ライオンズゲート・スタジオ（LION）2027年度第2四半期決算説明会：売上高41％増

主要なポイント

• 2027年度第2四半期の売上高は前年同期比41%増の6億6900万ドルとなり、調整後OIBDAは7200万ドル、営業利益は2900万ドルに達しました。
• 映画部門の売上高は前年同期比30%増の3億5900万ドル、セグメント利益は8900万ドルとなりました。テレビ部門の売上高は56%増の3億1000万ドル、セグメント利益は73%増の2200万ドルに拡大しました。
• 直近12カ月間のライブラリ売上高は前年同期比4%増の約10億4000万ドルとなり、スタジオ史上2番目の高水準を記録しました。経営陣によると、ライブラリのキャッシュフローマージンは約60%でした。
• 純レバレッジは4.3倍から3.7倍に改善しました。ライオンズゲート・スタジオの当四半期末時点の純負債は約15億ドル、現金は3億5900万ドル、リボルビング信用枠の利用可能枠は8億ドルとなりました。
• 経営陣は、劇場公開作品のラインナップ、テレビ番組の納品増加、およびライブラリの継続的な好調さに支えられ、2027年度の調整後OIBDAとフリーキャッシュフローが大幅に成長することへの自信を改めて表明しました。
• 同社は14億8700万ドルの受注残高（バックログ）を計上し、その約58%がテレビ部門に関連しており、2028年度および2029年度に向けた経営陣の見通しの透明性を裏付けています。

主要財務データ

事業および営業業績

映画部門の業績は、『Michael』からの継続的な貢献、前年度作品からの繰越、ライブラリの堅調な推移、ならびにプリント・広告（P&A）費用の抑制が寄与しました。経営陣は、『ハンガー・ゲーム』最新作『The Hunger Games: Sunrise on the Reaping』の初期指標（トラッキング調査、ソーシャルメディアの反響、前売り券の販売状況など）は心強く、前作の『ハンガー・ゲーム』映画を大幅に上回る業績を示唆していると述べました。

ライオンズゲート・スタジオが今後予定している大規模劇場公開15作品のうち10作品は、シリーズ展開が可能なブランドIP作品です。今後のラインナップには、『The Hunger Games: Sunrise on the Reaping』、『The Resurrection of the Christ Parts 1 and 2』、『The Housemaid’s Secret』、『Michael 2』、『NARUTO -ナルト-』が含まれています。また同社は、『ジョン・ウィック』、『ソウ』、『ブレア・ウィッチ』、『ランボー』の各フランチャイズのプロジェクトも開発中です。

テレビ部門の増収は、前年同期の7本に対し、22本のスクリプト付きエピソードを納品したことを反映しています。納品作品には『The Hunting Wives』、『Power: Origins』、『The Studio』などが含まれます。Netflixは『The Hunting Wives』シーズン2の配信開始を前に早くもシーズン3への更新を決定し、ライオンズゲートのアトランタ・サウンドステージで制作が開始される予定です。

直近12カ月ベースのライブラリ売上高は、過去5四半期中4回目で10億ドルを突破しました。主な貢献作品には『ハンガー・ゲーム』フランチャイズ、『Heartland』、『キル・ビル：The Whole Bloody Affair』などが含まれます。テレビコンテンツは、直近12カ月のライブラリ売上高の30%近くを占めるまでに拡大しました。

ライオンズゲートは50以上のグローバルFAST（無料広告付きストリーミング）チャンネルを開設しており、今年度末までに総視聴時間が10億時間に達すると見込んでいます。SVODアドオンチャンネルは36の国・地域で展開され、加入者数は200万人に迫っています。経営陣によると、グローバルチャンネル事業の年間売上高は2年間で3倍以上に増加し、1億ドルを大幅に上回る規模となっています。

同社はまた、知的財産を舞台制作、ライブ体験型イベント、コンサートツアー、ビデオゲームへと拡大しています。経営陣は、グローバル・プロダクツ＆エクスペリエンス部門全体で、2028年度末までに少なくとも8つの舞台演劇、4つのコンサートツアー、10の体験型イベント、9つのインタラクティブ・ビデオゲームを展開することを見込んでいます。

経営陣の業績見通し（ガイダンス）

経営陣は、2027年度の調整後OIBDAおよびフリーキャッシュフローの大幅な成長見通しを維持しました。主な牽引要因として、上半期の好業績、今後の劇場公開作品、テレビ番組の納品増加、およびライブラリの堅調さを挙げています。

第3四半期は、Netflixとの『Power』ライセンス契約にも一部支えられ、調整後営業利益の絶対額ベースで同社のピーク四半期になると見込まれています。第4四半期は前年同期の実績が高水準であったため厳しい比較対象となるほか、『Karoshi』や『Day Drinker』のP&A費用、さらに2028年度第1四半期に公開予定の『The Resurrection of the Christ』の公開前費用が含まれる予定です。

コンテンツ投資は、2027年度の上半期に約40%、下半期に約60%配分される見込みです。経営陣は、直近12カ月ベースのフリーキャッシュフローが今年度の残りの期間を通じてプラスを維持し、2028年度および2029年度には拡大が加速すると予想しています。

