SANTA MONICA, Calif. and VANCOUVER, B.C., Aug. 4, 2016 /PRNewswire/ -- Lionsgate (NYSE: LGF) today reported revenue of $553.6 million, adjusted EBITDA of $40.7 million, adjusted net income attributable to Lionsgate shareholders of $29.5 million or adjusted basic EPS of $0.20, and net income attributable to Lionsgate shareholders of $1.3 million or basic EPS of $0.01 for the first quarter of fiscal 2017 (quarter ended June 30, 2016).
"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," said Lionsgate Chief Executive Officer Jon Feltheimer. "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."
Strong Revenue Gains in Television and Film
Revenue of $553.6 million for the quarter grew 35% from the prior-year quarter driven by strong gains in Television Production revenue as well as revenue gains in all categories of the Motion Pictures segment.
Increased Television Production revenue was led by strong growth in domestic television series licensing and inclusion of $27.3 million in revenue from Pilgrim Media Group which more than offset declines from international television sales and home entertainment revenue from television programming. Domestic television series episodes and hours delivered in the quarter more than tripled those of the prior-year quarter.
Net income attributable to Lionsgate shareholders for the quarter of $1.3 million or basic EPS of $0.01 on 147.2 million weighted average number of common shares outstanding compared to net income attributable to Lionsgate shareholders of $40.7 million or basic EPS of $0.28 on 147.6 million weighted average number of common shares outstanding during the prior year quarter.
Adjusted EBITDA of $40.7 million for the quarter compared to adjusted EBITDA of $71.0 million in the prior year quarter. Adjusted net income attributable to Lionsgate shareholders of $29.5 million or adjusted basic EPS of $0.20 for the quarter compared to adjusted net income attributable to Lionsgate shareholders of $49.3 million or adjusted basic EPS of $0.33 in the prior year quarter.
Declines in adjusted EBITDA and EPS were attributable in part to higher marketing and distribution costs for a theatrical slate that included two wide releases in the quarter compared to no wide theatrical releases with associated marketing costs in the prior year quarter. Increased G&A in the quarter was due in part to one-time professional fees and other costs associated with Lionsgate's agreement to acquire Starz.
Overall Motion Picture segment revenue was $362.5 million in the quarter compared to $275.4 million in the prior year quarter. Theatrical revenue more than doubled in the quarter to $47.2 million due to a larger wide release slate than in the prior year quarter. Television revenues from the Motion Picture segment increased 10% to $53.3 million. Lionsgate's home entertainment revenue from motion picture and television production for the quarter was $150.3 million, a 16% increase from the prior year quarter, reflecting four wide theatrical releases compared to two wide theatrical releases in the prior year quarter.
International Motion Picture segment revenue increased 34% to $113.8 million in the quarter driven by the international box office performance of Now You See Me 2, which has already grossed more than $300 million at the global box office, and the continued performance of the fiscal 2016 releases Gods of Egypt, The Divergent Series: Allegiant, and The Hunger Games: Mockingjay—Part 2 as well as the Lionsgate UK release of Eddie the Eagle.
64 Episodes and 49 Hours of Domestic Television Series Delivered in the Quarter
The Television Production segment continued its strong performance. In the quarter, 64 episodes and 49 hours of domestic television series were delivered, led by Greenleaf, a breakout success in its debut season on OWN, Monica the Medium, Casual, Feed the Beast, Graves, Guilt and Nashville as well as the game and talk shows Family Feud, The Wendy Williams Show and Celebrity Name Game and the reality series The Ultimate Fighter and Street Outlaws from Pilgrim Media Group. International television revenue for the quarter declined compared to the prior year quarter that included revenue from Orange is the New Black's international licensing deal with Netflix.
Lionsgate's filmed entertainment backlog, or already contracted future revenue not yet recorded, exceeded a record $1.5 billion at June 30, 2016.
During the quarter, the Company declared a quarterly cash dividend of $0.09 per common share payable on August 5, 2016 to shareholders of record as of June 30, 2016.
Lionsgate senior management will hold its analyst and investor conference call to discuss its first quarter fiscal 2017 financial results at 5:00 PM ET/2:00 PM PT today, Thursday, August 4. Interested parties may participate live in the conference call by calling 1-800-230-1092 (612-288-0340 outside the U.S. and Canada). A full digital replay will be available from Friday, August 5, through Friday, August 12, by dialing 1-800-475-6701 (320-365-3844 outside the U.S. and Canada) and using access code 398706.
ABOUT LIONSGATE
Lionsgate is a premier next generation global content leader with a diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, international distribution and sales, branded channel platforms, interactive ventures and games, and location-based entertainment. The Company has nearly 80 television shows on 40 different networks spanning its primetime production, distribution and syndication businesses. These include the ground-breaking hit series Orange is the New Black, the fan favorite drama series Nashville, the syndication success The Wendy Williams Show, the breakout series The Royals and the Golden Globe-nominated dramedy Casual.
