Lions Gate Reports Strong Q3 Results - Analyst Blog


Driven by strong operating performance, success of its blockbuster release of The Hunger Games: Catching Fire, robust results from its filmed entertainment library and a fall in interest costs, Lions Gate Entertainment Corp. ( LGF ) reported record third-quarter fiscal 2014 results. The company's adjusted earnings of 70 cents per share surged 55.6% year over year.

The quarterly earnings, which include stock-based compensation but exclude loss on extinguishment of debt and valuation allowance, fared far better than the Zacks Consensus Estimate of 51 cents a share. Including one-time items, the company delivered earnings per share of 64 cents.

Delving Deeper

Total revenue of this Zacks Rank #3 (Hold) stock advanced 13.0% during the quarter to $839.9 million, surpassing the Zacks Consensus Estimate of $832.0 million. Improvement in revenues was mainly attributable to the domestic and global success of The Hunger Games: Catching Fire , apart from delivering other theatrical hits like Ender's Game, A Madea Christmas, Escape Plan, Red 2 and Now You See Me .

Going forward, management remains optimistic about its future performance due to the worldwide launch of the next installments of the Hunger Games franchise. The Hunger Games: Mockingjay I and The Hunger Games: Mockingjay II, are slated to be released globally on Nov 21, 2014 and Nov 20, 2015, respectively.

During the quarter, Lions Gate reported adjusted EBITDA of $154.1 million, rising significantly from $87.2 million in the year-ago quarter.

Segmental Performance

Motion Pictures ' revenue of $757.6 million shot up by 12% year over year, reflecting strong performances across Theatrical (up 44% to a quarterly record of $277.6 million), Television (up 7.1% to $105.8 million), Lionsgate U.K. (up 52.7% to $55.9 million) and International operations (up 30.8% to $88.7 million), partly offset by softness in the Home Entertainment segment (down 12.9% to $193.4 million) and other revenue (down 76.9%).

The decline in Home Entertainment segment revenue was driven by a decrease in the worldwide releases in the quarter compared to last year. While there were only 3 releases this year, the segment had coped 6 releases last year. However, this was partly offset by greater revenues from Other Product Category and Managed brands.

Television revenue was augmented by the release of Snitch and Temptation: Confessions of a Marriage Counselor, The Twilight Saga: Breaking Dawn - Part 2, Warm Bodies and Sinister . International segment benefitted from The Hunger Games: Catching Fire, Red 2, Now You See Me and Escape Plan . Lionsgate U.K.'s revenues were also driven by The Hunger Games: Catching Fire along with Olympus Has Fallen .

Television Production revenue jumped 17% to $82.3 million mainly attributable to a rise in revenue from domestic television (up 29%), higher international (up 17.8%) and other revenue (up 92.3%), partly offset by a dip in home entertainment category (down 34.2%). Television Production sales were boosted by shows like Nashville, Orange is the New Black and Anger Management .

Revenues at Lions Gate's Film Entertainment Library segment increased 10% to $148.6 million, marking it as one of the best quarterly performances for the company.

Financial and Other Details

Lions Gate ended the quarter with cash and cash equivalents of $75.4 million with film obligations and production loans of $573.9 million and shareholders' equity of $518.5 million. The company in the trailing four quarters has lowered its debt burden by $373.0 million, post which the principal outstanding amount under its revolving credit facility worth $800 million stands at $194.1 million,

During the quarter, contractual cash-based interest expense dipped to $11.5 million from $18.2 million in the year-ago quarter.

The company generated free cash flow of $117.4 million, representing a decline from $125.7 million in the year-ago period.

The company's filmed entertainment backlog rose to $1.2 billion at the end of the quarter, reflecting strong future revenues, which is encouraging.

For the first time during third quarter, Lions Gate announced a dividend payment of 5 cents per share to stockholders of record as of Dec 31, 2013, payable on Feb 7, 2014.  

Lions Gate is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release as well as television programming for cable and broadcast networks. Competing with major studios like Twenty-First Century Fox, Inc. ( FOXA ), The Walt Disney Company ( DIS ) and Time Warner Inc. ( TWX ), the company performed well in this quarter, benefiting from a healthy balance sheet and the content-friendly environment.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: DIS , FOXA , LGF , TWX

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