Starz Entertainment Corp (STRZ) 2024 Q2 法說會逐字稿

Good day, and welcome to the Lions Gate Second Quarter 2024 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Nilay Shah, Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us for the Lions Gate Fiscal 2024 Second 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; Chairman of the Motion Picture Group, Joe Drake; and President of Worldwide TV and Digital Distribution, Jim Packer. And from Starz, we have President and CEO, Jeffrey Hirsch; CFO, Scott MacDonald; and President of Domestic Networks, Alison Hoffman.

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 and as also 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. The matters discussed on this call also include the proposed separation of our television and movie production business from our Media Networks business. We urge you to read the relevant materials that we and our subsidiary, LG Orion Holdings, have and will file with the SEC, including a registration statement on Form 10, which was filed on July 12, 2023, that includes a preliminary joint information proxy statement.

The information and the joint information proxy statement will not be complete and may be changed. You can find these materials and other documents filed with the SEC free of charge at the SEC's website, www.sec.gov or on our Investor Relations website. Lions Gate, LG Orion and our directors, executive officers and certain other employees and other persons may be deemed to be participants in the solicitation of proxies from shareholders in favor of the proposed separation under SEC rules. Information about participants and their direct and indirect interest will be included in the joint information proxy statement and other relevant documents filed with the SEC as available.

I'll now turn the call over to Jon.

Thank you, Nilay, and good afternoon, everyone. Thank you for joining us.

Since this is the first earnings call since yesterday's announcement, I want to start by saying that we're very pleased that the strikes are over, with a fair and equitable resolution for all parties, and we can now all get back to work making great content for our global audiences.

We had a strong quarter, and we're reaffirming our guidance for the full year. This is despite the negative financial impact of the strike, which is expected to be approximately $30 million, a little less than we originally forecast. Our success in the quarter came from doing the things we do best, taking advantage of the diversification of our film and television businesses, utilizing new business models to monetize the fast and AVOD space, creating efficiencies in our infrastructure and remaining profitable at Starz, while using our agility to keep our content pipelines filled despite the strike.

In that regard, our Motion Picture Group reported strong financial results. The Saw franchise is back with the return of Jigsaw and an innovative marketing campaign, driving Saw X to more than $100 million at the worldwide box office. Our multi-platform releases, together with our library, complemented the success of our slate with strong contributions in the quarter, and they continue to serve as the ballast that takes the volatility out of our film business.

We continue to grow our franchises with prequels, sequels, spinoffs and franchise extensions. We're preparing the first of the John Wick theatrical spin-offs, Ballerina, for release next year. The prequel event series, The Continental launched successfully on Peacock and Amazon Prime in the quarter, and we signed a deal with a leading video game developer for a John Wick AAA game.

We're launching the first ever Hunger Games stage play in London next fall. And next week, we will open the first new Hunger Games film in 8 years. The Hunger Games prequel, The Ballad of Songbirds and Snakes, for a whole new generation of fans. Digital revenues for the previous 4 Hunger Games are up approximately 500% over the last 8 weeks.

Looking ahead, our planning, agility and ability to secure interim agreements for a number of films has helped us lock our fiscal '25 theatrical slate with a full pipeline of 14 movies. Releases like Ballerina, Borderlands, Flight/Risk starring Mark Wahlberg, Ordinary Angels starring Hilary Swank, Imaginary from Blumhouse, Shadow Force starring Omar Sy and Kerry Washington, Rupert Sanders' reimagining of The Crow, and a new film from Sherlock Holmes' Director, Guy Ritchie, are already in the can or currently shooting. And now that the strike is over, we will finish teeing up production for several of our biggest fiscal '26 tent poles, including Highlander, Now You See Me 3, and the Michael Jackson Biopic.

In terms of our television division, we've been busy keeping our pipeline full as well. Three weeks ago, Starz greenlit The Hunting Wives, a thriller from Lions Gate and 3 Arts. And today, I'm pleased to announce that Starz has greenlit Spartacus, the reimagining of one of the network's biggest early hits from Spartacus creator, writer and executive producer, Steven S. DeKnight, who will serve as showrunner.

Beyond these 2 shows, we're ready to resume or begin production on over a dozen series, including exciting new properties like Extended Family for NBC, and a Seth Rogen Comedy for Apple TV+.

