a film that fits our ethos of bold, edgy, and provocative fare. We're putting it on the schedule immediately and believe we have a real hit and a potential franchise on our hands. In terms of television, the headline is that we successfully operate as both a content arms dealer and a streamer. Our television group has become one of the world's leading independent suppliers of premium scripted series to third-party buyers, while also supporting Starz growth with a pipeline of 15 shows. Our licensing and windowing activities also extend to Starz in terms of how they stream, license, and bifurcate the rights to their shows. Having a bespoke partner at Starz has allowed us to scale to over 100 shows across our scripted and unscripted business, while our content partnerships with 3 Arts Entertainment, Debmar-Mercury, Pilgrim Media, BBC Studios in the UK, Bell Media in Canada, Stan in Australia, and talent management and production company 42 in the U.K. have allowed us to build a truly global content creation capability. This content platform continues to create hits. This quarter saw the continued growth of the comedy Ghosts on CBS, a breakout phenomenon that has steadily grown its audience since launch, emerging as CBS's number one comedy in key demos and already sold to Paramount+ for SVOD as we begin to monetize its many windows. The John Wick TV origin story, The Continental, is on its way to becoming another transformative property. After licensing it to Peacock domestically, we announced earlier this afternoon that Amazon Prime has licensed the show internationally. With Peacock and Amazon aboard as partners, the global rollout of The Continental is positioned to be one of the streaming events of 2023. It puts a solid exclamation point on the continued growth of John Wick into one of the world's premier action franchises, driving value across our television and film businesses. With Ghosts and The Continental on their way to becoming drivers that will sit alongside Mad Men, Weeds, and Orange Is the New Black in our library, we're continuing to convert this value into strong financial results with our television group expecting to generate strong and increasing segment profit this year as well as in fiscal 2024 and fiscal 2025. I want to close with a few thoughts about our strategic process. As we've said before, we are committed to separating our media networks and studio business. As part of this process to separate the businesses, we're disclosing today certain financial information prepared in connection with strategic and financial discussions. This disclosure provides additional information regarding management's expectation of the range of segment profit for each of the studio and media networks businesses in fiscal 2023 and fiscal 2024. Now I'll turn things over to Jimmy. Thanks, Jon, and good afternoon, everyone. I'll briefly discuss our second quarter financial results and update you on the balance sheet. Second quarter adjusted OIBDA was $47 million and total revenue was $875 million. The year-over-year adjusted OIBDA decline primarily reflects the tough year-over-year comparison as Motion Pictures prior year quarter benefited from strong rollover revenue from the fiscal 2021 slate. Reported fully diluted earnings per share was a loss of $7.95 a share, and fully diluted adjusted earnings per share came in at a loss of $0.12 a share. Adjusted free cash flow for the quarter was $124 million. As Jon mentioned in his prepared remarks, we took two large charges this quarter that impacted our unadjusted operating results. First in the quarter, we took a non-cash goodwill impairment charge of $1.475 billion related to our 2016 Starz acquisition. This write-down reflects changes in the market valuations for streaming assets and related factors stemming from increased competition and a slowing global economy. Additionally, we recorded a $233 million charge primarily related to the restructuring of our streaming service in several international markets. We believe that Starz's focus on the remaining territories will provide our international business a clear path to profitability while continuing to grow subscribers off a lower base. Now let me briefly discuss the fiscal second quarter performance of the underlying segments compared to the previous year quarter. Media Networks' quarterly revenue was $396 million and segment profit was $21 million. Revenue grew 3% year-over-year as we continue to see favorable shifts in subscriber mix driving continued OTT revenue growth, partially offset by continued linear pressure. Domestic revenue was essentially flat year-over-year, while year-over-year international revenue was up 48%. Media Networks' segment profit was up significantly year-over-year and primarily reflects lower marketing spend both domestically and internationally, partially offset by higher content expense. We ended the quarter with 37.8 million total global subscribers, including Starzplay Arabia. Total global media networks OTT subscribers grew 1 million sequentially to 27.3 million subscribers. This represents year-over-year global OTT subscriber growth of 52%, comprised of domestic OTT growth of 18% and international