Lions Gate Q2 Earnings Beat on Television Sales, Shares Up - Analyst Blog

Shares of Lions Gate Entertainment Corp. ( LGF ) - a film and television production company - climbed 5.7% during aftermarket trading hours yesterday, as its second-quarter 2015 adjusted earnings of 16 cents a share rose significantly from 8 cents reported last year, and also surpassed the Zacks Consensus Estimate of 13 cents.

Lions Gate Entertainment Inc - Earnings Surprise | FindTheBest

The improvement in adjusted earnings, which includes stock-based compensation, was backed by solid performance delivered by television operations. Further, the company expanded its business by experimenting with new fields. It also enhanced its online operations, adding to customers' convenience.

On a GAAP basis, the company delivered earnings of 15 cents per share, significantly up from breakeven results recorded in the year-ago period.

As the bottom line was impressive, the top line of this Zacks Rank #3 (Hold) stock also advanced 10.9% year over year to $552.9 million. The number also cruised ahead of the Zacks Consensus Estimate of $516 million, gaining from robust television production revenues.

During the quarter, the company's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of roughly $59 million climbed 4.4% from the same period last year.

Segmental Performance

During the reported quarter, Motion Pictures ' revenue of $398 million dropped 8.4% year over year, reflecting weak performances across Theatrical (down 41% to $44.9 million), Home Entertainment (down 24.7% to $153.9 million), International (down 14.8% to $75.6 million), partly compensated by Lionsgate U.K. (up 37.6% to $37.3 million), strong Television revenues (up significantly to $69.4 million) and other revenue (up over threefold to $16.9 million).

Within the Motion Pictures' segment, theatrical revenues fell as this quarter saw only two releases, including The Expendables 3 and Step Up All In . On the contrary, in the second quarter of 2014, the company had two theatrical releases, together with revenues spilling over from Now You See Me , released in May 2013 and a Spanish release.

The Home Entertainment revenue of the segment declined this quarter, compared to higher revenues from Managed brands and Now You See Me in second-quarter 2014. However, the decrease was partly offset by spectacular revenues from Divergent during the quarter being reported. International Motion Pictures revenue also descended on account of lower number of releases compared to last year.

The surge in television revenue at Motion Pictures was augmented by the introduction of the pay television window for The Twilight Saga: Breaking Dawn - Part 1 and The Hunger Games: Catching Fire . Further, The Hunger Games: Mockingjay Part 1 , which is the next part of the franchise, is slated to screen on Nov 21.

Television Production revenue soared to $154.9 million, largely stemming from strength witnessed at domestic television (up considerably to $109.6), international revenues (up significantly to $33.7 million), home entertainment category (up 90.9% to $10.5 million), partly offset by other revenue (down 8.3% to $1.1 million).

Shows including Orange is the New Black, Manhattan, Anger Management, Nashville, Houdini and Mad Men bolstered revenues at the television production segment.

Financial Details

Lions Gate ended the quarter with cash and cash equivalents of $26.3 million with film obligations and production loans of $781.1 million, and shareholders' equity of $554.2 million. The company had ended 2014 with cash and cash equivalents of $25.7 million, film obligations and production loans of $499.8 million, and shareholders' equity of $584.5 million.

The company's Film Entertainment backlog at the end of this quarter stood at $1.3 billion, compared to $1.2 billion at the end of 2014.

Also, during fiscal second-quarter 2015, Lions Gate hiked its quarterly dividend to 7 cents a share from 5 cents, payable on Nov 7, 2014 to stockholders of record as of Sep 30.

Recent Development

On Oct 20, 2014, Lions Gate announced that it has collaborated with Tribeca Enterprises to introduce a subscription video on demand service to cater to the fast growing online viewership. The company, along with giants likes CBS Corporation ( CBS ) and Time Warner Inc. ( TWX ), made this move in order to grow in the television market and create a seamless direct-to-customer network.

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 company is poised for growth, given 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 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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