Lions Gate Entertainment Corporation Class A (LGF.A) Q1 2023 Earnings Call Transcript

Lions Gate Entertainment Corporation Class A (NYSE: LGF.A)
Q1 2023 Earnings Call
Aug 04, 2022, 6:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Lions Gate first quarter 2023 earnings conference call. All participants will be in listen-only mode [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note today's event is being recorded. I would now like to turn the conference over to Nilay Shah with investor relations.

Please go ahead.

Nilay Shah -- Investor Relations

Good afternoon. Thank you for joining us for the Lions Gate fiscal 2023 first 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. And from Starz, we have president and CEO, Jeffrey Hirsch; CFO, Scott McDonald; president of Domestic Networks, Alison Hoffman; and president of International Networks, Superna Kalle. 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 Lions Gate's most recent annual report on Form 10-K as amended and 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.

Jon Feltheimer -- Chief Executive Officer

Thank you, Nilay, and good afternoon, everyone. Thank you for joining us. We're pleased to report a quarter of strong global subscriber growth at Starz, continued growth of our film and television pipelines, and key financial metrics in line with expectations. As I go through my remarks, you'll hear us focus on the operating environment, dealing with issues of economic uncertainty, recession fears, cord cutting, and the pandemic like everyone else.

But as I lay out how each of our businesses is addressing this environment, you'll also hear how our business model insulates us fairly well from some of the existing and potential headwinds. Starting with our motion picture business. With the box-office making a strong comeback, our motion picture group is in great shape to capitalize on its return with a strong lineup of exciting movies. Let me lead with our tentpoles.

We began shooting the eagerly anticipated "Hunger Games" prequel, "The Ballad of Songbirds and Snakes" in Poland two weeks ago. And the early footage looks great. The film rolls out globally in a prime holiday slot on November 17th next year. The other anchor of next year's slate is "John Wick," which has grown into a cultural phenomenon.

We will release "John Wick: Chapter 4" on March 24, 2023, to our huge and engaged fan base around the world. As we expand the "John Wick" universe across multiple businesses, production has just wrapped on the "John Wick" prequel event series for television, "The Continental." And in that same regard, we're in advanced pre-production on the "John Wick" action spinoff, "Ballerina" with "Knives Out" and "No Time to Die" star Ana de Armas in the title role. Behind these tentpoles, "Expendables 4" will bring back a world-class cast of action stars next year. "Dirty Dancing," starring Jennifer Gray and our reimagining of the romantic classic, arrives in theaters in time for Valentine's Day 2024.

We expect to have a major announcement in the coming weeks on "Now You See Me 3." And with titles including "Naruto," "Highlander," and the Michael Jackson event film lined up as well, we're growing a pipeline that can compete at any level theatrically. Our tentpole business is complemented financially and strategically by a consistently profitable, low-risk, multiplatform business for the 30 to 40 smaller and mid-size films we release each year. Especially in this current environment, our proficiency at delivering targeted films for a wide range of platforms is a profitable and repeatable strategy. This includes a direct-to-streaming component that continues to gain traction as it transitions from a largely opportunistic response to the pandemic to a planned, strategically focused business, with production deals in place with a growing number of platforms.

Turning to television, our status as one of the few independent suppliers of premium series at scale is our best defense against economic uncertainty and other headwinds. We have strong relationships across more than two dozen platforms, with multiple hit series of the broadcast networks, streamers, and a growing roster of AVOD platforms, along with a strong slate to drive the growth of sister company Starz. This diverse group of buyers helps mitigate a pullback in content spending by any one platform and has been our consistent strategy in both up and down markets. We're also coming off one of the most active periods of content creation in our television group's history.

With more than 30 new shows picked up to series in the past three years, 90% of them renewed for additional seasons and valuable new properties: "Ghosts," "Home Economics," "Minx," "Julia," "P-Valley," and a host of others. We will begin to generate increasing returns as they move into later seasons and create value in our library. For the past two years, our growth in television revenues hasn't been matched by growth in contribution and margin due to the investment in new series. This year, the television group segment profit is on track to increase by over 50% on improving margins, with even stronger gains next year as our series continue to mature.

At Starz, we had a strong subscriber growth quarter, adding 1.8 million global streaming subscribers, including 700,000 domestic subscribers. We're able to continue delivering these gains despite industry headwinds, given our differentiated offering of focused original programming coupled with a robust slate of Pay 1 output and library titles, all at a complementary price that provides great value to the consumer. The fiscal '23 slate has a consistent cadence of juggernaut performers, including "Outlander," "P-Valley," "BMF," and the Power Universe combined with tentpole movies like "Spider-Man: No Way Home." With a majority of the slate, underpinned by series returning for second and third seasons, we're confident in our ability to continue our subscriber momentum, acquiring new customers, and extending the lifetime value of our existing subscriber base. In the quarter, we continued to execute our commitment to engage both of our major cohorts with a new show every week with the successful debut of "Power Book IV: Force." All three of our Power spinoffs have become hits.

The drama "P-Valley" achieved record ratings in its breakout second season, becoming one of Starz's most widely viewed series ever. Fan favorite "Outlander" returned for its sixth hit season. And earlier today, we announced the highly anticipated "Outlander" prequel, "Blood of My Blood," to be written and executive produced by "Outlander" showrunner Matthew B. Roberts.