In terms of 3 Arts, we're in final discussions to extend our partnership with our industry-leading talent management and production company, which serves as a source of financial stability and growth for our Television business segment.

At Starz, the renewed availability and performance of first run studio movies from the Lions Gate Pay 1 and Universal Pay 2 output deals has reminded us of the importance of movies to a premium subscription platform. Movies like Plane, Operation Fortune, and John Wick Chapter 4, which achieved the network's most first title streams ever for a movie, coupled with the second season of the original series, Force, helped to drive Starz return to domestic OTT subscriber growth in the quarter. That, coupled with the recent rate increase drove sequential growth in revenue as well, and we expect that subscriber and revenue growth will continue through the rest of the year.

And as we wind down our Starz International business with our exit from the U.K., reorganize our domestic operations and continue our successful transition towards a more digital future. We have significantly reduced Starz overhead and continue to find creative ways to take cost out of our production slate. We expect the combination of these efforts to create solid margin improvement over the next few years as we focus on preparing Starz to thrive as a profitable and successful stand-alone company. In that regard, Jimmy will discuss the restructuring charges in the quarter.

Turning to E1. We anticipate closing the transaction by the end of December. We like what we're seeing as we refine our integration plans and we expect meaningful revenue and cost synergies along with the addition of significant rights and value to our library.

On the strategic front, we're actively engaged in steps towards highlighting the value of our 2 separate businesses and expect to update you by the next call.

In closing, we're operating in a difficult environment, but the quarter speaks to who we are, staying resilient and using every one of the tools at our disposal to keep our pipelines full, maximizing our assets concentrating our resources in places where we know we can win and positioning the company for future growth.

Now I'll turn things over to Jimmy.

Thanks, John, and good afternoon, everyone. I'll briefly discuss our second quarter financial results, provide an update on the balance sheet and then provide some details on the noncore charges we took in the quarter.

The second quarter adjusted OIBDA was $141 million, and total revenue was just over $1 billion. Revenue grew 16% year-over-year, while adjusted OIBDA was up nearly threefold. The year-over-year increases reflect revenue growth at Motion Picture and Media Networks and another quarter of segment profit growth at all 3 business units.

Reported fully diluted earnings per share was a loss of $3.79 per share, and fully diluted adjusted earnings per share was positive $0.21 per share. Adjusted free cash flow for the quarter was $133 million.

We are reiterating our fiscal 2024 outlook for each of our business segments, as well as our consolidated adjusted OIBDA target of $400 million to $450 million, which at the midpoint reflects nearly 19% year-over-year growth. Because of the accelerated recognition of minimum guarantees related to a deal with our Latin American bundling partner, fiscal '24 Starz International segment profit is now expected to be in a range of positive $35 million to $40 million. Our adjusted OIBDA target for fiscal '24 of $400 million to $450 million adjusted OIBDA excludes this benefit, as well as any impact from E1, which we expect to close by the end of December.

Now let me briefly discuss the fiscal second quarter performance of our Studio and Media Networks businesses, as well as the underlying segments compared to the previous year quarter. Media Networks' quarterly revenue was $417 million and segment profit was $67 million. Revenue was up 5% as continued growth of domestic OTT and international OTT revenue more than offset domestic linear revenue pressure. Domestic revenue was down 5% year-over-year, while international revenue was up nearly 100%.

On a quarter-over-quarter basis, domestic revenue grew approximately 1% as the impact of our June price increase drove a return to sequential revenue growth. Segment profit growth was driven by international as accelerated recognition of minimum revenue guarantees in soon to be exited territories, was partially offset by domestic declines.

As Jon noted in his prepared remarks, Starz will be exiting the U.K. streaming market by the end of March 2024. We continue to rationalize our international streaming efforts, and this decision will be a positive impact on Media Networks segment financials in fiscal 2025, strengthening its stand-alone segment profit, adjusted free cash flow and balance sheet.

Specifically, as we enter fiscal year '25, Starz will be primarily focused on growing its segment profit and expanding margins in the U.S. and Canada, while the studio maximizes monetization of Starz' content in international markets through third-party licensing arrangements with SVOD, AVOD and FAST networks.

As it relates to Latin America, the company continues to target an exit from the market by the end of December. International segment results for the quarter benefited from accelerated revenue we recognized related to minimum guarantees from our bundling partner in LatAm.