同社は、直近12カ月間の調整後OIBDAの増加と純負債額の緩やかな削減を背景に、2029年度にレバレッジを3倍未満に引き下げることを目標としています。経営陣の最優先事項は、デレバレッジを進めつつ、映画およびテレビ向けコンテンツへの投資を継続することです。

グローバル・プロダクツ＆エクスペリエンス部門について、経営陣は2028年度末までに年換算売上高ランレート約5000万ドル、3000万ドル超の利益貢献を目指しています。

リスク要因および注視すべき点

• 第4四半期の収益性は、極めて好調だった2026年度第4四半期との比較に直面する中、劇場公開向けのマーケティング費用や公開前プロモーション費用を吸収することになります。
• 下半期のコンテンツ支出は上半期に比べて大幅に増加する見通しであり、四半期および直近12カ月ベースのフリーキャッシュフローの推移に影響を与える可能性があります。
• 経営陣は、新たな制作パートナーや資金調達パートナーが登場しているものの、スクリプト付きテレビ番組の需要はようやく安定し始めた段階にあることを認めました。
• 同社は資本構成の評価を継続していますが、経営陣は近い将来に満期を迎える企業債務はないと述べました。eOneファシリティの残存期間は約3年、ライオンズゲートIPファシリティの残存期間は3年以上残っています。
• ライオンズゲートは、コンテンツ、データ、およびパートナーの権利保護の必要性を強調しつつ、制作、マーケティング、ライセンス供与、会計処理の各プロセスにおいて人工知能（AI）の活用を拡大しています。

アナリスト質疑応答の要点

経営陣は、『Michael』で採用された分割型Pay 1ウィンドウ（前半をStarz、後半をAmazonが担当）は期待通りの成果を上げていると述べました。また同社によると、EST（電子買い切り）およびTVOD（都度課金型動画配信）ウィンドウも引き続き好調です。

ライセンス供与に関して経営幹部は、市場への再投入が期待されるタイトルとして『Orange Is the New Black』や『Mythic Quest』などを挙げました。ライセンス流通しているテレビシリーズの数は、2022年度の4作品から2027年度には15作品に増加しており、経営陣は今年度末までに合計20作品に達すると見込んでいます。

AIに関してライオンズゲートは、プリプロダクション、ポストプロダクション、デジタル効果のレンダリング、制作ロジスティクス、マーケティング分析、ライセンス判断、ロイヤルティ処理などの領域でツールを展開していると説明しました。なお、経営陣は予想されるコスト削減効果の具体的な数値は明らかにしませんでした。

資本配分について、経営陣は現在コンテンツへの投資が同社にとって最も高い期待資本利益率をもたらすと述べました。将来的な株主還元は後日検討される可能性がありますが、当面の焦点は投資の継続と、2029年度までにレバレッジを3倍未満に引き下げることにあります。

経営陣はM&Aを巡る憶測へのコメントを控え、ライオンズゲート・スタジオは急速に進む業界再編の環境下において有利な立ち位置にあると考えていると述べるにとどめました。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to the Lionsgate Studios Second Quarter 2027 Earnings Conference Call.

[Operator Instructions]

Please note today's event is being recorded. I'd now like to turn the conference over to Nilay Shah with Investor Relations. Please go ahead.

Nilay Shah

Good afternoon. Thank you for joining us for the Lionsgate Studios Corporation's Fiscal 2027 Second Quarter Conference Call. We'll begin with opening remarks from our CEO, Jon Feltheimer; followed by remarks from our CFO, Jimmy Barge. After their remarks, we'll open the call for questions. Also joining us on the call today are Vice Chairman, Michael Burns; COO, Brian Goldsmith; Chairman of the TV Group, Kevin Beggs; Chairman of the Motion Picture Group, Adam Fogelson; Chief Revenue Officer, Jim Packer; and Senior Adviser to the Office of the CEO at Lionsgate and Co-CEO of 3 Arts, Brian Weinstein.

The matters discussed on the call also 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 our public filings for Lionsgate Studios Corp. 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

Thank you, Nilay, and good afternoon, everyone. Our strong performance in the quarter reflects all of the pieces of our fiscal '27 plan coming together, reaffirming our confidence in this year's forecast of strong adjusted OIBDA growth and giving us greater visibility into our continued growth in fiscals '28 and '29. I'd like to go through each of the components of that plan. First, we're driving our growth with our portfolio of franchises and other branded IP. 10 of our next 15 wide theatrical releases are repeatable branded properties, with the new Hunger Games, The Resurrection of the Christ Parts 1 and 2, The Housemaid's Secret, Michael 2 and Naruto leading the way, complemented by other marquee properties in proven areas of strength. We have confidence in the earnings power of our film slate over the next 3 years.

One of the most celebrated of these franchises, The Hunger Games: Sunrise on the Reaping opens in 2 weeks to kick off the Thanksgiving box office. We believe that this will be one of our biggest and best Hunger Games yet. Our television business is also driven by our ability to create long-running hit properties. The Rookie is growing in popularity as it heads into its ninth season. The Rookie: North spin-off will arrive in January on ABC and will stream on Hulu in the U.S. and Disney+ in most international territories. Ghosts is exploring new spin-off opportunities as it enters its sixth season on CBS. And our recent licensing deal with Netflix is indicative of the kind of value we're creating for the Power franchise 10 years after the original Power series launched.

