Lionsgate Records $80.8 Million Write-Down, Quarterly Earnings Beat Wall Street Estimates

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Lionsgate handily beat Wall Street estimates in its most recent fiscal quarter, as the company continued to explore spinning off or selling Starz, its cable and streaming business.

Revenue at the media company behind “The Hunger Games” and “John Wick” topped out at $1 billion, rising nearly 13% from the $885.4 million that Lionsgate reported in the prior-year period.  Net income reached $16.6 million, an improvement on the loss of $45.6 million that Lionsgate reported in the same quarter last year. Operating income at the company hit $7.8 million, down more than 16% from $9.3 million in the prior-year period. The company reporting earnings per-share of 26 cents, which compared favorably to its year-earlier loss of 12 cents per-share.

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Those results were better than expected. Analysts had predicted Lionsgate would report revenue of $885 million and a loss of 12 cents per share. Shares of the company climbed more than 5% after-hours trading on the strong report. During the quarter Lionsgate sold a partial interest in StarzPlay Arabia for a $43 million cash gain.  

The company also recognized an $80.8 million write-down, which it attributed to restructuring charge related to its decision to remove certain series from its streaming service.  

Lionsgate’s future remains murky. Finding itself dwarfed by bigger media competitors such as Disney, Comcast and Warner Bros. Discovery and unable to match the resources of tech giants such as Amazon and Apple that have gotten into the content business, Lionsgate is often seen as an attractive acquisitions target. But so far, no sale has materialized. Instead, the company has explored several spinoff and sales scenarios, and nearly reached a deal to merge with Hasbro in 2017. At present, Lionsgate said it plans to spin off its film and television studio and production company from Starz, which it purchased in 2016 for $4.4 billion in a bid to bulk up. The two arms of Lionsgate are expected to separate by September.

“The separation will give our two core businesses the opportunity to pursue strategic and financial paths that make sense for each of them and unlock greater value by operating as pure play entities,” Lionsgate CEO Jon Feltheimer told analysts on a call shortly after earnings were released. “We are exploring a number of financial strategies to leave both companies with strong balance sheets at the time of separation.” Feltheimer went on to say that “operating on a standalone basis will give both companies a chance to shine.”

In the short term, the company’s film and television library was partly attributable for the improved results. Lionsgate said the 17,000 title library hit a record $845 million in revenue for the trailing 12 months. 

Lionsgate ended the quarter with $425 million in available cash and an undrawn revolving credit facility of $1.25 billion.  During the quarter, the Company purchased $124 million of its bonds for $82 million, a $42 million reduction in its net debt. 

Lionsgate hasn’t been as active on the film front in recent years, but the company has several high-profile movies on the horizon, including a sequel to “John Wick,” a “Hunger Games” prequel, and “Michael,” a biopic about Michael Jackson. In television, Lionsgate touted the renewals of the Eugenio Derbez comedy “Acapulco” and “Mythic Quest” from Rob McElhenney, as well as the upcoming release of the HBO true crime limited series “Love and Death” from David E. Kelley and Nicole Kidman, who previously collaborated on “Big Little Lies.”

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