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Lions Gate Entertainment Corp (LGF.A) Q4 2021 Earnings Call Transcript

LGF.A Earnings Call - Final Transcript

Lions Gate Entertainment Corp (NYSE: LGF.A) Q4 2021 earnings call dated May. 27, 2021.

Corporate Participants:

Nilay ShahExecutive Vice President and Head of Investor Relations

Jon FeltheimerChief Executive Officer

James BargeChief Financial Officer

Kevin Beggs — Chairman, Television Group

Joseph Drake — Chairman of the Motion Picture Group

Jeffrey Hirsch — President and Chief Executive Officer, Starz

Analysts:

Thomas YehMorgan Stanley — Analyst

Tim NollenMacquarie Securities — Analyst

Kutgun MaralRBC Capital Markets — Analyst

Alexia QuadraniJ.P. Morgan — Analyst

Matthew ThorntonTruist Financial — Analyst

Steven CahallWells Fargo Securities — Analyst

Alan GouldLoop Capital — Analyst

James GossBarrington Research — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Lions Gate Fourth Quarter 2021 and Year End Earnings Call. [Operator Instructions] As a reminder, today’s conference is being recorded.

I would now like to turn the conference over to your host, EVP, Head of Investor Relations, Mr. Nilay Shah. Please go ahead, sir.

Nilay ShahExecutive Vice President and Head of Investor Relations

Good afternoon. Thank you for joining us for the Lions Gate fiscal ’21 fourth 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; and Chairman of the Motion Picture Group, Joe Drake. And from STARZ, we have President and CEO, Jeff Hirsch; CFO, Scott Macdonald; President of Domestic Network, Alison Hoffman; and EVP of International, Superna Kalle.

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 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 Lions Gate’s most recent Annual Report on Form 10-K as amended in our most recent Quarterly Report on Form 10-Q filed with the SEC. The company undertakes no obligation to publicly release the results 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 FeltheimerChief Executive Officer

Thank you, Nilay, and good afternoon, everyone. During an extraordinary year marked by a global pandemic and unprecedented industry disruption, we continue to execute on our strategy and business plan. And we’re wrapping up fiscal ’21 with our fourth strong quarter in a row. I’ll recap the highlights of the fiscal year, talk about how fiscal ’21 positions us for fiscal ’22 and close with a few of our learnings from this past year. Financially, we reported strong adjusted OIBDA and over $300 million in adjusted free cash flow in the fiscal year, allowing us to reduce our net leverage ratio by more than a full term. We also made qualitative enhancements to our capital structure by taking advantage of market conditions to refinance and extend our debt at lower rates.

We ended the fiscal year with over $500 million in available cash, an untapped $1.5 billion revolver and a healthy balance sheet. Operationally with a year of strong subscriber growth, great new television series, record library sales and a successful pivot to alternative release strategies for many of our films. Beginning with our studio businesses, our film and television production teams did an extraordinary job keeping productions running with minimal disruption. We recently had seven films, 19 scripted series and 20 unscripted shows shooting around the world at the same time, keeping STARZ programming on schedule, and responding to unprecedented demand from third-party buyers.

Nobody could have imagined that we would be operating for most of the year in a world without movie theaters. We pivoted quickly to new distribution models or films such as Run, Antebellum, Fatale and I Still Believe. By capitalizing on the optionality of our slate and our ability to future proof our model. We ended the year with a 42% increase in Motion Picture Group profitability. And the other Motion Picture business continues to evolve in ways that we’ve already seen in ways that are still emerging. We continue to believe in its vitality. We went into production on 13 films during the pandemic year as we prepare both for the continued reopening of theaters, and the exciting opportunity to deliver a robust slate to STARZ next year.

With the latest installment of our blockbuster action franchise, John Wick 4, the Hunger Games prequel, The Ballad of Songbirds and Snakes adapted from Suzanne Collins runaway bestseller, the star studded Borderlands, White Bird, the follow-up to our global hit Wonder, a nostalgic reimagining of our classic intellectual property Dirty Dancing. Are You There God, It’s Me, Margaret, based on Judy Blume’s iconic novel, franchise property Monopoly and Shotgun Wedding starring Jennifer Lopez. Our slate will be a compelling value proposition across every platform. As our spectrum of buyers continued to expand to include new players like Roku and IMDb, and we capitalize on an opportunity to return to the Network series business. Our Television Group is coming off one of its best years ever.

