Lionsgate on Thursday swung to a first-quarter loss that still beat Wall Street expectations as Starz added around 300,000 new domestic subscribers as the premium channel expands in Europe.
The studio, led by CEO Jon Feltheimer, reported net income at a loss of $7.9 million, compared to a year-earlier profit of $173.8 million.
Quarterly revenue for Lionsgate was $932.7 million, down from $1.05 billion in the same period last year, but beating a Wall Street estimate of $887 million for the overall revenue line.
The company also surpassed the consensus estimate for earnings during the latest quarter with a diluted earnings per-share loss of 4 cents, ahead of a street estimate of a loss of 7 cents.
The first-quarter results came as the studio increasingly looks to TV production and distribution, underpinned by its merger with Starz, now being positioned to expand internationally and more recently in Europe.
During the latest quarter, revenues in the media networks segment were up 3 percent to $354.9 million, largely due to over-the-top and traditional MVPD subscription revenue growth for Starz, which added around 300,000 new customers to reach 23.8 million in total. Lionsgate on Thursday revealed it has reached deals to set up Starzplay-branded channels in France, Italy and Spain with as yet unnamed local partners, following earlier launches in the U.K. and Germany.
Starz CEO Chris Albrecht during an earnings call said recent data pointing to decelerating cord-cutting and and increased take up of streaming services and other new distribution platforms held out the prospect of continuing growth in Starz subscribers, both domestically and internationally, through the rest of fiscal 2019.
Top Lionsgate execs also touted the benefits of the studio recently picking up a majority stake in 3 Arts Entertainment, the Los Angeles-based management firm, to get closer to Hollywood talent. Television Group chairman Kevin Beggs pointed to the Rob McElhenney and Charlie Day untitled comedy unveiled on Thursday that nabbed an Apple series order after the project was developed by Lionsgate, 3 Arts and Ubisoft.
“That’s a really great one right out of the gate that turned into a scripted series commitment,” Beggs told analysts. Lionsgate’s Feltheimer added the tie-up with 3 Arts allowed his studio to more aggressively pursue creative talent to exploit ownership rights, especially after acquiring Starz to get deeper into television.
“Talent with us can make movies, they can make TV shows, they can make them with any network, including Starz, they can be involved with co-productions on a global basis. They can really do absolutely anything at our company. And a lot of talent will take that particular path, rather than be tied up at one particular venue,” he said.
Feltheimer also answered a question from an analyst on how the studio was dealing with potential reputational and investment risks posed by allegations of sexual harassment and misconduct that may emerge from business partners Lionsgate did business with.
“I would say that — and it has come up — as we look at any investment and really any company and anybody we’d be in business with, we have an expectation that the way they operate is the way that we operate,” he said. “We expect them to follow our commitment to a safe, respectful and tolerant work environment for anybody, whether they’re an employee, a production partner or in any respect. If we knew it wasn’t that way, then that wouldn’t be an arrangement we’d enter into.”
Elsewhere in the studio’s latest financial results, TV production revenue at the company rose 7 percent to $279.4 million as gains in domestic license fees and international revenues offset the year-earlier first quarter, when Lionsgate recorded a digital media licensing agreement for Starz drama Power.
Overall motion picture segment revenue during the latest quarter fell 23 percent to $365.3 million as the prior year included home entertainment revenue from John Wick: Chapter 2 and international revenues from La La Land.
Aug. 9, 3:15 p.m. Updated with comments by top Lionsgate executives made during an analysts call.
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