Lions Gate Entertainment Posts Q2 Loss, Misses Estimates

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Lions Gate Entertainment Corp.LGF fell into the negative territory after reporting a whopping 160% earnings surprise in the first quarter of fiscal 2016. The company reported loss per share of 26 cents (including stock based compensation expense), contrary to the Zacks Consensus Estimate of earnings per share of 3 cents and the year-ago earnings per share of 16 cents.

Lions Gate Entertainment Inc. (LGF) - Earnings Surprise | FindTheCompany

On a reported basis, including one-items, loss came in at 28 cents a share versus earnings of 15 cents per share in the year-ago quarter.

Lions Gate's second-quarter fiscal 2016 financial numbers were primarily affected by timing of episodic television deliveries as well as change in timing of the extensive release of Sicario into October. Dismal performance of American Ultra and the write-down of $7.2 million on The Last Witch Hunter also hampered the company's quarterly numbers.

On the revenue front, Lions Gate witnessed a decline of 13.8% year over year to $476.6 million. The number also fell short of the Zacks Consensus Estimate of $478 million. Revenues were soft due to a decline in revenue from both Motion Pictures and Television Productions.

The dismal top-line as well as bottom-line performances was enough to raise investor concern. As a result, the company's shares fell 6.6% during the after-market trading hours yesterday.

On the other hand, Lions Gate's Chief Executive Officer Jon Feltheimer said, "Although this quarter will be the lightest of the year due to timing and softer-than-anticipated performance of some of our recent film releases, our robust film and television pipelines position us for a very strong second half of the year."

The company anticipates wide release of theatrical films during the rest of the year including The Hunger Games: Mockingjay - Part 2, Allegiant - Part 1, the visual effects-driven Gods of Egypt as well as the buddy comedy Dirty Grandpa. Mockingjay - Part 2 will hit the theaters on Nov 20, 2015 in 86 territories worldwide.

The company's filmed entertainment backlog was $1.2 billion at the end of second-quarter fiscal 2016.

The company's adjusted EBITDA (including stock-based compensation) came in at negative $8.1 million, down from the prior-year figure of $59 million.

Segmental Performance

During the reported quarter, Motion Pictures' revenues of $354 million plunged 11.1% year over year, reflecting weak performances across Theatrical (down 41.4% to $26.3 million), Home Entertainment (down 4.5% to $147 million), International (down 4.5% to $107.8 million) and Television (down 13.7% to $59.9 million). Moreover, other revenues at the segment fell 23.1% year over year to $13 million.

The company had only two wide releases, American Ultra and Shaun the Sheep, in the Motion Picture segment in the reported quarter. The decline in Home Entertainment revenue is owing to lesser wide release theatrical titles as well as product mix. Television revenues at Motion Pictures declined year over year primarily due to the fewer number of titles.

Television Production revenues declined 20.7% to $122.8 million, largely due to weakness witnessed at domestic revenue (down 19.8% to $87.9 million), international revenue (down 21.7% to $26.4) and also due to the home entertainment category (down 38.1% to $6.5 million).

The domestic television category suffered due to a fall in the number of television episodes delivered during the quarter. On the other hand, international television revenues were marred by lower revenues from Anger Management and Nashville, which somewhat offset surge in revenues from Orange Is the New Black (Season 4).

Financial Details

Lions Gate ended second-quarter fiscal 2016 with cash and cash equivalents of $170.4 million, film obligations and production loans of $904.1 million, and shareholders' equity of approximately $887.5 million. The company generated negative free cash flow of $11.7 million in the reported quarter.

The company has increased its quarterly cash dividend from 7 cents to 9 cents per share payable on Nov 10, to stockholders of record as of Sep 30, 2015.

Lions Gate, which competes with major studios like Twenty-First Century Fox, Inc. FOXA and DreamWorks Animation SKG Inc. DWA , 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.

Zacks Rank

Lions Gate currently carries a Zacks Rank #3 (Hold). A better-ranked stock in this sector is World Wrestling Entertainment Inc. WWE , which holds a Zacks Rank #2 (Buy).

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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 Nasdaq, Inc.

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

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