With 13 new series orders, all eight of our pilots picked up to series, and all seven of last year’s Freshman series renewed for their second season. We’ve also been busy aligning our content businesses behind the growth of STARZ and in fiscal 2021, we hit our full stride with 15 Lions Gate television series launched, preparing to launch or in production for STARZ. For 20 years, we’ve been investing billions of dollars in creating premium evergreen content. And the proof of concept is the record performance of our library. Our library revenues continue to grow year-over-year and reached an all-time high of $780 million in fiscal ’21, driven by the steady march of new SVOD, and AVOD platforms around the world with an enormous appetite for content.

And when we look at the success of our recent library packages, it’s interesting to note that instead of two or three big drivers, contributions are spread across hundreds of different profitable titles, all of them growing in value over time. Ours is a big, young and vibrant library, with over 80% of library revenue coming from titles produced since 2000, with many monetization cycles ahead. Turning to STARZ, we grew subscribers by 23% year-over-year, with 29.5 million global subscribers at year end excluding the nearly 1 million subs from Pantaya. Importantly, 16.7 million of our global subs are streaming well exceeding our fiscal yearend target of 13 million to 15 million and taking us past the digital inflection point of more over the top than linear subscribers.

Our domestic and international businesses both made significant contributions to this growth. In the United States, we reached the 10 million streaming subscriber milestone, thanks to a focused content strategy and a slate loaded with exciting new series, adult edgy premium content, whose demographic focus gives us a point of view and is making us a must have platform for certain affinity groups. Ghost and P-Valley recorded the number one and number two ranked STARZ premieres ever with Outlanders sixth season marking a multi-platform viewing series high. Hightown established itself as a critical favorite with a dedicated fan base and seduced the story of the Nxivm ‘Sex Cult was a great success in the unscripted space.

Internationally, it was a year highlighted by the 70% increase of our STARZPLAY subscriber base to 8.6 million, an expanding global distribution footprint, a successful best of global SVOD content strategy that continues to set us apart and new bundle deals driving our penetration in key territories. STARZPLAY’s combination of premium programming, speed-to-market and operational flexibility attracted more than 20 new partners in 15 countries as we have grown our footprint to a total of 58 countries within three years of our global launch. This head start allows us to continue to access best-in-class acquisitions, such as Normal People, The Great, Gangs of London and the upcoming Dr. Death to complement STARZ original series and Lions Gate films and library content.

We’re taking the same approach to growing STARZPLAY internationally that is driving the success of our domestic platform, emphasizing value over scale, and rolling out a targeted premium service, not a broad general entertainment platform, one that can sit on top of other platforms, and one that is defined by its exceptionally curated competitively price premium grown up content. To paraphrase former First Lady Michelle Obama, when they go broad, we go premium. Turning to the outlook for fiscal ’22, we will execute a targeted focused but substantial ramp in content across our businesses. This will include an expanded and strategically focused slated STARZ as we increase our number of scripted series by 70%.

Kicking off with the debut of Run the World to rave reviews two weeks ago, and continuing with the next two installments of The Power Universe, the Return of Outlander, Ghost and Hightown and the new series Blind Spotting, Heels, BMF, and Shining Vale among others. It’s our strongest slate ever. Please take a look at the sizzle reel posted on our IR website after the call. With our acceleration and content spend this upcoming fiscal year, we’re forecasting even better net ads domestically and internationally in fiscal ’22, than in fiscal ’21.

While some of our peers are seeing the slowdown as we lapped the pandemic’s impact on streaming, our highly targeted original strategy enables us to project a year-over-year net add improvement that accelerates in the second quarter of the year with a back loaded programming schedule. And then reassessing our historical target of 50 million to 60 million subscribers by fiscal ’25, we are now tracking at the high end of the range. Approximately 80% of those 60 million subscribers will be streaming subs. Our Television Group will also deliver one of its biggest slates growing from 10 premium scripted series to 26. Nearly all of them locked and importantly, half of them for STARZ.

While their profitability is concentrated later in their life cycles as they reach syndication and enter our library, they have immediate value for STARZ. And as the films we greenlit and started shooting during the pandemic begin to arrive in theaters later this year. We expect strong growth in theatrical revenues in fiscal ’22 that will continue to build into fiscal ’23 when we will have an exciting and impressive slate to deliver to our exhibition partners and to STARZ. In closing, as we begin to emerge from the pandemic, I’d like to share a few learnings from the past year.

We amplified our internal communications in the form of weekly letters from management and Friday meetings in which I had the opportunity to talk with nearly every one of our employees across the company, initiatives that we will continue going forward. We’ve all learned new ways of doing business, mastered new technologies, and develop new skills operating in a virtual environment. And many of these will form the cornerstone of our workplace of the future. Finally, that we were tested by the pandemic, we rose to the challenges as a family by pivoting, adjusting, adapting and showing the resilience and resourcefulness that we will continue to bring to bear on an industry undergoing the greatest disruption in its history.