As you may have seen, Netflix announced the third season renewal of The Hunting Wives even before its second season launched. The Hunting Wives was a breakout hit on the platform in its first season, topping their global charts and attracting 35 million viewers worldwide. Its second season will debut on Thanksgiving Day, and we will begin shooting the third season at our Lionsgate Studio Sound Stages in Atlanta next month.

Second, we're continuing to extend our franchises into new growth areas. We launched the North American tour of the Dirty Dancing musical to rave reviews in August. And as it heads for Broadway in February 2027, ticket sales are outpacing expectations. We announced the full creative team for the La La Land stage musical and begin workshopping it early next year for a 2028 opening. We opened Now You See Me Live at the MGM Grand in Las Vegas to sold out shows last month, and we'll be opening a limited run on Broadway next Friday. And earlier this week, we announced the expansion of one of our newest franchises, The Housemaid into a stage play shepherded by Tony Award-winning Life of Pi producer, Simon Friend, that will open in the U.K. next September.

We're also working on the Saw: Genesis multiplayer video game launching in 2027 and the John Wick AAA game in partnership with leading developer, Saber. All told, by the end of fiscal 2028, we expect to have at least 8 stage plays, 4 concert tours, 10 live experiences and 9 interactive video games across our Global Products & Experiences group. Third, we're continuing to grow our verticals in categories where we have historically excelled. During the quarter, we began principal photography on an exciting new chapter of the found footage horror classic, Blair Witch. We announced Mike P. Nelson to direct the next installment of our $1 billion horror franchise, Saw, in partnership with Blumhouse Atomic. Our adaptation of the horror thriller, Magic, produced and directed by Spider-Man and Evil Dead filmmaker, Sam Raimi, and our recent acquisition of Portrait of God, starring Chase Infiniti with Jordan Peele and Sam Raimi producing, round out our strongest lineup of horror films since the early days of the studio.

Contributing to this strength, our 3 Arts talent management company is a leader in representing the top voices of the next generation of horror with clients Dylan Clark, who is directing both Blair Witch and Portrait of God; Backrooms director, Kane Parsons; and Undertone director, Ian Tuason. You'll be hearing more about what 3 Arts is doing in the horror space soon.

We're also continuing our focus on the action space, wrapping production on the John Rambo prequel starring Noah Centineo and the next installment of the John Wick Universe, Caine, directed by and starring Donnie Yen. Both films have had strong early test screenings, and we've begun preproduction on the John Wick animated prequel, returning Keanu Reeves to his iconic role. Fourth, we're continuing to monetize our library in new ways as we scale our licensing business across a changing portfolio of buyers. We've rolled out more than 50 global FAST channels on track for 1 billion hours of viewership by the end of the fiscal year. We have SVOD add-on channels in 36 territories, approaching the 2 million subscriber mark. Together, they comprise a global channels business that has tripled its annual revenue to well over $100 million in the past 2 years, giving us greater control over where and how we license our content.

Our channels have become one of the drivers of our library's continued growth. And in that regard, we reported our second best trailing 12-month library revenue ever this quarter, returning to over $1 billion with approximately 60% cash flow margins. The growth of our library is coming from many different places. Drivers in the quarter included The Hunger Games franchise, as you might expect, but also Heartland, the Canadian family drama TV series that has been on the air for nearly 20 years, and Kill Bill: The Whole Bloody Affair from legendary filmmaker, Quentin Tarantino.

Fifth, we're finding new ways to monetize our content with new partners outside of our traditional media ecosystem. In September, we announced a joint partnership with Meta to support the launch of their new Meta VR glasses with a number of our films. And earlier this week, we announced that we are again working with Meta to convert one of these films, The Hunger Games: Sunrise on the Reaping for 3D theatrical release before becoming available on their glasses. And we're continuing to discuss with them additional content opportunities at the intersection of entertainment and technology.

Finally, the key to every element of our plan is our ability to replenish our content platform by sourcing, packaging, producing and delivering exciting new IP that adds value to our portfolio. We announced earlier this week that after highly competitive bidding, Sony Pictures has come aboard as our international partner and co-financier on Naruto, the film adaptation of Kishimoto's iconic manga, one of the most beloved and successful entertainment properties in the world. Sony brings deep expertise in anime and tremendous strength in international distribution to the film, which is helmed by Destin Daniel Cretton, the Director of the biggest domestic box office hit of all time, Spider-Man: Brand New Day. Naruto begins production in the spring.

In closing, we're performing well against the backdrop of an operating environment that is showing a number of encouraging signs. Audiences are coming back to the movie theaters. Scripted TV series orders are stabilizing with new creative and financial partners emerging across the media ecosystem. The close of the Skydance acquisition of Warner Discovery eliminates a layer of uncertainty that was hanging over the industry. And we bring to this environment not only strong content slates, a world-class library and a deep portfolio of branded IP, but a focus on monetizing it across a broader range of platforms than ever before.

Now I'd like to turn things over to Jimmy.