The Watergate series "GASLIT," starring Julia Roberts and Sean Penn, debuted strongly in the quarter, strengthening the Starz brand and showcasing our ability to offer high-end programming comparable to anything on premium paid television. We continue to expand Starz distribution successfully around the world. We announced a bundling deal with Disney in LatAm in the quarter, following on the heels of recent partnerships with [Inaudible] in France and Viaplay in the Nordic territories. This afternoon, I'm pleased to report that we've launched a deal with VIZIO in the U.S., making Starz available to millions of VIZIO smart TV users.

As we've been saying, this is just the tip of the iceberg in terms of where the industry is heading, and Starz will be a critical and desirable part of bundles and packages. With a growing number of platforms and devices. Again, we're cognizant of the headwinds in today's business environment. The economic uncertainty does make it harder to forecast our business.

The pandemic has gone on longer than expected and continues to add cost. There are growing pains in the streaming world and aging pains in the linear legacy businesses. In response, we're taking steps to conserve capital, keep our balance sheet strong, streamline operations, and mitigate risk while we continue to do what we do best, create great content and franchises that build our most important long-term asset, our world-class library. In closing, in terms of our strategic initiatives, we are proceeding nicely in spite of the turbulent economy and the complexity of ensuring that we retain and expand all of our strategic and operational benefits.

We continue to advance conversations with potential sponsors and strategic partners, and we remain on track to conclude a transaction as early as the end of the fiscal year. Now, I'll turn things over to Jimmy.

Jimmy Barge -- Chief Financial Officer

Thanks, Jon. Good afternoon, everyone. I'll briefly discuss our first quarter financial results and update you on the balance sheet. Q1 adjusted OIBDA was $5 million and total revenue was $894 million.

The year-over-year adjusted OIBDA variance reflects the expected timing of Starz programming, as media networks had an elevated level of content amortization associated with the build of its fiscal year '22 slate, as well as more expensive programming that launched in the quarter. Reported fully diluted earnings per share was a loss of $0.53 a share, and fully diluted adjusted earnings per share came in at a loss of $0.23 a share. Adjusted free cash flow for the quarter was a $62 million use of cash. Now, let me briefly discuss the fiscal first quarter performance of the underlying segments compared to the previous year quarter.

Media networks' quarterly revenue was $381 million and segment profit was a loss of $37 million. Revenue was down slightly year over year as we continue to see favorable shifts in subscriber mix with OTT revenue growth accompanied by linear declines. Year over year, domestic revenue declined 2.4%, while year-over-year international revenue was up 31%. The year-over-year decline in media networks segment profit primarily reflects the timing of content amortization and marketing cost with some foreign currency headwinds as STARZPLAY International.

We ended the quarter with 37.3 million total global subscribers, including STARZPLAY Arabia. Total global media networks' OTT subscribers grew 1.8 million sequentially to 26.3 million. This represents a year-over-year global OTT subscriber growth of 57%, comprised of domestic OTT growth of 26% and international OTT growth exceeding 100%. Now, I'd like to talk about the studio business in aggregate.

Revenue of $711 million was up 5% year over year driven by the television group. Segment profit of $70 million was up 48% year over year, driven by growth at both television and motion pictures. Our total library revenue at the studio was $749 million on a trailing 12-month-basis, up 1.4% over the $739 million of revenue reported in the first quarter last year. Breaking down the studio business between motion picture and television, let's start with the motion picture group.

Motion picture revenue was down 4.3% to $279 million, while segment profit of $51 million was up 14% on increased margins. Revenue and segment profit trends reflect continued strength in our library and an increased mix of direct-to-platform titles in the quarter. And finally, television revenue was up 12% to $432 million, driven by continued growth in output, which included both new and returning series. Segment profit came in at $20 million, up 500% year over year, reflecting new and returning series deliveries, continued strength at 3 Arts, and favorable comparisons relative to last year's first quarter.

On the balance sheet, we ended the quarter with leverage at 6.6 times or 4.1 times, excluding our investment in STARZPLAY International. We continued to retain significant liquidity with $379 million of cash on hand and $1.25 billion of an undrawn revolver. At the beginning of the quarter, we used some of our excess cash to prepaid $194 million of Term Loan A notes that would have otherwise been due in the fourth quarter of this fiscal year. Currently, we have no maturities until the fourth quarter of our 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. We continue to see adjusted OIBDA for fiscal '23 at similar levels as fiscal '22. And as previously noted, we see the year being back half weighted. Given the magnitude of adjusted OIBDA for the next three quarters as implied from our outlook, I want to give you some more color how this increasing cadence falls out over the next three quarters and the second half in particular.

As expected, the biggest driver is the timing of media networks' content amortization and marketing costs, which naturally peaked in the first quarter and is expected to decline in each successive quarter of fiscal '23. The level of first quarter content marketing costs reflects both the carryover amortization following the step-up in the number of Starz originals in fiscal '22, particularly the late fourth quarter premieres of "Outlander" and "Shining Vale" and the full complement of marketing and content expenses related to higher-cost programming launched in Q1, including "Gaslit" and "P-Valley." This amortization curve will cycle through in declining amounts as the year progresses. Finally, at STARZPLAY International, following strong subscriber trends in the first quarter and bundling opportunities with Disney in LatAm, we expect revenue performance will improve sequentially for the remainder of the year. At the TV studio, we expect steady revenue growth and an improvement in margins in fiscal year '23, particularly as episodic deliveries scale in the second half.

