I think we can keep [it up]. Just a quick note for important disclosures: please see the Morgan Stanley website. If you have any questions, please reach out to your Morgan Stanley associates. With that, my name is Thomas Yeh, Media Analyst at Morgan Stanley, and I'd like to welcome back to our conference, Jimmy Barge, CFO of Lionsgate. It's great to be here, Thomas. Thank you. Welcome back. Maybe we could just start at a high level with the separation that's still pending. We've seen a few delays on the planned separation of Lionsgate Studios and Starz. Can you just give us an update on where we are today and why you believe April might finally be the date that this gets done? We have been on this path for quite some time. We started that journey. We did not know there would be a pandemic, writer strikes, and somewhere along the way we made a fantastic acquisition of E1. There have been quite a few things, but we are definitely there. We are on track for mid to late April close. We filed the S-4 last Monday pre-market with the SEC. This is the Fourth Amendment. Hopefully, that is the last amendment. I think the questions and comments were just very manageable. We turned them around very quickly. The September financials, which was in the previous draft, were stale. We had to refresh with the December numbers, which took a few weeks. We refiled and are expecting comments back, and that should hopefully be the last turn. There is 30 days. You mail your definitive proxy, and then we have a shareholder vote meeting, and we're on our way. Those are really just the final steps: an SEC approval, a waiting period, and a shareholder vote? Exactly. Okay. The financing's already lined up. It's ready to fund as soon as we close. Great. Can we maybe just start with revisiting the rationale for the deal to begin with? What kind of strategic optionality are you hoping to unlock for either side? Maybe we can start with Studio and then talk about Starz as well. The rationale is still there. In fact, more maybe evident and important than ever. You're seeing a lot of people in the industry starting to segregate out their linear business. The good news is we don't really have a linear business. We have Starz, which is premium. It's digital-first, 70% digital revenues as of the end of this fiscal year, calendar year. Really a strong business. The Studio is legendary, as you know, the 20,000+ titles in library picked up another 6,500 titles with the E1 acquisition. Just an incredible asset there with the library, then TV and film production capabilities. We own 76% of probably the world's preeminent talent management company, Three Arts. This has been all about valuation, helping drive shareholder value, where we don't feel as a combined company that we're getting the valuation. We look like a conglomerate media company in the space that is competing with the Discoveries and the Viacoms and the Comcasts and the Disneys, when in reality Starz is a completely unique business, totally misunderstood. I think our library and our Studio is better understood, but when it's attached to a misunderstood asset, I don't think either side we've been able to tell the story. We've been able to achieve the valuations that we can when we're trading on a standalone basis. This is all about unlocking shareholder value, and we're very happy to be able to do that next month. Got it. I want to touch on the and dive deeper into the future of both of those businesses. Maybe just to start on the capital structure once this deal gets done, you mentioned some refinancing that you've done ahead of the separation, including some library back facilities at the Studio, I believe. How should we think about your view on the pace of deleveraging and maybe the appropriate long-term leverage that you think both of those assets should be sitting at over time? Yeah, I think it's probably easiest to start with Starz because I think it's just a fairly straightforward capital structure. Yo have, we've already completed $450 million of pro-rata financing, which would be $300 million term loan A and $150 million revolver. Okay? On top of that, they have the bonds because we've had the bond exchange. They have $325 million of bonds at 5.5% coupon due 2029. You really have your financing and your capital structure lined up for five years. What I said on the last earnings call is I think when we separate that the net debt will be right around $600 million at Starz, which $200 million of EBITDA, that's our guide, and we feel good about that. That's a three-times multiple. Jeff has said, and I believe they're nicely set up to deliver. Okay? You do $200 million of EBITDA a year. You really only cash that you need to for that is a cash negative would be your interest expense, cash interest, okay, which is manageable given the capital structure I just laid out. You have cash taxes. Remember, as we've said before, there's about $200 to $300 million of NOLs going over from our structure with Starz. Okay? You don't have much in the way of cash taxes, and they don't have much in the way of CapEx. Everything else is a zero-sum game when you talk about working capital shifts, pluses and minuses in your business, which of course occur, but it's a zero-sum game. You really have only those three things to really back out of EBITDA. If you're doing $200+ million EBITDA, you can immediately see that you can start to deliver significantly. Jeff's talked about two and a half, mid-range, below 2.8. And again, they're set up to deliver fairly quickly. Got it. Studio? Yeah. On the Studio side? On the Studio side, Studio side, you're absolutely right. We've