On February 6, 2025, Lions Gate Entertainment Corp. (NYSE: LGF.A, $9.78, Market Capitalization: $2.4 billion) reported robust 3Q25 results comprehensively beating revenue and adjusted EPS estimates vs consensus (for more information, visit spinoffresearch.com). Lions Gate Entertainment’s revenue was marginally down 0.5% YoY to $970.5 million in 3Q25, primarily due to lower media networks business revenue (down 17.4% YoY) and motion picture revenue (decline of 30.2% YoY), mostly offset by a significant rise in television production revenues (up 62.94% YoY). Notably, trailing 12-month library revenue was $954 million in 3Q25, up 22% YoY. The Company reported an operating profit of $35.8 million compared to an operating loss of $43.5 million in 3Q24 due to lower restructuring and impairment expenses. However, the Adjusted OIBDA marginally declined by 4.4% YoY to $144.2 million in 3Q24, with the adjusted OIBDA margin falling by 60 bps YoY to 14.9% in 3Q25 compared to 15.5% in 3Q25. Net loss attributable to common shareholders narrowed to $21.9 million from $106.6 million in 3Q24, and diluted Loss Per Share improved to $0.09 in 3Q25 from $0.45 in 3Q24. Furthermore, the adjusted net income increased 5.2% YoY to $68.4 million in 3Q25 compared to an adjusted net income of $65.0 million in 3Q24 due to lower restructuring and impairment expenses. Consequently, the adjusted diluted EPS came in at $0.28 in 3Q25 as against the adjusted diluted EPS of $0.27 in 3Q24.
During the 3Q25 earnings call, management noted that the separation of Starz and Studio business is expected to occur in mid-to-late April after updating financial statements. The Company is in regulatory review of its joint proxy registration statement with the SEC. Resultantly, LGF will need to update the proxy with financials as of December 31, 2024, which will take a few additional weeks. Pending further SEC review, a Shareholder Meeting will be held in mid-to-late April, with separation shortly thereafter.
Valuation and Recommendation
We value Lions Gate Entertainment Corp. (LGF.A) using EV/EBITDA methodology. Our intrinsic value of $10.00 (Previously: $8.50) is based on the FY2026e EV/EBITDA multiple of 4.7x (in line with closest peer AMCX multiple) for the Media Networks. Moreover, the intrinsic value also includes the value of an 87.8% stake in Lionsgate Studios (valued at market price). We maintain our ‘Hold’ rating on the stock with an implied upside of 2.2% from the current market price of $9.78 as of 2/21.
It is worth noting that the stock jumped ~15% on 2/7 on back following the solid 3Q25 results, Starz returned to domestic OTT subscriber sequential growth, and Starz/Studio separation expected in late April 2025. We think that the current valuation factors in the above-mentioned positive triggers. Upside risks to our target price include a faster rise in the subscriber base, huge box office hits from upcoming movie/television show releases in FY25-26, and constructive M&A activity post-studio separation.
Based on an ownership ratio of 1.0668 and CMP of $8.31 for LION, we arrive at an embedded value for LION in LGF.A at $8.87. This implies that LGF.A’s majority value is attributed to LION, and the market is assigning very little value to LGF.A’s Media Networks business.
FY25 Outlook
Following the revision of the fiscal 2025 outlook in 2Q25, LGF has reiterated the fiscal 2025 adjusted OIBDA outlook for the Studio business. For the Studio business, the Company continues to expect adjusted OIBDA between $300 million to $320 million, driven by the profitability of recent mid-budget film releases and steady television production. Moreover, LGF continues to anticipate ~$200 million-plus of adjusted OIBDA in fiscal 2025 for Starz (Media Network business). Management reaffirmed that the Company’s consolidated adjusted OIBDA and adjusted free cash flow will be weighted towards the back end of the fiscal year due to increased television deliveries, post-theatrical slate cash flows, a Starz price increase, and growth in OTT subscribers.
Lionsgate Studio Spin-Off Update
Earlier in October 2024, the Company had filed a joint proxy statement/prospectus on Form S-4 with the SEC relating to the separation of Starz and Lionsgate Studios businesses. On 1/27, Lions Gate Entertainment Corp filed an amendment and provided details regarding the transaction. Lionsgate Studios Business and the Starz Business will be separated through a series of transactions that will result in the pre-transaction shareholders of Lionsgate (LGEC) owning shares in two separate public companies as follows: (i) the Starz Business will be held by current Lionsgate under a new name, Starz Entertainment Corp., which will continue to be owned by LGEC shareholders as of immediately before the Transactions and operated through the same wholly owned subsidiaries of current LGEC, and (ii) the Lionsgate Studios Business will be held by New Lionsgate, which will be owned by LGEC shareholders and Lionsgate Studios shareholders as of immediately before the transactions.
