Lions Gate Entertainment Corp. Earnings: Sales Grow 34%

By Markets Fool.com

Image source: Getty Images.

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Thursday night, content-production studio Lions Gate Entertainment (NYSE: LGF) released its results for the second quarter of fiscal year 2017. The report caught both analysts and investors off guard, and Lions Gate shares rose as much as 13.4% in Friday's regular trading session.

Lions Gate's second-quarter results: The raw numbers

Q2 2017 Actuals

Q2 2016 Actuals

Growth (Year Over Year)

Revenue

$639.5 million

$476.8 million

34%

Net income attributable to shareholders

($17.3 million)

(42.1 million)

N/A

GAAP EPS (diluted)

($0.12)

($0.28)

N/A

Source: Lions Gate.

What happened with Lions Gate this quarter?

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This was one of the last financial reports from Lions Gate as a stand-alone business, as the pending merger with Starz (NASDAQ: STRZA) (NASDAQ: STRZB) draws to a close.

  • The motion picture group screened seven new releases in the second quarter, up from just three new titles in the year-ago period. Revenues in that segment jumped 34% higher.
  • On the television side of the house, sales increased by 43% thanks to the recent acquisition of Pilgrim Media Group and a more profitable slate of television episodes delivered to broadcasters during the quarter.
  • International motion-picture revenues jumped 56% higher and accounted for 26% of Lions Gate's total sales. That boost rested on the strong overseas performance of crime-thriller sequel Now You See Me 2.

Management did not offer any guidance for the third quarter or full year. Given the impending completion of the game-changing Starz acquisition, the company didn't even update its long-term EBITDA goals.

What management had to say

The Starz deal is expected to close in the fourth quarter, unlocking $50 million in annual operating cost synergies and $150 million of cash tax savings per year. The deal financing is all figured out, and CFO Jimmy Barge stated that he is "very pleased with the lender community reception."

All the necessary regulatory clearances have already been issued, and the only remaining speed bump is the upcoming shareholder vote. So far, Lions Gate's management sees no reason to worry about the outcome of that vote because Starz has been holding up its end of the performance equation recently:

Accprdomg tp Feltheimer:

Starz performance during their latest quarter reflects their growing momentum and reaffirms our belief that we're bringing our two companies together at exactly the right time. The Starz network continues to achieve steady subscriber gross, up 1.2 million year over year and 300,000 in the latest quarter. The Starz Over The Top offerings also continued to build their subscriber base, reaching nearly 1 million subscribers in 10 months, across an increasingly diverse array of platforms including the rollout last quarter on Xbox One.

Looking ahead

We'll probably see the Starz transformation take place within the next six months. The two companies have issued a joint proxy statement for their shareholder voting events, but the date was left blank.

If and when Starz joins forces with Lions Gate, the resulting company will be a very different beast, indeed. Stay tuned for more updates.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Lions Gate Entertainment. The Motley Fool also recommends Starz. Try any of our Foolish newsletter services free for 30 days.

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