been planning for this all along. We have actually already taken out the term loan Bs that previously existed, and our current credit facilities and all will pay that off at closing. We have layered in $340 million of an IP facility financed largely off the back of the E1 library. We paid $375 million for E1. We put in an IP library supported by their library, a little bit of Lionsgate Library too, right? It was a good deal, but it's kind of hard to buy the entire company off of the LTV that you would get in an IP financing. We layered in $340 million, so for plus 225 financing. Since then, we've layered in another $850 million using the IP and the Lionsgate Library. We'll top that up a bit more between now and closing, which is pretty well circled. We have already committed $800 million asset-backed facility, revolver, if you will, and that's it, so for plus $250 million. All of that together, and then of course at separation, $390 million of the bonds in the exchange will come over at a 6% coupon due 2030. Again, the Studio, all the financing's lined up. Again, you've got no maturities for five years, plus this is all five-year paper, and at very attractive rates. Hopefully with rates declining as we move forward in the future. Yeah. I mean, is there any update on the minority bondholder litigation process that we might be looking out for in terms of an expectation of a resolution there? Should it be on our radar as anything that might? Really nothing, nothing to update there. I think I don't see that affecting the separation or the timing of the separation at all. Again, those bonds are actually trading quite well. The gap between those bonds and the Studio bonds is only, I think it's less than 10 cents. They trade where they trade because it's a 5.5% coupon. We hit the market quite nice. Again, there's five years, four and a half, five years left on those bonds, and we'll pay every penny of principal and interest. Got it. You talked a little bit about the free cash flow conversion at Starz. I wanted to go back to Studio just in terms of the working capital needs and the free cash flow that we should expect from that business. I think the pandemic and then the Hollywood strikes drove some increased volatility in the timing of production and free cash flow. How should we think about what normalized looks like in more of a steady state period if there actually is one for Studio? No, good question. The biggest expenditure, of course, in the Studio business would be our content spend, right? Think of it as like a we've been at $2 billion, but that's with Starz on a combined basis. Think of the Studio like $1.5 billion of content spend. That's about 50% of our revenues or $3 billion plus revenues or the $3.5 billion. That feels right and very manageable. That supports our TV and film production, both of which are very healthy and doing well, and that's constantly replenishing the library. Remember, the library is we just finished a quarter with record trailing 12 months over $950 million of revenues. That has about a 50% cash margin. Okay? Now that cash margin is just a nice steady continuous library, even though $950 million was a record. Think $900 million, $850 to $900 million, but really a nice steady stream of cash, and then that supports the productions, okay, and your content spend. It has been in terms of cash flow, there has been a use of cash in the content world as we were exiting through the strikes and the pandemic as you build back up. As you actually what I think of as hold the inventory, right, you're waiting for the right time to release it. Like during the strike, talent really wasn't out promoting or able to go out and promote the films. A lot of that kind of backed up as well as television series delivery. That has kind of come through the pipeline, if you will, and we've ramped up the spend. I think we now kind of start to top out at that kind of steady level of spend. Likewise, in addition to the pandemic and the writer's strike, we've been in a very high interest rate environment. I know it's prolonged a little longer than probably any of us maybe had thought, but I mean, I think ultimately that's a downward projection as well. The Studio can throw off a lot of cash. Again, you have three things that basically you back off EBITDA in the long term when you set aside the zero-sum game and working capital, which the content spend is that. Okay? Cash taxes will have $800 million to $900 million of NOLs at the Studio. Okay? So there's minimal cash taxes. There's almost no CapEx. Okay? And it's cash interest. As you deliver and as rates start to come down, you power through that. Again, we've kind of steadied out at the level content spend. That $1.5 billion to $2 billion that we're seeing this year at the Studio ex eliminations, that's the right number going forward in terms of. Yeah, I wouldn't think it's going to be $2 billion for the Studio on a standalone basis. Okay. Got it. Okay. Got it. Look, we greenlight project by project, right? And we're very focused on NPVs and investment rate of return and modified investment of return. Look, I love nothing more than to be able to greenlight more because that means you've got great investment in IP. I think just given our cadence, again, we're focused on 10-12 wide releases a year on the film side. We've got P&A spend that goes with that. We have another 30-40 films that are direct to platform that do quite well, nice high margin business, but doesn't require significant investment. We have a significant television production business that we fund. I think we can do all of that. We call it $1.5 