The Transactions will consist of elements of a typical Canadian “spin-off” and will be completed through a British Columbia Plan of Arrangement, which is a British Columbia statutory procedure providing for approval with respect to fairness and supervision with respect to procedure by the BC Court. The Plan of Arrangement is subject to approval by the shareholders of LGEC, the shareholders of LG Studios and the BC Court. As currently contemplated, the Transactions will occur on a taxable basis to the shareholders of LGEC under the Canadian Tax Act, with non-residents of Canada expected to be exempt from Canadian income tax on any gains realized. Holders of LG Studios common shares who hold such shares as capital property for purposes of the Canadian Tax Act will generally not realize either a capital gain or a capital loss on the exchange of LG Studios common shares for New Lionsgate new common shares. Following are the steps regarding the transaction:
Initial Share Exchange:
In connection with the completion of the Transactions
• LGEC shareholders will first receive, in exchange for each LGEC Class A share, One (1) New Lionsgate Class A share and One (1) New Lionsgate Class C preferred share
• LGEC shareholders will first receive, in exchange for each LGEC Class B share, one (1) New Lionsgate Class B share with one (1) New Lionsgate Class C preferred share
LGEC will change its name to Starz Entertainment Corp. and create a new class of voting common shares, the Starz common shares.
Second Share Exchange:
New Lionsgate will create a new class of common shares without par value (the “New Lionsgate new common shares”), and New Lionsgate shareholders (formerly LGEC shareholders) will receive, in exchange for each:
• New Lionsgate Class A share they hold, together with each New Lionsgate Class C preferred share they hold and which was issued in exchange for an LGEC Class A share in the Initial Share Exchange, one and twelve one-hundredths (1.12) New Lionsgate new common shares and one and twelve one hundredths (1.12) Starz common shares;
• New Lionsgate Class B share they hold, together with each New Lionsgate Class C preferred share they hold and which was issued in exchange for an LGEC Class B share in the Initial Share Exchange, one (1) New Lionsgate new common share and one (1) Starz common share.
As a result of the steps described above, each of New Lionsgate and Starz will have a single class of “one share, one vote” common shares. Following the Second Share Exchange, pursuant to the Reverse Stock Split, the Starz common shares will be consolidated on a 15-to- 1 basis, such that every fifteen (15) Starz common shares will be consolidated into one (1) Starz common share.
LG Studios Reorganization Ratio
LG Studios shareholders, other than New Lionsgate and dissenting shareholders, will transfer to New Lionsgate each LG Studios common share, without par value (“LG Studios common shares”) they hold and such shareholders will receive, in exchange for each such LG Studios common share so transferred, a number of New Lionsgate new common shares equal to the product of the LG Studios Consideration Shares divided by the LG Studios Flip Shares (the “LG Studios Reorganization Ratio”).
The LG Studios Consideration Shares will equal the aggregate number of LG Studios common shares obtained when the LG Studios Flip Percentage is multiplied by the quotient of (a) the aggregate number of New Lionsgate new common shares issued to New Lionsgate shareholders (formerly LGEC shareholders) in the Second Share Exchange divided by (b) 1 minus the LG Studios Flip Percentage. The LG Studios Flip Percentage will equal the quotient, expressed as a percentage, of (1) LG Studios Flip Shares divided by (2) the total number of LG Studios common shares issued and outstanding immediately prior to the Arrangement Effective Time. Such transactions by LG Studios shareholders are collectively referred to as the “LG Studios Flip.”
As the LG Studios Reorganization Ratio is based on the aggregate number of New Lionsgate new common shares issued to New Lionsgate shareholders (formerly LGEC shareholders) in the Second Share Exchange, and such aggregate number of New Lionsgate new common shares will depend on the aggregate number of LGEC Class A shares and LGEC Class B shares that are issued and outstanding as of immediately prior to the Arrangement Effective Time, the actual number of New Lionsgate new common shares issued to LG Studios shareholders in the LG Studios Flip is subject to change prior to the Arrangement Effective Time.
LGEC Class A shares currently trade on the New York Stock Exchange (the “NYSE”) under the ticker symbol “LGF.A” and LGEC Class B shares currently trade on the NYSE under the ticker symbol “LGF.B”. Lionsgate Studios common shares currently trade on Nasdaq under the ticker symbol “LION.” Lionsgate anticipates that immediately following the consummation of the Transactions, (i) the LGEC Class A shares and LGEC Class B shares will be delisted from the NYSE, (iii) the LG Studios common shares will be delisted from the Nasdaq, and (iv) LG Studios will be deregistered under the Exchange Act. The New Lionsgate (Lionsgate Studios Corp) new common shares are expected to trade on the NYSE under the symbol “LION”, and the Starz common shares are expected to trade on the Nasdaq under the symbol “STRZ”. In comparison, trading in New Lionsgate new common shares and Starz common shares under these symbols is expected to begin on the first business day following the completion of the Transactions.