Now I’ll turn things over to Jimmy.

James BargeChief Financial Officer

Thanks, Jon and good afternoon, everyone. I’ll briefly discuss our fiscal fourth quarter financial results and update you on our balance sheet. Fiscal fourth quarter adjusted OIBDA was $77 million, with total revenue coming in at $876 million. Driven by strong revenue growth at STARZ and continued demand for library content. Reported fully diluted earnings per share were a loss of $0.17 a share. And fully diluted adjusted earnings per share came in at $0.0 a share with adjusted free cash flow for the quarter coming in at $3.1 million.

Now let me briefly discuss the fiscal fourth quarter performance of the underlying segments compared to the prior year quarter. You can follow along in our trending schedules have been posted to our website and show greater detail around our global media network subscribers, adjusted for the sale of Pantaya. Media Networks quarterly revenue was $401 million and segment profit came in at $43 million, driven largely by domestic and international over the top subscriber growth. Globally, including STARZPLAY Arabia, the company grew over the top subscribers 3 million sequentially or 22%, as you can see in our trending schedules.

STARZ domestic over the top subscribers increased 5% sequentially, while STARZPLAY international over the top subscribers grew 104% as we continue to roll out in new markets and platforms. We ended the quarter with 29.5 million total global subscribers. Linear subs declined to 12.8 million while total global media network over the top subs reached 16.7 million representing 69% year-over-year growth. Recall, this exceeds the top end of the 13 million to 15 million global over the top subscriber range to which we previously guided and again this is without the benefit of Pantaya. We have now reached 10 million over the top domestic subscribers representing growth of 47% year-over-year.

Currently nearly 80% of all domestic subscribers are on either over the top or a-la-carte plans. Now turning to Motion Pictures, revenue declined on limited theatrical releases to $292 million, while segment profit of $62 million reflects a tough comp against the prior year quarter, which included the theatrical release of Knives Out, as well as Ancillary Sales of John Wick III. This was partially offset by continued strength in library and platform releases.

And finally, television revenue for the quarter came in at $211 million and segment profit was $9 million. The results of our Television Group reflect a tough comp against the prior year quarter, which included licensing of library titles, Spartacus and meet the browns. Now turning to the balance sheet, we ended the quarter with leverage at 4.0 times trailing 12 months adjusted OIBDA or 3.1 times excluding our investment in STARZPLAY International. We continue to retain significant liquidity with $529 million of cash on-hand and $1.5 billion of undrawn revolver.

Just after the quarter ended, we opportunistically refinanced $445 million of Term Loan A and all of our unsecured notes, both reducing our average annual interest cost and extending the tenor by five and eight years to calendar year 2026 and 2029, respectively. We also extended $1.25 billion of our $1.5 billion undrawn revolver to calendar year 2026, with no increase in rate. We remain committed to strengthening our balance sheet and paying down debt.

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

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks Jimmy. Operator, can you open the call for questions?

Questions and Answers:

Operator

[Operator Instructions] And our first question will come from the line of Thomas Yeh. Your line is open.

Thomas YehMorgan Stanley — Analyst

Hi, thanks for taking my questions. This is Thomas Yeh at Morgan Stanley. My first one, in light of some of the industry consolidation that’s been happening, I would love to hear more about how you frame the TAM for premium relative to broad for STARZ, and the impact also that it might have on content production side of the house? And then second one for Jeff on STARZ. Can you give us a little bit color on the guidance for net ads to accelerate in 2022? What are you seeing on the churn front and the cadence of original programming that gives you the confidence for even higher U.S. penetration as we head into the second half of next year? Thanks.

Jon FeltheimerChief Executive Officer

Thanks Thomas. Jeff will take that.

Jeffrey HirschPresident and Chief Executive Officer, Starz

Thomas, I think if you take a step back and think of how the streaming industry is kind of unfolding right now, we really see it in kind of three groups of services. There’s kind of basic and broad based streamers, that are really these big scale ad supported kind of all things to all people in the homes and we think, in order to be profitable and get to scale, they’ve got to be somewhere between 250 to 300 million subs globally. The second tier is where we sit, which is that that premium service as a very edgy, non-ad supported, really tailored service. We think, again, if you look at the linear domestic world as any kind of guide for the world, that we need to be somewhere between 20% and 30%, to be profitable there.

