Lionsgate Posts Lower Fourth-Quarter Earnings After Box Office Stumbles
The studio still beat earnings expectations despite weak film performances for 'Allegiant' and 'Gods of Egypt,' causing the stock to surge 15 percent.
Lionsgate beat profit estimates with its fourth-quarter financial results after Divergent sequel Allegiant disappointed at the box office and Gods of Egypt misfired, and Wall Street was responding by bidding shares 15 percent higher after the closing bell on Wednesday.
The studio behind the Hunger Games and Divergent franchises, led by CEO Jon Feltheimer, reported net income of $11.4 million for the three months to March 31, down 41 percent from a year-earlier profit of $19.5 million. Revenue of $791.2 million was up 22.5 percent from a year-earlier $646 million on record TV revenue of $248.8 million and beat the $741 million estimate by analysts.
The profit of 7 cents per share beat Wall Street expectations for a 2 cent loss, and the adjusted EBITDA beat the consensus by $17.6 million. The per-share earnings performance had stock in Lionsgate rising sharply to $22.65 in extended trading, after closing Wednesday on the New York Stock Exchange at $19.76, up just 4 cents.
Full-year earnings at Lionsgate were $42.7 million, down sharply from a year-earlier $181.7 million, on overall revenue of $2.34 billion, just off $2.4 billion for fiscal 2015. Record full-year TV production revenue came to $669.9 million, against a year-earlier $579 million. That included a global deal for Orange Is the New Black.
At the same time, continued TV division growth failed to offset the box-office disappointments, leading to the reduced fourth-quarter earnings. To ease movie pipeline concerns, Lionsgate is looking ahead to the upcoming Now You See Me 2 and Power Rangers releases.
"Although last year's film slate didn't match the performance of previous years, this year's slate is bigger, more balanced and is expected to generate greater profitability," Feltheimer said late Wednesday in a statement.
To increase earnings visibility, the studio also is diversifying its film slate, and its TV division, for that matter, after last year’s Pilgrim Studios acquisition to get deeper into unscripted fare. Knowing the world has changed as the number of SVODs and the international marketplace expands, Lionsgate recently unveiled new lead sales posts for the streamer and alternative TV programming markets as the studio's global TV distribution business grows.
But corporate moves aside, Lionsgate's analyst call on Thursday morning will likely be buzzworthy for an expected guidance update for analysts. "Apart from film, we retain high confidence in Lionsgate's TV growth profile, but admit that film has to be turned around to justify owning Lionsgate stock," Wunderlich Securities analyst Matthew Harrigan said in an investors note issued on Wednesday morning.
For full-year 2016, Lionsgate posted overall motion picture segment revenue at $1.68 billion, against $1.82 billion a year ago. Theatrical revenue fell to $314.1 million, from $354 million. And full-year home entertainment revenue from the motion picture and TV production segments was $640.1 million, compared to a year-ago $707.5 million.
Feltheimer is expected to tell analysts on Thursday morning that his studio's franchises have strong box office and additional platform sales potential and that a growing TV division continues to rebalance Lionsgate from variable film production. "Our television business had a record year with all categories contributing great results, and we expect its strong growth to continue this year," the CEO added in his statement Wednesday.
Of course, his pep talk will come as betting continues on Lionsgate remaining a merger partner for Starz or a takeover target after Comcast scooped up DreamWorks Animation. Lionsgate execs will host an analyst conference call Thursday morning to discuss the latest financial results and future plans.