Lions Gate Entertainment Earnings Call INSIGHTS: Managing Anger Management, Domestic P&A

On Friday, Lions Gate Entertainment Corporation (NYSE:LGF) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Managing Anger Management

David Miller – Caris & Company: Three questions. First of all, on the guidance of $900 million in EBITDA over three years; I recall that 90 days ago I think I asked the question about whether or not that was adjusted or unadjusted. I’m pretty sure you guys said unadjusted. If you could just kind of reiterate that answer for maybe some of the other folks on the call today, I think, there might be some confusion out there about whether that formal guidance is adjusted or unadjusted. I’m pretty sure, you are going to say unadjusted, but if you could drive that home for the folks out there that would be great. Then, well on ANGER MANAGEMENT, how is this going to work with the other 90 episodes assuming that FX goes ahead with the 90 episode order, which it looks like, you know that’s the way things might fall, I know you have a couple of episodes to go. Should we assume that like another 10 episode block is going to air kind of in January, February and March and then the other 80 will air in fiscal ’14 or is it going to be sort of muddier than that? Thanks very much and then I have a follow-up.

Jon Feltheimer – Co-Chairman and CEO: I think you owe me one more question, David. In terms of EBITDA, yes, that’s an unadjusted number. In terms of ANGER MANAGEMENT, I don’t want to speak for FX right now, because I think they have a fair amount of flexibility, but I think you could assume a significantly larger amount of episodes airing over a period of time. I think Kevin Beggs is in the room, Kevin, I don’t know if you want to add any color there.

Kevin Beggs – President, Lionsgate Television Group: Well, our plan is to furnish them somewhere in the neighborhood of 40 episodes a year. How they then program them out will be completely up to them and air them, but our writers are working in anticipation that it goes forward and we start shooting in September to be able to furnish new episodes in large-large block for them as early as January ’13.

David Miller – Caris & Company: Then I have just a quick follow-up. Well, where you guys in the upfront this past June for TV Guide and what was sort of the price and volume statistics if you’re willing to give that out on the call?

Kevin Beggs – President, Lionsgate Television Group: Yes, we definitely were in the upfront and from both a revenue perspective and from a CPM perspective we were up about you know 5% in revenue and perhaps 3% in terms of CPM pretty much really in line with other networks of our size, so we had a good upfront.

Domestic P&A

Ben Mogil – Stifel Nicolaus: So, I want to talk a little bit about the P&A. It looks to us that the domestic P&A for titles released in the quarter was around $98 million, which seems pretty high given that HUNGER GAMES would have been the quarter before, so can you maybe talk a bit about that, particularly given they were pre-targeted releases and also maybe talk about whether not you actually increased the HUNGER GAMES P&A after the strong opening weekend?

Jon Feltheimer – Co-Chairman and CEO: We have $116 million of total P&A theatrical marketing costs in my Q1, $18 million of that did pertain to the next quarter. There was not very much marketing costs associated with HUNGER GAMES in my Q1, most of it had been expensed in my Q4. Just to say and there was obviously five films that generated the $98 million in our marketing cost with theatrical.

Ben Mogil – Stifel Nicolaus: So that seems like a bit of a high number, given that a couple of them were targeted i.e. African-American and a couple of them were pretty limited – not limited, but sort of very niche releases. Are you guys sort of thinking now that P&A environment is one where you got to spend a little bit more than you historically had?

Jon Feltheimer – Co-Chairman and CEO: No, I wouldn’t say that at all, actually if you take away the pre-expense, we had somewhat atypical pre-expensing specifically for EXPENDABLES. We wanted to hit the Olympics, which if you’ve been watching them, you can see we did pretty extensively, although I think it was pretty effectively as well in terms of costs. But I think if you look at five releases, particular Tyler Perry’s was done I think on the last day of the quarter, if you do five releases an average of (100 million) that’s what about $20 million minus that $18 million pre-expense. So I think that on a picture basis, we are definitely keeping our foot on the brakes in terms of cost and I think that will be pretty much through the year, obviously a big release like EXPENDABLES we’ll have more P&A than perhaps a genre movie but at the end of the day I think we are still on track just the same way we’ve always been trying to be as target as we can be with our P&A spend. Ben, does that answer your question?

Ben Mogil – Stifel Nicolaus: I guess for Jon. Is the 200 million of deleveraging that you talked about does that include the 23 subsequent to the quarter or is that in addition?

Jon Feltheimer – Co-Chairman and CEO: That does not include that 23 million subsequently, that is in addition to that.

Ben Mogil – Stifel Nicolaus: Then lastly, do you guys have any kind of update on TV Guide, either on sort of the strategic review or on sort of – obviously it’s had a tough couple of quarters now. Any thoughts on sort of what’s change around that?

Jon Feltheimer – Co-Chairman and CEO: I think, Ben, we’ll probably have a little bit more to say in the next quarter. We are working on some interesting strategy we think obviously again we had a good upfront. We’ve done I think a very good job in the distribution side perhaps I have more to say about that as well next quarter. On the programming strategy, again I am working on some things, I think perhaps in the next quarter we can talk about them.