Massive Tax Break and Strong Box Office Push Lionsgate Past Q3 Wall Street Earnings Expectations

Studio saved $165 million from a lower tax rate, company reported on Thursday

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A massive one-time tax cut and a strong performance at the box office pushed Lionsgate to a better than expected third quarter, with the studio reporting a nearly $200 million profit on Thursday.

After markets closed, the studio reported $1.14 billion in revenue and earnings of 87 cents a share for the three months ended December 31, which the company classifies as its fiscal third quarter. The sales and earnings beat analyst expectations of $1.08 billion in revenue and 25 cents EPS, respectively.

Earnings were bolstered by $165 million stemming from a lower tax rate, with net income coming out to $193 million. The strong quarter comes amid reports Lionsgate is a potential takeover target.

Lionsgate CEO Jon Feltheimer said the quarter pushed the company to resume its quarterly cash dividend, which the company suspended in 2016.

“Our strong performance in the quarter, with robust contributions from our Motion Picture Group and Starz, keeps us on track for our fiscal year expectations,” said Feltheimer in a statement accompanying earnings. “With this financial strength, we’re pleased to announce that our Board has approved the resumption of our quarterly cash dividend, returning value to our shareholders as we continue to grow our Company.  Despite a disruptive operating environment, the quarter shows our success in creating premium content that cuts through the clutter of a crowded marketplace and our ability to supply it to a diverse array of media companies.”

The company will resume its quarterly cash dividend at $0.09 per common share.

Lionsgate released five films during the quarter, with “Wonder,” the Owen Wilson-Julia Roberts coming-of-age drama, leading the way at the box office with $277 million pulled in. The studio also released “Jigsaw,” “Tyler Perry’s Boo 2!,” “My Little Pony: The Movie,” and Richard Linklater’s small comedy-drama “Last Flag Flying.” Motion picture revenue was up 14 percent year-over-year to $539.1 million, while registering $54.3 million in profit.

It was a quiet quarter for its TV business,with revenue dropping about 2 percent year-over-year to $227.3 million. Lionsgate didn’t offer much news on Starz — which had about 2 million subscribers coming into the quarter — but its media networks division did see a revenue increase of 6 percent to $382 million.

Lionsgate shares fell more than 3 percent to about $30 on Thursday, but jumped 1 percent after earnings were reported.

The company will hold a conference call to discuss the earnings report at 5:00 p.m. ET.