James Barge

Thanks, Jon, and good afternoon, everyone. I'll briefly discuss our fiscal second quarter 2027 financial results and provide an update on the balance sheet. For the quarter, Lionsgate Studios revenue increased 41% year-over-year to $669 million, while adjusted OIBDA improved significantly to $72 million. Operating income was $29 million, reported diluted loss per share was $0.05 and diluted adjusted earnings per share was $0.07. Use of adjusted free cash flow in the quarter was $8 million, substantially better than the prior year. Trailing 12 months library revenue increased 4% year-over-year to approximately $1.04 billion, representing the second highest library performance in the studio's history.

Trailing 12-month library revenue has now exceeded $1 billion for 4 out of the past 5 quarters. Studio segment profit, which reflects our Motion Picture and TV segment profits before corporate overhead expense, more than doubled year-over-year to $110 million. The improvement was driven by growth at both Motion Picture and Television. Looking specifically at Motion Picture, revenue increased 30% year-over-year to $359 million, while segment profit increased substantially to $89 million. Results were driven by continued contributions from Michael, carryover from our prior year slate, continued library strength and lower P&A expense.

Turning to Television. Revenue increased 56% year-over-year to $310 million, while segment profit increased by 73% to $22 million. The year-over-year improvement was driven by 22 scripted episodic deliveries in the period, including deliveries for The Hunting Wives, Power: Origins and The Studio compared to 7 episodic deliveries in the prior year quarter.

Now turning to the balance sheet. We ended the quarter with net debt of approximately $1.5 billion. Leverage improved over 0.5 turn from 4.3x to 3.7x, driven by continued growth in trailing 12-month adjusted OIBDA. We ended the quarter with $359 million of cash and $800 million of available capacity on our revolver. Our capital structure remains well positioned with no near-term corporate debt maturities. Additionally, last week, we announced that SP Media made an investment into the new joint venture that includes Lionsgate's interest in 3 Arts. The proceeds from this investment will be reflected in our December quarter balance sheet, and we anticipate that it will primarily be used to help satisfy our put obligation in January of 2027.

We remain ever more confident in our fiscal 2027 outlook. Our performance in the first half, combined with a highly compelling upcoming theatrical slate and expectation for both an increase in TV deliveries and continued strength in library performance supports our visibility into significant growth in adjusted OIBDA and free cash flow for the full year and beyond.

Now I'd like to turn the call over to Nilay for Q&A.

Nilay Shah

Thanks, Operator. Can we open the call for Q&A?

Operator

[Operator Instructions]

Today's first question comes from Vikram Kesavabhotla with Baird.

質疑応答

Vikram Kesavabhotla

Okay. My first one is on the Hunger Games. Can you talk more about your observations there as you've gone through the marketing campaign for that film? I know you had the London premiere recently. What was the initial reception like there? And is there anything else you can share that's informing your outlook at this stage?

And then separately, I also wanted to ask about the library business. The trailing 12-month revenue there was the second highest ever. Can you talk more about the drivers of that performance? What do you think is supporting the strength? And as we look ahead and particularly considering some of the changes unfolding at some of the streamers, how do you expect the appetite for licensing across the industry to evolve going forward?

Adam Fogelson

Vikram, it's Adam. Thanks for the question. Yes. Look, the response to the Hunger Games has been spectacular. I mean, starting as far back as a year ago when we launched that first teaser trailer, it became second most watched trailer in the history of the studio. Every beat since then has been really, really encouraging. And now that we're in the shoot with a couple of weeks to go, all of the signals are very, very positive, whether you're talking about tracking signals, whether you're talking about social media listening signals or whether you're talking about advanced ticket sales, which I don't want to comment on specifically, but Sean Gamble at Cinemark yesterday and IMAX today and others who have access to their own data are all pointing to a result that should be meaningfully higher than what we saw with the last Hunger Games movie and put us back in a position to deliver both creatively and financially an incredible, incredible result.

The reaction to the film that you saw out of London is consistent with the other screenings we've had. So creatively and financially, we feel really good about where we're headed.

James Barge

Yes. And Vikram, on the trailing 12 months, yes, it's pretty spectacular, another quarter well over $1 billion. So as Jon noted, the margins on that cash margins are around 60%. So gross contribution probably right around 50%. And when you just step back and think about it, I mean, we're a relatively young company relative to some of our peers. So for the last 26 years, we've been creating massive amounts of film and TV programming. So what we find is that the more we own, more the margins improve.

Another factor would be, as you know, international films and rights are constantly reverting back. So we have films that have been out for 10 to 15 years coming back and driving margins. And what Jim Packer and his team is doing in self-directed channels is really adding incremental high margins. And Jim, I don't know if you want to comment some on that and the licensing.

Jim Packer

Yes. I think the key is it's an amazing portfolio. I mean if you look at the TV side over the last few years, it's grown to close to 30% of the trailing 12. We have everything from the Power franchise to Rookie, Mad Men, Weeds. You just look through the portfolio of TV, that's been a driver. Every time we get a new film like we're getting with Hunger Games, all of those library titles become incredibly in demand and help that whole trailing 12 months. And then the channels business for us is really a unique situation where we can take advantage of open windows and be strategic and it's offensive and defensive. And it's really starting to become a meaningful part of the library.

Operator

And our next question today comes from Brent Penter with Raymond James.

