Next up we have Lionsgate Studios, which is a leading standalone pure-play content company. It has a motion picture group with iconic franchises including "The Hunger Games," "John Wick," and "Saw," and a TV studio producing for every major platform, a library of more than 20,000 titles generating over $1 billion in annual revenue, as well as a talent management and production powerhouse. The company completed its full separation from Starz just before this event last year, collapsing its dual share structure into a single class of stock and establishing itself as an agnostic talent-first content supplier. The company has about 290 million shares, trading close to $14 when I just checked, about a $4 billion equity market cap, $1.6 billion of net debt for about a $6 billion total enterprise value. We have the company's Vice Chairman, Michael Burns, here, as well as Head of Investor Relations, Nilay Shah. Thank you so much for making the trip from L.A. to join us. Getting started, high level, kicking things off for those newer to the story, can you touch on how Lionsgate Studios has evolved over the last decade into the standalone company that it is today? Sure. Thanks for having me. I have two questions. One, press here or no press? We can go off record. No, I'm just wondering. There is press here, yes. Okay. Then webcast? It is being webcast. Okay, great. Now I have the rules. Great. Thank you. It's going to be a lot less colorful now. Not really. Jon and I came over to Lionsgate in 2000, so 26 years ago. What we tried to do is not be the smart guys, and our thesis was pretty simple. You think about our original investors, we did a very small $33 million convertible preferred. Jon and I put money into it. We got our friend Gordy Crawford at Cap Research, who's still on our board. He was at Cap Research at the time. They invested, Fidelity invested, my recently fired friend Jamie Dimon invested. That's the best thing, by the way, that ever happened to him. Our thesis was pretty simple, which is control as much content, buy as much library product as possible when no one was really paying attention to library. We didn't want to bet on a particular platform or technology. We just knew as they came to us that we'd have a chance to ring the cash register with our content. We sort of bought everything that was out there at fairly reasonable multiples. Now the core asset that we have is the library, which is over $1.1 billion of revenue, very high margin business, which is more than 50%. To create an opportunity for us that we would hit a lot of singles and doubles in the film and television business, but every once in a while we'd get a franchise. We built up the library, we built up the feature film business, and we've done reasonably well. It's sort of us and the majors. The question that you all are probably asking, which is why do I buy the stock now? I've been doing this a long time, I'm just going to sort of jump into it. The answer is timing. We have better visibility that we've ever had in our recent history. We have the combination of new IP and franchises coming down the pipe. We also have a great number of renewals for our scripted television shows. A lot of hits that you guys probably watch. I hope you do. By the way, if you haven't seen "The Studio," which is our show on Apple, it's worth seeing. Sadly, it's funny as hell and absurd, you realize just how odd the business is, the movie and television business, the studio business is, it's worth watching. We have had great success recently with the Michael Jackson movie. I think taking a term, I'm old, so I've been around since the Michael Milken days of the highly confident letter. I'll tell you that I'm highly confident there will be another Michael movie. There will be two more "Housemaids" based upon the additional books. I think, again, you never want to bet on your favorite child. Jim Packer was here two years ago. I think he said publicly that Michael was going to be the biggest movie in recent Lionsgate history. He was right. I think it'll do $1 billion of worldwide box office. It's over $800 million now. The visibility in our business is better than I've seen it for a very, very long time. What you guys are looking for is comfort that you have the earnings power and the cash flow power over the foreseeable future. I think right now we're in an interesting play. We're a growth story. At the same time, we're a value proposition. We cleaned up our capital structure, again, I'm sort of fast-forwarding. We had two classes of stock. I hated it. Most investors hated it. We've got one class of stock now. We're trading, I don't know, three million shares a day. We've got much more liquidity than we've ever had, obviously a bunch of mutual funds and hedge funds and investors are looking for liquidity. We have that. We have our debt at a manageable level coming down. We have very reliable cash flows. You've got the feature film business, 12 pickups of scripted shows, a lot of reality shows. On top of that, you have the library. You've got the management business, 3 Arts, we own 75% of. We like that coupled with the television business, and you have the feature film business with a bunch of franchises