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Lions Gate (LGF.A) Q4 Earnings Beat, Revenues Decline Y/Y

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Lions Gate Entertainment (LGF.A - Free Report) delivered fourth-quarter fiscal 2018 adjusted earnings of 25 cents per share that beat the Zacks Consensus Estimate by 6 cents but plunged 53.7% from the year-ago quarter.

Revenues declined 17.2% year over year to $1.04 billion and also lagged the Zacks Consensus Estimate of $1.07 billion.

Adjusted OIBDA declined 13.1% from the year-ago quarter to $303.8 million. However, OIBDA margin expanded 140 basis points (bps) to 29.2%.

Operating Income fell 32.4% from the year-ago quarter to $48 million. Operating margin also contracted 100 bps on a year-over-year basis.

Q4 Segment Details

Motion Pictures (40.8% of total revenues) reported revenues of $424.9 million, down 35% year over year. The segment logged adjusted OIBDA of $29.2 million, down 43.8% from the year-ago quarter. Results were negatively impacted by difficult year-over-year comparisons. The year-ago quarter benefited from the release of La La Land, Deepwater Horizon and John Wick Chapter 2.
 

 

Television Production (24.3% of total revenues) revenues increased 4.2% to $252.7 million. Moreover, segment profit soared 80% to $23.4 million.

Media Networks’ segment (40.8% of total revenues) formed after the acquisition of Starz reported revenues of $365.7 million, down 1.4% year over year. Moreover, segment profit came in at $115.2 million, dropping 7.7%.

Starz revenues increased 2.9% to $350.5 million. The company ended the quarter with 23.5 billion subscribers, down 500K sequentially.

During the quarter, Starz signed new deals with Verizon, Amazon, Altice and Sprint. The company recently launched Starz on Amazon Prime in the United Kingdom and Germany.

Lions Gate also launched its fast-growing Spanish-language streaming movie service Pantaya on Comcast X1 platform. Moreover, Starz is set to launch on YouTube TV in June and Hulu in October.

Fiscal 2018 at a Glance

Lions Gate delivered adjusted earnings of $1.54 per share, significantly up from 54 cents reported in the year-ago quarter.

Revenues increased 29% year over year to $4.13 billion.

Motion Pictures (44.1% of total revenues) reported revenues of $1.82 billion, down 5.1% year over year.

Television Production (19.5% of total revenues) revenues decreased 3.8% to $805.3 million.

Media Networks’ segment (37.1% of total revenues) reported revenues of $1.53 billion as compared with $456.6 million reported in fiscal 2017.
 
Balance Sheet & Cash Flow

As of Mar 31, 2018 cash and cash equivalents were $378.1 million, while film obligations and production loans were $327.2 million.

Net cash flow from operations was $17 million in the reported quarter.

Lions Gate generated $330 million of free cash flow which along with the proceeds from the sale of EPIX was used to reduce net debt by $650 million. Net leverage at the end of the year came in at 3.4x, which is down from 4.3x at the beginning of the year.

Zacks Rank & Key Picks

Currently, Lions Gate carries a Zacks Rank #3 (Hold).

Stocks worth considering in the broader consumer discretionary are Cable One (CABO - Free Report) , AMC Networks (AMCX - Free Report) and Roku (ROKU - Free Report) . All the three stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Cable One, AMC Networks and Roku are currently pegged at 3%, 7.68% and 17%, respectively.

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