As Jon said in his prepared remarks, we see ourselves coming in by 2025, with the high end of the range around 60 million subscribers. And really in that tier in our models a little different than you see in that broad base tier, where we’re more wholesale than retail and the third box is a very talented niche type services. So we think we need to get to somewhere in 50 to 60 million range. And as Jon said, we’ll come in the high end of that range by 2025. Your second question, if you look at domestic, we’re coming into our biggest and broadest slate in the history of the business. We’re gone from seven originals this year to 12 originals next year. And the way those originals layout, it’s really stacked more in the second, third and fourth quarter.

And so when we look at how we kind of forecast the business which is really a data driven approach, each piece of content is given a subscriber acquisition target and goal. And so when you start to layer in multiple shows on every week, week-to-week, all the 52 weeks, you start to see those ads kind of accelerate. And again, I’ll remind everybody, as we talked about on a few of these calls, we’re really playing more of a retention game by bringing subscribers on the two core demos that we have in filling those gaps. So when Power comes on the air or Ghost comes on the air, then we bring raising canon on then we bring P-Valley back, then we bring the Hightown back, we’re moving subscribers from one shows to the next the next, this quarter, we saw churn at all-time low. And we think as we get into this robust slate, it will come down to single digits.

Thomas YehMorgan Stanley — Analyst

Great. And maybe if I can squeeze one last one in, there was a bit of a sequential decline in the blended U.S. ARPU for STARZ. Can you talk a little bit about the dynamic there and where you think that settles out? Are you lapping some noise from the fixed variable transition where Comcast or anything else related to the mix shift?

Jon FeltheimerChief Executive Officer

Really, in the quarter, you saw a lot of discounting and promotional activity from not only on our own app, but from our partners like an Amazon and Hulu, and so there’s some discounting noise in the number. We still think that on a total domestic basis, ARPU will be around $5.70 to $6. And remember that all — 80% of all of our subscribers domestically are in some kind of al-a-carte or revenue share deal. And so that’s why you see that kind of blended average handling around that number.

Thomas YehMorgan Stanley — Analyst

Okay, very helpful. Thank you so much.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks Thomas. Operator, can we get the next question.

Operator

Tim Nollen, your line is open.

Tim NollenMacquarie Securities — Analyst

Great, thanks. One number that jumped out to me on the trending schedules was the International OTT number of 4.9 million. I wonder if you could talk a little bit about how you basically doubled that sequentially, you mentioned new markets, but any more commentary on that? And then a follow-on; could you talk about profitability of the OTT business, I think you’ve in the past talked about it being close to the same profitability as linear. Any further discussion, you might be able to offer us in terms of profitability, given these much larger sub targets now by 2025? Thanks.

Jon FeltheimerChief Executive Officer

So, n the quarter, we saw in the a-la-carte international business accelerate. And then there was opportunistic large volume deal that we did in a market that we thought was great to extend the brand and really build a business in the quarter. And so both sides of the business really accelerated. We feel really great about that. Long-term projections obviously, we continue to look at the business and think on a long-term basis by 2025 are a-la-carte ARPU will be somewhere around the $3 range, as we’ve talked about. And if you look out from ’25 a little far, we think globally, the business will have 120% margin.

Tim NollenMacquarie Securities — Analyst

Thanks.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks, Tim. Operator, can we get the next question, please?

Operator

Kutgun Maral, your line is open.

Kutgun MaralRBC Capital Markets — Analyst

Great, thanks for taking the questions, two if I could. First on M&A, obviously, there have been a few changes across the ecosystem over the last few weeks. It’s somewhat of an open ended question. But I’d love your perspectives on the shifting landscape and as your views on what role Lions Gate might play have changed?

And maybe second, you’ve entered fiscal ’22 with encouraging momentum though I assume this year still isn’t too representative of your full earnings potential, especially given the ramp up of programming spend. I’m not sure how granular you’d be willing to get and I’m not expecting specific guidance. But as we think about a world post COVID, can you help us think about some of your financial expectations beyond this year, whether that’s specific to fiscal ’23, or further out or just any high level commentary on the puts and takes, that’d be very helpful. Thanks.

Jon FeltheimerChief Executive Officer

Jimmy is going to will flip those answers. And Jimmy is going to go first on the financials.

James BargeChief Financial Officer

As you noted, we’re really excited about fiscal ’22, particularly our investment opportunities. There are some great opportunities to lean in, and our content across all of our businesses, really, and it’s supported by hard data, proven track record. And it’s going to drive revenues, both short-term, and certainly long-term as well. So we’ll be able to shoulder that increase spend and content and marketing with pretty much a modest, fairly modest impact on the earnings and cash flows during the year. And that’s no surprise, when you look at analysts’ expectations for ’22 as an investment year. And then obviously, we’re so well positioned moving and beyond that into ’23 and beyond with regards to the ramp up in content, and what that does for the out years.