and new IP. It feels like we're loaded for bear. All right, we're done. Let's go to lunch. There you go. Let's address the elephant in the room, if I may. Obviously, a lot of little deals, one big, good old-fashioned takeover deal. Some facets to that, one, do you have the scale to compete as a buyer? Two, do you have the scale to compete in a world of dwindling streaming services? Depending in part on the answer to those questions, where does that leave you with a very valuable library? It's the right question. Look, do we have scale? We have scale. We have market share in both television and feature film. I wish I could tell you there was a lot of stuff to buy. We picked off eOne, and that would turn out to be a great acquisition, particularly with The Rookie franchise. Not a lot to buy, not a lot of library to buy. Are we big enough to stay as a standalone company? Sure. We're making a lot of money, and we should continue to make a lot of money over the next few years and de-lever. Do I think that the landscape is interesting for a lot of different things? Yeah, because everybody has the same issue, which is you want to show growth, and you only have two ways to show growth, which is organically, which is really hard to do, or inorganically, which are doing deals. I think we're an interesting strategic partner for a variety of places. If you said, "Well, who would they be?" I don't have a crystal ball, and I wouldn't tell you even if we were in the middle of doing a deal. I will tell you that private equity, a lot of money interested in doing certain things. There have been some press about that, a company that's backed by a private equity company. Do I think that's the right strategic partner? Maybe. Do I think that somebody that's got strategic synergies, both cost and revenue synergy? Yes. There's a tremendous amount of synergies with a few players that are out there. You've got some of these wild cards with these. Sovereigns? I was going to say, well, sovereigns are one thing. They've got a lot of money, but also, and obviously, the price of oil helps them. You look at some of these AI companies with staggering valuations, but growth rate just incredible. We've got this strategic relationship with Runway we're pretty excited about. It's funny, years ago, I made a joke with Cristóbal Valenzuela when we first did a deal with him. I said, "Maybe someday we'll buy you." Now he's probably smirking at me saying, "Well, let's take a look at how our valuation turns out. Yeah. That's a helpful overview as we kind of think about the landscape. Moving on a little bit to content, I think we have this slide up here with theatrical releases. You've clearly doubled down on some major franchises with John Wick, Hunger Games, Twilight. Can you talk a little bit about how you're balancing these tentpoles with mid-budget content moving forward? Adam Fogelson runs our film business with his partner, Erin Westerman. They are very disciplined on not only the overhead they have in our film group, but you have to have the right mix. The film business is art and science. You have to have the right mix of existing franchises that you feel like they're reliable, and you don't have to spend as much money on marketing necessarily, and you've got a built-in audience, but you have to come up with new IP, i.e., The Housemaid. We'll put out, I don't know, call it a dozen wide releases and a lot of other movies that are smaller releases. We've got a great movie coming out this weekend called "Power Ballad." If you don't like it, if you go see the movie and don't like the movie, I'll send you your 20 bucks back. For the people in the room, all of a sudden, I'm going to get 1,000 people, but it's really a fun movie. It's a limited release, but I think it's going out on 1,200 screens, less P&A, but it's a movie that I don't put that in the category of the Michael and the Housemaids and Resurrection Part One and Part Two, which, by the way, I think is, and again, I don't want to go out on a limb, but I will. I think those are going to be gigantically successful movies for us. I made a joke the other day, which Resurrection has a lot happier ending than The Passion of the Christ. Maybe not for the disciples. I would say, overall, we are going to have this sort of art and science with some smaller releases throughout the year, segment two movies that are really good bread-and-butter business for us, and the wide releases. As I said, coupled with the library and the television product, and a television product that is doing very well. I like the visibility. So- I was going to say also reinventing. I know Nilay would think I was remiss if I didn't mention, obviously, there'll be a new "American Psycho," there'll be a new "Saw," there's going to be a "Blair Witch," and certainly "Dirty Dancing." That is existing IP that you can reboot and hopefully create another leg of upside with the entire franchise. Diving into that a little bit more, I want to touch on the library obviously has been continuing to do well over the last several years. You've spoken about using AI to mine that longer-tail catalog for incremental high-margin revenue. That's the first part, and then also I'd like