狮门影业 (LION) 2027财年第二季度业绩电话会：营收增长41%

核心要点

• 2027财年第二季度营收同比增长41%至6.69亿美元，调整后OIBDA达到7200万美元，营业利润为2900万美元。
• 电影业务营收增长30%至3.59亿美元，部门利润为8900万美元；电视业务营收增长56%至3.1亿美元，部门利润同比增长73%至2200万美元。
• 过去12个月片库收入增长4%至约10.4亿美元，创该影业历史第二高水平。管理层表示，片库现金流利润率约为60%。
• 净杠杆率从4.3倍降至3.7倍。截至本季度末，狮门影业拥有约15亿美元净负债、3.59亿美元现金以及8亿美元可用循环信贷额度。
• 在院线片单、电视内容交付量增加以及片库持续强劲表现的支撑下，管理层重申对2027财年调整后OIBDA和自由现金流实现大幅增长的信心。
• 公司报告的在手储备订单达14.87亿美元，其中约58%与电视业务相关，这为管理层对2028财年和2029财年的业务能见度提供了有力支撑。

核心财务数据

业务与经营业绩

电影业务业绩得益于《迈克尔》的持续贡献、上年片单的结转收益、片库的出色表现以及宣发费用（P&A）的下降。管理层表示，《饥饿游戏：收获日出》（The Hunger Games: Sunrise on the Reaping）的前期指标（包括受众追踪调研、社交媒体反馈及预售票房数据）表现喜人，预示其票房成绩将明显超越前一部《饥饿游戏》电影。

在狮门影业接下来计划大规模院线发行的15部影片中，有10部为可延续开发的品牌IP。相关储备影片包括《饥饿游戏：收获日出》、《耶稣复活（上、下）》（The Resurrection of the Christ Parts 1 and 2）、《女佣的秘密》（The Housemaid’s Secret）、《迈克尔2》（Michael 2）以及《火影忍者》（Naruto）。此外，公司还在开发《疾速追杀》（John Wick）、《电锯惊魂》（Saw）、《女巫布莱尔》（Blair Witch）和《第一滴血》（Rambo）等系列IP衍生项目。

电视业务的增长主要得益于交付了22集剧集内容，而上年同期仅为7集。交付的剧目包括《狩猎妻子》（The Hunting Wives）、《权欲：起源》（Power: Origins）和《制片厂》（The Studio）。奈飞在《狩猎妻子》第二季开播前便已续订第三季，该剧计划在狮门影业位于亚特兰大的摄影棚开机制作。

在过去五个季度中，片库过去12个月的收入第四次突破10亿美元大关。主要贡献来源包括《饥饿游戏》系列、《心灵牧场》（Heartland）以及《杀死比尔：血肉横飞全集》（Kill Bill: The Whole Bloody Affair）。电视内容在过去12个月片库收入中的占比已增长至近30%。

狮门影业已在全球推出50多条FAST频道，预计到财年末总收视时长将达到10亿小时。其SVOD附加频道已覆盖36个国家和地区，订阅用户数接近200万。管理层表示，全球频道业务在两年内年营收增长至原先的三倍以上，远超1亿美元。

公司还在将其知识产权（IP）拓展至舞台剧制作、实景娱乐体验、巡回演唱会及视频游戏领域。管理层预计，到2028财年末，全球产品与体验（Global Products & Experiences）业务将涵盖至少8部舞台剧、4场巡回演唱会、10个实景体验项目和9款互动视频游戏。

管理层业绩指引

管理层维持了对2027财年调整后OIBDA和自由现金流大幅增长的预期，并指出上半财年的强劲表现、即将上映的院线电影、增加的电视内容交付量以及稳健的片库是主要驱动因素。

从绝对调整后营业利润来看，第三财季预计将是公司的峰值季度，部分得益于与奈飞达成的《权欲》（Power）授权协议。第四财季则面临较高的同期基数对比压力，并将包含《过劳死》（Karoshi）和《日间饮者》（Day Drinker）的宣发费用，以及定于2028财年第一季度上映的《耶稣复活》的前期宣发支出。

在2027财年，内容投资预计大约40%分布在上半财年，60%分布在下半财年。管理层预计，过去12个月自由现金流在年内剩余时间将保持正值，并在2028和2029财年加速增长。

在过去12个月调整后OIBDA增长以及净负债适度绝对减少的支撑下，公司的目标是在2029财年将杠杆率降至3倍以下。管理层的首要任务仍然是在推进去杠杆的同时，持续投资影视内容。

针对全球产品与体验业务，管理层的目标是到2028财年末实现约5000万美元的年化营收运行率，利润贡献超过3000万美元。

风险与关注重点

• 第四财季的盈利能力将受到院线营销费用及上映前支出的影响，同时还面临2026财年第四季度格外强劲基数的对比压力。
• 下半财年的内容支出预计将大幅高于上半财年，这可能会对单季度及滚动自由现金流的表现节奏产生影响。
• 管理层坦言，剧集电视内容的需求目前仅处于企稳阶段，不过新的创作与融资合作伙伴正在不断涌现。
• 公司在持续评估其资本结构，但管理层表示近期不存在公司债务到期的风险。eOne信贷额度尚有近三年到期，狮门IP信贷额度尚有三年以上到期。
• 狮门影业正扩大人工智能在制作、营销、授权及财务核算流程中的应用，同时强调必须保护内容、数据以及合作伙伴的权益。

分析师问答环节亮点

管理层表示，《迈克尔》采用的拆分首轮付费窗口期（Pay 1 window）——前半段由Starz获得，后半段由亚马逊获得——表现符合预期。公司还表示，电子付费买断（EST）和TVOD窗口期的表现同样保持强劲。

在内容授权方面，高管透露《女子监狱》（Orange Is the New Black）和《神话任务》（Mythic Quest）等剧目有望重新进入市场。参与授权流转的电视剧数量已从2022财年的4部增至2027财年的15部，管理层预计到财年末总数将达到20部。

关于AI技术，狮门影业表示正将相关工具部署于前期筹备、后期制作、数字特效渲染、制作后勤、营销分析、授权决策以及版税结算等环节。管理层未对预期的成本节约进行量化。

在资本配置方面，管理层表示，内容投资目前能为公司提供最高的预期资本回报率。未来可能会考虑潜在的股东回报，但近期的重点仍然是内容投资以及在2029财年之前将杠杆率降至3倍以下。

管理层拒绝就并购传闻置评，仅表示狮门影业认为自己在快速整合的行业环境中占据了有利地位。

财报电话会议完整实录

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完整财报电话会议逐字稿

管理层陈述

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.

分析师问答

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.