Lionsgate expecting bundle of joy

Strong outlook from DVD, 'Juno' offsets weak fiscal Q3

After posting a lower profit and lower-than-expected revenue for its latest quarter, Canadian producer Lionsgate predicted Tuesday that its current quarter will hit a revenue and free-cash-flow record on the strength of its home entertainment business.

Lionsgate CEO Jon Feltheimer told analysts that he expects his Vancouver-based company to generate more than $400 million for the firm's current fiscal fourth quarter.

As a result, he forecast Lionsgate would meet guidance of $110 million in free cash flow and $1.2 billion in overall revenue for the full fiscal year.

SMH Capital analyst David Miller said the main reason for the weak profit in the fiscal third quarter was that Lionsgate "expensed $24 million more in P&A for this year's (quarter) versus last year's (quarter) as a result of an expanded film slate." Lionsgate posted earnings of $2 million for the three months ending Dec. 31, down 90% year-over-year even though revenue jumped 14% though to $290.9 million.

However, trends are looking up now. In January, Lionsgate said it experienced its best home entertainment month ever as "War," "3:10 to Yuma," "Good Luck Chuck" and "Saw IV" posted impressive bows as DVD and Blu-ray Disc releases.

Feltheimer reiterated that Lionsgate would post an $80 million loss for its fiscal 2007 before swinging to a projected profit that exceeds $100 million in 2008.

At the boxoffice, Lionsgate said it is on track to attain $400 million in theatrical receipts for fiscal 2007. Mandate Pictures' "Juno," released by Fox Searchlight, is expected to generate $130 million-$140 million in boxoffice revenue, backed by its Oscar push.

During the latest quarter, Lionsgate's motion picture revenue rose 15% on such major theatrical releases as "Saw IV" and Tyler Perry's "Why Did I Get Married?"

Lionsgate has spent $310 million on P&A so far this fiscal year and expects that spend to trend down slightly in the next fiscal year.

The producer also expects $560 million in home entertainment revenue for the full fiscal year, up 6% from 2006 levels.