billion to $1.7 billion, something like that. Good. That's great. Let's focus on motion picture a little bit. You had a tough summer box office, which led to a reset in the earnings expectations earlier this fiscal year. What gives you the confidence that this was an under-earning moment and that your annualized run rate for Studio should be kind of higher than that? Sure. For one reason, historically, that's the first time we've ever, ever, ever seen that in our business. Borderlands was, as we spoke to in a day, wasn't de-risked and didn't deliver. By the way, it's doing great in home video and other ancillary markets, but not enough to recoup. Yeah, we took a write-off and we move on. It's all about a portfolio approach. Again, that was an outlier. Have nothing in the pipeline at all that looks like that. Again, we follow a de-risk model of pre-licensing the international revenues. We're only picking up self-distribution in the U.K. and U.S. and only responsible for the P&A in those territories. We've got a really good slate coming up. Actually, we bounced back quite nicely with Best Christmas Pageant Ever, Flight Risk, Den of Thieves 2, all of which outperformed our kind of internal projections. As you know, we do not project out major hits, but it is nice when we overperform our projections. They all did nice in the market. That is more akin to the kind of the portfolio approach that we are known for. We have got three really strong tentpoles coming out next year. We have Ballerina, which of course is a spinoff of John Wick. Keanu Reeves is in this film and it is more than just a cameo. We are excited about that. We have Now You See Me 3, and then we have the Michael Jackson project. We have a lot of mid-budget films more along the lines of the ones I just mentioned a minute ago, The Long Walk, Housemaids. We've got a nice slate for fiscal 2026. Is fiscal 2026 then a little bit more representative of what you think would be a more normalized level of big tentpoles and smaller films? And that's how we should think about going forward. That's right. I think so. Yeah. Yeah. You also did a recent expanded pay-one deal where you increased your partnership and renewed with Starz, but also signed an opportunity with Amazon. I think on the earnings call, you mentioned that you believe that that should be driving meaningful earnings upside relative to the prior deal. How should we think about the opportunity to monetize the movie windowing and where there might be additional opportunities to unlock that further? Right. That is a great opportunity and it is a win-win. Jim Packer and his team and Starz working with Starz, working with Amazon, and you find a way just to divide the window up slightly different. Starz gets a product out through the end of calendar year 2028, which is great, and they get it earlier. They get it earlier where you can really leverage the P&A spend that has happened theatrically. That is excellent. You carve out a window then for Amazon. Amazon can pick it up and leverage their big Prime Video base. Again, it ultimately comes back to Starz at a later date. It is just a creative way to take the window and make more out of it. We think it is a win-win for everybody. We have about four films that will be delivering in our fiscal 2026, and mostly you'll see the impact in fiscal 2027, our fiscal 2027. What do you forego in the home video window by accelerating that delivery to Starz? Yeah, there's a little bit there. We obviously looked at that very carefully. It's just a few weeks. We think net-net, it's clearly a win-win. We were very confident about being able to strike the deal. It's just a good example as windows will continue to evolve, right? They have been. Every time you have content and you can slice the window or do something more creative, again, you're just squeezing more juice out of the same orange. Makes sense. I think another piece of the motion picture puzzle is the way that you finance films through international presales. Just wanted to get a gut check in terms of how you see the health of that market as a financing vehicle for your movies. Are you seeing the demand for first-run film content increase in spite of the broader industry focus on cracking down a little bit on content spending? Yeah. No, we're actually seeing a very robust market. Helen Lee Kim and her team have been seeing more and more buyers of English-speaking content in the international markets. Just recently, we actually got John Wick: Chapter 4 accepted for release in China. That will be the first John Wick ever released theatrically in China. That bodes well perhaps for Ballerina. We'll wait and see. We're just seeing more and more market opportunities. The Michael Jackson project was another great example, as was Flight Risk, where you cover a substantial portion of your production cost in those presales. That just minimizes the amount, what we call our U.S. gap, the amount that we need to recover predominantly in the U.S. market, but also we self-distribute in the U.K., that you need to recover to be kind of in the clear. It's gravy and upside from there. Got it. Makes sense. Switching to the television side, I do feel like in the last few quarters, there's been some comments from you about just a spending environment where there have been a little bit more lower series orders in general. Do you expect that rationalization effort across the industry to continue to be a source of pressure for you? We're seeing some bounce back and some green shoots, I have to tell you, but it has been very difficult. The strikes and then everything that's transpired has