Lionsgate LGF.A reported fourth-quarter fiscal 2020 adjusted earnings of 21 cents per share, which came in line with the Zacks Consensus Estimate and improved 90.9% on a year-over-year basis.
Revenues increased 3.3% year over year to $944.3 million but missed the consensus mark by 0.2%.
Markedly, the company reported a charge of $50.5 million during the quarter, owing to the global coronavirus pandemic. This includes development charges pertaining to changes in financial expectations and feasibility of project completions, as well as costs related to the halt in production of film and television projects.
Similar to its Zacks Film & Television Production & Distribution peers like IMAX (NYSE:IMAX) Corporation IMAX and ViacomCBS (NASDAQ:VIAC) VIAC, the coronavirus outbreak negatively impacted Lionsgate’s fourth-quarter results.
Notably, IMAX’s first-quarter 2020 revenues declined significantly due to the closure of substantially the entire theater network of the company. ViacomCBS’ first-quarter 2020 results were negatively impacted by lower ad revenues.
On the other hand, iQIYI IQ benefited from a spike in demand for digital entertainment amid coronavirus-led lockdowns and shelter-in-home guidelines. As of Mar 31, 2020, total subscribers rose 23% year over year to 118.9 million.
Nevertheless, Lionsgate has outperformed IMAX, ViacomCBS and iQIYI on a year-to-date basis.
Year-to-date Performance
Segment Details
Motion Picture (41.6% of revenues) revenues increased 10% year over year to $393.3 million on strong home entertainment performance of Knives Out and other titles. The only theatrical release in the quarter was I Still Believe, which was quickly launched in an exclusive premium video-on-demand window to mitigate loss in theatrical revenues due to coronavirus.
Moreover, the Motion Picture segment raked in a profit of $101.2 million compared with $20.9 million in the year-ago quarter.
Television Production (27.3% of revenues) revenues declined 5.4% year over year to $258 million. The decline was partly offset by strong library sales. Segment loss was $21.5 million, up 10.2% year over year.
The Media Networks segment (37.9% of revenues), formed after the acquisition of Starz, reported revenues of $358 million, down 1.1% year over year. Segment profit declined 71.9% to $25.5 million due to the ongoing investments in STARZPLAY’s international expansion.
Starz Networks revenues declined 4.8% year over year to $337.7 million. STARZPLAY International revenues in the quarter were $9.3 million compared with $1.2 million in the year-ago quarter. Streaming services revenues surged 83.3% year over year to $11 million.
At the end of the quarter, Starz had 24.6 million total global subscribers (from Starz, STARZPLAY Arabia and PANTAYA), up 4.4 million year over year. Global OTT subscribers reached 10.6 million.
Total Media Networks domestic subscribers improved 3.7 million year over year to 22.8 million.
Operating Details
Adjusted OIBDA increased 21.8% year over year to $125.8 million in the reported quarter.
Direct operating expenses, as a percentage of revenues, expanded 140 basis points (bps) on a year-over-year basis to 59.7%.
Moreover, distribution and marketing expenses, as a percentage of revenues, contracted 190 bps on a year-over-year basis to 23%.
General & administrative expenses, as a percentage of revenues, were almost flat year over year at 12%.
Operating loss was $12 million in the reported quarter compared with operating loss of $34 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents were $318.2 million compared with $195.5 million as of Dec 31, 2019.
Moreover, as of Mar 31, 2020, total film obligations and production loans amounted to $353.7 million compared with $$286.8 million as of Dec 31, 2019.
Net cash flow from operating activities was $180.3 million at the end of the reported quarter, compared with $215.9 million in the previous quarter.
Adjusted free cash flow was $175 million compared with free cash flow of $88.4 million in the previous quarter.
Outlook
Due to coronavirus induced uncertainties prevailing in the market, Lionsgate, which carries a Zacks Rank #3 (Hold), did not provide any specific forecast for fiscal 2021 adjusted OIBDA. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nevertheless, the company expects Media Networks OTT subscribers to be in the range of 13 million to 15 million in fiscal 2021.
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