Additionally, we expect TV and motion picture will benefit from high-margin licensing revenue of key library titles in the second half as "Schitt's Creek" and earlier film franchise releases become available. Finally, we will have elevated P&A in the fourth quarter tied to the release of "John Wick 4," we expect our alternative distribution strategy with the March quarter platform avail of "Shotgun Wedding" will facilitate a strong close to the year for motion picture. Now, I'd like to turn the call over to Nilay for Q&A.

Nilay Shah -- Investor Relations

Thanks, Jimmy. Operator, can we open the call up for Q&A?

Questions & Answers:

Operator

Absolutely. [Operator instructions] Today's first question comes from Phil Cusick with J.P. Morgan. Please go ahead.

Phil Cusick -- J.P. Morgan -- Analyst

Hi, guys. Thank you. You know, I guess, number one, can you give us an update on strategic changes? Anything you can share there would be helpful. And then second, I wonder if you can talk about churn at Starz, the roughly level of that, and what's the extent of the content offering in the last year.

Thanks.

Jon Feltheimer -- Chief Executive Officer

I'll have Jeff go first with the Starz issue.

Jeffrey Hirsch -- President and Chief Executive Officer

Yeah. Hi, Phil. How are you? So, you know, as we talked about over the last probably two to three years, our content strategy has been really about driving churn down to low single digits by landing up content to our core demos, you know, every week, 52 weeks a year. So, we're just in the ending of "P-Valley." We premiered into "Kanan" on the 14th, and so we'll move that base from "P-Valley" into "Kanan." And what we've seen in post-season's churn, you know, before we were in the strategy, post Power churn was somewhere north of 40%.

It's now below, you know, 15% of [Inaudible] So we continue to see churn come down in the single digits. We continue to see it come down to all-time lows. And we think as we continue to roll through this content slate, lining up the content every week for the two core demos, we'll continue to see it get down to that low single digits.

Jon Feltheimer -- Chief Executive Officer

And Phil, in terms of our strategic planning, I would say the ultimate plan to value both Starz and studio sides of our business separately remains the same. I think I'd add that, as you can imagine, there's a number of ways to do this and actually numerous complexities to address in order to make sure that the sum of the two parts, when they are valued separately, is significantly more than they're currently valued together. In terms of timing, I'd say my comments today reflect what we've said before on this subject.

Phil Cusick -- J.P. Morgan -- Analyst

Thank you.

Operator

Thank you. Our next question today comes from Matt Thornton at Truist Securities. Please go ahead.

Matt Thornton -- Truist Securities -- Analyst

Hey, good afternoon, guys. Maybe one for Jon, one for Jimmy. Jon, just a follow-up to the prior question. It sounds like getting an announcement by the end of the summer is still the way we should think about that.

I guess my incremental question there is, I know a couple of years ago, you guys had done an independent third-party valuation of the library. I think the valuation at the time was, correct me if I'm wrong, but, you know, 3 billion to 4 billion. And my question there is do you think that's still prudent, you know, one or two years later in the current environment? And then just secondly, for Jimmy, two housekeeping. I know you talked about currency, which is now something we talked about, but obviously, the international business is getting a little bit bigger.

So, if you can quantify what that currency headwind was. And do you still expect to be about free cash flow breakeven to positive for the full year? Thanks, guys.

Jon Feltheimer -- Chief Executive Officer

If I got you right, you're asking. I'm not sure. You started with a timing issue and then went into library value. I'm not sure you're connecting those two.

In terms of library value, you know, frankly, if anything, the library is, well, more valuable than it was in that time period and continues to grow. It grows for two reasons. One, obviously, we're filling the pipeline with a lot of content. And the more renewals we get, particularly in the television business, the more valuable that content is.

And the second thing is, and, you know, we'll see in a recessionary environment if it's quite the same, but we are finding huge increases in demand with so many new buyers for our content. And frankly, again, such a significant portion of our content is scripted and premium. And frankly, that's what have -- the longest lifetime value and the most demand right now, that's what moves people's needles. And when you see a lot of the big streamers obviously moving into new territories, you know, they need a lot of content.

And frankly, it's expensive to make new content. So, yeah, our library continues to grow significantly in value. It's an amazing library. And again, we keep growing it.

Did you have a question about timing?

Matt Thornton -- Truist Securities -- Analyst

Yeah. Sorry for the confusion, Jon. Just to follow up on the prior question, it sounded like the way we were thinking about timing, getting resolution by the end of the summer in a deal clause by the end of the fiscal year is still the way we should think about it. I want to make sure I heard that right.

Jon Feltheimer -- Chief Executive Officer

Michael, why don't you jump in?

Michael Burns -- Vice Chairman

OK. Great. As Jon said that we're on track. The key is to do the transaction or the initiative, right and not fast.

It's fairly complex. It's important to note that we have an attractively financed balance sheet and very valuable tax attributes, and we're working very hard to preserve the value of both of those. The structure that we're considering has become broader. And even in the separation, some of our potential partners have expressed interest in both the studio and Starz, and as always, our priority is to create significant shareholder value.

Jimmy Barge -- Chief Financial Officer

And Matt, for your question on FX and free cash flow, yeah, we did see some foreign currency headwinds in the quarter. I think of it more as timing, but we'll have to wait and see. It was about 12 million for the quarter. About half of that would be STARZPLAY International, as you might expect.