definitely had its effect across the entire industry and not just Lionsgate. We've seen it across the industry. We've seen some disruption in the industry with mergers and people reevaluating their spending patterns, driving the streamers to profitability as opposed to just chasing subs is something that Jeff Hirsch at Starz has been doing for a long time, and now other people are starting to follow suit. It's amazing, but profitability is important. They're achieving that, and we're seeing people open their pocketbook up again. Since the strike, we've put 60 series orders into development. We have another 60 that we have across more than two dozen platforms that are in production. We've got a significant breadth across our television business, both scripted and unscripted. I mean, just last month, we announced CBS. We've got the number one or number two comedy on all the broadcast, which is Ghost. Hope you watch it. CBS, after premiering season four, put in a two-season order for season five and six. That was just this last month. Okay? In January, we premiered Rookie season seven. Those procedurals, and that was actually a pickup from E1. Those procedurals can go on and on and on. There's a lot more runway well beyond season seven for that. That season seven, like I said, premiered in January on ABC. On the unscripted side, Ultimate Fighter is in production for its 33rd season, okay, and airs on ESPN+. Those go on and on. In that context, another E1 asset that we picked up, done by Renegade on the unscripted side, was Naked and Afraid. It's going into production for its 12th season. You can just see how much runway there is there. We're seeing, again, more orders, people bouncing back, and we really feel good. We had a very good quarter in our TV business this third quarter, which was our third quarter, the December quarter. We're also projecting a very good end of fiscal year fourth quarter for ourselves ending March. A lot of these episodes are delivering as we speak. Great. The demand trend, it sounds like, excuse me, that on a both scripted and unscripted basis, you're kind of seeing a little bit more. A little bit of bounce back. I mean, good. It's off of an easier comp, right? I think the strength is there. At the end of the day, content's what drives viewership. Whether you're a streaming platform or broadcast, you've got to have content. You've got to drive viewership or else it's a downward spiral. Right. Starz, I think, has been historically a big buyer of Lionsgate TV series. How does that relationship evolve over time as Starz, I think Jeff has mentioned, looking to de-age his lineup and move towards newer shows with better economics to them? How should we think about the offset to that on the studio side? No, I think it's great. Look, the studio owns the IP and the Power Franchise and BMF, all of those shows that we produce. The studio owns the content. We have always had an intercompany agreement with Starz, and that'll continue on in strength. In separation, we're kind of keeping the best of the best. We're letting the two companies trade and pursue separate paths, but at the same time, keeping the synergies and the best of the best in the context of content sharing. If you look at Power Franchise, I mean, the Power Franchise, when we merged with Starz, it was just Power. Okay? We've had three spinoffs since then: Kanan, Ghost, Force, and more to come. Jeff's working on that with Kevin and our team, our TV team, as we speak. There is a lot more to come out of all of those. In terms of the de-aging, what Jeff is looking at there and other buyers too, you are always looking creatively at how you create adjacencies and characters that can be spun off and carry their own, just like Force, just like Kanan, just like Ghost. They can carry their own weight in terms of a new series or adjacent storylines. We had a spinoff of BMF. That allows you to kind of start with a fresh cast and therefore lower your overall cost and reset the budget. That is just a natural phenomenon. It is very creative and something that there is always a focus on: where do we go from here? When does this story end? When should it end? A lot of times it ends a little before the consumer wants, but then again, we're in this business to make money. That's another good way to do that. You drive shows that are driving 10 million viewers. These are some of the shows that are the biggest in television. We're just not necessarily the demographic. You got to check it out on Starz. Yeah. Sounds good. You talked about the sub $2 billion of cash needs for the studio side. On the Starz side, how should we think about the investment needs in the past there as we think through this kind of lineup mix shift over time? Do we see that coming down in terms of how much the cash spend might be? I think of the $2 billion, Jeff was ± $700 million in that business. I think that's a nice steady state. That could be managed back, I think, in the context of this de-aging and where you can bring your overall cost of production down and therefore bring down your overall cost of licensing fees. Those two go together, right? You can get a better breadth and more throw rate. I don't think the goal is necessarily just to drive down production costs as much as be efficient with the production spend and programming spend and then get better breadth and drive and superserve those consumers. Keep in mind, he's focused on two major demographics, right? Women and African American, not trying to be all things to all people, no sports, no news. It's pretty much edgy programming, R-rated. It's not, again, it's premium