OTT growth of nearly 100%. I wanna update everyone on the impact of the international restructurings we'll have on our subscriber trajectory and financial outlook going forward. While the exact timing is still being finalized, we expect our transition to be completed by the end of this fiscal year and our total international subscriber base at year-end to exceed 7 million. We expect international segment profit will improve significantly on a quarter-over-quarter and year-over-year basis, starting with the current December quarter. We remain committed to reaching breakeven in our international business exiting calendar year 2024 or earlier. Now I'd like to talk about the studio business in aggregate. Revenue of $655 million was down 1.8% year-over-year, driven by the Motion Picture Group. Segment profit of $69 million was down year-over-year, driven by declines in both Television and Motion Picture. Our total library revenue at the studio was $747 million on a trailing twelve-month basis, which is in line with the prior quarter. Breaking down the studio business between motion picture and television, let's start with motion picture. Motion picture revenue was down 32% year-over-year to $224 million, while segment profit of $56 million was down due to a difficult comparison with the last quarter's second quarter, which benefited from the rollover of the 2021 slate. Revenue and segment profit trends reflect continued strength in our library while we move into the second half slate with the return of some of our larger theatrical titles, including fourth quarter release of John Wick: Chapter 4, as well as several major releases in fiscal year 2024. Finally, television revenue was up 28% to $431 million, driven by continued growth in output, which included both new and returning series. Segment profit came in at $14 million and was down year-over-year, reflecting the impact of accelerated content amortization related to a series cancellation. Now let's talk about our balance sheet. Excluding the restructured Lionsgate+ territories from the trailing twelve months adjusted OIBDA, leverage for the quarter improved to 5.5 times. We also continue to retain significant liquidity with over $550 million of cash on hand and a $1.25 billion undrawn revolver. Currently, we have no maturities until the fourth quarter of fiscal 2025. We remain committed to strengthening our balance sheet and continuing to pay down debt while funding our investment in content and marketing from adjusted free cash flow. In anticipation of separating our studio and media networks businesses, you will see that we have provided an adjusted OIBDA outlook for fiscal years 2023 and fiscal year 2024 that breaks out each of these businesses. Given some of the headwinds we are seeing from the slowdown in the global economy, most acutely felt at Starz, we now forecast adjusted OIBDA for the year to be between $275 million and $325 million. This implies a healthy ramp in adjusted OIBDA in the back half of the year, driven by strong library sales, including the licensing of Schitt's Creek to Hulu, the direct-to-platform release of Shotgun Wedding to Amazon, and continued cost rationalization, most directly evidenced in our international restructuring. As for fiscal 2024, we see adjusted OIBDA in the range of $400 million-$450 million. We see a strong year in fiscal 2024 as John Wick follow through, along with the licensing of The Continental to Peacock in the U.S. and Amazon internationally, should make for strong studio segment profits and margins. Finally, you will notice that our eliminations are a larger than normal drag on adjusted OIBDA in fiscal 2023 and fiscal 2024. This is due to the increase in intercompany activity between Starz and the studio businesses, as represented by the healthy amount of content for Starz made by our television studio, as well as the Q3 onset of the pay one deal between our Motion Picture Group and Starz. Over time, the eliminations at the profit line should normalize to zero, but I wanted to point out this near-term impact on our overall consolidated adjusted OIBDA. Finally, it's important to note that when we separate the studio business from Starz, the eliminations will go away. Now I'd like to turn the call over to Nilay for Q&A. Can you open the line up for questions? Certainly. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Once again, that's star then one to ask a question. Our first question comes from Kutgun Maral at RBC Capital Markets. Great. Thanks for taking the questions. Two, if I could. You know, first, can you provide some background on what seems to be a decision or maybe a path to spin off the studio business instead of Starz? And if there's anything you could share on how those discussions are evolving, any expectations around timing. And just second, you know, when we think about the Lionsgate+ exit in the seven international markets, I was just curious if that could offer any content licensing opportunities, as you kind of dig into the business plan. And more broadly, if it does, you know, what does that kind of, how does that impact your thinking on, you know, other international markets or even Starz