Lionsgate's Earnings: More Meow Than Roar

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Lionsgate (NYSE: LGF-A) (NYSE: LGF-B) reported earnings Feb. 8, covering the results of fiscal year 2019’s third quarter. The producer of TV and cinema content stared down a difficult year-over-year comparison, since the same period of fiscal year 2018 held a massive tax benefit and a huge blockbuster movie. Here’s how the latest holiday season compared with that uniquely profitable quarter.

Lionsgate’s third-quarter results: The raw numbers

Metric

Q3 2019

Q3 2018

Year-Over-Year Change

Revenue

$933 million

$1.14 billion

(18%)

Net income attributable to common shareholders

$22.9 million

$193 million

(88%)

GAAP earnings per share (diluted)

$0.10

$0.87

(89%)

Data source: Lionsgate.

What happened with Lionsgate this quarter?

  • The GAAP numbers in the table above are not exactly an apples-to-apples comparison. The year-ago period included a unique tax benefit of $165 million due to that quarter’s implementation of the Trump administration’s corporate tax reform. Adjusting both periods for this effect and other noncash and one-time items, Lionsgate’s non-GAAP earnings fell 27% to $0.35 per diluted share.
  • Motion picture sales fell 33% to $363 million. The holiday season’s titles failed to find an audience, and the prior year’s comparable period saw the premiere of the Julia Roberts vehicle Wonder . That family drama collected $306 million in global box-office receipts and had no equal in the reported quarter.
  • The television segment saw revenues falling 19% year over year to $217 million, based on the timing of deliveries to streaming and broadcast platforms.
  • The media networks division, which accounts for the Starz premium cable network, reported 4% higher revenues of $367 million. Within this segment, Lionsgate’s streaming video platforms saw sales nearly doubling to $4.7 million. Traditional cable platforms still accounted for 99% of this sector’s total sales, despite the rapid growth in streaming operations.
  • Media networks produced the lion’s share of Lionsgate’s segment profits. The motion picture division generated 11% of the company’s total income at this level while TV productions contributed 22% and the Starz-powered networks collected the remaining 67%.

A movie theater where many audience members are screaming or covering their eyes, as if watching a horror movie.

Image source: Getty Images.

What management had to say

CEO Jon Feltheimer has a grand vision in mind for Lionsgate’s media networks division. On the third-quarter earnings call , Feltheimer outlined the upcoming slate of Starz content and international expansion plans before turning to the unit’s longer-term prospects.

“This is just the tip of the iceberg in terms of the vision we had when we merged our two companies, investing in and nurturing talent relationships together, retaining rights to our intellectual property, cross-promoting our content, and utilizing all of our global relationships to maximize our biggest competitive advantage,” Feltheimer said. “We continue to combine our best-in-class content engine with a fast-growing global streaming platform to create a compelling value proposition for our partners and our consumers.”

Looking ahead

Lionsgate does not offer quarter-by-quarter financial guidance for its investors and Wall Street analysts. Instead, management likes to discuss the future in broader strokes.

Starting with the streaming video discussion above, digital platforms will be a growth driver for the long haul, although it’s too early to expect that they’ll move the business needle by much in 2019.

The fourth quarter should see an increased amount of promotion and advertising activity in support of several big-ticket productions. Lionsgate’s management is putting a lot of faith in Hellboy , John Wick: Chapter 3 – Parabellum , and Long Shot , all of which will take a bow in this summer’s blockbuster season and should boost the motion picture segment’s financial fortunes in fiscal year 2020.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lionsgate (Class A and B). The Motley Fool has a disclosure policy .

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