Brent Penter

First one for me, you mentioned the joint venture with SP Media. Can you expand on that a bit and what that enables? And then does that mark a conclusion to the 3 Arts strategic review process? Or are you still talking with other possible investors?

Brian Goldsmith

It's Brian Goldsmith. Thanks for the question. We're very excited to work with our new partner, SP Media, Steven Paul. He's done a number of movies for us in the past. So we have a bunch of experience with him. As Jimmy noted, in exchange for a meaningful investment, SP now holds an interest in a joint venture platform that holds, among other things, our interest in 3 Arts. I think it's important to note that the venture itself does not have any involvement in 3 Arts' operations or management. We're also really excited to focus on developing the production and distribution relationship with SP Media, including in the multi-platform motion picture product business, which has really been a successful one for us historically. And our new partner has a lot of expertise and has proven themselves to be a reliable creative commercial product in this area. So that's going to be a real area of focus for us.

Brent Penter

Okay. Great. And then my next question, you also talked about the Warner Bros., Paramount merger closing and how that has -- it's good to hear that, that has kind of cleared up some uncertainty. I realize it's only been a few weeks, but can you talk about how has that improved your conversations with buyers across the industry as well as how have your conversations gone with the new combined company?

Kevin Beggs

Sure. It's Kevin Beggs. I'll take that. In the combined entity, we have a big book of business, huge hits on CBS with Ghosts. One of the evergreen franchises of the Discovery Network is the Naked and Afraid franchise. And we just started production really -- it's winding up being the first production of the newly merged Paramount Warner Skydance TV arm, Trauma, which is essentially a high-concept terrorist thriller, think Die Hard meets The Pitt conceptually that we're doing both for Paramount Global and Amazon U.K. So we're -- and we have a development across all of them. We're -- we feel good about a stronger buyer, and they're moving very quickly to ramp up all their operations. And we think as a third-party supplier on the TV side, we're going to continue to be a big part of it.

Adam Fogelson

Yes. I'd add, overall, we have a great relationship with everybody. There's a combined company, starting with David with whom we did probably his first television series. And whether it's co-financing movies together, whether it's supplying television to them, we believe that having another strong buyer and strong partner is going to be really good for us.

Brent Penter

Great. And then final one for me. You all laid out confidence out to fiscal 2029. And you talked about several of the film releases that are contributing to that. Can you talk a little bit more about the TV side going beyond fiscal '27 into fiscal '28 and '29? And what gives you the confidence on that side of the business, particularly given it's been such a strong year in fiscal '27 you're comping against?

Kevin Beggs

Sure. It's Kevin again. I mean the good news for us is that we have a high degree of visibility. Year-over-year, obviously, up 65% in episodic deliveries is going to be a tough comp to match, but we do plan on growth going forward. And many of our franchises are just that franchises, which we are tending to and growing and intending to go the distance. Jon touched on The Rookie and Season 9, The Rookie: North spin-off will premiere this January on ABC and Hulu, the relationship with Disney+, who has global on The Rookie: North. This kind of thing is important. The Power franchise is really the gift that keeps on giving both the giant success for us and for Starz, our network partner. The original Power series, the first of 6 that we have done, is coming on to Netflix next week. It's been advertised. We think it's going to be a giant uplift for both Netflix viewers and Starz viewers and introduce the franchise to a larger audience.

And on a long-term basis, with that many episodes of a show that is working, we think it's going to be one of the most consequential and lucrative financial franchises in the TV portfolio of the entire history of the company. That's the kind of thing that gets us excited and gives us confidence about growth moving forward.

James Barge

Brent, and just adding to that to Kevin's point about visibility. I would point out, we have $1.487 billion of backlog. That's future revenues and free cash flow, as you know. And really interesting is that about 58% of that is actually television. That's up from 52% from last year. So it's a bit slower build, a longer build, if you will, because we -- relative to a lot of the others in our comps, we retain the back-end rights long term. And that's really building up, and you're seeing it not only come through library, as we've shown coming from 10% to 30% over the last decade in terms of trailing 12 months library, showing up in backlog, too, representing almost really 58%, call it, almost 60% of the backlog. And that gives us a lot of visibility into fiscal '28 and '29. So we're very well poised for growth in the future.

Operator

And our next question comes from Omar Mejias with Wells Fargo.

Omar Mejias Santiago

Jon or Michael, on M&A, there's been press reports that you guys received an offer from Legendary. I know you don't comment on specific proposals, but can you help us understand how the Board is thinking about the path forward, specifically, what would the Board need to have in place before running a more formal process to evaluate strategic alternatives?

Jon Feltheimer

Omar, I haven't even seen any press. Are you sure about that? No. As always, we're not going to respond to M&A speculation. What I'd say is what I said before, which is in this rapidly consolidating environment, I believe we're very well positioned, simple as that.

Omar Mejias Santiago

That's fair enough. Maybe, Jimmy, on the balance sheet, there's also been reports about the IP credit facility, refinancing the IP credit facility with library-backed bonds. Can you walk us through the rationale and timing for that refinancing? And how should we think about it alongside the strategic optionality you talked about? Is it tied to that or just more of a stand-alone financing decision?

