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Lionsgate Soars Past Q1 Earnings Expectations, Stock Rises

Lionsgate reported revenue of $554 million and earnings of 20 cents per share, driven by strong TV performance

Mini-major studio Lionsgate once again relied on the small screen to carry the weight, as its TV business carried the studio to quarterly earnings that soared past expectations and sent the stock rising 4 percent in after-hours trading.

Lionsgate reported revenue of $554 million and earnings of 20 cents a share for the three months ending June 30, which it classifies as the first quarter of fiscal 2017. That handily topped consensus analyst estimates of $494 million in revenue and a loss of 17 cents a share.

Lionsgate’s film studio has had a rocky road of late, with “Gods of Egypt” and especially “Allegiant” going down as major disappointments. But revenue was still up by nearly $100 million over the same period the previous year, as more releases made up for some of the blockbusters that didn’t quite deliver. TV, however, continues to be a strong point, highlighted by hits such as “Greenleaf” and “The Ultimate Fighter.”

But the quarterly performance was overshadowed by Lionsgate’s big purchase. On June 30, the company announced a long-anticipated $4.4 billion acquisition of premium cable network Starz. Billionaire media mogul John Malone has a substantial stake in both companies.

“In addition to a very solid performance across all of our businesses, the most significant development in the quarter was our agreement to acquire Starz,” Lionsgate CEO Jon Feltheimer said in a statement accompanying the earnings.  “Upon closing, it will be the largest and most transformative transaction in our history. The combination will accelerate the growth and diversification of both companies, deepening our portfolio of content, expanding our access to distribution, streamlining our pathways to the consumer and unlocking enormous opportunities for future growth.”

Lionsgate, which is the seventh-largest studio by market share this year, with 4.2 percent of box office revenue, had been a hotly speculated acquisition target before its union with Starz. It was one of the few publicly traded “pure play” studios, unlike competitors like Universal, Disney, Fox and Warner Bros., all of which are part of media conglomerates that also include linear TV networks that have come under pressure from cord-cutting.

In a joint Aug. 1 filing, Lionsgate and Starz projected that the combined company would have 2017 revenue of $4.6 billion and a film and TV library containing 16,000 titles. Lionsgate and Starz also said that they would realize $50 million in cost synergies and annual tax savings of $150 million. Lionsgate has a favorable Canadian tax domicile.

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