라이온스게이트 스튜디오(LION) 2027 회계연도 2분기 실적 발표 콘퍼런스콜: 매출 41% 증가

핵심 요약

• 2027 회계연도 2분기 매출은 전년 동기 대비 41% 증가한 6억 6,900만 달러를 기록했으며, 조정 OIBDA는 7,200만 달러, 영업이익은 2,900만 달러를 달성했다.
• 영화(Motion Picture) 부문 매출은 전년 동기 대비 30% 증가한 3억 5,900만 달러, 부문 이익은 8,900만 달러를 기록했다. TV 부문 매출은 56% 증가한 3억 1,000만 달러, 부문 이익은 73% 증가한 2,200만 달러로 집계됐다.
• 최근 12개월(TTM) 기준 라이브러리 매출은 전년 동기 대비 4% 증가한 약 10억 4,000만 달러로 스튜디오 역사상 두 번째로 높은 실적을 기록했다. 경영진은 라이브러리 현금흐름 마진이 약 60%라고 밝혔다.
• 순레버리지 비율은 4.3배에서 3.7배로 개선됐다. 라이온스게이트 스튜디오는 이번 분기 말 기준 약 15억 달러의 순부채와 3억 5,900만 달러의 현금을 보유했으며, 회전신용대출(리볼버) 가용 한도는 8억 달러를 확보했다.
• 경영진은 극장 개봉작 라인업, TV 납품 증가, 지속적인 라이브러리 호조에 힘입어 2027 회계연도에 상당한 수준의 조정 OIBDA 및 잉여현금흐름 성장을 달성할 것이라는 자신감을 재확인했다.
• 회사는 14억 8,700만 달러 규모의 수주잔고를 보고했으며, 이 중 약 58%가 TV 부문에 연계되어 있어 2028 회계연도 및 2029 회계연도에 대한 실적 가시성을 뒷받침하고 있다.

주요 재무 데이터

사업 및 영업 실적

영화 부문 실적은 ‘마이클(Michael)’의 지속적인 기여와 전년도 개봉작의 이연 효과, 라이브러리 실적 호조, 프린트 및 광고(P&A) 비용 감소 등의 수혜를 입었다. 경영진은 ‘헝거게임: 선라이즈 온 더 리핑(The Hunger Games: Sunrise on the Reaping)’의 사전 추적 지표, 소셜 미디어 반응, 사전 예매율 등 초기 지표가 고무적이며, 전작 헝거게임 영화를 유의미하게 웃도는 흥행 성과를 가리키고 있다고 밝혔다.

라이온스게이트 스튜디오의 향후 극장 와이드 릴리스(전국 개봉) 15편 중 10편은 반복 제작이 가능한 프랜차이즈 브랜드 IP다. 파이프라인에는 ‘헝거게임: 선라이즈 온 더 리핑’, ‘그리스도의 부활(The Resurrection of the Christ)’ 1·2부, ‘하우스메이드의 비밀(The Housemaid’s Secret)’, ‘마이클 2’, ‘나루토(Naruto)’ 등이 포함된다. 아울러 회사는 ‘존 윅’, ‘쏘우’, ‘블레어 윗치’, ‘람보’ 프랜차이즈의 신작 프로젝트도 개발 중이다.

TV 부문의 성장은 전년 동기의 7편 대비 크게 늘어난 22편의 드라마(scripted episodic) 납품 실적을 반영했다. 납품작에는 ‘더 헌팅 와이브스(The Hunting Wives)’, ‘파워: 오리진(Power: Origins)’, ‘더 스튜디오(The Studio)’ 등이 포함됐다. 넷플릭스는 ‘더 헌팅 와이브스’ 시즌 2 공개 전에 이미 시즌 3 제작을 확정했으며, 라이온스게이트의 애틀랜타 촬영 스튜디오에서 제작이 시작될 예정이다.

라이브러리 매출은 최근 5개 분기 중 네 번째로 최근 12개월(TTM) 기준 10억 달러를 넘어섰다. 주요 기여 작품으로는 ‘헝거게임’ 프랜차이즈, ‘하트랜드(Heartland)’, ‘킬 빌: 더 홀 블러디 어페어(Kill Bill: The Whole Bloody Affair)’ 등이 꼽혔다. TV 콘텐츠 비중은 최근 12개월 라이브러리 매출의 30% 수준에 근접할 정도로 성장했다.

라이온스게이트는 50개 이상의 글로벌 FAST(무료 광고 기반 스트리밍 TV) 채널을 출시했으며, 이번 회계연도 말까지 누적 시청 시간 10억 시간을 달성할 것으로 예상하고 있다. 회사의 SVOD 애드온 채널은 36개 지역에서 운영 중이며 가입자 수 200만 명에 근접하고 있다. 경영진은 글로벌 채널 사업이 2년 만에 연간 매출을 3배 이상 늘리며 1억 달러를 크게 웃도는 수준으로 성장했다고 밝혔다.

회사는 또한 지식재산권(IP)을 무대 공연, 라이브 체험, 콘서트 투어, 비디오 게임으로 확장하고 있다. 글로벌 프로덕트 & 익스피리언스(Global Products & Experiences) 부문에서 경영진은 2028 회계연도 말까지 최소 8편의 무대 공연, 4건의 콘서트 투어, 10건의 라이브 체험, 9개의 인터랙티브 비디오 게임을 선보일 것으로 기대하고 있다.

