Lions Gate Entertainment Corp. (LGF) reported a loss of 18 cents per share in the second quarter of 2012, improving considerably from a loss of 22 cents a share in the prior-year quarter as well as the Zacks Consensus Estimate of a loss of 36 cents.
Gain on the sale of Maple Pictures and a notable rise in equity interest income helped the company narrow down the loss and drive bottom-line numbers.
Management stated that the sturdy performance of television and digital businesses were more than offset by the sluggish performance of theatrical films and the timing of DVD releases.
Consequently, total revenue in the reported quarter decreased 21.5% year over year to $358.1 million, and lagged the Zacks Consensus Revenue Estimate of $406 million.
Segment wise, Motion Pictures’ revenue of $218.9 million plunged 35.8% from the prior year. Within Motion Pictures, decline in Theatrical revenue (down 70.7% to $22.3 million), Home Entertainment revenue (down 16.6% to $120.4 million), International Film revenue (down 40.3% to $22.4 million), Television revenue (down 51.4% to $28.2 million) and Mandate Pictures revenue (down 71.8% to $2.4 million) were partly compensated by higher Lions Gate UK revenue (up 41% to $22 million).
Television Production revenue jumped 20.7% to $139.2 million, reflecting an upside in home entertainment segment. Domestic series licensing revenue from the television distribution and syndication business decreased 27.4% year over year to $71.7 million, while International television segment increased 50.6% year over year to $12.5 million.
Home Entertainment revenue for the television production came in at $54.6 million, up significantly from $8.1 million in the prior-year period.
During the quarter, the company reported negative adjusted EBITDA of $16.1 million compared with a positive adjusted EBITDA of $24.3 million in the prior-year period. During the reported quarter, the company generated a negative free cash flow of $30.2 million compared with a positive free cash flow of $18 million in the prior-year quarter.
Lions Gate ended the quarter with cash and cash equivalents of $29.5 million with film obligations and production loans of $373.4 million and shareholders’ equity of $37.5 million.
Lions Gate is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release and also television programming for cable and broadcast networks. The company has a strong track record of producing small and mid-budget specialty films.
To grab its share of box office receipts, Lions Gate competes with other major studios, such as Fox Entertainment Group, Paramount Motion Pictures Group and Time Warner Inc. (TWX).
Currently, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Lions Gate retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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