James Barge

Yes. Thanks, Omar. Yes, what I would say is that we're always evaluating our capital structure, okay? There is -- not necessarily bonds, but relatively more likely if we were to do something, right, would be more like an asset-backed securities, so ABS market, slightly different, as you know. But look, we don't really have to do anything. There's no near-term maturities. As you know, the IP facility is also backed by IP, right, asset-backed. There are almost 3 years left on the eOne facility and over 3 years on the Lionsgate IP facility. So -- but again, we're always willing to replace existing tranches of corporate debt with layers that have better terms and better pricing. So -- and we're always looking. I wouldn't read too much into what the article said. But again, always considering our optionality.

Omar Mejias Santiago

Great. And one last one for me, Jim. Michael is one of the first big films going through the new Pay 1 structure with Starz taking the first part of the window and Amazon taking the second. Now that you're seeing it in practice, how is that split window performing versus your expectations? And how should we think about downstream value for Hunger Games and next year's slate compared with the prior single window deal?

Jim Packer

Yes. It's performing exactly the way we had hoped. Starz is getting a big benefit out of it. I think you've seen some of the announcements they've made about their happiness with our Pay 1 windows. Amazon, who I speak to all the time has been very, very happy. And what's really interesting is that these are giving me and giving our team in the free window, some movies at levels that we have not had in a while. And that's going to be a significant driver for future business for us. And if you just look at the transactional EST and you look at TVOD, those windows also continue to be strong and robust. And with Housemaid as an example, it's one of the early ones that we got from Adam, it set records for us in that area.

So not only are people coming back to the theaters, they're also renting and buying. So overall, very pleased and excited about what I'm getting from the Motion Picture Group.

Operator

And our next question today comes from Sean Diffley at Morgan Stanley.

Sean Diffley

I would love to hear how you're leveraging AI on both the TV and film production side. What kind of cost savings are you seeing? Is it 20%, 50% from AI? Is that all pre and post production or VFX? Are you leveraging runway or other tools? And then should we expect that you'll reinvest most of that savings to make more content? Or should we see some of it flow to the bottom line?

Brian Goldsmith

Thanks for the question. It's Brian Goldsmith again. Look, we're moving AI into practical use across our entire business. So that includes making the latest tools available to our creative and talent partners, particularly in the preproduction and post-production uses, including digital effects rendering, production logistics, et cetera. As well as throughout the entire organization with the goal, of course, to improve efficiency and productivity across -- throughout our businesses. I mean I'll name a couple of examples where we've integrated AI into internal processes, you can kind of get a sense for the breadth of what we're doing outside of the creative process. Our marketing teams are leveraging AI tools to track and collect data around theatrical marketing campaigns. Our licensing and distribution teams, under Jim, are using these tools to enhance which titles we choose to license and then monitor their performance across the platforms and use those feedback mechanisms to make better decisions in the future.

And then our accounting and collection teams are using the tech to process revenues faster and collect royalty statements faster. We're doing all this in a very thoughtful manner, utilizing robust protections around our and our creative partners' content, data and rights, which, of course, is paramount for us. In terms of -- I won't get to any specifics in terms of savings and the like, but ultimately, we're going to try and squeeze out as much efficiency as we can while creating those commercial products as possible.

Sean Diffley

Great. Maybe just elaborate on -- I think you said 10 of the next 15 wide releases are repeatable branded properties. Maybe just talk about the value of IP versus your desire to kind of create new IP, leveraging some of this unlocking creativity that you're talking about.

Adam Fogelson

Yes. It's Adam. Thanks. Just because something is IP doesn't necessarily mean that the audience is desperate for more. So the first job is to identify the IP, the characters, the storylines that the audience is asking for more and then being really thoughtful and intentional about how we do that. But the other thing is if you're making original content at the right price with top creative talent, there is a huge opportunity to not only be successful on a one-off basis, but to start to create new IP.

And so over the course of the last year, the Long Walk was a mid-budget film that we were incredibly profitable with. The Housemaid became a giant piece of new IP for the studio with 3 books that we're going to be able to hopefully make great films on. And so a number of the non-IP films that we're making, we think we have the right creative partners. We think we're making them for really, really good prices. And we think that we're going to be able to be profitable and create new franchises out of that. We're constantly talking to all of our partners on the most important IP. I know that Kevin can speak to what's happening with respect to Twilight in the TV space, but we are constantly in communication with all our creators and Stephenie and Twilight, for example, we know that audience is desperate for more authentic content in that space. And Kevin can speak to TV, but certainly in film, we look forward to ongoing conversations with her.

Kevin Beggs

And just thinking from what Adam said about Twilight and Stephenie, she's a huge fan of television, all genres as we come to get to know her better and animation specifically, which really led directly to the adaptation of Midnight Sun, which was her latest book and the Twilight Saga, which takes a point of view of the Cullen family and retells a story that we know from a different POV. That's a 2-season adult animation order at Netflix. Stephenie and her team are very hands-on, really running the process along with us at Netflix. We have high expectations and hope and more importantly, are engaging our audience and her audience in a continuation and expansion of our universe.

Operator

And our next question today comes from Matthew Harrigan at StoneX.

