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‘La La Land’ Helps Lionsgate Hit the Right Notes With Strong Q3 Earnings

Studio reported a profitable quarter behind award-winning films and TV hits

Lionsgate has dominated awards season so far, and the mini-major studio started 2016 by beating earnings-per-share expectations in its first report since acquiring Starz late last year.

A few minutes after markets closed Wednesday, the mini-major studio reported revenue of $752 million and adjusted earnings of 21 cents a share for the three months ended Dec. 31, which Lionsgate classifies as its fiscal third quarter. That compares with $671 million in revenue and earnings of 26 cents a share the company made during the corresponding period last year. It also topped analyst estimates of 13 cents a share in earnings, although Lionsgate fell short of projected revenue of $762 million.

Lionsgate actually reported a net loss of $31 million, but that was primarily due to $52 million in restructuring costs related to its Starz acquisition.

“We’re pleased to report increased profits across our film, television and media networks divisions as well as another strong revenue performance from our Television Group,” Lionsgate Chief Executive Officer Jon Feltheimer said in a statement accompanying the earnings. “We’ve just completed one of our busiest and most productive quarters ever as we continue to scale our global content platform and integrate Starz into our operations. Our strong film and television offerings are now complemented by our Starz premium network that is becoming a ‘must-have’ value proposition for the digital age.”

Lionsgate’s movie studio placed seventh with just 5.8 percent market share, but it’s had an outsize impact on awards season, particularly its musical love story to Los Angeles, “La La Land.” The Damien Chazelle-directed film starring Ryan Gosling and Emma Stone won a record seven Golden Globes (sweeping each category in which it was nominated) and has picked up a record-tying 14 Oscar nominations. The studio nabbed a robust 26 Oscar nods in total, with “Hacksaw Ridge” and “Hell or High Water,” released in partnership with CBS Films, also receiving multiple nominations. That Oscar buzz has helped “La La Land” to nearly $270 million in worldwide gross on an estimated $30 million budget, making it one of Lionsgate’s biggest success stories of the year.

While much of “La La Land’s” revenue will count toward Lionsgate’s upcoming quarter, as the film went into wide release in late December and benefited from a January awards push, cost-cutting in production and marketing helped the film division increase its profits by 55 percent even though revenue dipped 13 percent from the same period last year. While the 2015 holiday season had “The Hunger Games: Mockingjay Part 2,” strong performances from fall and winter films including Tyler Perry’s “Boo! A Madea Halloween,” which has reeled in $75 million on an estimated $20 million budget, kept revenue from declining too much.

The company’s small screen business has also been a strong performer in recent months, as Lionsgate produces hit TV shows including “Orange Is the New Black,” which will have its fifth-season premiere June 9 on Netflix. Lionsgate’s TV production division reported a robust 39 percent gain in revenue, with profits up a whopping 117 percent.

Lionsgate split its stock into two share classes following its December acquisition of cable network Starz for $4.4 billion. The move gives Lionsgate’s TV and movie business a predictable subscription revenue stream — and a potential home for some of its content. Lionsgate hosted an investor day last month at Starz’ Colorado headquarters, where executives discussed plans for the combined company — including a “hypercharge” of its nascent streaming services.

Under the terms of the deal, each share of Lionsgate common stock was reclassified into half voting shares (trading as LGF.A) and half newly-created non-voting shares (LGF.B). Lionsgate’s A-shares are up 4 percent year-to-date, while the company’s B-shares have risen 6 percent since the start of the year.