Lions Gate Entertainment Corp. (LGF) recently reported third-quarter 2011 results. The company posted a quarterly loss of 4 cents a share, a noticeable recovery from a loss of 55 cents a share in the prior-year quarter. The analysts covered by Zacks had expected Lions Gate to deliver a lower loss of 1 cent a share.
Total revenue for the quarter jumped 24.0% year over year to $422.9 million reflecting an increase in home entertainment, international film and TV revenues. Theatrical revenue marginally contributed to growth. Total revenue outpaced the Zacks Consensus Estimate of $419 million.
By segment, Motion Pictures revenue of $326.7 million climbed 30.0% from the prior-year quarter. Within Motion Pictures, revenues increased across Theatrical (up 9.0% to $53.8 million), Home Entertainment (up 63% to $174.4 million), International Film (up 31% to $21.4 million) and Lions Gate UK (up 42% to $30 million), offset partly by Mandate Pictures (down 12% to $11.3 million) and Television (down 9% to $49.7 million).
Television Production revenue surged 5.0% year over year to $96.2 million, reflecting a 52.0% increase in domestic series licensing revenues. However, domestic series licensing from Lionsgate Television fell 32% year over year.
Lions Gate recorded an adjusted EBITDA of $28.9 million in the reported quarter, way ahead of a loss of $9.5 million in the corresponding period last year. The sharp rise in EBITDA is primarily due to strong performance in the home entertainment business. Television and international film along with filmed entertainment library also contributed meaningfully to growth.
Lions Gate ended the quarter with cash and cash equivalents of $69.6 million with film obligations and production loans of $278.3 million, and shareholders’ equity of $76.6 million. During the quarter, the company generated a negative free cash flow of $62.7 million, reflecting a drastic fall from a free cash flow of $60.2 million reported in the prior-year quarter.
Lions Gate is a film studio, which produces and distributes motion pictures for theater and straight-to-video release, and television programming for cable and broadcast networks. The company has a strong track record of producing small and mid-budget specialty films.
To grab its share of box office receipts, Lions Gate competes 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’ rating on the stock. Lions Gate holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation.
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