MGM Revenue Soars 43% in Third Quarter

Warner Bros.
"The Hobbit"

UPDATED: Thanks to James Bond and "The Hobbit," revenue for the first three quarters of 2013 is up 123 percent.

With ancillary market revenue from the James Bond movie Skyfall and the first of three Hobbit movies flowing in, MGM Holdings' (parent company of Metro Goldwyn Mayer studios) reported revenue for the third quarter of 2013 was $243 million -- up 43 percent over the year prior -- while revenue for the first three quarters of 2013 totaled $1.1 billion, up 123 percent year-over-year.

Net income was $17 million, up $23 million over the same quarter last year (excluding $48 million revenue from the one-time sale of MGM’s international networks). 

MGM also announced it is increasing its stock buyback from $75 million to $150 million. The privately (and thinly) traded stock price rose to $66 on Thursday, up 6.9 percent for the day. There have been rumors MGM may do an IPO, but so far it has not announced any plans.

"We had another impressive quarter and are extremely pleased with our results year to date, which show the earnings power of our growing fresh content pipeline in both film and television," said MGM CEO Gary Barber. "Our board of directors is displaying its continued confidence in the company and its prospects by increasing the authorization under our stock repurchase plan by $75 million to an aggregate of $150 million, and the board will continue to assess the size of its repurchase plan over time."

The company's bank debt, which stood at $371 million on Dec. 31, 2012, has now been reduced to zero. MGM has drawn down $55 million from its revolving credit line with banks of $655 million.

However, the cash on hand dropped to $51 million from $101 million in the same quarter last year. That is because of increased investment in new movies, including Robocop, Hercules and The Hobbit : The Desolation of Smaug, the last of which will open Dec. 13 (distributed by New Line/Warner Bros.)

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) -- an important measure of the success of the company -- was $36 million in the third quarter, up 133 percent from the prior year. The company said that was driven by higher TV licensing revenue and lower theatrical marketing costs.

For the first three quarters of the year, revenue was $1.1 billion up 123 percent from the prior year.  Along with Skyfall and The Hobbit, this includes income from the successful History Channel TV series The Vikings and the continued airing of Teen Wolf, a series on MTV.

MGM is having a spectacular year so far.

Adjusted EBITDA for the nine months ending Sept. 30 was $272 million, up 97 percent over the same period last year.

As of October 2013, MGM has repurchased 948,199 shares of common stock at a price of $55 a share, for a total of $52.2 million already spent out of the $150 million now allocated for buybacks.

The movies also helped drive the television licensing business where revenue rose to $76 million, an increase of 84 percent over the prior year’s third quarter. That came mostly from the pay TV and VOD revenue for Skyfall and The Hobbit in international markets.

MGM, after rising from bankruptcy nearly three years ago, not only has a third Hobbit movie coming (The Hobbit: There and Back Again), but also will have in distribution (by other studios) in 2014 Robocop, 22 Jump Street, Hercules and the remake of Poltergeist.

Steven Azarbad of the hedge fund Maglan Capital in New York, which owns some MGM Holdings stock, called on Barber to accelerate any plans he may have to go public, suggesting that with the next Hobbit arriving in December, early next year would be a good time for an IPO.

Azarbad estimates that if MGM went public, its stock -- if it got a similar multiple to Lionsgate -- would be worth over $90 per share.