MGM Has Strong Second Quarter Thanks to TV

The net income was up thanks to the success of shows like 'Fargo,' despite a small write off on 'Hercules'

MGM Holdings, the parent company of Metro Goldwyn Mayer, reported improved net income on Thursday in the second quarter and had solid financial results. It also showed an increase in free cash flow which helped push up the stock price on the private market.

The net income for the quarter which ended June 30 was $40.7 million compared to $35.9 million in the same quarter a year ago when money was flowing in from the James Bond movie Skyfall.

The company said 22 Jump Street also performed well, but that revenue will not hit the books until later this year.

That was despite a write off for the movie Hercules starring Dwayne “the Rock” Johnson, released through Paramount on  July 25, which performed at a lower level than expected. MGM said for the quarter it took a write-off of $11.8 million which included Hercules. It would not break out the movie’s loss but indicated to investors most of it was from Hercules.

For a big budget movie that is a small write-off.

MGM reported revenues for the quarter of $315.6 million compared to $338.9 million in the same quarter last year.

For the six months, revenue was $652 million compared to $820.6 million in the prior year. For the six months,  net income was $85.3 million compared to $93.3 million the prior year.

The good news was from TV where MGM has a hit with Fargo on the FX network and other shows including Vikings and Teen Wolf are performing well. For the quarter worldwide TV licensing revenue was $139 million, an increase of 15 percent over the $121 million in the same quarter last year.

The TV revenue including licensing of The Hobbit: The Desolation of Smaug and Carrie worldwide on VOD.

For the six months, TV revenue was $255.5 million up 11 percent from $230.5 million a year earlier.

The thing investors cheered was the EBITDA (cash flow) of $82.2 million in the quarter compared to $79.4 million a year earlier. The company said it had more free cash flow because of improved performance by TV and digital, which does not have the same high costs as physical home entertainment.

MGM is also in a strong cash position. It borrowed $300 million earlier this year and reported cash on hand of $434 million at the end of the quarter. It also said it now has cash on hand of $474 million.

In the call, investors asked if MGM was going to go public, and the company simply said it was keeping options open and continues to study the market; but had no announcement.

On the closely traded private market MGM shares rose to $79 up from $76 a week ago.

UPDATE: An earlier version of this article incorrectly stated that MGM's net income was lower for the second quarter.