Lions Gate Entertainment Corporation (LGF)

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Lionsgate Entertainment Corp. (LGF)

Q2 2013 Earnings Call

November 9, 2012 9:00 am ET

Executives

Jon Feltheimer – Chief Executive Officer

Jim Keegan – Chief Financial Officer

Rick Prell – Chief Accounting Officer

Michael Burns – Vice Chairman

Rob Friedman – Co-Chair, Motion Picture Group

Patrick Wachsberger – Co-Chair, Motion Picture Group

Steve Beeks – Co-Chief Operating Officer, President Motion Picture Group

Kevin Beggs – President, Television Group

Peter Wilkes – Senior Vice President, Investor Relations

Analysts

Alan Gould – Evercore Partners

David Miller – Caris & Co.

Ben Mogil – Stifel Nicolaus

Doug Creutz – Cowen & Co.

James Marsh – Piper Jaffray

Jim Goss – Barrington Research

David Bank – RBC Capital

Matt Harrington – Wunderlich Securities

Alexia Quadrani – JP Morgan

Tuna Amobi – S&P Capital

David Joyce – ISI Group

Presentation

Operator

Ladies and gentlemen, good morning. Thank you for standing by and welcome to the Lionsgate Fiscal 2013 Second Quarter Earnings call. At this time, all lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given at that time. If you should require any assistance today, please press then zero and an AT&T operator will assist you. As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Senior Vice President, Investor Relations, Mr. Peter Wilkes. Please go ahead.

Peter Wilkes

Good morning. Thank you for joining us today. Jon Feltheimer, our CEO, will begin with remarks and then we will open the call to questions. Joining the call are Michael Burns, our Vice Chairman; Rob Friedman and Patrick Wachsberger, co-Chairs of the Motion Picture Group; Steve Beeks, co-COO and President of the Motion Picture Group; Kevin Beggs, President of our Television Group; Jim Keegan, our CFO; and Rick Prell, our Chief Accounting Officer.

The matters discussed on this call include forward-looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the risk factors as set forth in Lionsgate’s annual report on Form 10-K filed with the SEC on May 30, 2012, which risk factors are incorporated by reference. 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.

Jon?

Jon Feltheimer

Good morning everyone and thank you all for joining us. As I mentioned in our earnings release, this quarter’s solid performance was driven by the core values on which we’ve been building our company over the past 12 years, remaining agnostic while delivering content to the growing spectrum of digital and traditional buyers, innovating new models in our television business designed for a multi-platform environment, growing our library organically and through third party acquisitions, producing film and TV content differentiated for passionate targeted audiences and continuing to aggregate a business where the sum is greater than its parts.

Here are some of the quarter’s highlights. We’ve continued building out our international film distribution network as part of our ongoing commitment to lower our risk and extend our visibility and predictability while maintaining our upside. With the recent announcements of deals in Germany, France, Spain, Australia, Latin America and Russia, among others, we’ve established partnerships in major territories representing approximately 80% of the world outside of China and India. These output arrangements and partnerships will cover more than the majority of the costs of our Lionsgate and Summit feature film production slates, significantly reducing our capital at risk on each film we produce.

To give you a significant and recent example, while the scope and therefore the budget of Hunger Games: Catching Fire is substantially larger than the first Hunger Games film, thanks to these output deals and the tremendous sales achieved by our international team led by Patrick Wachsberger, we actually have the same domestic exposure on Catching Fire that we had on the first movie.

Turning to our television business, we’re deep into production on the second order of Anger Management, and the show looks great. In addition to its 90 episode pick-up by FX, Anger Management had an excellent start to its syndication rollout. Debmar-Mercury’s deal with the Fox TV stations gives us great time slots on great stations across the country. As we’ve mentioned before, we’ll be in syndication at least three years earlier than a traditional television rollout.

We’re also pleased with the ratings for the first five episodes of Nashville. In today’s time shifted environment, it’s particularly encouraging that Nashville’s live-plus-three numbers continue to average more than 50% higher than the ratings for its live-plus-same-day airing, making it one of the most time shifted shows on television. With eight songs debuting high on iTunes’ charts this month and generating over half a million downloads already, Nashville is that rare show that has the opportunity to expand its marketing reach and revenue base through touring, soundtracks, and merchandising. We believe that the show will continue to grow and become an important asset for both Lionsgate and the ABC.

On the feature side, we continue to be pleased with the performance of our film slate this year with Sinister and The Possession doing particularly well recently. Even more important is the continued development of our young adult franchises. I just got back from the set of Catching Fire and I’m very excited about what I saw. As you’ve read in the press, we just signed Francis Lawrence to the next two installments and we’re obviously impressed with what he’s doing with the franchise.

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