to talk a little bit more broadly about AI, the impact on the content creation business, and how you're leveraging that, as well as any risks you see moving forward. We hired this new AI czar, Kathleen Grace, and she's doing great in every one of our businesses. I'll give you an example of AI. Jim Packer, who was here, as I said, a couple of years ago, head of Worldwide Television Distribution. Jim has launched some channels. For example, there's a channel called MovieSphere, and it's a very successful channel. It's priced correctly, $5.99, no commercials, and it's basically AI is helping us making sure. Think about the airplane that takes off with empty seats. They never get the revenue back. Jim's got this channel which has a bunch of library product, but it also has really good titles in there that they're open for a week or two weeks or three weeks, et cetera, and bang, he fills that void. That channel should be 1.5 million subscribers, very high margin business. It's our channel. It's using our product when it's available and do the math. $5 a month, 1.5 million growing subscribers done for the right price point. We have a world today which is a tale of two cities. You have half this country that can't write a $500 check in a medical emergency. Netflix has gotten expensive, and this is part of the reason that the FAST channels do so well, and AVOD channels do so well because they're free and people will subject themselves to ads and if they get something for free. On the other side, if it's an inexpensive ad-free channel, like for example, MovieSphere, that's a good value proposition for them. We would never be able to do that, one, without sort of the programming that AI provides us with. Also, we couldn't do it without the library that we have. I had a meeting the other day, Matt Leonetti and Brianna came in my office with Kathleen, and they showed me all the stuff we're doing in the world of AI, which is with our movie-specific shots, previewing the movie, figuring out how to budget those, again, with AI. AI is going to save us tens of millions of dollars a year. Primarily at this point on the cost side with a little bit of the revenue that you've just mentioned. I guess, how are you thinking about IP protections as these tools become more capable? Again, if you own the underlying IP, then you have protection built in. You have Sora that came out and all of a sudden everybody was stealing everything, and then that sort of got shut down. We like the idea within a certain, I'll call it playpen or sandbox, where people can work with our IP if there's a way for us to monetize it in those scenarios. AI is Look, it's like Moore's law on crack. It is going so fast, that again, if you own the existing IP, you get a lot of different ways to monetize it. I think it's exciting on both. If the law works. What's that? If the legal protections works. Yeah, I think they will. Again, actors' likenesses, with cooperation, I think that there's a participation with them. Again, if everybody can monetize it together. Okay. Just touching on TV segment performance and expectations moving forward. I've kind of alluded to it, but just touching on kind of what you're expecting there and the sustainability of renewal runways from here. Here's what I think. I think that we have an unbelievable television business, but it's a bread and butter business. It's a sort of low on a normalized year. It's a low double-digit margin. All those shows eventually come back to us. For example, I know "Mad Men" recently came back to us. We re-licensed that to HBO. We have a big title coming back to us, one of Netflix's biggest hits, for us, which was "Orange Is the New Black." That comes back to us. On the years that you have your bread and butter business, your normal renewals, Kevin Beggs got 11 of the 12 scripted shows renewed, and that's great, and we make money every season. However, when you have something that comes back and you've got 60, 70, 80, 100 episodes, and then you're re-licensing them again, that's when the margins spike tremendously in the television space. The idea that content's coming back to us, we bought companies over the years and libraries, and one of the big acquisitions we did years ago was Summit. Summit has great library titles and all those Twilights that they licensed out, the first cycle, Twilight one, two, three, I think there were five of them. They're all coming back to us. We had original projections. We said, "Oh, it's going to come back in France." We licensed it, I'm making this up, for $5 million for a 10-year, 12-year license. Summit did that. Comes back to us now. In the past, you'd say, well, it was $5 million for a cycle. It'd probably be a discount to that, $3 million. Well, now it's a multiple to $5 million, and the term is a third of what it was the first time around. If you want to know why that is, there are three explanations, Apple, Amazon, Netflix. Those people that are licensing our content are looking for world-renowned content brands that they recognize, and we're in a good place on that. Maybe you could talk a little bit about 3 Arts. Just explain to the broad audience what that is and how it fits or maybe it doesn't fit. Yeah. It's a management company that works very well with particularly our television side of the business. By the way, they manage the director for this big hit that just came out, Backrooms. Again, it's a commission business. They're charging X percentage, call it 10%, of their client's income, and they're out there hustling. They've got less clients, so meaning that agencies have a lot of clients, you could be an agent and have 100 people. They're very specific on who they take as clients. They're great in packaging television shows. 