domestically? Thanks. Maybe I'll answer the first part. Sure. You know, with regards to the decision to spin the studio and the separation, look, we've done a lot of work here, and there's definitely, as we've noted before, structural benefits to handling it in this fashion. Particularly on the financial side of things, there are advantages. I would just remind you that the debt structure, including the favorable interest rate bonds, reside on the Starz side of the business. There's obviously benefits to spinning the studio in lieu of Starz. From a tax perspective, there's a couple things because we've had the question. I would just note that, as we've said before, that the separation, okay, and spin of the studio would be done in a very tax-efficient manner. I would expect that it would be tax-free for shareholders. In order to retain flexibility, okay, it would be taxable from a corporate spin perspective, but without any significant cash tax consequences. The other thing I'd point out from a tax perspective, as you've seen in our filings, we have over $1.4 billion of NOLs, which would not be degregated during the spin process. $1.2 billion of those NOLs would travel with the studio, leaving a little over $200 million with Starz. With regards to timing and the regulatory process, I would just say that we've done a lot of work here. I would just say that this does not preclude a transaction or deleveraging event prior to or in conjunction with pursuing any regulatory approvals. Okay. I would also note that we can also separate the companies without a deleveraging event. Yeah. In terms of your other question, Kutgun. Jon, I'll answer. Jeffrey may wanna jump in. If I understood your question, you know, we're exiting mostly territories that have low ARPU, a lot of bundled subs. Frankly, when you think about it that way, sort of the ability to pay in those territories for expensive content, whether it's our content at Starz and Lionsgate or a third-party content, really, it's not the most efficient use of that content, frankly. You know, we're a global distribution business. We will take the content rights that we own. We will sell them. Hopefully, we'll do better. In terms of even the write-off, we hope and frankly expect to mitigate a large portion of that with our sales. Does that answer your question? Yeah. Yeah, it does. Thanks so much. I really appreciate it. Thank you both. Great. You're welcome. Thanks, Kutgun. Operator, could we get the next question, please? The next question is from Matthew Thornton at Truist Securities. Hey, good afternoon, everyone. Thanks for taking the question. You know, I think, Jon Feltheimer, I think your goal here was to strike and find a transaction that enabled deleveraging, provided a valuation marker, and I think, you know, perhaps provided some strategic benefits, if that could be found. Obviously, the macro is pretty turbulent here, but deals are getting done as we saw with Skydance. My question here is, has your confidence in getting a deal done that meets your criteria changed, since the last earnings update? No. I wouldn't say so. Obviously, it's not helpful, number one, when there's a big disconnect between the separate values, some of the parts, if you will, of our two core businesses, and where our stock price is right now. Because obviously, when people are looking at either of those sides, they may look at Topco and say, "Well, maybe that's a better and smarter investment for me, at least as part of my investment thesis and, you know, being in business with us." You know, that's not particularly helpful. It's frankly one of the reasons that we put out these numbers today to give all of our investors, frankly, an equal playing field, with anyone we may have given this information to before, frankly, to show, you know, the transparency, and frankly, particularly at the studio level, where, I think sometimes the consolidated company eliminations have somewhat masked, I would say, the real value of what we're doing at the studio. I don't know if everyone understands those eliminations. Jimmy, I don't know, can you fill them in a little bit? Yeah, certainly. The 8-K is, you know, prepared in conjunction with preparing for separation. To Jon Feltheimer's point, and as I noted in my remarks, the intercompany eliminations go away upon any separation. You know, this is important to look and see that you can see that some of the parts adjusted to EBITDA for the Studio and Starz together, just look at that, excluding the intercompany eliminations, of course, which go away, the midpoint of that projection is over $500 million in fiscal 2024. That's worth noting. The other thing I think is worth noting in particular, and it masks perhaps $1 billion of value in the Studio, is if you look at the corporate G&A, you know, if you wanna just use a 10x multiple or whatever you would wanna put on it, you know, in any ultimate monetization of the Studio, the corporate G&A would likely be significantly reduced or eliminated. Again, that masks $1 billion of value in the Studio if you look at those numbers. That's helpful. Maybe, Jimmy, I could just ask you for a quick housekeeping follow-up. The TV