content. Got it. Okay. Before I dig deeper into the Starz piece of it, I did want to ask about an E1 update. At acquisition, I think even with synergies, it appeared like it was a lower margin business than your legacy TV segment. What's the roadmap for driving margin improvement from E1? Now that it's fully operationalized into the broader content library, how should we think about its ability to drive the TV segment's profit overall? Sure. This has been a great acquisition, actually. I mean, it was a year of integration. That took some time and clearly affected the timeline to the ultimate separation. Now that we're there and now that we've transitioned and integrated E1, it's just a great asset. First of all, slightly lower margin, just given the makeup of the library. Again, 6,500 titles, we ingested that relatively quick. That was not the lengthy transition. That comes pretty natural to Jim Packer and his team, which can, without adding any incremental G&A effectively, and in fact, can reduce G&A pretty substantially in that category, can create so much more value by linking that library to our existing library. That has been a major plus. The TV side was a longer integration, but it has come over. I've mentioned a few of the projects already. The Rookie, I mentioned, the Recruit, the Naked and Afraid. It had scripted and unscripted business. The scripted business, we've matched up with Pilgrim Media. For the unscripted business, we've matched up with Pilgrim Media. It's now Lionsgate Alternative. We've got what was three or four different brands under E1, and then our Pilgrim brand now under Lionsgate Alternative, realizing some significant savings and overhead there. Again, integrating those assets fully into the TV business. On the film side of the business, keep in mind, Den of Thieves 2, we were actually distributing already for E1, and that was an E1 film. We just definitely upped our economics there, which was great. Otherwise, the film integration went fairly quickly because we're not picking up a lot of projects other than I would suggest that there definitely should be a Den of Thieves 3 in the future, but nothing to announce. Again, we're just very happy with that asset across the board. Okay. Great. With the time we have left, I do want to touch on Starz a little bit and then maybe also just the ancillary revenue opportunity that you saw, that you see going ahead, given the fact that I think there is maybe a little bit of increased focus on monetizing some of that. Just on Starz first, despite its largely à la carte subscriber base, I think that we have seen linear headwinds remain a pretty significant source of pressure on the overall subscriber number and that, as of late at least, has been outweighing the OTT gains. What do you see as the growth opportunity from here more broadly for Starz domestically as we kind of think about this asset on a standalone basis? Yeah. Every year you grow your OTT subs and you have a little bit of reductions on the linear side, you're getting closer and closer to effectively kind of having lapped that. As Jeff would say, and as we've said on our earnings calls, at the end of this year, we'll be 70% digital. Really, Starz was digital first. They've been focused on this really since date of acquisition when we merged the company. This has been, again, a consistent path for them. If you look back, their revenues and subscribers have been very domestic, been very steady, and very strong. I think here going forward, there's bundling opportunities. You saw the announcement bundling with Max. We have other bundles as well. Bundles is kind of becoming the new way, if you will. Starz is perfect to bundle a bundling partner. Because first of all, it's not ad-based. It's edgy. It's catering to two very important demographics. Okay? That creates what that does. It reduces churn. It gives you better economics. Likewise, you can serve up advertising or serve up, rather, programming that can be timed with programming in the other parts of your bundle. Particularly for African American and women audience and what Starz brings to the table, it can really provide a continuing serving that audience in the bundle. That's helpful to your, not only to Starz, but also to your bundling partner. Got it. Lastly, on the ancillary revenue opportunity, which you spoke about on the quarter call, can you maybe just help us dimension-wise how you think about it in terms of an earnings contribution perspective just from the various opportunities that you might see? There's a musical, a video game, Broadway. Yeah. We've got Dirty Dancing, La La Land, the musical, the John Wick Experience opening in Las Vegas. We've had the Saw Experiences. We've got the AAA John Wick game in development. The great thing about this is it's effectively 100% margin. Okay? Not quite, but almost. We're basically getting publishing rights and fees, minimal, if any, investment in that space, minimal in a way of overhead required to drive that. It keeps your franchises alive and just keeps them relevant. At the same time, you're clipping coupons, bringing in incremental revenues, usually in the form of minimum guarantees. The model that makes sense for you is a licensing one where you're licensing? Yeah. Look, we always look for the right opportunities. Yeah, that's the premise of that. You're always open to opportunities where you can expand your upside. Generally speaking, that's just incremental licensing fees without any significant investment. Understood. I think we're out of time. Thank you so much for being here. Thomas, thank you. Thank you. Appreciate it. Thank you.