And, you know, we saw effectively what I think of as a four-year effect in foreign currency occur in the first quarter. So, we'll see where rates go from here. But generally speaking, we don't have a significant exposure to foreign currency, as you know. But relative to this quarter, relative to just the size of the first quarter profitability, it was, you know, kind of an outsized percentage relative to all things being considered.

From a free cash flow standpoint, absolutely. Yeah. We still feel good that we can continue to finance our increased investment and content marketing cycle, including SPI or STARZPLAY International from our positive free cash flow. It's a, you know, not a quarter-to-quarter thing.

It's a trailing 12 months or a full year cycle because as you know, content spend and cash flows move quarter to quarter. So, you know, we had a use of 62 million this quarter. I expect another use of cash in the second quarter as well. That is some tough comps as well on the trailing 12 months.

So, probably peak leverage in Q2 and then reduce that into the levels of five times by the end of the year and again on positive free cash flow.

Nilay Shah -- Investor Relations

Thanks, Matt. Operator, could we get the next question, please?

Operator

Absolutely. Our next question comes from Steven Cahall with Wells Fargo. Please go ahead.

Steven Cahall -- Wells Fargo Securities -- Analyst

Thanks. Maybe first for Michael or for Jon on the strategic alternatives. It sounds like you're having some discussions around both assets, maybe with multiple partners. I think the timing, you know, is maybe taking longer than some of us might have thought.

I guess unless you have surety on a transaction coming together, would you consider going ahead and separating the companies in order to generate some of the value that you're looking to get, maybe provide, you know, some valuation discovery as to what the market thinks those worth. Or maybe you can talk to us about why it's better to not do that while you're pursuing the process that you currently are. And then, Jon, at the beginning, you talked about the TV segment profit increasing. It sounds like you're getting to some shows that are in later seasons.

Could you maybe just talk us through what kind of profit growth we might expect over the last -- sorry, over the next few years? Thanks.

Jon Feltheimer -- Chief Executive Officer

I'll let Michael take the personnel. I'll take the TV segment.

Michael Burns -- Vice Chairman

Yeah, Steven, we're not going to give too many more details, but obviously, this initiative is all about creating shareholder value. But it's important to note that we are still on track to announce our intention in September.

Jon Feltheimer -- Chief Executive Officer

And in terms of television, I actually think I had it in my remarks. Again, we had virtually all of our shows renewed. Obviously, we're a little disappointed with "First Ladies" not going into second season, but we actually are exploring another potential buyer for that. Other than that, everything we had was picked up, and we're moving into the second, third, fourth season of a number of shows.

As I said, I believed our contribution could go up. Something like 50%, I believe, is in my remarks. And frankly, more the following year which would be fiscal 2025. So, I'm sorry, fiscal '24.

So, yeah, I think it's all working according to plan. And again, when you think in a recessionary period, frankly, it's a lot less expensive for networks and platforms to renew shows than actually to spend the 15 million or 20 million or more to launch new ones. And so we think, again, in that sense, we're a little bit insulated from recessionary pressure.

Steven Cahall -- Wells Fargo Securities -- Analyst

Great. Thank you.

Jon Feltheimer -- Chief Executive Officer

You're welcome.

Nilay Shah -- Investor Relations

Thanks, Steven. Operator, could we get -- go ahead. [Inaudible]

Operator

Absolutely. Our next question comes from Peter Supino with Wolfe Research. Please go ahead.

Peter Supino -- Wolfe Research -- Analyst

Hi. Thank you. This question relates to the eventual harvest of the investments that we've seen in your financials. Over the last five quarters, your programming investment has gone up by about $1 billion.

Your TV margins have fallen from 10% to almost zero on growing revenues. And we've heard a lot of talk about deficit financing. And I want to see if you can talk about the importance of that and any other factors that would get you from your current run rate to much higher margins and higher revenues.

Jon Feltheimer -- Chief Executive Officer

[Inaudible]

Jimmy Barge -- Chief Financial Officer

Yeah. I mean, we've got a lot of visibility in terms of what we're doing on the content side. As Jon's noted, we've had some great content generation and continue to do that. But yeah, it ultimately needs to pay back, right? And it does.

In television, I often say, you know, a lower margin at the time is a good thing because it means that what Kevin and the team's doing are killing it on building the future [Inaudible] So in the first quarter, for example, we had a higher mix of deficit financing, which will be long-term benefits, than we expect in the second half of the year. So, as we move through the year, that mix will change and then that margin will start to increase. And as Jon, you know, mentioned earlier, we feel really strong about that going into not only the rest of '23, but '24 and beyond. And I'll just remind you that Kevin has a mix of business there and the team, you know, with about, you know, at least half, if not more than half to third parties as well.

And obviously, a great supply relationship in programming with Starz. So a strong business and a return to follow.

Nilay Shah -- Investor Relations

Thanks, Peter. Operator, could we get the next question, please?

Operator

Absolutely. Our next question comes from Thomas Yeh with Morgan Stanley. Please go ahead.

Thomas Yeh -- Morgan Stanley -- Analyst

Yeah. Thanks so much. As we think about the potential stand-alone value of a studio business approaching the other end of this upcoming transaction, I was wondering if you can just talk a bit more about the content monetization engine. I know there's a variety of ways.