production accelerated amortization, any quantification there? Then just, currency in the quarter, I would assume, was probably some headwind top line and bottom line in international. I guess, any quantification there. Thanks again, guys. Yeah. To give you an idea, the FX was, you know, over $10 million in the quarter, and primarily in Starz International, as you would expect, as well as the Motion Picture Group. In terms of the, Amortization. In terms of the amortization, that's really timing. There was a specific series that was not picked up for renewal, and so we took that out of our ultimate estimates, which accelerates the amortization into the current period. It's timing of cost that would have ultimately been amortized in following periods. Thanks, Matt. Operator, could we get the next question, please? The next question is from Phil Cusick at JPMorgan. Hi. Thank you. A couple, if I can. First, can you quantify the level of profit improvement in the December quarter from international restructuring and then how it evolves from there? Second, can you just talk about the latest data points in the theatrical business and how those influence your theatrical strategy going forward? What do you think the preference is today on the Studio side for making direct-to-platform versus theatrical movies? Thank you. Hey, Jimmy. Yeah, Phil, thanks. In terms of Starz International and the restructure. Cusick, can you hear him? One moment, please. No, I can't. Oh. One moment, please. Hear me? Hello? Yes, we can hear you. Please continue. Hey, should I bring everybody in here? He's doing the math right now. You've been reconnected with the conference. You can continue. Hey, sorry for the confusion, everyone. I think Phil Cusick just asked a question. Joe, why don't you finish the question on how we're approaching the theatrical and VOD market? Yeah, I think we actually covered it. I don't know if everyone heard it. Oh, I see. Phil, did you hear the answer to the question? No, you cut off right as you started to talk. Okay, got it. What I was saying was that we have, we're actually quite bullish on the theatrical market. Equally, as we have said in past calls, we have a very intentional additional leg of the business that's leaning into streaming. For the theatrical side of the business, what I was saying was that we have, on the one hand, the best lineup we've ever had with Jon talked a little bit about it, with John Wick coming back into the new year. Ballerina, which is the first spinoff, which we think has enormous potential. We got The Hunger Games, Dirty Dancing, and a bunch of more targeted movies that we always talk about. What I wanted to share with you on the theatrical business is we think that even what we did this last weekend really speaks to the strength of our strategy moving back into the theatrical marketplace. Prey for the Devil did, you know, sub-$10 million in the opening box office, and that's actually, in some ways, the good news for the business and that we have with our ability to be super disciplined in P&A, what we're seeing happening in the ad market, and I think some benefits we're gonna get there. The strength of the international values that we've talked a lot about and the strength of those downstream values, we can have a very profitable business on these targeted movies, at, you know, lower box office levels. Then when they break out, tons of upside in the business. From the theatrical side, even at these levels of box office that we're seeing today, there's a super compelling business for us, and we're really excited that we're moving back into the market with a 10-15 picture slate every year. On the streaming side, we have a very intentional business. We release on a multi-platform basis between 30 and 40 movies a year. Very low cost or very low risk, very high return for us. We've, as we've said on past calls, and still feel very strongly about it 'cause we're still seeing the demand, there's an opportunity to generate additional low risk, high margin for our business. All in all, this is actually a fantastic time for us in the motion picture business. Bill, does that answer your question? Go to the next question. We apologize for that delay. We all got off here, but we understand Jimmy got cut off as well in the middle of his explanation on eliminations, and I think that's important. I'm gonna let him give a quick recap of what those eliminations mean. It was on the Starz International. Phil, I'll thank you for your question a second time. Just to round that out, we would expect the second half losses in Lionsgate+ to be less than half of what they were in the first half. Then we'll expect continuing sequential improvements into fiscal 2024, reaching run rate positive in calendar year 2024. Thanks, Phil. Sorry again everyone for the delay. Operator, could we get the next question, please? Certainly. The next question comes from Rich Greenfield at LightShed. Hey, thanks for taking the question. You know, I guess just from a high level, the capital allocation, I think, is sort of something I hear a lot from investors, like, how do you all think about where to put your dollars? You know, I heard what you