Lionsgate Reports Lower First-Quarter Earnings, Beats Expectations

Now You See Me 2 Jesse Eisenberg Still H 2016
Courtesy of Summit Entertaiment

Shares in the studio jumped 5 percent, or 96 cents, to $20.00 in the wake of the first quarter results being unveiled after the market close.

Lionsgate beat profit estimates with its first-quarter financial results on Thursday, sending its stock up in after-hours trading.

The studio reported net income at $1.3 million, compared to a profit of $40.6 million for the year-ago period. Quarterly revenue for Lionsgate was $553.5 million, up 35 percent from a year-ago $409 million.

Lionsgate beat the consensus estimate for earnings during the latest quarter with 1 cent per share, well ahead of a street estimate of a 16 cents loss. The studio also beat estimates on revenue and adjusted EBITIDA of $40.7 million.

Shares in the studio jumped 5 percent, or 96 cents, to $20.00 in the wake of the first quarter results being unveiled after the market close. The first-quarter results came as the studio increasingly looks to TV production and distribution, underpinned by its pending $4.4 billion merger with Starz, to offset a decline in theatrical film slate performance after the end of its Hunger Games and Twilight franchises.

Given TV growth is a key driver for the studio these days, Lionsgate CEO Jon Feltheimer on Thursday focused on the pending merger with Starz in his remarks to analysts during a conference call. He reported that Starz will move from its current base in Beverly Hills to Lionsgate's Santa Monica headquarters to harmonize the two companies.

"We're going to combine these companies in an effective way... We're not turning this into two different companies," Feltheimer said of the integration planned after the merger deal is completed. He added the Starz deal will allow Lionsgate to expand its original premium TV series production, with nearly $1 billion a year to go into new TV series alone.

The studio and Starz will also invest around $1.8 billion annually in new content, including into movie production. And the two companies plan to spend around $700 million each year to market their content globally.

And the news that Lionsgate is planning the final Divergent film as a TV series may have caught the cast and fans unawares. But the film-to-TV migration has generated interest in at least a dozen networks that studio TV boss Kevin Beggs will be pitching to in the next week, the company reported. 

During the latest quarter, TV production revenue at Lionsgate rose 43 percent, due in part to growth in domestic TV series licensing and a $27.3 million contribution from Pilgrim Media Group, which delivered the Ultimate Fighter and Street Outlaws reality shows. That offset lower international TV sales, compared to a year earlier when the studio signed an international licensing deal with Netflix for Orange Is the New Black

Overall motion picture segment revenue rose to $362.5 million, against a year-earlier $275.4 million. Theatrical revenue doubled to $47.2 million, thanks to a box-office release slate that included magician heist movie Now You See Me 2, which cast an impressive spell on moviegoers worldwide.

International motion picture segment revenue jumped 34 percent to $113.8 million in the quarter, underpinned by Now You See Me 2 to date grossing over $300 million at the global box office.

August 4, 6:30 p.m. Updated with comments by CEO Jon Feltheimer to analysts during a conference call.