Jon FeltheimerChief Executive Officer

So I’ll take the M&A question. Both of the big deals that have happened within what the last two or three weeks I think are pretty simple. They’re a resounding affirmation, I’d say about the value of content, the value of IPs, and the value of brands. I think sort of our approach and where we fit in is pretty simple at this point in time, which is, with all this disruption, I think we’ve got a benefit in terms of lack of disruption here at the company and of cohesiveness. And I think that’s the key thing that we’re going to do is keep our head down, and just keep executing on our plan. I think the thing that we don’t want to get distracted by frankly is this concept of scale, because we think our job is actually just to create for our shareholders outside value.

That’s what we think we’re doing with STARZ. When people refer to us like this morning in one of those M&A articles as having a niche service. We don’t think 30 million subs is a niche service. If we wanted to be in niche services, obviously, we wouldn’t have sold Pantaya. So, we think 30 going to 60 are that’s a big business, we want to be the market leader in premium. And that’s how we’ll build our value. So obviously, we talked to everyone, we listened to everything. But our main job right now, as I say is to create outsized value in the way we’re going to do is by keeping our head down, having all of our businesses talk to each other 10 times a day, which is what they do. So that again, as Michael and I’ve said before, one plus one plus one is way more than three.

Kutgun MaralRBC Capital Markets — Analyst

Thank you both.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks Kutgun. Operator could we get the next question, please?

Operator

Alexia Quadrani, your line is open.

Alexia QuadraniJ.P. Morgan — Analyst

Thank you, just two questions, if I may. The first one is on STARZ. You saw some nice acceleration in sub growth in the quarter in a period where many of your peers kind of saw moderation of growth? I’m curious, do you think it’s just really entirely content driven or with other factors driving that success? And then my second question really is on the theatrical releases and the windowing? I guess there any are we sort of taking a different approach here, but I think most or most studios are short of settling around kind of a 45 day window. I’m sure you’ve had your own conversations with the exhibitors. I’m curious what your thoughts are about windowing and general distribution of your film product?

Jon FeltheimerChief Executive Officer

Great. We’ll have Jeff go first and then Joe.

Jeffrey HirschPresident and Chief Executive Officer, Starz

Hey, it’s Jeff, obviously, in the pandemic, we saw a lot of discovery of STARZ and a lot of consumers for the first time, which we continue to see the engagement on the service. Over the last three years, we continue to see the monthly hours increase. And we obviously saw that in the pandemic, but that was starting two, three years ago. I think the subscriber additions that Jon talked about in his prepared remarks in 22 tours versus 21, again, is really driven by the size of the slate that we have coming in the scheduling of the slate as that we have coming.

As I talked about earlier, churn is at an all-time low. So we think these consumers that found the service for the pandemic are still with us watching our service. And we think that we’ll continue. We’ve got three power series coming this year and Outlander coming back this year. So four big tent pole events, and Freshman shows like Black Mafia Family and Heels behind that. And so we couldn’t be more excited about the subscriber growth that we’ve got planned based on the content that’s coming online right now.

Joseph DrakeChairman of the Motion Picture Group

Hi, Alexia on the theatrical business, there’s certainly is a lot happening in Windows and we have really taken the approach for ourselves to really look at each film has its own piece of business and how that is best served, you’ll see in the case of Spiral, our metrics actually improving on that film. The metrics in this new model are very strong that will be — that will have had three weeks of a theatrical window exclusive and then we’ll stay in theaters while it goes to premium video on demand. We’ve got Hitman’s Bodyguard coming up next in a slightly different window that’ll settle out just around 45 days within a couple of days of that. It’s based on when we want to go to a different secondary window exploitation.

And so I think what you’re going to see, and certainly what we’ve experienced is that we love the theatrical business, we’re working very close with exhibitors, exhibitors have been great partners in working with us and with our competitors on finding the right way for us to collaborate, help support that market but maximize the value of our titles. I think that’s going to continue for a bit and we’ll see where it settles out. But we’re kind of boat we’re very. The last thing I would say is we are very bullish on the theatrical market, I mean you’re going to see a really big weekend this weekend. And yet, I think the real news here is there’s a lot of ways we can exploit to monetize our titles now and have great partners to do it with.

Alexia QuadraniJ.P. Morgan — Analyst

Thank you.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks Alexia. Operator, can we get the next question, please?

Operator

Matthew Thornton, your line is open.