3 Arts, why they like us is by partnering with Lionsgate on a lot of these television shows, like, for example, Hunting Wives, you just get much better economics with the studio definition that comes from Lionsgate. That deal has been great for us and great for them. We own 76% of it. We may own 100% of it down in the future, we may own less. Just stay tuned on that. We do like that business. It strikes me in that conversation, by the way, Backrooms came up in an earlier session, that you're actually relatively well-positioned versus other studios that own big lots and have lots of capital. You're really a capital-light business at the top of the stack. Yeah. The studio, these giant overheads- Yeah If you look at our television and our feature film business, it's a fraction of what everybody else's. We don't see the point in owning all that. Yep. You become a captive. We have some stages because we want to make sure we have them. We've got a great deal in New Jersey. We've got some stages that were in Yonkers. As long as the subsidies are there, we're going to shoot a lot of product there. We're doing some stuff overseas as well. Right. Now, that, I guess, brings up capital. You mentioned Michael and Milken earlier. You're a little over six times leverage today. You've got a path organically to, I think your target is four to four and a quarter, something like that. Yeah. Maybe you could just talk a little bit about, maybe it's too early, but what next after that? Well, I think you're going to see the trajectory going down when you spend a ton of money on content and P&A and et cetera, and that's going to go up. We're certainly much more comfortable getting to a level of, call it three and a half times. We don't want to be over-levered. That's a death spiral for anybody in our business. We like the trajectory of that. We've invested $20 billion+ in content that we're going to be mining in perpetuity. Anything else to add? I guess we touched on it a bit at the beginning, with in terms of the stock price moving up significantly more recently. Business is seemingly at an inflection with the most recent fiscal year being more of a transition year. Looking ahead to the next fiscal year, slate's loaded, leverage coming down. I guess anything to highlight for investors or catalysts that we should watch out for before we move to audience Q&A? Let's make Nilay sing for his supper. What do you want to highlight, Nilay? Yeah, look, I think that the biggest thing that I took away as we were getting ready for the call and just thinking about how we were going to message the future is really that fiscal 2027, right? Because we started our fiscal year on April 1, is not just about Michael, and it is not going to be about any one film. We are sitting here today talking about a multi-year growth story, right? I think the studio business, the Achilles heel has always been the product cycle, right? Is it a Bond year? Is it not a Bond year? Is it a "Spider-Man" year for Sony? Is it not a "Spider-Man" year? I think given the visibility we have, we really think that this is a multi-year EBITDA growth story. I think that that, combined with the free cash flow story and the de-leveraging story, really makes this not just about the product cycle, it's about the library, it's about the sustainability of the tent poles, it's about the IP and franchise that we talked about. We really feel confident that we've turned the corner, and this is going to be the inflection point story that we're talking about. Obviously, Michael referred to strategic optionality as well. We really feel like we're probably better positioned than since I've ever been at the company, since 2021. I think you could even look back further and say, "Wow, they've really laid the groundwork for all parts of the business really accelerating." We feel really good about the business. The takeaway is the separation really worked. Took us a long time, many of our shareholders, our long-term shareholders, were very patient, boy, oh boy, that was painful to collapse the A and B shares the same time you're separating Starz and Lionsgate into two separate public companies. Starz has had a good run, I'm involved in Starz. I'm on the board there, actually chair, non-executive chair. Jeffrey Hirsch and his team have done a great job there. The show "Fightland," by the way, from 50 Cent is going to come out, that's a very exciting show for them. I feel like there's no doubt that the separation worked. All you got to do is do the math. What you've got, you've got X shares of Starz if you were a Lionsgate shareholder, you've got a share of Lion. We're pretty excited that what our thesis was by