For example, some of the library TV deals are structured, some of them maybe even include advertising revenue share and ad exposure. Maybe just give us an update on the structure of these deals, how they [Inaudible] especially given kind of the diversity of players that you mentioned that you work within the space. And then as part of that, I also saw, you know, the recent announcement about a partnership with IMG on consumer products. Given your deep portfolio of IP on the studio side, I was wondering if you can put some dimensions around that opportunity for you, where you sit now on that front versus where you hope to go.

Jon Feltheimer -- Chief Executive Officer

Yeah, I'm going to have Kevin Beggs answer that first part of the question.

Kevin Beggs -- Chairman of the TV Group

Sure. Thanks, Jon. I mean, generally, you know, our television -- and Jimmy was alluding to it just now, we take a portfolio approach, a mix of deficit license fee, controlling our own destiny with global distribution and downstream domestic distribution. And the emerging model of a cost plus that you would see at Netflix and Apple and Amazon, a few of the other players which is upfront but a longer return to your library.

Something like "Ghosts" on CBS is a clear winner for us. Twenty episodes a year, a hit comedy, the No. 1 new comedy of the year. And we have the downstream domestic distribution, which we've already set up at Paramount Plus, which is exciting and just going to continue to throw off.

But even deep library, something like "Nashville" continues to perform -- overperformed and continues to be relicensed of 132 episodes. You know, those are the big wins that we look for, and we kind of leaven those near-term profitability shows with cost-plus buyers in between. But ultimately holding onto rights is what we're all about and why we've always been in the deficit game and are going to continue to be in that in every way that we can.

Jon Feltheimer -- Chief Executive Officer

Yeah. I think I should point out, I think, most of you know this, that the multiples paid for businesses that are in the studio business where they control rights, you've seen before, you know, multiples 15 to 17 times and above as opposed to some of the multiples you see for the diversified businesses and the legacy businesses. So we believe strongly in deficit financing. We believe strongly in investing in content where we will own the copyright, we will own it for life, where we will be able to explore multiple distribution revenue streams forever and ever.

And in terms of both the -- your question and last one, there's no question in my mind that this value creation is going to be significant and monetization will be a multiple of what we're putting into the business.

Nilay Shah -- Investor Relations

Thanks, Thomas. Operator, could we get the next question, please?

Operator

Absolutely. Our next question comes from Kutgun Maral with RBC Capital Markets. Please go ahead.

Kutgun Maral -- RBC Capital Markets -- Analyst

Great. Thank you for taking the question. You know, it's great to hear the profit outlook of the TV segment. I know the dynamics at motion picture are a bit different than TV.

And that for motion pictures, you know, 2023 will presumably be maybe down a little bit year over year. But given the slate that you have ahead, I know you've talked about your distribution strategy, you've talked a lot about your very successful approach to monetize in the library. Are we getting closer to a point where motion pictures can also really ramp the segment profit profile? Thank you.

Joe Drake -- Co-Chairman, Motion Picture Group

Yeah. This is Joe. It's a great question. We very much are.

You know, Jon talked about the robust slate that we're driving into '23 with. We've been very intentional. As you know, we tested a few films this last year and we got a couple at the end of the year to really position ourselves for coming back into the market with a really robust slate. And yet he mentioned about, you know, how that streaming business and our multiplatform business has really been a deliberate business from what was opportunistic.

And so, what we've been able to do leading into '23 is stand up another leg of the business, faster return on cash, high margins. Our margins have been very strong for the last three years. We now go back -- now, we go into '23 with really probably the best slate we've had in years. You've got some giant brands in there like "Wick" and "The Hunger Games." We've got some super targeted stuff.

You know, one of the things that we always -- we obviously want to be able to compete at the box office, but we're equally focused on profit. When you look at the box office, everybody is focused on these big tentpoles. We have our share of those. But if you also look, you'll see things like "Scream," which we have [Inaudible] participants in, [Inaudible], these middle movies are really some of the most profitable movies that are out there in the marketplace.

And when you look at our slate, in addition to those big drivers, we've got a number of action movies, "Expendables" little franchise for us, "Shadow Force," or Jon mentioned we're launching a spinoff of the "Wick" franchise and "Ballerina," really compelling an economics smart price point with an opportunity to kind of extend that brand. So, the answer to your question is a resounding yes.

Kutgun Maral -- RBC Capital Markets -- Analyst

That's very helpful. Thank you so much. And if I could actually just maybe follow up, you know, related to the transaction and the studio. You know, you teased us with the comment structure has become broader and that there's unsurprisingly interest in the studio as well.

You know, we just talked about how motion pictures, at least, you know, the results and profitability over there is probably very subdued given all the investments. And, you know, in a multiyear period, if you have the patience, we should probably see that inflect quite nicely. You know, when you talk with interested parties about valuation, you know, what's kind of a framework that you look at to make sure that, you know, you're -- you'd be getting potentially a fair value for this asset that, at least, from the Street's perspective, has been, you know, arguably undervalued.

Jon Feltheimer -- Chief Executive Officer

I would answer that a little differently. I think the whole reason that we've entered into these discussions to separate the values of these businesses, we found that there's, interestingly enough, two very different sets of investors. And some investors really like the fact that we've got this targeted platform very specific. I would say, again, even in this recessionary period, we're sort of in the fourth or fifth inning.

And sometimes it's better to be smaller. And we -- our expectations are a little bit different. We're already making money in our domestic streaming business. And honestly, we're like in that fourth inning internationally in that business.