Matthew Harrigan

I guess maybe undead IP is even better than long-lived IP going back to Bela Lugosi. I was going to ask about Twilight, but you did a good job -- a great job of addressing that. And I was just curious on the remark that on the Meta glasses on Sunrise on the Reaping, you were going to also have it in theaters. Maybe some of that is at the instigation of your partner. But is that an indication that there's another better technology round for 3D and theaters that might actually get some traction with people? Are you inclined to revisit that? Or was that just kind of a casual comment on something you're working on with Meta?

Adam Fogelson

It's Adam. I'll start just by saying that while it hasn't been a primary focus as conversations about IMAX and the other major PLF formats and Dolby and other screens have taken the lion's share of the conversation about what's happening in theatrical, but there has actually been a really nice, robust business in 3D. And so this opportunity that came about in the partnership with Meta allowed us to create content for the glasses when the movie reaches the home environment, but also allows us to take advantage of those screens that are doing and selling really nice ticket sales in the 3D space.

Unknown Executive

Yes. This was -- Matt, this is really a great opportunity to do something right at the intersection of technology and creativity. As a licensing deal, frankly, this is going to be a very lucrative one. But I think it's -- for us, we're looking at this a little differently that as the space between the small screen and the large screen shrinks, frankly, I think Meta has the real possibility of being a big player in the content area. And again, as part of this, we're already discussing some original programming ideas with them.

Operator

And our next question today comes from David Joyce at Seaport Research Partners.

David Joyce

I had a question around your comment that Netflix has ordered The Hunting Wives third season before the second starts already. Given that they've had some engagement issues because of the duration in between the first and second or whatever subsequent series, are you seeing a trend of the industry requesting that these series or the next seasons be produced more quickly? What are your constraints on doing that? And what are the opportunities for you?

Kevin Beggs

Absolutely, yes, it's Kevin. The cadence of getting things back on in a predictable timetable, similar ironically enough to the broadcast dynamic that we all know and grew up with is becoming more and more important. There are so many other competitors and so many other things that are out that viewers get a little bit disconnected and forget about it. So it was important for Netflix when the season 1 launched last summer to quickly order a second season that we got into production on.

And while we were in production, opened a writer's room, pitched them out the third season that Rebecca Cutter and Erwin and that creative team presented that they loved, and we're going to be in production in a way that we can be on every year around this time. We're feeling quite privileged to be on a Thanksgiving premiere, which has traditionally been the home of one of Netflix's biggest hits, Stranger Things. We consider it the Super Bowl of television. super excited.

And the entire month of November, I must say, is big for us. Power is coming on to Netflix, The Vow on FOX Nation from our alternative team, The Hunting Wives Season 2, The Rainmaker is killing it on USA. And one of our hallmark series, Mistletoe Murders, just launched on Netflix as well on a sublicense basis, and it's in the top 5. Just an important month of television, and we're thrilled to be part of it.

David Joyce

That's great. And second question, if I could. This is for Jimmy. I was wondering what are your opportunities to actually pay down debt as part of your deleveraging as opposed to just driving up the EBITDA as you're really firing on all cylinders. Do you need to get through this kind of elevated theatrical and film production cycle until those cash flows are starting to come before you would consider that?

James Barge

Well, look, we're just going to continue to delever and net debt modestly declining. But to your point, we're fully investing where appropriate with great visibility into our content across motion picture and TV in a very responsible, derisked way and plan for the long-term valuation in our library. And you're seeing the results of that, not only in backlog but trailing 12 months, and that's our playbook. But naturally, the net debt will decline. I'll remind you in the second half, if you look at our investment content spend this year, okay, it's more heavily weighted to the second half. It's more like 40% first half, 60% second half, just to give you an idea.

So in that context, that will from any quarter-to-quarter or trailing 12 months affect the free cash flow. But I expect to totally be positive free cash flow for -- on a trailing 12 months basis for the rest of the year and accelerating that into '28 and '29 and continuing to delever in absolute terms and even more important, delevering significantly down below 3x in '29, okay, based on increasing trailing 12 months.

Operator

And our next question today comes from Matt Condon at Citizens.

Matthew Condon

The first one, just maybe following up on that last question, just given the progress you've made deleveraging as you're thinking out longer term, can you discuss how you're thinking about capital allocation over the next few years as leverage continues to come down, how do you balance your film and television slate pursuing maybe strategic opportunities for returning capital to shareholders?

James Barge

Look, I think any time you're deploying capital, you look and see where can you be at your greatest return on capital. And right now, that's investing in our content. Content is more valuable than ever. You look at the multiples being put on libraries and content businesses, and we're a pure-play content company for a reason. And that's our playbook. But yes, obviously, if share prices don't respond and all the other things respond in the right way, could there be a world where you've got a return of capital to shareholders? Of course. But you know what, we're focused on delevering below that 3x in 2029, and then we'll talk about it.

Matthew Condon

Great. And maybe to follow up, just following the recent Netflix licensing agreement for the power franchise, just are there any additional major titles returning to the market that could drive a meaningful step-up in licensing revenue here over the next several years?

Jim Packer

Yes. Thank you. I think Orange Is the New Black. It's coming back in a year or 2, a couple of years. And that, to me, will be very significant. Mythic Quest is another show we have on Apple that's coming back. Keep in mind, all these library titles like Mad Men, Weeds, those titles all come back, HBO deal, all of these come back. So one thing people need to realize we are such a young company. Our library is young. I mean a deep catalog title for us is Mad Men, and that's not that old. And so for us, what we bring to market is really, really good. I just look at the amount of series that are in licensing circulation right now. In fiscal '22, we had 4 TV shows in circulation. This year, in fiscal '27, we have 15, and I think we'll end with 20. So not only do we have more of these coming back, they're much more in demand, and you'll see it in our numbers.

