Lions Gate Entertainment To Spin Starz In April

Lions Gate Entertainment Corp. (LGF.A) 3Q25 Results Summary

1. Robust Financial Performance in 3Q25

Lions Gate Entertainment Corp. (LGF.A) delivered strong results for the third quarter of fiscal year 2025 (3Q25), exceeding both revenue and adjusted EPS estimates. Despite a slight 0.5% year-over-year (YoY) decline in revenue to $970.5 million, the company demonstrated resilience through significant growth in its television production business, which rose by 62.94% YoY. This growth was partially offset by declines in media networks revenue (-17.4% YoY) and motion picture revenue (-30.2% YoY). The company’s trailing 12-month library revenue also saw a notable increase of 22% YoY, reaching $954 million.

From a profitability standpoint, Lions Gate reported an operating profit of $35.8 million, a significant improvement from the operating loss of $43.5 million in 3Q24. This turnaround was driven by reduced restructuring and impairment expenses. While the Adjusted OIBDA marginally declined by 4.4% YoY to $144.2 million, the company’s net loss narrowed to $21.9 million, with diluted Loss Per Share improving to $0.09 from $0.45 in the prior year. Adjusted net income rose 5.2% YoY to $68.4 million, reflecting the company’s disciplined cost management and operational efficiency.

2. Strategic Update on Starz and Studio Separation

During the 3Q25 earnings call, management provided key updates on the upcoming separation of the Starz and Studio businesses, a move aimed at unlocking shareholder value. The separation is expected to occur in mid-to-late April 2025, following regulatory approvals and the updating of financial statements for December 31, 2024. The process involves a joint proxy registration statement with the SEC, which is currently under review.

The separation will result in two distinct public companies: Starz Entertainment Corp., which will retain the media networks business, and New Lionsgate, which will house the Lionsgate Studios business. Shareholders of Lions Gate Entertainment Corp. as of the transaction date will receive shares in both entities. The deal is structured to be tax-efficient, with non-residents of Canada expected to be exempt from Canadian income tax on any gains realized.

3. Valuation and Analyst Recommendation

Based on the EV/EBITDA methodology, Lions Gate Entertainment Corp. has been valued at an intrinsic price of $10.00 per share, up from the previous estimate of $8.50. This valuation is supported by the company’s closest peer multiple (AMCX) and includes the value of its 87.8% stake in Lionsgate Studios. The stock has shown recent strength, surging approximately 15% following the positive 3Q25 results and the announcement of the Starz/Studio separation timeline.

Analysts maintain a ‘Hold’ rating on the stock, citing a modest implied upside of 2.2% from the current market price of $9.78 as of February 21, 2025. Key upside risks include subscriber growth at Starz, potential box office hits, and strategic M&A activity post-separation.

4. Fiscal Year 2025 Outlook

Lions Gate Entertainment reiterated its fiscal 2025 outlook, with the Studio business expected to generate adjusted OIBDA of $300–$320 million, driven by the success of mid-budget films and steady television production. The Starz business (Media Networks) is projected to contribute over $200 million in adjusted OIBDA for the fiscal year. Management emphasized that the company’s consolidated adjusted OIBDA and adjusted free cash flow will be weighted toward the second half of the fiscal year, supported by increased television deliveries, post-theatrical slate cash flows, a Starz price increase, and growth in OTT subscribers.

5. Business Segment Performance

In 3Q25, Lions Gate’s Media Networks business faced challenges with a 17.4% YoY decline in revenue to $344.5 million, primarily due to the exit of international territories. Segment profit fell 70.9% YoY to $24.9 million, driven by higher content amortization costs. The segment margin dropped significantly to 7.2% in 3Q25 from 20.5% in 3Q24. For the nine months ended 3Q25, Media Networks revenue declined 14.3% YoY to $1.0 billion, with segment profit decreasing 40.5% to $109.5 million.

On the other hand, the Lionsgate Studios (Studio) business performed well, with revenue increasing 3.2% YoY to $713.8 million in 3Q25, fueled by a 62.9% YoY surge in television production revenue. Segment profit grew 33.2% YoY to $144.5 million, leading to a segment margin improvement to 20.2% from 15.7% in the prior year. However, for the nine months ended 3Q25, Studio revenue was only marginally higher at 0.9% YoY, with segment profit declining 18.9% YoY due to increased operating expenses.

6. Future Prospects and Strategic Initiatives

Lions Gate Entertainment is positioning itself for long-term growth through strategic initiatives. The company recently extended its multi-year theatrical output deal with Starz, ensuring exclusive first pay TV and SVOD window rights for Lionsgate Studio films. Additionally, a new exclusive pay deal with Amazon Prime Video enhances the company’s distribution capabilities, with Prime Video securing early access to Lionsgate’s film slate from 2025 to 2028.

Starz also saw a return to domestic OTT subscriber growth in 3Q25, with 12.6 million North American OTT subscribers, reflecting sequential growth of 170,000 subscribers. This growth was driven by popular content such as the seventh season of Outlander and a strong slate of first-run movies. On the distribution front, Starz entered into several new partnerships, including deals with Prime Video, VIZIO, and YouTube TV, further expanding its reach.

With the upcoming separation of Starz and Lionsgate Studios, the company is poised to streamline its operations, enhance profitability, and deliver value to shareholders. Despite the current valuation reflecting the positive developments, Lions Gate Entertainment remains a compelling investment opportunity for those looking to capitalize on its strategic transformation and content-driven growth.