While the acceleration of content amortization expenses partially offset some of the revenue, the Latin American business contributed a positive $27 million to Media Networks segment profit in the quarter. We expect LatAm to contribute a similar level of segment profit in the December quarter. Excluding LatAm segment profit from the second quarter of '24 and the second quarter of '23 results, Media Networks segment profits was still up 45% year-over-year.

Now let me discuss our pro forma subscriber numbers, which for comparability purposes, exclude the previously exited or to be exited markets of Continental Europe, the U.K., LatAm and Japan.

On a pro forma basis, we ended the quarter with 28 million total global subscribers, including STARZPLAY Arabia. This represents net additions of 210,000 subscribers, driven by a return to domestic OTT growth and growth at STARZPLAY Arabia, offset by linear losses.

Focusing specifically on OTT subs, we ended the quarter with 18.8 million global OTT subscribers, which represents year-over-year subscriber growth of 11% on a pro forma basis.

Now I'd like to talk about our Studio business. Revenues of $790 million increased 21% year-over-year, while segment profit of $131 million was up over 89%. On a trailing 12-month basis, library revenue at Studio was $870 million, up 17% compared with the second quarter 2023's trailing 12-month library revenue.

Breaking down the Motion Picture and TV Studio businesses, let's start with motion picture. Motion Picture revenue was up 77% year-over-year to $396 million, while segment profit of $68 million was up 22% year-over-year. Revenue growth was driven by the strength of John Wick 4 home entertainment, as well as the impact of an increase in wide releases this fiscal year.

Segment profit growth was further driven by continued library strength and was particularly impressive in light of 185% year-over-year increase in P&A spend supporting our expanded release schedule.

And finally, television revenue of $394 million expectedly declined year-over-year on a difficult comparison given the strike's impact on episodic deliveries. Segment profit of $63 million increased significantly due to the delivery of the highly anticipated John Wick prequel mini series, The Continental, to Peacock and Amazon.

As we mentioned on our last earnings call, the strike primarily impacts our television group. As you can see, we actually navigated the quarter quite well, and we now estimate the cumulative impact of the strike for all of fiscal 2024, will be approximately $30 million, most of which occurred in the September quarter.

Looking ahead, we expect the lingering effect of the strike in fiscal year '25, to be between $15 million to $20 million. This generally reflects the carryover impact the strike has had on episodic deliveries and increased cost on continuing productions that were put on hold during the overall industry work stoppage.

Despite these factors, we expect the studio to achieve double-digit adjusted OIBDA growth in fiscal year '25 before the benefit of E1. And to clarify, as we prepare for separation, we define our Studio-adjusted OIBDA as Motion Picture and Television segment profit less corporate overhead.

Now let's talk about our balance sheet. Excluding adjusted OIBDA from previously exited or soon to be exited Lionsgate Plus territories, trailing 12 months leverage improved to 3.2x. We continue to retain significant liquidity with $224 million of unrestricted cash on hand at quarter end and $1.25 billion of an undrawn revolver.

While we remain committed to deleveraging through adjusted free cash flow generation and adjusted OIBDA growth, as we said last quarter, we expect a sequential increase of more than half a turn in the leverage upon the closing of the E1 transaction in the December quarter.

Finally, I want to talk about the $876 million of noncore charges we took in the quarter. First, we took a $494 million noncash goodwill impairment charge related to the carrying value of our Media Networks asset. The goodwill impairment reflects the impact of industry trends, resulting in lower sector multiples as reflected in our share price and prolonged increases in interest rates. As of September 30, we are no longer carrying any goodwill from the Starz acquisition on our balance sheet.

In addition, we took $170 million noncash charge related to the Starz trade name asset that was recorded at the time of the Starz acquisition. In the quarter, we also had a content impairment charge of $212 million related to both our Starz domestic and international businesses. This includes $121 million related to the curation of domestic programming as we move towards separation with a renewed focus on the North American market. The remaining $91 million charge is tied to our international business, including content costs related to our LatAm and U.K. exits.

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

(Operator Instructions) The first question today comes from Steven Cahall with Wells Fargo.

Maybe first one just on the guide. So I think you've done about $225 million in OIBDA fiscal year-to-date, the library sales look like they're accelerating. I think you've said that this year would be a little bit back-half weighted for OIBDA.