경영진 가이던스

경영진은 2027 회계연도에 상당한 수준의 조정 OIBDA 및 잉여현금흐름 성장을 달성할 것이라는 전망을 유지했다. 상반기 실적, 향후 극장 개봉작, TV 납품 증가, 견조한 라이브러리 실적을 주요 동인으로 제시했다.

회계연도 3분기는 넷플릭스와의 ‘파워’ 라이선스 계약 등에 힘입어 절대 조정 영업이익 기준 분기 정점을 기록할 것으로 예상된다. 반면 회계연도 4분기는 매우 견조했던 전년 동기 실적에 따른 역기저 효과에 직면할 예정이며, ‘카로시(Karoshi)’와 ‘데이 드링커(Day Drinker)’의 P&A 지출 및 2028 회계연도 1분기 개봉 예정인 ‘그리스도의 부활’에 대한 사전 마케팅 지출이 반영될 전망이다.

2027 회계연도 콘텐츠 투자는 상반기에 약 40%, 하반기에 60% 비중으로 집행될 예정이다. 경영진은 최근 12개월(TTM) 기준 잉여현금흐름이 남은 기간 동안 플러스를 유지하고 2028 회계연도와 2029 회계연도에 한층 가속화될 것으로 내다봤다.

회사는 최근 12개월 조정 OIBDA 증가와 완만한 절대 순부채 감축을 바탕으로 2029 회계연도에 레버리지 비율 3배 미만을 목표로 하고 있다. 경영진의 최우선 순위는 디레버리징(부채 축소)을 추진하는 동시에 영화 및 TV 콘텐츠 투자를 지속하는 것이다.

글로벌 프로덕트 & 익스피리언스 부문의 경우, 경영진은 2028 회계연도 말까지 연간 환산 매출 기준 약 5,000만 달러, 공헌이익 3,000만 달러 이상을 달성하는 것을 목표로 설정했다.

리스크 및 주요 관전 포인트

• 회계연도 4분기 수익성은 극장 마케팅 비용과 개봉 전 지출을 흡수해야 하는 데다, 특히 실적이 우수했던 2026 회계연도 4분기와 비교되는 부담을 안게 된다.
• 하반기 콘텐츠 지출은 상반기보다 실질적으로 더 많을 것으로 예상되며, 이는 분기별 및 최근 12개월 잉여현금흐름 흐름에 영향을 미칠 수 있다.
• 경영진은 새로운 창작 및 자금 조달 파트너들이 나타나고 있으나 드라마(scripted television) 수요는 이제 막 안정화 단계에 접어든 상태임을 인정했다.
• 회사는 자본 구조를 지속적으로 검토하고 있으나, 경영진은 단기 만기 도래 회사채나 차입금은 없다고 밝혔다. eOne 신용공여 한도는 만기가 약 3년 남아 있고, 라이온스게이트 IP 신용공여 한도는 만기가 3년 이상 남아 있다.
• 라이온스게이트는 콘텐츠, 데이터 및 파트너의 권리를 보호해야 할 필요성을 강조하는 동시에 제작, 마케팅, 라이선스, 회계 프로세스 전반에서 인공지능(AI) 활용을 확대하고 있다.

애널리스트 질의응답(Q&A) 하이라이트

경영진은 ‘마이클’에 적용된 분할 페이 1 윈도(Pay 1 window, 1차 유료 방영권)—스타즈(Starz)가 전반부를, 아마존이 후반부를 확보한 방식—가 예상대로 성과를 내고 있다고 밝혔다. 회사에 따르면 전자 소장용 다운로드(EST)와 TVOD 윈도 역시 견조한 흐름을 유지하고 있다.

라이선스와 관련해 경영진은 시장에 재진입할 것으로 예상되는 대표 작품으로 ‘오렌지 이즈 더 뉴 블랙(Orange Is the New Black)’과 ‘미틱 퀘스트(Mythic Quest)’를 꼽았다. 라이선스 유통 중인 TV 시리즈 수는 2022 회계연도 4편에서 2027 회계연도 15편으로 늘어났으며, 경영진은 회계연도 말까지 총 20편에 달할 것으로 예상하고 있다.

AI와 관련해 라이온스게이트는 프리프로덕션(사전 제작), 포스트프로덕션(후반 작업), 디지털 특수효과(VFX) 렌더링, 제작 물류, 마케팅 분석, 라이선스 의사결정, 로열티 정산 등에 관련 툴을 도입하고 있다고 밝혔다. 다만 경영진은 예상 비용 절감액을 구체적인 수치로 밝히지는 않았다.

자본 배분과 관련해 경영진은 콘텐츠 투자가 현재 회사에 가장 높은 기대자본수익률을 제공한다고 설명했다. 향후 잠재적인 주주 환원 정책이 검토될 수 있으나, 단기적 초점은 투자와 함께 2029 회계연도까지 레버리지 비율을 3배 미만으로 낮추는 데 맞춰져 있다.

경영진은 M&A 관련 추측에 대해서는 언급을 거부하며, 라이온스게이트 스튜디오가 빠르게 재편되고 있는 업계 통합 환경 속에서 유리한 입지를 확보하고 있다고 본다는 점만 밝혔다.

실적 발표 콘퍼런스콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

질의응답

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.