just said about the theatrical business, but obviously it's changed a lot and, you know, there's obviously been some real headwinds to that business over the course of kind of even in the post-pandemic period. Like, as you think about sort of putting the capital you have to work, let's keep the spin-off as a separate issue for right now. If you had to put a dollar into each of your three businesses between movies, TV, and Starz, what's the best use of Lionsgate capital today? Yeah. That's a great question. I think you should know, I think we've mentioned before, but there isn't a piece of product that we go forward and make that we don't run a financial analysis that includes an NPV and a return on capital. We think that's important. As you know, it's also important, you know, we've got corporate overhead. Jimmy mentioned earlier, if we separate the businesses and if there's further transactions or monetization, obviously that's a big number, but that's a big number that's gotta be covered on a gross basis. You know, we've gotta build business that's big enough to cover, you know, corporate overhead and obviously all the expenses. But we do an analysis of all of our businesses. Getting out of the territories that we got out of with an analysis of the return on the incremental investment in that area. Obviously, you know, part of the analysis, the calculus that we did at one point in time and the investment overall in the Starz business and the Starzplay international business was based upon multiples. You do that analysis. Obviously, when those multiples were 20, 25 even, I mean, you know, nobody has seen the moves more than you have, Rich. You would have said, "Let's put even more money into it." You know, as those multiples have come down, as we look forward at what they could be and will be, where they'll stabilize, we think they'll certainly stabilize higher than where the linear cable multiples are now, but, you know, then you shift that a little bit. I would say it's the analysis you would expect us to make on a, you know, more macro basis and a micro basis in terms of every specific thing we invest in. I know that that's a little, you know, that's a little broad, but I think that's how we do it. Helpful. Thanks, Rich. Operator, could we get the next question, please? Certainly. The next question comes from Barton Crockett at Rosenblatt Securities. Okay. Thanks for taking the question. Let me see. I was wanting to ask a little bit about the outlook for 2024 that you gave. Can you give us a sense of the trajectory in Starz that you're assuming versus the trajectory in the separated studio businesses? We know you've got some more movies coming out, but maybe some of this is in the 8-K that I haven't yet had a chance to digest, but maybe talk through what happens. I know you talked about the international exit, but just broadly what happens with the EBITDA to get us to the number that you were talking about for 2024 by segment. Look, Barton, thanks for the question. You know, as you can see in our outlook, you know, in the ranges we're giving, that there's nice acceleration both in Starz, you know, particularly as we've restructured the international operations and, great acceleration on the studio side. You know, nice acceleration. As John mentioned in his opening remarks, you know, we're looking forward to really a strong fiscal 2024. You know, that's reflected in these numbers. I just think it's important as we noted that the eliminations mask some of that because the eliminations are going up, as you would expect, as television product is ramping up, further and further in terms of, Starz, programming. We're also, as you know, this next quarter, meaning the current December quarter, starting the pay one window, starting with the Nicolas Cage movie into the pay one deal between Motion Picture and Starz. Overall, you know, strong trajectory on a consolidated basis, and that includes some ramp-up in eliminations which ultimately go away. Yeah. And just to kind of follow up on that idea of a strong Starz, the, you know, obviously you flagged kind of increasing linear pressures. What's your view over time in this kind of outlook about what happens to those linear pressures? Hey, hey, it's Jeff. Thanks for the question. In the current quarter, I think there was really three things that we saw that impacted the sub trajectory in the quarter. Obviously, the economic pressure that we've all talked about really accelerated some linear loss. We did see some of that pressure hit some of our big digital wholesale partners. The good news in the quarter is P-Valley premiered to a massive growth curve for us. What we saw in P-Valley was that half the audience was net new to the franchise, and so we saw great growth pushing up into the TAM. The downside to that was only half of the audience overlapped with the Power cohort, and so we did see some elevated churn. We do expect to sit within this economic environment for another quarter or so, but in the fourth quarter of the fiscal, we have BMF and Ghost, which are our two biggest shows coming on. We expect to turn to great growth in the fourth quarter. Thanks, Barton. Operator, could