Lionsgate Q4 Results Miss Wall Street Estimates As Starz Investment Proves A Drag

John Wick 3
Mandatory Credit: Photo by Eric Charbonneau/REX/Shutterstock (10238238x) General view of atmosphere Lionsgate presents the Los Angeles Special Screening of JOHN WICK: CHAPTER 3 - PARABELLUM at TCL Chinese Theatre, Los Angeles, CA, USA - 15 May 2019

Lionsgate reported fourth-quarter estimates below Wall Street analysts’ expectations after the close of trading Thursday.

Revenue of $913.7 million in the period ending March 31 dropped 12% from $1.04 billion in the year-earlier quarter, falling short of the Street estimate of $949.4 million. Adjusted earnings per share of 11 cents plummeted from 26 cents a year ago and came in well short of the consensus outlook for 19 cents.

The earnings report comes just days after word surfaced that CBS had made an offer to buy Starz for $5 billion, with Lionsgate then countering at a higher price. Starz has been an anchor of stability for the company since being acquired in 2016 for $4.4 billion. In addition to its main linear premium network, the unit has launched streaming services across several international territories and also begun co-ordinating production activities with Lionsgate Television. Starz CEO Chris Albrecht parted ways with the company in February.

For the time being, Starz remains a key priority, though investments in the brand’s international expansion helped drag down the quarterly numbers. Without an incremental increase in funding the global rollout of Starz, the quarterly numbers may well have cleared analysts’ bar. But the return on investment is one reason for interest from would-be suitors like CBS. Starz’s stand-alone streaming offering now has more than 4 million domestic subscribers, and its overall subscriber tally grew 1.2 million to 24.7 million as of the end of the quarter.

The film side of the company has been in a prolonged slump, but John Wick: Chapter 3 – Parabellum has already brought in $105 million worldwide in less than a week in theaters. It is already the company’s first true blockbuster since Wonder, a Thanksgiving 2017 release, but its results are not reflected in the fourth-quarter figures. Instead, the earnings snapshot includes a more middling handful of releases such as The Kid, Tyler Perry’s A Madea Family Funeral and teen romance Five Feet Apart.

On a full-year basis, Media Networks revenue rose 4% to $1.46 billion. Motion Picture revenue hit the same figure from the other direction, plunging 20% to $1.46 billion, a drop the company blamed on “a smaller film slate over the prior year.” Profits on the film side slid 28% to $129 million.

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