Lionsgate Studios Corp. (LION) Cash Flow Statement

Over the last ten quarters, operating cash flow was positive in five quarters despite net losses in six, with the OCF/NI ratio swinging wildly from -25.5 to 11.7. The large D&A charges, particularly in 2025Q1 ($593.4M) and 2024Q3 ($511.2M), are non-cash and reflect the amortization of capitalized content, which can obscure the true cash-generating ability of the library. The negative working capital changes in every quarter indicate that cash is being consumed by content production and delivery timing, not necessarily by operational inefficiency.

The FCF trajectory is extremely lumpy, with positive quarters driven by large cash inflows from content deliveries (e.g., 2026Q1 and 2025Q1) and negative quarters reflecting heavy production spending. The average FCF margin over the period is roughly -2%, but this is skewed by the deep troughs; the most recent quarter (2026Q2) shows a positive 6.6% margin, suggesting a potential stabilization. However, the persistent negative net income and the reliance on timing of content deliveries mean that FCF is not yet a reliable indicator of sustainable profitability.

The CapEx/Revenue ratio is consistently below 1%, indicating that traditional fixed asset investment is minimal. However, the massive negative working capital changes (e.g., -$526.4M in 2024Q4) suggest that LION is investing heavily in film and television production, which is capitalized as inventory or content assets. This off-balance-sheet-like investment is the primary driver of cash flow volatility and should be viewed as the company's true capital expenditure, even though it does not appear in the CapEx line.

The persistent negative working capital changes reflect the studio's business model, where cash is spent upfront on production and recovered upon delivery of content. The magnitude of these swings (e.g., -$515.6M in 2024Q3) suggests that LION is financing a large content slate, and the timing of deliveries can cause cash flow to diverge sharply from net income. Investors should monitor the trend in working capital changes to assess whether the company is managing its production pipeline efficiently or if it is accumulating content inventory that may not generate expected returns.

The absence of dividends and buybacks is notable, especially given the negative net income and the need to preserve cash. The acquisition activity, such as the -$31.7M in 2025Q4, suggests that LION is selectively investing in content or library assets to bolster its catalog. The lack of shareholder returns, combined with the negative net margins, indicates that management is prioritizing balance sheet repair and content investment over returning cash to shareholders, which may be prudent given the current financial strain.

The cumulative gap between net income and operating cash flow is substantial, with operating cash flow exceeding net income by over $400M. This divergence is primarily due to large non-cash amortization charges (D&A) and the timing of working capital changes, which can mask the underlying cash generation of the library. However, the fact that operating cash flow is barely positive over the period suggests that LION is not yet generating sustainable cash flow from its operations, and the positive quarters may be driven by the timing of content deliveries rather than recurring profitability.