we get the next question, please? Certainly. The next question comes from Steven Cahall at Wells Fargo. Thank you. Maybe first, Jimmy, thanks for all of that info on the Studio spin. I was wondering if you have any target leverage ratios for Studio and Starz upon completion of the separation. My guess is that some of the external interest might be greater in the Studio's business, but you would also maybe wanna deleverage the Starz business. Does it make sense to put more of the debt on the Studio than Starz at separation to kinda expect that potential for a transaction? Then on the FY 2024 guidance, it looks like you've got the Studio business above the fiscal 2021 level of adjusted OIBDA. I'm guessing library is pretty steady in there. I understand what you're talking about eliminations, but is there more to that ramp? Are there some big TV deliveries you expect, or is it really the film slate that's driving that? Thank you. Well, let's take that one first. You know, in the projections looking forward that we've got. You know, it's library for sure. Strong. You know, library continues to be strong and a great contributor. It's a ramp-up in the titles coming out theatrically with a great carryover from the John Wick release, which is right in our March quarter of fiscal 2023. Good carryover there. Kevin and the team's got a great lineup rolling in deeper and deeper, more mature series that have higher margins that's rolling into 2024. Really got a lot of good things happening there and then strength in Starz as they continue, and particularly with the international restructuring. That's that piece. In terms of the first part of the question was. I'll come back to that. Yeah. Yeah. I wanna go back to that. Yeah. Back to overall leverage and the debt. Yeah. I got it. On the leverage side of things, we have a lot of optionality. I wouldn't make any particular assumptions, but as you've seen, you know, we concluded the quarter when you look at it on a pro forma basis, given the international structuring. We've, you know, we concluded with 5.5x leverage. As we've talked about before, we'd expect to come into the end of this year closer to the 5x range. Moving into fiscal 2024, you know, in the 4x range. Even without a deleveraging event, I think it's imminently financeable in terms of the separation. Of course, with any transaction that involves a deleveraging event, then, you know, you manage debt levels down from there. Thank you. Thanks, Steven. Operator, could we get the next question, please? The next question is from Alan Gould at Loop Capital. Yeah, thanks. I've got two questions. First of all, Jimmy, you said before how the corporate overhead goes away. Would the corporate overhead go away or would it just get split up between the two companies? Then secondly, on a free cash flow question, I noticed in the quarter that you had a big increase in net production loans taken out. I know you've done this regularly throughout the years, but it just seems unusually high this quarter. I was wondering if you could just address that. Sure. Well, look, in terms of the corporate overhead, I think, you know, on the Starz side of the business, having been a standalone public company before, they have a pretty large complement, not large, but sufficient complement of talent and abilities. There may be some more there that would be needed in separation. It really depends on the ultimate, you know, party in a monetization as to what may be needed. Generally speaking, I think on the Studio side, there wouldn't be a lot more needed within those operations. Okay. From a free cash flow perspective, yes, we are at peak content spend, particularly on the television side of things, given the ramp-up in television production, which is a high-quality aspect and use of capital. We ramped up from a working capital perspective, we ramped up the production loans relative to television product in the quarter, and so that's what you saw there. Okay. Thank you. Thanks, Alan. Operator, could we get the next question, please? The next question comes from Thomas Yeh at Morgan Stanley. Thanks so much. Following up a bit on Barton's earlier question, within the media segment network, media network segment profit improvement that's expected for next year, could you help us think about the U.S. business in particular? It seems like based on what Jimmy said about the international profit cadence into the latter half of this year and into next, that that's largely the driver of the improvement. You know, in the quarter, it looks like U.S. Starz expenses came down. Just wondering how you're thinking about what the cost structure looks like domestically into next year in light of the industry headwinds. Is it right to spend through it? Then if I could squeeze a housekeeping one in for Jimmy. The corporate G&A expectations are baking in a 20% growth in fiscal 2024, which is, I think it's typically been pretty flattish at $100 million. Is there anything transaction-related that might be going on there in any way to kinda help think about how to allocate that $120 million in the event of a separation between Studio and Media? Thank you so much. Sure. I'd just say, on