Operator

And our next question is a follow-up from Vikram Kesavabhotla with Baird.

Vikram Kesavabhotla

First one, I want to follow up on some of the comments on Michael. Obviously, it sounds like that's continued to perform well following the theatrical run. Any updates you can share regarding a potential sequel and more specifically, what the timing of that could look like?

Adam Fogelson

Yes. It's Adam. Thanks. We are hard at work on breaking the story and on making sure that we've got the creative team fully in place and hope that we'll be able to announce timing, both in terms of start of production and a release date in the not-too-distant future, but it's lining up to be incredibly exciting. We're making real progress.

Vikram Kesavabhotla

Okay. That's helpful. And then on -- maybe one for Jimmy. On the adjusted operating profit, any comments you can share in terms of what the second half could look like this year? And more specifically, just what the biggest drivers are that will contribute to the second half and your level of visibility into those components right now?

James Barge

Sure, Vikram. Look, if you're looking at the second half, right, we've got -- third quarter, obviously, I think, is our peak quarter for the year in the context of absolute terms, right, with power Netflix deal coming through licensing. You see part of that in the backlog now, which will flow into third quarter earnings. Remember, when we get to Q4, though, we're lapping a really big, really big fourth quarter in fiscal '26, where that year was heavily back-end loaded. So -- and we're going to have 2 theatrical releases, Karoshi as well as Day Drinker. Day Drinker coming out March 26.

So you're going to have the P&A spend associated with 2 films, one in the very last few days of the fourth quarter. In addition, we have Resurrection coming up May 7 in fiscal '28. We're all super excited about all of those, by the way. So there's going to be some pre-spend in the fourth quarter on Resurrection, which will be following in the first quarter of '28. So great visibility. That's the cadence of the rest of the year. And again, with the backlog and everything else that we can see coming through with that visibility, right, it gives us great confidence in finishing the year strong, like we said, significant growth in '27 as well as carrying that growth well into '28 and '29.

Vikram Kesavabhotla

Okay. That's very helpful. You also early in the prepared remarks, you talked about extending your IP into new areas, and you highlighted a bunch of the live productions that you've started. How meaningful can all of that be to your business over time? And how should we expect your strategy around that to evolve over time?

Jon Feltheimer

I believe quite meaningful. And when you start these things, it takes a long time to get each Broadway show up and running, frankly, just because like our films and television shows, we want to do them right, especially when we have great franchises, and we don't -- we want to enhance them and not hurt them. But I believe probably run rate, I'm going to give you sort of a ballpark. We don't do this that often. But ballpark, I think we're looking for a run rate by the end of '28, revenues of around $50 million. That's what I'm targeting and contribution of over $30 million. So starting to be meaningful, and it will continue to grow.

Vikram Kesavabhotla

Okay. Great. And then just the last question for me and perhaps a bit of a higher-level question on the business. It feels like the last year or so has been particularly notable with your film slate, both in terms of the performance, but also just the variety of genres and IP that you've been successful with. And so I'm curious, when you have a year with momentum like this, how does that impact your broader conversations with the creative community, whether that's IP holders or directors or on-screen talent or whoever. I'm curious if you're seeing more opportunities arise on the back of the recent strength. And in general, how would you characterize the types of conversations you're having today versus even a few years ago?

Adam Fogelson

Yes. It's Adam. Thank you. We are absolutely seeing momentum. And it comes, I think, from a variety of different factors. One is because of how we're structured, because of how efficient we are, because of our ability to make money on movies that others might not be able to make money on, -- and because we are delivering an experience for filmmakers and for talent that I think is unique, it's really white glove service that can be delivered only by a company of a smaller size, but the ability to deliver outsized results consistent with how major studios operate.

When you look at the filmmakers who are signing up to every one of the films that Jon mentioned in the opening remarks or that we've talked about today, when you look at the actors and actresses and producers who are working with us, when you look at the people who are signing first look deals with us, that momentum, when you look at the creativity of the marketing and distribution that we're putting together, when you look at our ability not only to successfully monetize films in the theatrical space, but to the point Jon was just making, figure out ways to really create exciting extensions of these franchises into other areas. beyond any words I might say on a call like this one, I just think looking at the names of the talent that are working with the studio gives you every indication that the momentum is there and it's growing.

Jon Feltheimer

Yes. And I'd add, by the way, the really close relationship that our operating group, film and television at Lionsgate have with 3 Arts. 3 Arts is really doing an amazing job bringing up this next group of filmmakers, the influencers, the directors and the same we're using a number of them. And I think the ability to go back and forth, the trust between the companies to bring talent back and forth, I think, is really an important asset that most other companies don't have.

Operator

And that concludes our question-and-answer session. I'd like to turn the conference back over to Nilay Shah for closing remarks.

Nilay Shah

Please refer to the Press releases and Events tab under the Investor Relations section of our website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thanks, everyone.

Operator

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.