Lionsgate Beats Earnings, Revenue Expectations

Mike Pont/FilmMagic
Lionsgate CEO Jon Feltheimer

The studio, led by Jon Feltheimer, reported its second straight billion-dollar revenue quarter after acquiring premium cable network Starz.

Lionsgate beat profit estimates with its first-quarter results on Tuesday, thanks to higher TV and movie profits.

The studio reported net income at $174 million, compared to a year-earlier $1.3 million, which includes a $201 million gain on the sale of the studio's equity interest in Epix during the quarter.

Quarterly revenue for Lionsgate was $1.01 billion, against a year-ago $553.5 million. Lionsgate beat the consensus estimate for earnings during the latest quarter with 84 cents per share, compared to a Wall Street estimate of 27 cents, or an adjusted earnings per share of 52 cents. Analysts also projected $996 million in quarterly revenue.

Metro-Goldwyn-Mayer in April announced it had acquired Epix from co-venture partners Viacom and Lionsgate for $1.031 billion. Lionsgate in an SEC filing at the time said it stood to receive $397.1 million for its 31.15 percent stake in Epix.

Motion picture segment revenue rose nearly 16 percent to $472.4 million, driven by home entertainment performances for John Wick: Chapter Two, La La Land, Saban's Power Rangers and The Shack. On the theatrical side, higher revenue and lower marketing costs had the segment profit rising 173 percent to $86.9 million. 

TV production segment revenue fell 18.6 percent to $156.6 million, due to the timing on episode deliveries, while the TV segment profit jumped 22 percent to $12.6 million. And the media networks segment revenue, which includes Starz, rose 9.2 percent to $390.5 million, as the premium cable network debuted American Gods and The White Princess.

During an analyst call, Lionsgate CEO Jon Feltheimer told investors Discovery Communications and Scripps Networks Interactive merging as part of a $14.6 billion deal to combine the two cable networks companies known mostly for nonscripted and lifestyle content held collaboration opportunities for his studio.

"Having them [Discovery] scaling up is a better opportunity for us to do more business," Feltheimer said. Scripps operates HGTV, Travel Channel and Food Network, among others, while Discovery's networks include the likes of Discovery Channel, Animal Planet, TLC and OWN.

Lionsgate and Discovery recently worked together on Manhunt: The Unabomber, formerly titled Manifesto, an eight-episode series centered on the hunt for Ted Kaczynski (Paul Bettany), who terrified the nation with a letter-bombing campaign in the 1980s and early 1990s.

The studio boss also touted over-the-top subscriber growth at Starz as it eyes expansion of its video streaming service Starz Play Arabia beyond the Middle East and North Africa. "Today, Starz’s over-the-top offerings have approximately two million subscribers, running well ahead of our own projections and fulfilling their promise as a “must have” channel for every platform," he said.

Feltheimer also teased more projects to come from The Hunger Games and Twilight franchises, without being specific. "We think there's a lot more stories to be told, and we're ready to tell them when our creators are ready to tell those stories," he said.

In the TV space, Starz is developing a small-screen take on Ascendant, which earlier was set to be the fourth movie in the Divergent franchise, and recently went straight to series on The Rook, a drama from Twilight author Stephenie Meyer.

The first-quarter results came as the studio bets on TV production and distribution in the wake of its $4.4 billion merger with Starz, and a diversified film slate, to offset a decline in theatrical film slate performance after the end of its Hunger Games and Twilight franchises.

Feltheimer touted the combined Lionsgate-Starz entity as it competes in a fast-changing entertainment business facing cord-cutting, internet competition and industry consolidation. "A year ago, some wondered if the Starz deal had cost us our 'pure content' status. In fact, today we find ourselves even better positioned to participate in the ever-increasing global consumption of content," he told market watchers.

On the M&A front, Lionsgate last week offered no comment after a media report Hasbro had ended informal takeover talks with the studio.

Lionsgate is also making inroads elsewhere in the streaming space against Netflix and Hulu with offerings like Pantaya, a newly launched Netflix for Latinos; Tribeca Shortlist; Comic-Con HQ; and Kevin Hart's Laugh Out Loud VOD platform.

Aug. 8, 6:30 p.m. Updated with comments by Feltheimer to analysts during a conference call.