Matthew ThorntonTruist Financial — Analyst

Hey, good afternoon, everybody. Thanks for taking the question. Maybe a couple questions, if I could. I guess first STARZPLAY Arabia, you guys almost doubled your International OTT business, STARZPLAY Arabia, however, doesn’t seem to be moving much quarter-to-quarter. So my question is, is that one that you’re still considering as a strategic acquisition at some point or is that one perhaps you could monetize similar to we do with Pantaya, and just go it alone, given the momentum you already have elsewhere, internationally? I guess that’s the first question.

Second question, International. And I apologize if I missed this. But International breakeven, I remember, couple years back, we talked about fiscal ’23, with before you guys kind of upsized the subscriber guidance out to fiscal ’25. Any update to how you’re thinking about international breakeven? And again, I apologize if I missed that one. Thanks, guys.

Jon FeltheimerChief Executive Officer

STARZPLAY Arabia, we really like what Maaz has built there. We think there again, they’re continue to be the market leader, I think is 19 minimum countries they have, have experienced, obviously economic issues in some of the markets that we’ve seen. But ultimately, we really feel good about the business. And we’ll continue to watch it and watch it continue to return to growth. And then we’ll make a decision on whether we continue to take a controlling interest in that, continue to stay as a viable strategic partner or monetize in some other way. But we feel really good about what Maaz is building and we hope those countries and we will see those countries returning back to growth in the next couple quarters.

Jeffrey HirschPresident and Chief Executive Officer, Starz

And on a run rate basis, we still expect to be positive in calendar ’23. And that would be without SBA.

Matthew ThorntonTruist Financial — Analyst

That’s great. Maybe I can flip one more and quickly. Coming back to some of the recent deals specifically the MGM multiples. It looks to me like, they reported library cash flow numbers similar to you guys. I think those 420s puts their enterprise valued about 20 times that number. I’m just curious if there’s any, obviously at the epics business which comps against STARZ pretty well. But on the library size, is there any difference between the way you guys think about library cash flow versus what they have report? Just curious if you have any thoughts there? Thanks again, guys.

Jon FeltheimerChief Executive Officer

Great observation. This just proves the value of content. And our library is incredibly valuable with 17,000 titles, no matter how you look at it. So really, when you look at the scarcity value against our enterprise value, I mean however, whatever multiple you put on it, like with a 50% cash margin and $700 million plus revenues, you can see that clearly the library was substantiate a significant portion of our current enterprise value.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks Matt. Operator can we take the next question.

Operator

Steven Cahall, your line is open.

Steven CahallWells Fargo Securities — Analyst

Thanks. Maybe first, for me, I was just wondering if you could touch on the cadence of originals which you have this fiscal year at STARZ we can kind of think about the subscriber growth, maybe of original this year versus what you had last year. And then just also wondering if you have an idea of what your P&A expense might be in fiscal ’22 or how many films you’re planning to release since I know that’s just an expense you didn’t really have last year, that’s going to come back? And maybe lastly, Jimmy, I think a lot of the annual free cash flow this year, adjusted free cash flow came from the production loans and the tax credit facility. Maybe just help us understand that a little bit since that’s kind of a funky free cash flow dynamic. Thank you.

Jon FeltheimerChief Executive Officer

From the content cadence perspective domestically on STARZ, as we said, we’re going from seven originals to 12 this year, heavily loaded more in the second and third quarter this year than last year. And so I think you’ll see the subscriber cadence follow that as well.

James BargeChief Financial Officer

Your question about the P&A spend, you’d expect to see, obviously, as we expand theoretically with market coming back there, probably almost double our broader theatrical releases. So you’re going to see an increase in the P&A spend. Not to the levels that you saw in fiscal ’20, maybe something along the 60% to 70% of maybe the fiscal ’20 pre pandemic levels or P&A spend. In the context of free cash flow, well, I mean is, as you noted, we finished $300 million of free cash flow in fiscal ’21. There were certainly some benefits there from managing our working capital. But more than 50% of that, for the Lion’s share was obviously operational. So we can continue to fully fund all of our businesses, and the increase in content marketing spend, as well as the fully funding SBI, which by the way, our STARZPLAY international peak cash funding, we just lapped in fiscal ’21. So really feel good about that. And feel good about our ability to generate positive free cash flow and continue to reduce that moving forward.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks Steve. Operator, could we get the next question please.

Operator

[Operator Instructions] Next, we’ll open the line of Alan Gould. Your line is open.