Neither New Lionsgate (Lionsgate Studios Corp) nor Starz will issue fractional New Lionsgate new common shares or Starz common shares in connection with the Initial Share Exchange or Second Share Exchange. Prior to the Reverse Stock Split, to the extent that the Initial Share Exchange or Second Share Exchange would result in any LGEC shareholder or LG Studios shareholder being issued either a fractional New Lionsgate new common share or a fractional Starz common share, such fraction will be rounded down to the nearest whole number. Computershare will aggregate the remaining fractional shares. Such shares will be sold in the public market by Computershare, and the aggregate net cash proceeds of these sales will be distributed on a pro-rata basis.
The Transactions are intended to be generally tax-free for U.S. federal income tax purposes to holders of LGEC common shares and LG Studios common shares. The Transactions are expected to incur capital gains or capital losses for Canadian federal income tax purposes for holders of LGEC common shares. However, non-residents of Canada will generally not be subject to Canadian income tax in respect of any such capital gains or losses. The Transactions are intended to be generally tax-free for Canadian federal income tax purposes to holders of LG Studios common shares. In connection with the completion of the Transactions, New Lionsgate (Lionsgate Studios Corp) anticipates having approximately $1,755.3 million of outstanding indebtedness, while Starz anticipates having approximately $631.7 million of outstanding indebtedness.
Other Business Updates
• Lionsgate announced the standalone capital structures for both Lionsgate Studios and Starz. In this regard, the Company has obtained bank commitments for an $800 million asset-backed revolver at the Studio, a $300 million Term Loan A, and a $150 million revolver at Starz. These facilities would be funded upon separation, with proceeds used to extinguish all of the remaining Lionsgate bank debt.
• During the quarter, Lionsgate extended its multi-year theatrical output deal with Starz, which retains exclusive first pay TV and SVOD window rights to the Lionsgate Studio’s films. As part of the new deal extension, the theatrical films will appear on Starz on an accelerated basis closer to their initial theatrical release. Additionally, LGF secured a new exclusive pay deal with Amazon Prime Video, in which Prime Video secured an early window for several films from the Copany’s 2025 slate and the full lineup of 2026 through 2028 slates, immediately following the Starz window. The combination of these two deals is expected to increase the contribution from the pay television window.
• Starz witnessed a return to domestic OTT subscriber growth in 3Q25 with 12.6 million North American OTT subscribers, representing a sequential growth of 170,000 subscribers. The subscriber growth was driven by the strong performances of the seventh season of Outlander, the drama series Three Women based on the New York Times bestseller, and a strong slate of first-run movies from the Lionsgate theatrical output deal. Moreover, on the distribution front, Starz entered into several new deals in the quarter, including two with Prime Video for Max and BET+ bundles, with VIZIO for an AMC+ bundle, and with YouTube TV for a strategic offer timed to Super Bowl weekend. Starz also secured three key linear partner renewals during the quarter.
3Q25 and 9M25 Results Review
3Q25
Lions Gate Entertainment’s revenue was marginally down 0.5% YoY to $970.5 million in 3Q25, primarily due to lower media networks business revenue (down 17.4% YoY) and motion picture revenue (decline of 30.2% YoY), mostly offset by a significant rise in television production revenues (up 62.94% YoY). The Company reported an operating profit of $35.8 million compared to an operating loss of $43.5 million in 3Q24 due to lower restructuring and impairment expenses. However, the Adjusted OIBDA marginally declined by 4.4% YoY to $144.2 million in 3Q24, with the adjusted OIBDA margin falling by 60 bps YoY to 14.9% in 3Q25 compared to 15.5% in 3Q24. Net loss attributable to common shareholders narrowed to $21.9 million from $106.6 million in 3Q24, and diluted Loss Per Share improved to $0.09 in 3Q25 from $0.45 in 3Q24. Furthermore, the adjusted net income increased 5.2% YoY to $68.4 million in 3Q25 compared to an adjusted net income of $65.0 million in 3Q24 due to lower restructuring and impairment expenses. Consequently, the adjusted diluted EPS came in at $0.28 in 3Q25 as against the adjusted diluted EPS of $0.27 in 3Q24.