the corporate G&A, that ramp-up is related to bonuses, expectations with regards to going from fiscal 2023 to fiscal 2024. That's the. That's the delta there primarily. With regards to the domestic side of the business and international, I'm not gonna frame and break those out separately other than what I, you know, said to you with regards to the kind of improving international numbers relative to the restructuring. Jeff, is there anything else you wanna add to that? Yeah. I would say in terms of your question about the expense portfolio going forward. Obviously, when you're in any kind of tough economic time and you have, you know, pressure on one side of your business, you always go back and look at all aspects of your business to make sure you're putting the expense where the growth and the profitability is. You know, if you look at what we've done over the last five years, we've pivoted this business from a linear only to a digital first business with over 70% of our subs being digital, 62% of our revenue coming from digital. We aren't as pushed on the linear side, especially because we don't have advertising. Again, we're out looking at every part of the business and making sure that as one part of our business is shrinking, we're putting resources and efforts against places that are growing. Thanks so much. Thanks, Thomas. Operator, could we get the next question, please? The next question is from James Goss at Barrington Research. Thanks. As you've been rebuilding this theatrical business, I was wondering if you could talk about the value that may have been created with windows of various types and how it might vary by size of film. You might also comment on the sequencing of windows from theatrical to other downstream windows and how that might vary by size of movie. Sure. I think that the most obvious opportunity for us has been in the intentional growth on the streaming and multi-platform side of our business, is where it's had the most current impact. We've been growing in that business, both in terms of the kinds of movies that we're making directly for streamers as well as those that we're either making or acquiring. We ended up picking up three movies in Toronto. Two of those would be multi-platform. Of the, let's say, 30 films that we'll release through that side of the business, there might be eight-10 different release strategies across those 30 movies with different windowing, some going to shorter window PVOD, some day and date theatrical releases, that we did that with this movie, Fall, recently. Similarly, we have an opportunity with our partners here at Starz, as you know, that our theatrical slate is now rolling into Starz to drive value there. We are able to have conversations with them regularly about different windowing on movies as we see opportunities in the marketplace. On the direct-to, it's been a real growth engine for us. On the theatrical side, depending on the size of the movies, I think you'll see our big brands stick to slightly more traditional. I don't know that we're gonna be having full old-fashioned pay windows. We may accelerate those a bit, but they'll be exclusive theatrical releases. As we get into some of those more targeted movies, you may see us move up to slightly shorter windows into PVOD and the like. It's just created optionality for us. It's helped us stand up a whole additional leg of the business and continues to evolve. You know, I would add one more thing really to make it simple. The windows are shorter, the prices are higher, many of the windows are split. At the end of the day, when you add all of that up, the downstream revenue from a theatrical movie is significantly higher than it was before. Okay. Sort of one related thing. Knives Out, which is now being brought for a very limited release by Netflix. Are you watching that with interest to see whether that might, you know, offer another opportunity in ones you hadn't even considered a window to? Well, I mean, you know, Netflix controls Knives Out, two and three, and obviously we wish them luck with it. Obviously, again, talking about the downstream revenue, I promise you, all the PR that they're putting into this and the next one is gonna make our Knives Out one significantly more valuable. No, but I meant similar movies that you might have where you wouldn't have really considered. You might have gone direct to some video type or direct to streaming. Might you now reconsider that? Yeah. Great. That's a great question. If I understand it, you're saying if we created a hit movie franchise, but the money was good enough, would we consider doing the next one or the, you know, one after that with a streamer? I say we're pretty agnostic to how we make money. We just wanna make money. I would also say part of that making money is keeping a franchise alive and important. If you see what's happening right now with John Wick, I think really we've done. Joe's team, they've done an amazing job, you know, not only keeping it alive, but actually, making each movie more and more valuable so that now we have the spinoff television show, and we're talking about a triple A video game, and a spinoff Ballerina, which is really