Alan GouldLoop Capital — Analyst

Thanks. I’ve got three questions, please. And thanks for taking the questions. First, Jeff, what gives you the confidence now that you’ll hit the high end of that 50 to 60 million range and implies about 9 million a year if you were to smooth it out? Take that one, and then I’ll go to the other questions.

Jon FeltheimerChief Executive Officer

Hey Alan, thanks for the question. As we look at our countries that we’ve launched in our distribution deals, and as we start to last, the distribution deals, more content comes on, we signed more distribution deals. We look at the math, and we see that as we build up this business over time, we’re really going to end up at the higher end of the range. As we see the business continue to accelerate, we’ve got great confidence that we’ll actually continue to move to that number.

Jeffrey HirschPresident and Chief Executive Officer, Starz

Yeah, Alan, I’d even add, again, when you look at what the expectation of these basic screamers are, somewhere between 300 million and 400 million subs. And we’re projecting out in that same period of time, what, 20% of their breath, if you will, it seems quite reasonable. When you understand again that we’re building a premium service that sits on top of every other service, it’s not competitive, that the local players that are emerging, they are competitive to the base extreme, they’re not competitive to us. And so we feel that we can package and bundle with virtually every other platform out there. Who knows, 60 maybe a little conservative, but I mean, we’re basing that just on the current results that we have, and what we’re seeing in the marketplace.

Alan GouldLoop Capital — Analyst

Thanks, Jeff, very helpful, Jon. Question for Kevin. Kevin. I’ve never seen someone have all their pilots picked up and all their Freshman shows renewed? Can you tell us a little — I mean congratulations on that. What is happening in the TV space?

Kevin BeggsChairman, Television Group

It’s a great question. And we’re really happy we have an amazing team. A huge amount of this goes to the ongoing integration and relationship between Lions Gate and STARZ and what Jeff and Ali and Superna and Christine are all doing, along with our group. Half of those four — of those eight are with STARZ, and also just demand in the marketplace. The platform expansions, consolidations not withstanding are just bringing about more spending, more demand for high end premium scripted programming, and a big volume business on unscripted. We’re in both of those areas in a really smart way, with an extraordinary creative team internally, and an amazing lineup of producers and writers and artists and directors and just hitting on all cylinders. So good timing, and I think preparation. And despite pandemic productivity through the roof.

Jon FeltheimerChief Executive Officer

I think it’s important to note as well, because sometimes people will say, well, why aren’t you only doing shows for STARZ. And the great thing about such a large portion of that business being to third parties is that we’re getting third parties to pay for almost the full price of those productions. And virtually every single one of them will return home to us or go in our library could even end up some point on STARZ. So, we like that business and we think it’s pretty critical as well, Alan that we service all of the talent that we’ve gotten. So that we want to keep our talent happy, we want to keep them busy, and we want to keep them productive. So if we can keep them doing that sometimes for third parties, as I say fully funded or mostly funded by those third parties, and its premium content that will ultimately be in our library forever.

Alan GouldLoop Capital — Analyst

So even the big broadcast network shows don’t have huge deficits associated with them. You’re saying?

Jon FeltheimerChief Executive Officer

We’ve renegotiated virtually every one of those deals and what’s interesting again as they have more vertically integrated so with their streaming companions, if you will and with their cable companions we’ve actually opened up windows for them that didn’t exist before. So they’re paying a much larger percentage of the license fee, but they’re getting more early rights. And yet again, we’re always getting some rights, which we can exploit immediately off their third-party platforms. And then as I say, later on, those are almost always shows that are going to revert back to us and go into our library and the evergreen properties.

Alan GouldLoop Capital — Analyst

Okay, one quick one for Jimmy. Despite the pandemic, you were able to spend more $1.6 million this year investment in content, so you’re able to keep producing, how much bigger do you think that’s going to increase in fiscal ’22?

James BargeChief Financial Officer

Yes, as you noted, as Jon’s referenced in remarks, and as we’ve answered questions, we’re definitely looking ’22 as an investment year, great opportunity to increase content marketing spend. I think maybe the best way to frame it is if you go back to pre-pandemic levels, fiscal ’22, and think about content marketing, spend being up, say 30% plus, versus these pre-pandemic levels. And just point out to you that, again, while there’s some moderation in free cash flow and earnings are driving short-term revenues, as well as long-term revenue. So I expect that to be fairly modest.

Alan GouldLoop Capital — Analyst

I was actually referring to on the cash flow statement, your increase in investment in film and TV programming rights?

James BargeChief Financial Officer

Yes, that’s correct.

Alan GouldLoop Capital — Analyst

That’ll be up 30%. Okay. Thank you.