The Company's feature film business spans eight labels and includes the blockbuster Hunger Games franchise, the Now You See Me, Divergent and John Wick series, Sicario, The Age of Adaline, Roadside Attractions' Love & Mercy and Mr. Holmes, Codeblack Films' Addicted and breakout concert film Kevin Hart: Let Me Explain and Pantelion Films' Instructions Not Included, the highest-grossing Spanish-language film ever released in the U.S.
Lionsgate's home entertainment business is an industry leader in box office-to-DVD and box office-to-VOD revenue conversion rates. Lionsgate handles a prestigious and prolific library of approximately 16,000 motion picture and television titles that is an important source of recurring revenue and serves as a foundation for the growth of the Company's core businesses. The Lionsgate and Summit brands remain synonymous with original, daring, quality entertainment in markets around the world. www.lionsgate.com
For further information, Investors should contact:
James Marsh
310-255-3651
jmarsh@lionsgate.com
For Media inquiries, please contact:
Peter Wilkes
310-255-3726
pwilkes@lionsgate.com
The matters discussed in this press release include forward-looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films and television series, budget overruns, limitations imposed by our credit facility and notes, unpredictability of the commercial success of our motion pictures and television programming, the cost of defending our intellectual property, difficulties in integrating acquired businesses, risks related to our acquisition strategy and integration of acquired businesses, including our proposed acquisition of Starz, the effects of disposition of businesses or assets, technological changes and other trends affecting the entertainment industry, and the risk factors as set forth in Lionsgate's Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the "SEC") on August 4, 2016, which risk factors are incorporated herein by reference. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
June 30, | March 31, | ||||||
(Amounts in thousands, except share amounts) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 69,897 | $ | 57,742 | |||
Restricted cash | 10,801 | 2,906 | |||||
Accounts receivable, net of reserves for returns and allowances of $42,218 (March 31, 2016 - $51,809) and provision for doubtful accounts of $5,939 (March 31, 2016 - $6,014) | 899,721 | 1,049,289 | |||||
Investment in films and television programs, net | 1,429,279 | 1,478,296 | |||||
Property and equipment, net | 42,815 | 43,384 | |||||
Investments | 493,139 | 464,346 | |||||
Goodwill | 534,780 | 534,780 | |||||
Other assets | 67,965 | 69,075 | |||||
Deferred tax assets | 166,863 | 134,421 | |||||
Total assets | $ | 3,715,260 | $ | 3,834,239 | |||
LIABILITIES | |||||||
Senior revolving credit facility | $ | 220,970 | $ | 156,136 | |||
5.25% Senior Notes | 221,240 | 220,796 | |||||
Term Loan | 388,701 | 388,207 | |||||
Accounts payable and accrued liabilities | 288,806 | 377,698 | |||||
Participations and residuals | 650,698 | 607,358 | |||||
Film obligations and production loans | 560,877 | 715,018 | |||||
Convertible senior subordinated notes | 100,555 | 99,984 | |||||
Deferred revenue | 321,566 | 328,244 | |||||
Total liabilities | 2,753,413 | 2,893,441 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interest | 91,776 | 90,525 | |||||
SHAREHOLDERS' EQUITY | |||||||
Common shares, no par value, 500,000,000 shares authorized, 147,638,816 shares issued (March 31, 2016 - 146,785,940 shares) | 903,207 | 885,800 | |||||
Retained earnings | — | 7,584 | |||||
Accumulated other comprehensive loss | (33,136) | (43,111) | |||||
Total shareholders' equity | 870,071 | 850,273 | |||||
Total liabilities and shareholders' equity | $ | 3,715,260 | $ | 3,834,239 | |||
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2016 | 2015 | ||||||
(Amounts in thousands, except per share amounts) | |||||||
Revenues | $ | 553,575 | $ | 408,941 | |||
Expenses: | |||||||
Direct operating | 366,276 | 230,310 | |||||
Distribution and marketing | 125,039 | 71,924 | |||||
General and administration | 78,667 | 60,712 | |||||
Depreciation and amortization | 5,616 | 1,830 | |||||
Total expenses | 575,598 | 364,776 | |||||
Operating income (loss) | (22,023) | 44,165 | |||||
Other expenses (income): | |||||||
Interest expense | |||||||
Cash interest | 12,892 | 10,371 | |||||
Amortization of debt discount and deferred financing costs | 2,342 | 2,254 | |||||
Total interest expense | 15,234 | 12,625 | |||||
Interest and other income | (949) | (600) | |||||
Total other expenses, net | 14,285 | 12,025 | |||||
Income (loss) before equity interests and income taxes | (36,308) | 32,140 | |||||