separating the businesses was the right move. It was worth the wait, some left in the tank. What's the Money Bank Guarantee movie again? I think Resurrection is going to be a giant. Oh, no, "Power Ballad. No, yeah, "Power Ballad. Power Ballad. Power Ballad," you can watch it. I think it's 100% on Rotten Tomatoes. It's a really fun movie with one of the Jonas Brothers. Which Jonas Brother is it? Nick Jonas and Paul Rudd. Nick Jonas. Not that I could name the other ones, but Nick Jonas and also Paul Rudd. It's about the stealing of a hit show. It's very, very good. I'd be shocked if you didn't like it. All right. It's not a huge release for us, but again, it's a good business for us. We've got another Jason Statham movie coming out later on. Yeah, "Mutiny". Mutiny," which are money makers for us because his audience always shows up. There are worse things to do than follow studios and soccer teams. Appreciate you being here. Yeah, you're in a fun business. Yeah. You know? It's a lot more fun than following healthcare. Definitely agree with that. If you guys have any questions, you've got me for- Sure Five more minutes. Please, anybody. No. Nilay's really smart. On certain topics maybe. Yeah. Exactly. Well, we've got Starz coming up later. Oh yeah, Jeff will be here today, which I think it's worth seeing. As I said, he's doing a really great job and he's got a very good niche audience for his which are underserved women, African Americans, and it's a pretty exciting story for him as well, and real cashflow. I think we're going to pay attention to our cashflow going forward, and pay attention to the trajectory of our earnings. Actually, we do have a question. Here we go. Kind sir. Thanks so much. Have the cracks in the private credit world changed your perception of your ability to buy content in one to two years from now? To buy content, you mean libraries? Yeah. It feels like the rise of the private credit world gave rise to kind of irrational bidding on certain assets, including in the content world. Music libraries, I think he's maybe talking about. I think that we're opportunistic on the timing of when we buy libraries and who we buy them from. We've had great success, that I'm not going to disparage them, but we like buying libraries from institutions that really didn't know what they bought in the first place. Yes, it gets frothy and people spend a lot of money and then they ultimately say, "Wait a second, this really isn't a core asset for us." It is a core asset for us. We're hoping that some of that stuff shakes loose. There's just not a lot of it out there. With 20-some thousand titles in the library, we certainly have a core asset that has scale. Yeah. I think the music library business, it's just a lot more fragmented, right? It's on an artist by artist basis in a lot of cases in terms of what deals are happening. As Michael alluded to, the media business, it's the opposite of fragmented. That's why our asset is so scarce, and eOne was kind of this really unique opportunity. There just aren't that many out there, right? Here's a question for the audience. Let's throw it back to libraries and the way these work together. Who was the number one artist on Spotify streaming last week? Michael Jackson. Okay. The way that these feed off each other is really terrific. That movie, not only great for us and everybody involved with it, but certainly the Michael Jackson estate and catalog. Oh, bank. Can I shout it out? Yeah. Yeah, go ahead. Could you just explain the accounting behind when you relicense an existing portfolio, the incremental margins on that? I'm glad you asked that question because here's how ridiculous the accounting is in the film and television business. When we release a movie, we have to write it down to zero in 10 years. Our book value of that product is zero. Most of it is in the first six or seven years, actually, before that. Anything that came out 10 years ago, there's no "value" on our books. Yeah, the margin's pretty good. I mean, there's still participations that you have to pay- You've got residuals. Generally speaking. Yeah Yeah. When I mean margin's pretty good. Yeah Typically certainly more than 50%. Yeah. You think about it, you've got residuals, call it that 7%, 8%, and then on top of that, some participations. We're also very active. Brian Goldsmith, who's our Chief Operating Officer, is an animal. He spends a lot of time buying out participations because if the math works for us, and it's great if a participant wants to get money early, we're all ears with a checkbook to buy out those participations going forward. Good for them, good for us. All right. We're going to go to lunch on an accounting question. You must see a lot of movie pitches. You've gotten that down. You're pretty good. Yeah, I've seen a lot of movie pitches. Yeah. I'll tell you one final joke, which is hilarious because, at least it was to me. My 13-year-old son said, "Dad, how long have you been Vice Chairman of Lionsgate?" I said, "26 years." He goes, "Why can't you get promoted? Thank you all. All right. Thank you, everybody. Thanks everyone. We're going to go to lunch. We'll be back here at 12:20 P.M sharp for our sports panel. Thank you everybody.