So can you talk about why the decision not to necessarily increase the guide today? Is it that -- you've just got a little more strike impact that you said there's still maybe $15 million to go? Is it just some of the marketing expense drag from the films that are opening? Or you just want to be a little bit conservative at this point? And then maybe specific to the library, could we get some color on what drove the strong growth in the quarter? I think it's been accelerating nicely over the past few, is this a lot of consumer-driven home entertainment? Did you have some major series deliveries, or other platform streaming deliveries of library or kind of all of the above?

Well, thanks, Steven, I'll take the first part of that. Look, I appreciate your confidence in terms of why not increase the guide. Essentially, we have, if you look at it, because we've effectively absorbed the impact of the strike, which both Jon and I spoke to, as well as we are excluding the LatAm benefit. So in addition, it's all without, of course, the benefit of E1.

But in addition to absorbing those, look, I feel confident in terms of cadence. We have a strong second half coming up for sure, and feel good about where we are, but still early in the year, and we look forward to the second half.

And on library, Steven, I would say it is a little bit of everything. I think overall, most of our series, TV library licensing has been very steady. The AVOD market has been better than we anticipated. Our rev share quarter this year was -- this last quarter was the highest one we've had. So even with maybe some downtick in the basic cable advertising world, I'm not seeing that in our AVOD rev share. And we've also been able to pick up a lot of really good high-profile third-party content, all the Quentin Tarantino, Kill Bills and Jackie Brown have been helpful, and The Chosen. So all of that kind of combined has been very helpful.

Yes. I'd add one more thing that with the new Hunger Games coming out, actually, our last 4 Hunger Games in digital are up to about 500% in the last couple of months. So again, good library performance all the way around.

The next question comes from Douglas Creutz with Cowen.

I just wondered if you think that there's going to be any issue now that we've come through this extended work stoppage and people are going back to work. In the near term, does that create any cost pressure or inability to produce content that you want to produce given that people can only work on one thing at a time, and obviously, everyone's going to want to ramp production back up. Any color you can give on that would be helpful.

Kevin Beggs speaking. The color I can give on that is that we're back to production immediately. We have 2 network comedies that start shooting again on Monday. We're sprinting to get Power Book IV, Raising Kanan, back into production, as you know, was set to start shooting on the day that strike began. So we're -- the new series is going to launch shortly, and we're simultaneously getting ready to prep.

So we're trying to mitigate the cost where we can. There -- as Jimmy mentioned, there are obviously some costs associated with series delays, and there are definitely a couple of series casualties that are due to the strike, and I think you're seeing that across the board. But we've actually mitigated those pretty well on the increase and enhanced cost both on the writing and the performing side, we will continue to manage our budgets and find efficiencies and savings wherever we can to both mitigate against those and also pass along some of those costs to the buyers and everyone is in the same boat, so everyone knows those costs are coming.

Just quickly on the Motion Picture side, we were able to strategically really get ahead of it. We were able to secure a number of waivers and really lined our productions up so that as soon as we came out of the strike, we could be running the Michael Jackson movie starts in January. We've got a reimagination of Now You See Me ready to go in the spring, Highlander. So it really doesn't have -- I don't think it's going to really impact us. I think we got ahead of it pretty nicely.

The next question comes from Thomas Yeh with Morgan Stanley.

Yes. Just echoing the nice Studio outperformance again. And Jimmy, you gave us some color into the double-digit growth outlook for fiscal '25. I was hoping I get some color on just the drivers of that, particularly in the light of some of the industry comments around maybe a more offsphere spending environment? Do you expect catalog strength? Or should we think about maybe (inaudible) and new episodic deliveries building as well?

Yes. I mean, look, we've got a strong pipeline for sure, across Motion Picture and television. So we're going to have a lot of carryover from fiscal '24 on the Motion Picture side, I mean, look, we're excited about Ballad of Songbirds and Snakes, but also have a really strong fourth quarter lineup with Ordinary Angels, Imaginary. And you get into fiscal '25, there's strong titles, Ballerina, and others.

