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Lions Gate Posts Strong 2Q - Analyst Blog

Posted: 11/9/2012 10:10:00 AM
Referenced Stocks: LGF;TWX

Lions Gate Entertainment Corporation ( LGF ) recently posted a robust second-quarter 2012 results. The quarterly earnings of 53 cents a share substantially exceeded the Zacks Consensus Estimate of 8 cents. Moreover, earnings witnessed a significant improvement from a loss of 27 cents reported in the comparable prior-year period.

Lions Gate's strong performance in the quarter was the result of solid double-digit growth in revenue, mainly due to healthy box office result and home entertainment revenue.

Total revenue soared 97% year over year to $707.0 million, and also surpassed the Zacks Consensus Estimate of $619.0 million. The better-than-expected year-over-year growth was witnessed due to hearty response at the box office from the films such as ' The Possession' , ' The Expendables 2 ', ' Step Up Revolution ' and ' Madea's Witness Protection ', along with strong performance at home entertainment by global blockbuster ' The Hunger Games'. The revenue was also boosted by healthy growth in the revenue of international market.

Segment Performance

Motion Pictures' revenue of $608.0 million surged 178.0% from $218.9 million in the prior-year period. This segment includes the revenues of 'Theatrical', 'Home Entertainment', 'Television', 'International', 'Lionsgate UK', and 'Mandate Pictures.

Theatrical category revenue surged to $116.2 million compared with $22.3 million in the prior-year quarter. The increase was due to good response at the box office for the films released in the month of June.

Home Entertainment category's revenue augmented 117.5% to $261.9 million against $120.4 million in the comparable quarter last year, mainly driven by the release of 'Hunger Games' during the quarter.

International revenue (excludes Lionsgate UK) recorded an increase of 382.1% to $108.0 million from $22.4 million in the second quarter of 2011, driven by global release of Hunger Games along with strong revenue from Cabin In The Woods , What To Expect When You're Expecting , Step Up Revolution and Cold Light Of Day .

Lions Gate UK's revenue was up by 120.0% to $48.4 million from $22.0 million, driven by the company's strong performance at the theatrical division by the releases made during the quarter.

Television category revenue came to $35.5 million compared with $28.2 million in the prior-year quarter, reflecting an increase of 25.9%, whereas Mandate Pictures revenue came in at $31.6 million, up substantially from $2.4 million in the prior-year quarter.

Television Production revenue decreased 28.9% year over year to $99.0 million, reflecting a 70.9% decline in Home entertainment category of television production to $15.9 million along with decrease of 28.0% in International revenue to $9.0 million, partly offset by 2.4% increased revenue from domestic series licensing to $73.4 million.

During the quarter, the company reported adjusted EBITDA of $109.7, which improved from a negative EBIDTA of $13.4 million in the year-ago quarter. The improvement in EBIDTA during the quarter was witnessed mainly due to strong theatrical box office performance of ' The Possession' along with healthy international results.

Lions Gate ended the quarter with cash and cash equivalents of $54.4 million with film obligations and production loans of $437.6 million and shareholders' equity of $146.2 million.  The company generated a free cash flow of $18.9 million during the quarter.

The company's filmed entertainment backlog increased to $1.2 billion, reflecting strong future revenues, which is encouraging.

Lions Gate is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release and also television programming for cable and broadcast networks. The company has a strong track record of producing small and mid-budget specialty films. Lions Gate operates in the entertainment industry with other major studios, such as Fox Entertainment Group, Paramount Motion Pictures Group and Time Warner Inc . ( TWX ).

Currently, we have a long-term 'Neutral' recommendation on the stock. Moreover, Lions Gate holds a Zacks #3 Rank that translates into a short-term Hold rating for the next 1-3 months.

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