James BargeChief Financial Officer

Yes, that’s a cash spend comment. The content — the 30% as a content marketing, because without marketing really why spend to content. So, on an aggregate, if you broke it down, I would say the content spend relative that would be up probably over 50%, and less. So obviously on the marketing side of things, because keep in mind that in fiscal ’20, we had a pretty full level of spend on P&A.

Alan GouldLoop Capital — Analyst

Right. Okay. Thanks for taking the questions.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks Alan. Operator, could we get the next question, please?

Operator

And our last question will come from the line of Jim Goss, your line is open.

James GossBarrington Research — Analyst

Thanks. Regarding the alternative release strategies and you were talking a little about the windows before a couple of your new releases? What are the drivers or patterns and expectations for the various alternative release strategies?

Jon FeltheimerChief Executive Officer

Thanks, Jim. That’s a good question. So we look at it a bunch of different ways. I first say we bifurcated domestically and internationally. Domestically, as you know, we self-distribute here, really in all media, internationally, we self-distribute in Latin America, in the UK, and we license otherwise. And so we’ve really opened up as the appetite and the ways in which you can exploit it internationally have grown at an extraordinary rate, we sort of opened up the approach to how we monetize content internationally.

And what I can tell you is we’re seeing significant increases in what we’re getting, and the ways in which we’re distributing. If you look at the last couple of titles, you’ll see — as the last couple of things we put into production when they finally reach market, you will see in the mix traditional theatrical distributors, you’ll see footprints for streaming platforms, you’ll see some theatrical to PVOD sort of and everything in between, over the look at the market agnostically, what are we trying to achieve creatively, and then maximize monetization. I can tell you that it’s a really exciting time over there. And there’s a lot of upside to be to be garnered.

On the domestic front as you know, we just done our pay television deal with STARZ. And so we’re very focused on putting into production, the kind of content that’s going to help grow that business and feed the big theatrical appetite. And then from a windowing perspective, it really depends on the piece of content. And so as I said in the case of spiral, a shorter theatrical leaning then into PVOD, moving into more traditional exploitation and then accelerating a window for STARZ was the best way to monetize that particular piece of content.

In the case of Hitman’s Bodyguard, it’s a little bit different. And we sort of approach each film agnostically and look at that moment in time look at release dates, like a competition, and the best way to monetize it and so it just gives us a lot of flexibility both from a dating perspective, honestly, it also gives us more flexibility in terms of how we look at dates as well as how we’re going to ultimately monetize.

James GossBarrington Research — Analyst

Are you able to give somewhat and some splits, that you feel you’d have value in the greater flexibility in the windowing as a result of that?

Jon FeltheimerChief Executive Officer

Are you saying, we have interchanged our film rent splits? That’s the question.

James GossBarrington Research — Analyst

Yeah or I mean, if you have a less consistent pattern, then maybe you once did and all windows have changed over the past year, it seems like there could be some give, you need to get in order to get — in order to take advantage of the shorter window should probably need to maybe accept less of the domestic box office in terms of the split with the exhibitors?

Jon FeltheimerChief Executive Officer

Yes, what I would tell you is that we are having all of those conversations, there haven’t been meaningful shifts in any one direction, up or down. And any adjustments are frankly fairly small, if and when we need to do that. Obviously, we’re only making — we’re here to drive customers back into those theaters and be successful in that space. But anytime we’re going to make a decision to change our splits. And again, if we do that they will not be significant, is because there’s a bigger pie overall to harvest out of our content.

James GossBarrington Research — Analyst

Okay. And then one final one. Could you discuss the pace of the return to your ultimate targeted film releases, in terms of numbers of releases, and the mix in terms of the release strategies by theatrical versus other alternatives?

Jon FeltheimerChief Executive Officer

Sure. We’re moving back into the theatrical business for fiscal ’22. We won’t be — I don’t know the exact number, we’ll probably somewhere between 50% and 60%, of where we were at the peak in ’19 and ’20. We hope — we plan to be returning to or calling full form of wide release by ’23 and continuing forward from there. But we look at the wide release, again, from the perspective of why theatrical release or wide alternatives. And so I would say ’22 were up a little bit, and by ’23, we should be fully back perform.

James GossBarrington Research — Analyst

Alright, thank you very much.

Nilay ShahExecutive Vice President and Head of Investor Relations

Thanks, everyone. Please refer to the press releases in Events tab under the Investor Relations section of the company’s website for discussion of certain non-GAAP forward-looking measures discussed on this call. And also, as Jon mentioned in his prepared remarks, please check out the sizzle reel at the top of the Lions Gate Investor Relations website. Thank you.

Operator

[Operator Closing Remarks]

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