Lionsgate Posts Sharply Higher Fourth-Quarter Earnings, Beats Expectations

Mike Pont/FilmMagic
Lionsgate CEO Jon Feltheimer

Recent movies released by the Jon Feltheimer-led studio include 'La La Land' and 'Power Rangers.'

Lionsgate beat profit estimates, on sharply higher quarterly revenues, with its fourth-quarter financial results on Thursday.

The studio, led by CEO Jon Feltheimer and having bought Starz late last year, reported net income of $61.6 million, compared to a year-earlier $11.4 million.

Revenue of $1.25 billion was up 59 percent from $791.2 million last year, as the studio's most recent box-office releases included La La Land, the Keanu Reeves-starrer John Wick: Chapter Two and Power Rangers, the big-screen adaptation of the classic kids TV show about a group of morphin' superheroes.

During a conference call with analysts, Feltheimer didn't mention another sequel for Power Rangers, which grossed $140 million worldwide at the box office, but did mention discussions with partner Saban on a location-based entertainment property for the franchise.

TV revenue was down 3.5 percent at $242.6 million, from $248.8 million in 2016. The prior year is a tough comparison as the fourth quarter of 2016 included a global order for four seasons of Orange is the New Black from Netflix.

Revenue from the motion-picture division rose just over 7 percent to $654 million, up from a year-earlier $542.3 million.

Media network revenue, which mostly comprises Starz, came to $370.8 million, up from $365.6 million last year on a pro forma basis. Lionsgate execs used most of the analyst call to discuss the studio's fast-growing TV division, an increasingly diversified film portfolio and a continuing expansion onto emerging digital platforms.

"Not only do our numbers reflect a great quarter and a strong year, but our accomplishments reflects the continued transformation of Lionsgate from a film and television studio into a diversified global content machine, developing, producing and owning the rights to great intellectual property that we monetize across multiple platforms and windows, many of which we own," Feltheimer told analysts.

Lionsgate now has seven series in development at Starz, whose CEO Chris Albrecht told analysts his premium channel was close to issuing production greenlights on a couple projects. "We're optimistic we will have a Lionsgate-owned show on Starz in the near future," he added on the call.

The profit of 30 cents per-share beat Wall Street expectations for a 28 cents per-share earnings line. The results included $89 million in restructuring and other acquisition costs related to the purchase and integration of Starz.

In the wake of the latest Lionsgate results, Wall Street analysts focused on acceleration at Starz, which includes the licensing of series like Black Sails and Power to Hulu and other new digital platforms, which offset slower TV revenues. "Overall, Starz, once barely growing, is now on a healthy teens growth trajectory," Barton Crockett, an analyst with FBR & Co., wrote in an investors note. 

Rosenblatt Securities analyst Alan Gould in his own note said Starz subscriber base falling 100,000 was "disappointing," but not as bad as market watchers predicted. Excluding AT&T shifting subscribers from the U-verse platforms to DirecTV, Gould noted Starz' customer count rose 5 percent last year across new Internet-based platforms.

Jefferies analyst John Janedis forecast Starz subscriber numbers will increase over the summer with new programming releases, including American Gods.

May 26, 4 p.m. ET Updated with commentary by Wall Street analysts following the release of the fourth quarter earnings.

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