exciting. You know, you could give up by taking the short money. Frankly, you can give up the much larger, long money. Those are decisions we make every single day. Like Rich's comment about where you- Spend your capital. I mean, you've gotta think about short-term profits 'cause you have to cover your overhead. You gotta, most importantly, think about long-term value creation for your shareholders. Okay. Thanks very much. Thanks, Jim. Operator, could we get the next question, please? Certainly. The next question is from Brett Feldman at Goldman Sachs. Thanks for taking the question. I'm curious, you know, to the extent there is a spin you're able to complete the proposed transactions, what level of long-term commitment might there be as part of that between Starz and the studio? The reason I ask the question is I'm looking at the 8-K and I'm looking at your fiscal 2024 forecast, and it looks like you're expecting that in fiscal 2024, the studio business is gonna see OIBDA grow year-on-year by nearly $100 million at the midpoint of the range. You're also highlighting that you would expect eliminations that year at a corporate level to increase by about $40 million. Maybe I'm reading it wrong, but that would imply that you're expecting about 40% of the growth in the studio's business' OIBDA to come from increased business with Starz. I'm wondering if that's indicative of the level of business that you would expect between those businesses on a go-forward basis, once they're separated, and if there'd be any commitment to that, or if there's something unique about fiscal 2024. Thank you. Yeah, I think that's a great question. I think we've said a number of times that regardless of the separation, we've built a business between Kevin and Joe and Jeff that is incredibly efficient. Communication happens every single day. I think we know at the studio side what Starz is looking for in terms of series. Again, I expect there to be, after the separation, significant crossover in terms of production development and production as well as distribution opportunities. Starz doesn't have a built-in global distribution business. They're expensive to run, and I think that you will probably see you know a synergistic relationship there. You know, hard to look forward and you know sort of extrapolate that exact percentage of business. I would doubt that there will be any sort of specific requirement like that, but I can promise you there will be numerous things we do to create that synergy. Officially and unofficially, that relationship is pristine. Does that answer your question? Yeah. Thank you. You're welcome. Thanks, Brett. Operator, I think we have time for up to maybe two more questions. Okay. The next question is from Matthew Harrigan at Benchmark. Oh, I'm sorry. I thought I took myself out of the queue. I was gonna ask about John Wick. You pretty much answered it, so I'll give you guys a respite since it's been a long call. Thanks. Okay. Thank you. Thanks. Operator, could we get the last question then, please? Certainly. We have Matthew Thornton at Truist Securities. Matt, please go ahead. Can you guys hear me okay? Yeah. Yeah. All right, perfect. Real quick one. Maybe one for Jeff. Would you guys consider any price increases at Starz, whether that's $0.50 or $1? Obviously, we've seen a lot going on the pricing curves across other streaming services. I'm curious how you're thinking about that. Just one, maybe, clarification. I think you noted a John Wick video game. Is that something new that's in the pipeline, or were you referring to prior IP? Thanks again, guys. Yeah. Hey, it's Jeff. You know, we continue to look at doing pricing studies all over the business and not only the U.S., but every territory. We actually have just completed a pricing increase in the U.K. in the last six months that we think went very well, and we saw great ARPU increase and not a lot of spike in churn on the back end. I think right now, at least domestically, you know, we've gone from six to 11 originals. We've got a pay one with Lionsgate. We've got a pay two coming on with Universal and a bunch of libraries at $8.99. If we take a step back and think about our strategy of being complementary to all of the other partners, we always wanna be priced below those big, broad-based services that we're seeing. You know, that coupled with the state of the economy right now, we think it's best to kinda hold serve for our audience and our core demos with the content portfolio and the price point we're at right now. It is something that we consistently look at. In terms of John Wick AA A, I don't wanna get ahead of myself here, but I would say we believe that there is a big AA A game to be made out of John Wick. We have been fielding proposals. You know, we certainly are interested in moving that forward, but I don't wanna say any more about that at this time. Thanks, everyone. Please refer to the press releases and events tab under the investor relations section of the company's website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thank you, everyone, and our apologies again for the technical issues. Thank you. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.