And so instead of adding new territories, which everybody is doing, we're actually going the other way. We're kind of scrubbing each territory to make sure it's the territory we need to be in. And as we've said before, we're sort of within two years of a run rate of cash positive in our international business. So, we have, you know, a different way of looking at those businesses.

But certainly, there seemed to be a group of investors that really like the streaming side and the platform side. And there is another -- understand that the immense value that we have is really after the MGM sale to Amazon, but really the only real actionable investable studio. And you know, again, MGM, if that's a comp, there you go, use that. Our library honestly is better than the MGM library.

It's newer, it's fresher. We've been investing in it for five or six or seven years. So, if you want, use that as a comp. But again, at the end of the day, it is not surprising that people might show interest in both sides.

But we still have to create a vehicle so that we can value both sides separately right now. That's what we're doing. As Michael said, there are good complexities, the complexities of having a really smart financing structure, NOLs, and things that we want to preserve in this structure. And so, we're taking our time, and we think we're on track in terms of our timing, as I said, to potentially be able to close the transaction as early as the end of our fiscal year.

But we're going to do this right. We're going to create the value for our shareholders. And again, we're advancing just really pretty much at the speed we expected to.

Kutgun Maral -- RBC Capital Markets -- Analyst

That's great. Thank you both for all the color.

Nilay Shah -- Investor Relations

Thanks, Kutgun. Operator, could we get the next question, please?

Operator

Absolutely. Our next question comes from Bryan Kraft of Deutsche Bank. Please go ahead.

Bryan Kraft -- Deutsche Bank -- Analyst

Hi. Good afternoon. I want to ask you, I guess, two questions. First, on international sub growth at Starz, can you just talk about, you know, sustainability of that and, you know, your confidence in the next few quarters being able to continue to grow the way you did this quarter or even better than we did last quarter.

And then separately, I guess for Kevin, what are you seeing is generally as far as third-party demand for nearly produced content. I know that the studio's doing well and growing, but with some of the streamers like Netflix and Warner trying to become more disciplined around content spending, are you seeing, you know, any changes in demand for new projects or any renewed discipline around costs of those projects? You know, maybe on the leading edge of the conversations at this point. Thank you.

Jon Feltheimer -- Chief Executive Officer

[Inaudible] Jeff.

Jeffrey Hirsch -- President and Chief Executive Officer

Hey, Jeff, thanks for the question. You know, I think there's really two things that are giving us great confidence in continued subscriber growth in the international business. We're seeing a lot of great momentum in distribution deals. We've got a lot of distribution deals that are, you know, about to be signed and about to be launched.

So, we're bringing -- as Jon said, instead of launching new markets, we're going deeper in existing markets where there's more consumers. And so, we're seeing a lot of consumer uptake. We're seeing a lot of momentum in the distribution side of the business. He talked about in Jon's prepared remarks, we launched the bundle with Disney.

We've got some bundles in Benelux that we launched. And I think on top of that, if you take a step back, the content from the U.S. is really driving into the international business, much like we talked about the domestic side. Now that we've lined up the content international, that content is really starting to come online and drive the subscriber business.

And then in company -- territories like LatAm and Mexico, we've got these great originals that we knew we had a programming gap from the U.S. and we've built on these great originals. And seemingly the Senorita 89 has performed really, really well. We're excited about Nacho coming out of Spain to come onto the platform very soon.

So we feel really good about the -- we're on track to hit that 50 million to 60 million subscriber target for the world by 2025. And that will come out of that, you know, and the run rate breakeven coming out of the end of calendar '24.

Kevin Beggs -- Chairman of the TV Group

And on the TV side, in the demand, you know, it's always been the way that, you know, some platforms are a little more aggressive than others. The Challenger brands, which is where we've really always built our business with new players that are emerging and have bigger needs that are not only programming but marketing with their programming. When you go back to "Mad Men," it built the AMC brand along with being a great show and opened the door for a lot of other great shows, that's where we always want to be. So, while there is some discipline being displayed within some of the legacy streamers, if you can call them that now, the Challenger brands are eager to take market share.

I mean, it's a high bar because the gray area between feature film and television talent has been blending over the last many years. And big stars and big auspices drive television events and television series. As a Challenger independent, we have to be better than everybody else, certainly the internal studios. But that's what drives us.

We're super competitive, we want to win. And most of the shows we're bringing to the market these days have multiple bidders. We're feeling really good about that. But development is just development.

It's converting to production and making those shows for a disciplined price which continues to renew our business. 

Bryan Kraft -- Deutsche Bank -- Analyst

OK. Thanks very much.

Nilay Shah -- Investor Relations

Thanks, Bryan. Operator, can we get the next question, please?

Operator

Absolutely. Our next question comes from Jim Goss with Barrington Research. Please go ahead.

Jim Goss -- Barrington Research -- Analyst

Thanks. Good afternoon. Some of these things have been addressed, but what I -- what I'm sort of interested in knowing is post-separation. I was wondering if you frame out the studio strategy as a renewed stand-alone business.

Not long ago you had smaller TV productions and sort of mostly singles in the film side. Then you move more aggressively with "Hunger Games" and "Twilight." And recently you've been focusing on working with Starz with this new lease on life. How do you think you've characterized your approach on the TV side and the film side? I think you're just taking a bit of the TV, but, you know, is there a way investors should perceive the overall approach to the business in terms of getting that 50 to 79 multiple you've referred to earlier?