So -- and in the context of the Television side, yes, there's a lot of great programming there coming back post strike. And as we move forward, notwithstanding the headwinds that we mentioned where there is some carryover impact into '25 kind of onetime strike related. But we've got a very diversified business there, as you know, between scripted, unscripted, Debmar-Mercury, 3 Arts, really feel great about that business. We're glad to be back from the work stoppage and looking forward to second half of the year and going into '25.

Great. And then on Starz, maybe just a little bit more on the restructuring. I think we're down to Canada and India as the subscriber base internationally, which still has a pretty healthy 5.5 million subscribers. You helped with the sizing of the LatAm revenue recognition piece.

Maybe help us think about what the appropriate run rate on profitability potential there for the remaining markets. And then domestically, the guide for a return to revenue growth and sub growth, is that informed by a content slate? Now that we kind of have moved past the price increase, has churn improved?

It's Jeff. Thanks for the question. If you look at the domestic business, we continue to look at the business and try to drive up to a 20% kind of steady state long-term margin.

What you saw in the company-wide restructuring included the closure of the U.K., but we really focused on moving resources of the business to where we see growth in the industry. And as the industry moves, we'll move resources around there. And so I think we netted out about growth, 17% of the G&A in the business and the restructure. As part of many aspects to try to get up to that 20% margin. And I think you'll see in the back half of this year, you'll start to see the margin growth. We feel very good about returning to subscriber growth even in a quarter where we had a rate increase. I think the Pay 1 and Pay 2 movies that came online, coupled with Force, really was a full complement of content for the first time since probably second quarter of '21. And I think we had -- we forget that Pay has always been -- Premium Pay has always been about big originals and big first-run movies and that came back online.

So even in the face of a rate increase, we saw subscriber growth return on the OTT side. We saw sequential revenue start to grow. And I think as that rate increase settles into the subscriber base, you'll start to see that sequential revenue accelerate through the back half of the year. So we feel very good about the business moving to that profit kind of portfolio and setting up for a good stand-alone business post-spin.

The next question comes from Barton Crockett with Rosenblatt.

I guess one just kind of definitional. When you guys are talking about strike impact, some of your peer set would use as part of that box office impact because actors can't market movies. You guys aren't doing that. I just want to clarify, you're really just focusing on TV shows that were impacted. Is that correct?

Yes, that's correct, Barton. I mean these are costs that are really onetime. They happen to fall over the course of 2 fiscal years, but they're directly related to the strike and not anything other does not include box office impact or anything else. So that's separate, not factored in.

Okay. And on that front, so we've got the Hunger Games movie coming out. And there's obviously some early talking about what the opening weekends have looked like, and obviously, we're kind of in a different era than we were back originally with Hunger Games.

But can you give us any guidepost for how to think about how you've risk mitigated this movie, the up down kind of puts takes, given that this is historically a larger production cost than what you guys typically do? And then on that front also, the library has been strong. And I understand like that the strike has impacted new TV production, but has the strike actually helped the library? And I know you said Hunger Games has helped, but I'm wondering if the strike might have helped as well.

Joe, why don't you go first?

Yes, you bet. So look, on Hunger Games itself, it -- you've heard me say on prior calls how the economics of film are better than they've ever been. That's partially driven by the international side of our business, where we are getting 15% to 30% more in value from every title than pre-pandemic, which is really just the result of supply/demand, as well as really being the premium sort of remaining large supplier big, broad IP release films available to the marketplace.

So on a risk and opportunity basis, we've done really, really well. On the international front, the domestic economics are better than they've ever been as well, in terms of the way we can spend P&A to dollars and the like. And I would just say that tracking right now looks really strong with some interesting bits. There's a new younger female audience that's showing real enthusiasm as are men. I'm actually -- I actually left the world premiere here in London to come join you all. So feeling really good about where the movie lives in terms of an economic model and how it can perform in a week or so here.

Barton, this is Jim. I would also say on the library side, there's been a couple of things. First of all, if you look in '23, half of Netflix top titles have been licensed titles, 50% of it. So it's kind of like they've really been aggressive on the licensing side from third parties. A little bit of the Suits effect that I'm sure you've seen.

Also, one thing in addition to what Jon was saying about Hunger Games. This year, we had Wick, Expendables and Saw X, and all 3 of those movies have other films that not only dropped up with theatrical, they dropped up in licensing and they dropped up in transactional. The transactional team had a great year. So all of that really combined is really what's helping us, in addition to just people being in a mode where they're using our content.

