Shares of Lions Gate Entertainment Corp. (LGF) slipped 2.7% during after-market trading hours yesterday, after the company released its third-quarter fiscal 2015 results, wherein both the top and bottom line came in below expectations.
Though the company’s adjusted earnings of 66 cents per share missed the Zacks Consensus Estimate by a penny, the same jumped 4.8% year over year.
The improvement in adjusted earnings, which includes stock-based compensation, was backed by solid domestic television performance, reduced marketing expenses, higher interest from equity investments, lower effective tax rate and the global release of The Hunger Games: Mockingjay–Part 1.
Interest income from equity investments was mainly driven by Lions Gate’s EPIX pay television business with Viacom, Inc. (VIA) and Metro-Goldwyn-Mayer Studios Inc.
On a GAAP basis, the company delivered earnings of 65 cents per share, up 10.2% from the prior-year quarter.
However, the top line of this film and television production company plunged 10.5% year over year to $751.3 million and missed the Zacks Consensus Estimate of $767 million. Revenues remained soft as the fall in Motion Pictures’ revenues more than offset strong television production revenues.
During the third quarter of fiscal 2015, the company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of roughly $146.8 million declined 9.2% from the same period last year.
Segmental Performance
During the reported quarter, Motion Pictures’ revenues of $590.1 million plunged 22.1% year over year, reflecting weak performances across Theatrical (down 32.9% to $186.4 million), Home Entertainment (down 11.6% to $170.9 million), Television (down 21.6% to $82.9 million) and International (down 32.2% to $79.4 million), partly compensated by Lionsgate U.K. (up 12.2% to $62.7 million). Other revenues of the segment remained flat year over year at $7.8 million.
Within the Motion Pictures segment, theatrical revenues fell as the quarter saw only two releases, Mockingjay–Part 1 and John Wick. On the contrary, in the third quarter of fiscal 2014, the company had 4 theatrical releases.
The fall in Home Entertainment revenues is attributable to lower theatrical slates in the quarter along with lower revenues from Managed Brands. Likewise, International Motion Pictures revenues descended on account of lower number of releases compared with last year.
Also, Television revenues at Motion Pictures slumped year over year as the quarter witnessed only 1 theatrical release – Divergent, compared with 5 releases in the prior-year quarter. However, Insurgent – its next Divergent series movie is slated for release on Mar 20, in theatres worldwide.
On the contrary, strong revenues at Lionsgate U.K. were fuelled by a robust pipeline in the quarter, including the releases of Mockingjay–Part 1, The Expendables 3, The Railway Man and Postman Pat: The Movie.
Television Production revenues soared 95.9% to $161.2 million, largely stemming from the strength witnessed at domestic television (up significantly to $124.4 million), international revenues (up 15.1% to $23.6 million), home entertainment category (up 67.1% to $12.2 million), partly offset by other revenues (down 60% to $1 million).
Shows including Anger Management, Orange is the New Black, Nashville, Ascension, Mad Men and Manhattan bolstered revenues at the television production segment. Alongside, game and talk shows like Celebrity Name Game, Family Feud and The Wendy Williams Show made significant contributions to the segment.
Financial Details
Lions Gate ended the quarter with cash and cash equivalents of $28.9 million with film obligations and production loans of $737.6 million, and shareholders’ equity of roughly $668 million.
Also, with its third-quarter fiscal 2015 earnings release, this Zacks Rank #3 (Hold) company announced a quarterly dividend of 7 cents a share, payable today to stockholders of record as of Dec 31, 2014.
Management remains impressed with its digital initiatives as these endeavors added to the revenues and profits in the reported quarter. Going forward, the company expects further contributions from its digital undertakings.
These undertakings include its recent collaboration with Tribeca Enterprises to introduce a subscription video-on-demand service to cater to the fast-growing online viewership. The company, along with giants likes CBS Corporation (CBS) and Time Warner Inc. (TWX), made this move in order to grow in the television market and create a seamless direct-to-customer network.
Lions Gate is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release as well as television programming for cable and broadcast networks. Competing with major studios like Twenty-First Century Fox, the company is poised for growth, given the content-friendly environment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment