Johnny Depp’s ‘Mortdecai’ Drags Lionsgate’s Q4 Down, But 2015 Strong

Studio tops $250 million in cash flow for third straight year despite 60 percent drop in earnings for quarter

Lionsgate on Thursday reported significantly lower fourth-quarter earnings and revenue, but its 2015 fiscal year was strong and its shares held steady in after-hours trading at $32.

The studio posted earnings of $19.5 million for the three months ending March 31, or 14 cents per-share. That’s a steep 60 percent drop from the comparable period last year, which showed a profit of $49.1 million, and below the consensus estimate for earnings of 34 cents per-share.

The numbers were hurt by a downtrend on the film side thanks to the box-office flop of the Johnny Depp film “Mortdecai” — which made $30.4 million at the globally on a $60 million budget —  and a drop in the number of movies released.

Quarterly revenues for Lionsgate was $646 million, down 10 percent from the year-ago quarter’s $721.8 million.

The good news was that for the year, Lionsgate reported revenue of $2.4 billion, adjusted earnings of $384.9 million, net income of $257.5 million or $1.85 per share. Net income rose 20 percent from last year, to $181.8 million or $1.31 per share.

Free cash flow in fiscal 2015 was $261.6 million, marking the third straight year in which the company delivered over $250 million in free cash flow.

The strong yearly earnings were driven by strong domestic and international TV performance; a film slate that included hits “The Hunger Games: Mockingjay — Part 1,” “Insurgent” and “John Wick”; increased earnings from its Epix channel and reduced interest expense and lower movie marketing costs.

Lionsgate posted record TV production revenue at $579.5 million in full-year 2015, up 30 percent from a year-earlier $447.4 million. The studio delivered 238 episodes and 168 hours of TV offerings, including series “Anger Management,” “Orange is the New Black,” “The Royals” and “Nurse Jackie.”

The helped offset losses by the overall motion picture segment, which posted revenue in the fiscal year of $1.82 billion, a decline of 17  percent compared to the prior year. Within the group, theatrical revenue in the fiscal year was $354 million compared to $524.7 million in the prior year, due in part to a drop in the number of movies released. Lionsgate rolled out 10 movies in the fiscal year compared to 13 last year. It has 14 scheduled next year including the finale of its blockbuster “Hunger Games” franchise.

Lionsgate’s home entertainment revenue in the fiscal year was $707.5 million compared to $863.9 million in the prior year, which offset home entertainment gains from TV production.

Lionsgate chief executive Jon Feltheimer focused on the positive in a statement released with the earnings numbers.

“We’re pleased to report very strong financial results in fiscal 2015, bolstered by a stellar performance from our television business, complemented by a great year on the strategic front as well,” he said.

“With the launch of new strategic initiatives ranging from location-based entertainment and OTT platforms to video games and virtual reality, exciting new partnerships in China, a robust portfolio of current and future film franchises and the strongest balance sheet in the company’s history, we’re very well positioned to capitalize on opportunities throughout our global environment.”

The results were announced after the close of trading Thursday.

For B. Riley analyst Eric Wold, the takeaway was the increasing potential for Lionsgate’s TV operations.

“While theatrical releases grab the headlines, we continue to believe the improving growth, visibility and margin profile of TV production remains underappreciated – with our projections that the segment could represent 35 percent of revenues in the next few years vs.25 percent for the just-ended fiscal year,” he said.

“As top shows are renewed for additional seasons (recently this included ‘Nashville’ on ABC and ‘Orange is the New Black’ on Netflix), not only does visibility improve, but the value of other shows can move higher along with margins as they enter syndication. We are projecting at least 15 percent to 20 percent growth for fiscal year 2016 and 2017.”