DreamWorks Animation Beats Earnings Expectations

Paul Jeffers
Jeffrey Katzenberg

The company reported $181 million in revenue while analysts predicted $177 million. Stock is up 5 percent in after hours trading

DreamWorks Animation reported Wednesday that it earned 14 cents per share in the third quarter on $181 million in revenue, better the than the five cents per share on $177 million that analysts had expected, in part due to a strong overseas reception to How to Train Your Dragon 2.

In the same quarter a year earlier, DreamWorks Animation reported earnings of 12 cents a share on $154.5 million in revenue.

DreamWorks Animation has fallen on tough times lately, with Turbo, Rise of the Guardians and Mr. Peabody & Sherman each underperforming significantly enough to warrant a write-down. In the case of Turbo, federal regulators are investigating the write-down.

In a conference call Wednesday, CEO Jeffrey Katzenberg dodged a question concerning the status of that investigation, and he also said he would not address rumors that SoftBank or some other entity might be interested in purchasing DreamWorks Animation. The company on Wednesday, though, took another $2.1 million "incremental impairment" charge related to Turbo.

The next release from DreamWorks Animation is franchise property The Penguins of Madagascar next month followed next year by a couple of movies based on new concepts: Home and B.O.O.: Bureau of Otherworldly Operations. It also has in the works Boss Baby, Trolls, Captain Underpants and Bollywood Superstar Monkey, though Katzenberg made it clear Wednesday that release dates are not yet firm, especially since rival Disney this week announced several new Marvel movies.

"We are going to remain flexible in the release of these movies," Katzenberg said. "You can look at our release schedule as the intent of the moment. I just have to say, every time something happens in the marketplace, we're going to respond to that in the most offensive way we can to protect the performance of those films."

Wall Street reacted favorably to the company's earnings release Wednesday, with the stock rising 5 percent after the closing bell after having fallen 2 percent, to $23.29, during the regular session. The stock spiked past $28 a share a month ago amid the SoftBank rumors.

Katzenberg sold 423,214 shares of stock into that rumor -- for a very mild profit of a nickel a share, or about $20,000 -- and the company said Wednesday it was because the CEO had an order in place to sell shares when they reached a certain price.

"The third quarter of 2014 was strong for DreamWorks Animation, with both quarterly revenue and earnings per share up 17 percent in a year-over-year comparison," Katzenberg said Wednesday. "Driving the company's third-quarter results is the blockbuster performance of How to Train Your Dragon 2, which has reached over $615 million at the worldwide box office to become the highest-grossing animated film of the year."

That film, in fact, contributed $74.2 million in revenue to the company during the quarter, more than half of the $142.4 million that the entire feature-film segment contributed.

In that segment, Turbo contributed $12.7 million, Rise of the Guardians was good for $3.5 million and The Croods for $1.8 million. Library titles contributed $50.2 million.

The company said the television segment added $14.3 million in revenue while the consumer products segment contributed $12.1 million. Other segments were also good for $12.1 million.

Helping the bottom line was a decision by DreamWorks Animation to reduce the estimated fair value of its AwesomenessTV acquisition, a move that resulted in a pre-tax gain of $4.9 million in the third quarter.