Jon Feltheimer -- Chief Executive Officer

Yeah. I honestly, doing -- continue to do exactly what we do right now, continue to build great, particularly scripted television shows and big feature films. Take our franchises. There's more announcements coming on." John Wick." Look at what we're doing in television with "The Continental." You know, I'm not going to give all of Joe's fun away, but you'll see some interesting announcements coming down the pike.

We're not going to separate these businesses without maintaining a lot of the synergies between Starz and Lions Gate television's business. I can promise you that. So, I would say, actually, you know, both sides would be free ultimately to consolidate potentially some other businesses. But at the end of the day, both are strong in and of their right.

They will maintain a tremendous amount of synergy, as I just said. And I like our mix of products in television, As Kevin said. He mixes in the portfolio, some things with less deficit, but of course, that's right. Joe, I like the fact that he is now -- have got a diversified portfolio as well with big brands.

Bigger movies. Our core sort of mid-range action pictures, as well as a -- as he and I both have set a deliberate strategy around streamers and multiplatform, probably areas where all of the other studios really won't spend much time, but where we make $50 million, $60 million a year. So, I like our businesses on both sides. I like that Starz on the international side is going to be in a much shorter time frame than most of the other big streamers, cash flow operating, cash flow positive.

So, yeah, I don't foresee huge changes other than as I say, it is possible that they will scale up each of their businesses, but much more specific to their business.

Jim Goss -- Barrington Research -- Analyst

Do you think you'd have one or two bigger franchise films every year or two or something like that to keep that interest going along? And on the distribution strategy, side, I know internationally, you know, you don't have your own distribution network. I wonder how that will work as well.

Jon Feltheimer -- Chief Executive Officer

OK. Well, Jim, again, when you say that -- what all you're really talking about in that is the international exhibition business, which I don't consider a distribution business. And frankly, the discipline that we have of being able to go to a market internationally and cover so much of our budget in terms of our movies, from taking both third-party international distributors, as well as going to streamers and putting those pieces together, I think it gives us tremendous flexibility, particularly in a period where you don't know are we -- inflationary and recessionary? We do self-distribute in the U.K. We like that market, but we retain, don't forget, as much as we can in LatAm, for example.

We retain all of our other rights other than the exhibition rights. So, you know, I like the fact that we are scrappy and entrepreneurial, and we don't have any legacy mores that we have to follow. We build these business models as the business changes. That's what we're going to keep doing.

But again, I like the business that we do and again, the multiples I referred to. If you look at some of the purchases of some businesses recently that actually don't even retain rates, and you look at the prices that are paid, you would say that this library and that this studio is immensely valuable. 

Nilay Shah -- Investor Relations

Thanks, Jim. Operator, can we get the --

Jim Goss -- Barrington Research -- Analyst

All right. Thank you much.

Nilay Shah -- Investor Relations

Thanks, Jim. Operator --

Operator

Yes, sir. Our next question comes from Alan Gould at Loop Capital. Please go ahead.

Alan Gould -- Loop Capital Markets -- Analyst

Thanks for taking the question. I've got two for Jeff and one for Joe. Jeff, we're starting to see a lot of advertising coming into the streaming business. Just wondering how you think that's going to affect Starz? You know, you'll be differentiated as one of the few that doesn't offer an ad business, but it may keep prices lower.

Also, if you could just address what's happening with the ARPU, both domestically and internationally, at Starz? And for Joe, Joe, pre-pandemic, Lions Gate was averaging about 14 wide releases per year. And given the changes in the box office environment, does it make sense for you to just be doing, you know, half that amount or fewer number of films, but just bigger budget such as "The Hunger Games," "John Wick?"

Jeffrey Hirsch -- President and Chief Executive Officer

Hey, Alan, it's Jeff. How are you? Look, I think, as you know, the other streamers start to replicate what we used to see in the linear business with advertising. It actually really, I like to say the more things change, the more they look the same. It really then recreates what we used to have in terms of being that cherry on top of an advertising, broad-based service.

And so, we think it lowers price points. It makes Starz more accessible. It makes us a better bundling partner where we have non-ad supported. And very adult, very premium content is a great complement to all of the broader services that can have advertisers around.

So, we are actually excited for that to happen. We look forward to those services getting launched and seeing where we can create some kind of commercial, you know, synergies through bundles of each of those services. In terms of the ARPU on the domestic side, relatively flat sequentially. We had a lot of big growth in the back third of the quarter.

And so, you'll see that. But I expect that to set us up pretty well for the rest of the year. So "P-Valley" came in in the back third, and that's what you saw there. On the international side, we had a big bundling deal come in the quarter that drove our fruit down a bit.

I do think long term, they're still somewhere between, you know, nonbundle, somewhere between two euro and 3 euro, or $2 and $3. And so, I would expect that number to start to accelerate as well in the coming quarters.

Jon Feltheimer -- Chief Executive Officer

Joe?

Joe Drake -- Co-Chairman, Motion Picture Group

Yeah, thanks, Alan. So, we're -- the way we've geared the business is around eight to 12 films in terms of really driving the flywheel. We, because of these other areas of growth, our international business is stronger than ever in terms of the value of our rights. Our multiplatform business, our streaming business have added growth overall.

So, we don't require as many films. We're geared so that if we have 12 great offerings, and in fact, that F '23 slate right now is 12 films. We're certainly capable of still driving that output, but we don't need as many to hit our numbers.

Alan Gould -- Loop Capital Markets -- Analyst

OK. Thanks lot.