The next question comes from David Joyce with Seaport Research Partners.

A couple of questions on the strike-related effects. First, I was wondering if you had any similar TV content that's "in the can" that helped you maintain your guidance for the year? And secondly, related to getting started up again next week already. We've heard from other industry sources that it could take about 3 months until the whole industry is really up and running. Just wondering if there's anything different with your business model, how you're able to kind of get back started immediately?

It's Kevin again. Just speaking to the last part of that question, just the 3 months. I mean you got to think about where shows are in their life cycle. So the ones I was referring to, Extended Family in NBC, we shot 6 out of our initial order. So many of those scripts were done, and the writers' strike has been over for a while. So we've been writing, but not been able to go back to production. Ghost is a big hit for us and BBC Studios for CBS. And we had been writing before the strike began. So in that case, those shows were kind of ready to go and Ghost is a third season show.

If you're talking about a drama that has not written, it will take 2 months or more to get going on a writer's room and then move in to prep and then start shooting. So every genre has a slightly different timetable. You will see the broadcast stuff that is -- shows in its third, fourth and fifth season, moving faster than the streamers or the premium cables, because they operate on a different timetable and the urgency of getting stuff back on in the broadcast cycle is what's helped bring the strike to an end, and is what's informing some of the urgency around that.

Yes. And Joe, you want to talk a little about your pipeline?

Yes, sure. So our -- for fiscal '25, we actually went into the strike with a full pipeline with a couple of waiver movies that will fill the back half of the year. When you look at our forward-looking production pipeline, we are as loaded as possible. We've been -- we have a content strategy that sort of relies on a couple of big branded all audience IP movies every year and then want to be in that faith space, the action space, leaning into horror as well. We got a fantastic mix of that in '25.

But when you look into how we're going to fill our pipeline after that, as I said earlier, we're launching Highlander with Chad Stahelski, who is behind, obviously, our big Wick, by Wick universe, and he's now setting off to deliver that movie for '26. We've reimagined Now You See Me with Ruben Fleischer, who is an absolute master at shepherding franchises. If you think, he did Venom and Uncharted. I couldn't be happier about that. That's going to start in the spring.

We've -- on the Wick side, we've got multiple spin-offs and Wick V that we started to work on right when the writer strike started, and we've gotten back to work as soon as it ended. Our faith business is fully loaded with some of the best brands in that space. As we -- as Jon mentioned earlier, we've got our first Jason Blum movie and hope we can do more there. So very, very excited and have pretty much everything we need to keep hitting our stride.

I think you've -- I was going to say, I think you've heard us say before, we have all of the ability to do anything else the major studios do, but we do tend to pivot a little bit more quickly. And I think we prepped pretty well for this in film and television. And frankly, we're up and running already and have full pipelines in all of our businesses.

That's great. I appreciate it. I was also wondering if you have any kind of insights as to how the economics of the business might change given the strike's resolution. And if that was starting to be contemplated in how industry deals were being priced, because there used to be full content sales at like cost plus $20 or $30, but now there's less exclusivity, because you might be the selling content in a couple of windows. I was just wondering if there's anything -- any kind of change in the industry dynamics that way.

Yes. I think we're going through right now the agreement, but there's no question about it. There's going to be some cost attached to this. And that's okay. Maybe we have to work a little harder to take some costs out of the business, things that we can actually manage. One of the things that's going on right now is that Kevin, on the Studio side, and Jeff are really working to be really smart about the slate for Starz that they're putting together.

And again, we've just got to be continue to be really thoughtful about the business. And we and buyers other than Starz are outside buyers. We're going to just have to be smart about how we pay for things. And again, I think that they've come up with something that's really equitable for all the participants. And so we've all just got to figure out a smart way to pay for it.

(Operator Instructions) The next question comes from Matthew Harrigan with Benchmark.

I'm sorry, I didn't detach from the queue. I was also going to ask you about the long-term effects of the strike on the cost side. So I'm fine. Congratulations on the quarter and all the momentum you have.

Thank you, Matthew. I appreciate that.

There are no further questions at this time, which concludes our question-and-answer session. I would like to turn the conference back over to Nilay Shah for any closing remarks.

Thanks, everyone. Please refer to the Press Releases and Events tab under the Investor Relations section of the company's website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.