Lions Gate Entertainment Corp. Delivers Earnings Growth From the Starz Merger

By Anders

TV and cinema content-producer Lions Gate Entertainment (NYSE: LGF-A) (NYSE: LGF-B) reported earnings on Thursday night, covering the fourth quarter of fiscal year 2017. This was the first full quarter reported since Lions Gate closed its merger with premium cable TV network Starz, which explains why some of the year-over-year comparisons below might look a bit extreme.

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On that note, let's dive in and take a closer look at the quarter's results.

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

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Data source: Lions Gate.

What happened with Lions Gate this quarter?

  • The company also provided some non-GAAPresults where the year-ago figures represent the combined numbers from Starz and Lions Gate. On that basis, combined revenues rose 2%, to $1.26 billion. Gross margins increased from 19.5% to 20.5%, and operating costs fell 13%, led by efficiencies in the media-networks and motion-pictures divisions. Adjusted operating income before depreciation and amortization (OIBDA) profits increased 27% over the combined year-ago total, landing at $163 million.
  • Motion-picture sales increased 7% year over year, driven by award-winning blockbuster La La Landand Keanu Reeves' vehicle John Wick: Chapter Two.
  • Combined TV production revenues slid 3.5% lower, mostly due to difficult year-over-year comparisons to a Q4 2016 that included a global order for four seasons of Orange Is the New Black from Netflix (NASDAQ: NFLX). No comparably huge deal was completed in this period.
  • Lions Gate reported a $1.4 billion backlog of already contracted film and TV content license sales not yet recorded, down from $1.5 billion a year earlier. Starz did not track and report this metric when it was a separate business.

What management had to say

In a prepared statement, Lions Gate CEO Jon Feltheimer applauded the fourth quarter as "a great finish to a strong year."In particular, he seemed pleased with the progress of the media-networks division, formerly known as Starz.

"Our film slate ended fiscal 2017 with an impressive box office run, our Television Group turned in another standout performance and Starz had a great year," Feltheimer said. "We couldn't be more pleased with how successfully we're integrating them into our operations and, working together, unlocking fresh opportunities."

Image source: Getty Images.

Looking ahead

It's still early, and it will take some time to get a real read on Lions Gate's synergies and cost savings.That being said, Starz added strong bottom-line profits from day one, and the eponymous cable network grew its subscriber total from 24 million to 24.2 million names.

The marriage of Lions Gate's content-production muscle and Starz's distribution know-how is off to a good start.

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Anders Bylund owns shares of Netflix. The Motley Fool owns shares of and recommends Lions Gate Entertainment (Class A and B shares), and Netflix. The Motley Fool has a disclosure policy.