Nilay Shah -- Investor Relations

Thanks, Alan. Operator, can we get the next question, please?

Operator

Absolutely. Our next question comes from Matthew Harrigan with Benchmark. Please go ahead.

Matthew Harrigan -- The Benchmark Company -- Analyst

Oh, thank you. Actually honing in again on Jon's very favorable comments on TV. Firstly, if you do the math and you're up 50% this year and you're up a good half again next year, it feels like you probably have about a 75 million increment or so, where the Street is on the TV profit in '24. Should we probably just regard that as a buffer to the economic macro uncertainty and creative execution and all that? Or are you feeling, you know, more optimistic about your overall outlook for the next couple of years? And then I guess, as a corollary to that, you know, listening to the Warner Bros.

Discovery call, I mean, it feels like they're trying to rectify, you know, the effort to have sort of tearing apart their business at one point and taking a more, you know, balanced approach. I know you've got a good relationship with HBO. I think it's like five pilots and Casey Bloys just renewed his contract. Some of the -- your admission that things are looking better for the TV business, just kind of a sense that things are rebalancing at some of the larger, you know, legacy streamers, as you alluded to.

And it's helping you. I mean, is the TV increment kind of a surprise from where you are a couple of months ago? Or are you just being a little bit more, you know, open kimono about it? Thanks. 

Jon Feltheimer -- Chief Executive Officer

Kevin, you start.

Kevin Beggs -- Chairman of the TV Group

OK. Yeah. I mean, we -- I think, you know, there's a lot of positive momentum in television because there's just so many buyers, so many new buyers. And as Jeff alluded to, kind of the realignment of the linear bundle moving into the digital bundle.

AVOD players are pressuring legacy SVOD streamers, and legacy television in the same way that basic cable was pressuring the networks, you know, 15 to 18 years ago. That's just great from a selling perspective. A lot of optionality in places where we can sell and make at different price points based on customer and client needs. We have a great relationship with them, you know, all parts of the HBO Warner Discovery family.

We have several shows that are going to be pilots there right now. We have shows that are being made or renewed in limited series. We expect and hope that those will continue to go on and be successful. If anyone falls out, there's others to replace them elsewhere.

And we just look at the business holistically. And it's a very different business than even five years ago with all the entrants. They're competing with each other. And that's great business for us.

We've also had, you know, the amazing partnership and good fortune of partnering with Jeff and his entire team of Starz. That's built our business. We're going to continue that relationship in any iteration of the structure that's been alluded to before because we have so much share in common and know each other so well and speak so frequently and have had a great partnership and relationships. So, those have all been reasons that revenue is driven.

And as we've gotten older and aged -- we're you know, we're kind of like pre-teen in the television business. Most of our competitors have been doing this for 60 or 70 years. We've been doing it for 20. Some of those libraries are now really turning into ongoing revenue.

Many of our competitors have massive libraries, have been going for -- since the 1950s. The other big component that we should just not fail to mention is the 3 Arts is an amazing engine. That transaction was accretive on day one. All the partners have a huge business in the management and production side, and now we have four shared series together.

We expect to have more up. "Serpent Queen" is coming up on Starz. We're excited about that. "Julia" has been a big success for HBO Max and Warner.

And we have a great model together. We expect more down the line. "Mythic Quest" just got renewed for two more seasons and we think season three is in the can. So, those kind of things just didn't exist before.

And it really goes back to Jon and Michael's overall strategy of getting closer to content and content creators. And it's a smart strategy in a world that continues to shift every day, as we're seeing today on the other earnings calls.

Jon Feltheimer -- Chief Executive Officer

Yeah. I'll try to drill down even a little bit more for you. But again, the good news about television at this point in time, and that includes with 3 Arts, and the shows they know are being picked up and the visibility Kevin has, including having the shows at Starz. You know, again, we have a great visibility.

And I don't know how you extrapolated your number, but I would say the television margin and contribution for fiscal '23 is significantly higher. I don't know these numbers that far off, and I could see a similar kind of jump into fiscal '24. So, I hope that's helpful.

Matthew Harrigan -- The Benchmark Company -- Analyst

Great. Thanks, Jon. Thanks, Kevin.

Nilay Shah -- Investor Relations

Thanks, operator.

Operator

Yes, sir. That concludes the question-and-answer session. I'd like to turn it back to the management team for any final.

Nilay Shah -- Investor Relations

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 have a good evening.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Nilay Shah -- Investor Relations

Jon Feltheimer -- Chief Executive Officer

Jimmy Barge -- Chief Financial Officer

Phil Cusick -- J.P. Morgan -- Analyst

Jeffrey Hirsch -- President and Chief Executive Officer

Matt Thornton -- Truist Securities -- Analyst

Michael Burns -- Vice Chairman

Steven Cahall -- Wells Fargo Securities -- Analyst

Peter Supino -- Wolfe Research -- Analyst

Thomas Yeh -- Morgan Stanley -- Analyst

Kevin Beggs -- Chairman of the TV Group

Kutgun Maral -- RBC Capital Markets -- Analyst

Joe Drake -- Co-Chairman, Motion Picture Group

Bryan Kraft -- Deutsche Bank -- Analyst

Jim Goss -- Barrington Research -- Analyst

Alan Gould -- Loop Capital Markets -- Analyst

Matthew Harrigan -- The Benchmark Company -- Analyst

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