DreamWorks Animation Falls Short of Earnings Expectations and Shares Sink

1:19 PM PST 07/29/2014 by Paul Bond
AP Images/Invision
DreamWorks Animation CEO Jeffrey Katzenberg

UPDATED: The company says it hasn't yet reaped the benefits of "How to Train Your Dragon 2." The company also said regulators are looking into a write-down for "Turbo."

DreamWorks Animation on Tuesday reported a net loss of $15.4 million, or 18 cents per share, much wider than analysts had expected as How to Train Your Dragon 2 awaits release in several significant international territories, including China, Spain and Italy.

Dragon 2, CEO Jeffrey Katzenberg said Tuesday, "will be a highly profitable film for the company and DreamWorks Dragons will remain a very valuable franchise for many years to come."

While Dragon 2 has made $428 million worldwide so far, it contributed only $2.6 million in feature film revenue during the second quarter.

The more bullish analysts had expected DreamWorks Animation to break even in the quarter, whereas the more bearish ones figured on about a 7-cent loss per share. Revenue came in at $122.3 million while analysts predicted $138.1 million.

After the closing bell, shares of DreamWorks Animation were off as much as 8 percent. During the regular session, the stock sunk 1 percent to $22.66.

The stock is down 36 percent this year, in part because a quarter earlier DreamWorks Animation posted a $43 million net loss due mostly to a weak reception to Mr. Peabody & Sherman.

DreamWorks Animation also said Tuesday that the U.S. Securities and Exchange Commission is investigating a $13.5 million write-down on Turbo, a $135 million release last summer that took in just $282.6 million worldwide. The write-down was disclosed in February and executives on Tuesday refused to offer details about the SEC investigation.

Katzenberg on Tuesday also weighed in on this summer's well-publicized drop in box office, predicting it would be temporary.

"This is the cyclical nature of the movie business … but I would be very confident of looking at 2015 and in particular 2016 and I would be very comfortable making a sizable bet that you'll see maybe unprecedented opportunity in the movie business," he told analysts. "These are the cycles of the movie business. I know it makes all of you that have to follow this business incredibly challenged here, if not sometimes cranky. It's not a lot of fun on our side, I have to say."

The company has for a few years been pursuing new opportunities so that it is not quite so dependent on the box-office results of its movies. It acquired digital entertainment entity AwesomenessTV, then launched DreamWorksTV on YouTube, for example.

DreamWorks Animation also acquired last month the iconic Felix the Cat brand, and its image is expected to be used in fashion and other products.

The company recently hired Michael Francis as chief global brand officer and Margie Cohn as head of television, and on Monday it hired former Walt Disney executive Mark Zoradi as COO. Also Monday, DreamWorks Animation promoted Ann Daly to president of the studio and made CFO Lew Coleman its vice chairman.

During the second quarter, the feature film segment contributed $69.7 million and gross profit of $23.9 million. The Croods led the way with $25.5 million mostly due to international pay TV.

The television segment contributed $20 million in revenue, primarily due to Turbo F.A.S.T. on Netflix, as well as Classic Media content and DreamWorks Dragons: Riders of Berk on Cartoon Network.

 

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