9M25
Lions Gate Entertainment’s revenue declined 5.0% YoY, from $2.9 billion in 9M24 to $2.8 billion in 9M25, primarily due to lower media networks business revenue and motion picture revenue. However, the operating loss showed improvement and stood at $34.1 million compared to a loss of $877.9 million in 9M24, largely due to lower restructuring expenses. Adjusted OIBDA came in at $231.0 million, down 38.8% YoY from $377.3 million in 9M24. Net loss attributable to common stockholders narrowed significantly to $244.7 million from $1.1 billion in 9M24. However, the Company reported an adjusted net loss of $16.2 million in 9M25 compared to the adjusted net income of $103.7 million in 9M24. Diluted EPS improved and came in at ($1.03) in 9M25 as compared to ($4.56) in the prior-year period, while the adjusted diluted EPS declined from $0.44 in 9M24 to negative $0.07 in 9M25.
Segments
A] Media Networks business
3Q25
During 3Q25, Media Networks revenue decreased 17.4% YoY to $344.5 million due to the exit of the majority of international territories. Segment profit decreased 70.9% YoY to $24.9 million from $85.5 million in 3Q24, driven primarily by higher content amortization. Consequently, the segment margin fell 1,330 bps YoY to 7.2% in 3Q25 compared to 20.5% in 3Q24.
9M25
In 9M25, Media Networks revenue decreased 14.3% YoY to $1.0 billion compared to $1.2 billion in 9M24 due to the exiting of the majority of international territories. Segment profit decreased 40.5% YoY to $109.5 million from $184.1 million in 9M24, owing to an increased content investment, with segment margin shrinking 460 bps YoY from 15.2% in 9M24 to 10.5% in 9M25.
B] Lionsgate Studios (Studio business)
3Q25
Studio business revenue was up 3.2% YoY to $713.8 million in 3Q25, primarily due to higher Television Production revenue (up 62.9% YoY), partially offset by decreased Motion Picture revenue (down 30.2% YoY). Segment profit grew by 33.2% YoY to $144.5 million in 3Q25 compared to $108.5 million in 3Q24, primarily due to solid box office performance. Consequently, the segment margin improved 460 bps YoY to 20.2% in 3Q25 compared to 15.7% in 3Q24.
9M25
Studio business revenue was marginally up 0.9% YoY to $2.1 billion in 9M25, primarily due to increased Television Production revenue (up 23.4% YoY), partially offset by lower Motion Picture revenue (down 14.6% YoY). Segment profit declined by 18.9% to $268.5 million in 9M25 compared to $331.2 million a year ago due to increased direct operating expenses. Consequently, the segment margin decreased 310 bps YoY to 12.6% in 9M25 compared to 15.7% in 9M24.
Valuation
Lions Gate Entertainment:
EV/EBITDA Valuation: We value Lions Gate Entertainment Corp. (LGF.A) using EV/EBITDA methodology. Our intrinsic value of $10.00 (Previously: $8.50) is based on the FY2026e EV/EBITDA multiple of 4.7x (in line with its closest peer AMCX multiple) for the Media Networks. We have assumed an FY2026e net debt of $563.2 million. Moreover, the intrinsic value also includes the value of an 87.8% stake in Lionsgate Studios (valued at market price). We maintain our ‘Hold’ rating on the stock with an implied upside of 2.2% from the current market price of $9.78 as of 2/21.
Company Description
Lions Gate Entertainment Corp.
Lions Gate Entertainment Corp. engages in film, television, subscription, and location based entertainment businesses in the United States, Canada, and internationally. In FY24, the Company recorded total revenues of $4.0 billion. Earlier, the Company operated through three segments: Motion Picture, Television Production, and Media Networks. However, after the spin-merger, Lions Gate Entertainment retained the Media Networks segment and held an 87.8% stake in Lionsgate Studio. Media Networks consists of the following product lines: (i) Starz Networks, which includes the domestic distribution of Starz branded premium subscription video services through over-the-top (OTT) platforms and U.S. multichannel video programming distributors (“MVPDs”), including cable operators, satellite television providers and telecommunication companies (collectively, “Distributors”) and on a direct to consumer basis through the Starz App and (ii) LIONSGATE+, which represents revenues primarily from the OTT distribution of the Starz premium subscription video services outside of the U.S. (formerly StarzPLAY International). The Company strategically decided to exit seven LIONSGATE+ (formerly StarzPLAY International) international territories, France, Germany, Italy, Spain, Benelux, the Nordics, and Japan, to streamline the business. For FY24, the Media Networks business recorded revenues before intersegment eliminations of $1.6 billion. Following the Starz/Studio separation (expected in late April 2025), Lions Gate Entertainment Corp will change its name to Starz Entertainment Corp, and the Starz common shares are expected to trade on the Nasdaq under the symbol “STRZ”. Moreover, the Company has projected ~$200 million-plus of adjusted OIBDA in fiscal 2025 for Starz and net debt of ~$600 million immediately following the Starz/ Studio separation.
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