Equity interests income | 10,846 | 11,388 | |||||
Income (loss) before income taxes | (25,462) | 43,528 | |||||
Income tax provision (benefit) | (26,302) | 2,844 | |||||
Net income | 840 | 40,684 | |||||
Less: Net loss attributable to noncontrolling interest | 414 | — | |||||
Net income attributable to Lions Gate Entertainment Corp. shareholders | $ | 1,254 | $ | 40,684 | |||
Per share information attributable to Lions Gate Entertainment Corp. shareholders: | |||||||
Basic net income per common share | $ | 0.01 | $ | 0.28 | |||
Diluted net income per common share | $ | 0.01 | $ | 0.26 | |||
Weighted average number of common shares outstanding: | |||||||
Basic | 147,215 | 147,619 | |||||
Diluted | 149,611 | 157,498 | |||||
Dividends declared per common share | $ | 0.09 | $ | 0.07 | |||
LIONS GATE ENTERTAINMENT CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2016 | 2015 | ||||||
(Amounts in thousands) | |||||||
Operating Activities: | |||||||
Net income | $ | 840 | $ | 40,684 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 5,616 | 1,830 | |||||
Amortization of films and television programs | 292,394 | 160,419 | |||||
Amortization of debt discount and deferred financing costs | 2,342 | 2,254 | |||||
Non-cash share-based compensation | 21,731 | 16,591 | |||||
Other non-cash items | 1,250 | — | |||||
Equity interests income | (10,846) | (11,388) | |||||
Deferred income taxes | (30,720) | 791 | |||||
Changes in operating assets and liabilities: | |||||||
Restricted cash | (7,895) | — | |||||
Accounts receivable, net | 145,962 | 134,173 | |||||
Investment in films and television programs | (250,011) | (315,861) | |||||
Other assets | 702 | (2,514) | |||||
Accounts payable and accrued liabilities | (70,861) | (95,336) | |||||
Participations and residuals | 43,590 | 29,916 | |||||
Film obligations | 5,518 | (9,218) | |||||
Deferred revenue | (6,523) | 16,776 | |||||
Net Cash Flows Provided By (Used In) Operating Activities | 143,089 | (30,883) | |||||
Investing Activities: | |||||||
Investment in equity method investees | (4,172) | (800) | |||||
Purchases of property and equipment | (2,906) | (3,248) | |||||
Net Cash Flows Used In Investing Activities | (7,078) | (4,048) | |||||
Financing Activities: | |||||||
Senior revolving credit facility - borrowings | 185,000 | — | |||||
Senior revolving credit facility - repayments | (121,000) | — | |||||
Term Loan - borrowings, net of deferred financing costs of $616 in 2015 | — | 24,384 | |||||
Convertible senior subordinated notes - repurchases | — | (5) | |||||
Production loans - borrowings | 63,263 | 203,087 | |||||
Production loans - repayments | (222,730) | (74,276) | |||||
Dividends paid | (13,210) | (10,187) | |||||
Distributions from noncontrolling interest | (2,159) | — | |||||
Excess tax benefits on equity-based compensation awards | — | 45 | |||||
Exercise of stock options | 423 | 3,118 | |||||
Tax withholding required on equity awards | (13,752) | (16,082) | |||||
Net Cash Flows Provided By (Used In) Financing Activities | (124,165) | 130,084 | |||||
Net Change In Cash And Cash Equivalents | 11,846 | 95,153 | |||||
Foreign Exchange Effects on Cash | 309 | (1,300) | |||||
Cash and Cash Equivalents - Beginning Of Period | 57,742 | 102,697 | |||||
Cash and Cash Equivalents - End Of Period | $ | 69,897 | $ | 196,550 | |||
LIONS GATE ENTERTAINMENT CORP.
USE OF NON-GAAP FINANCIAL MEASURES
This earnings release presents EBITDA, Adjusted EBITDA, free cash flow, adjusted net income attributable to Lions Gate Entertainment Corp. (the "Company," "we," "us" or "our") shareholders, and adjusted earnings per share, all of which are important financial measures for the Company but are not financial measures defined by generally accepted accounting principles ("GAAP").
These measures are non-GAAP financial measures as defined in Regulation G promulgated by the Securities and Exchange Commission (the "SEC") and are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with United States ("U.S.") GAAP.
We believe these non-GAAP measures to be meaningful indicators of our performance that provide useful information to investors regarding our financial condition and results of operations and cash flows before non-operating items. These non-GAAP measures are commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. However, not all companies calculate these measures in the same manner and the measures as presented may not be comparable to similarly titled measures presented by other companies.
These measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of operating income, cash flow, net income, or earnings (loss) per share as determined in accordance with GAAP. Definitions and reconciliations of the adjusted metrics utilized to their corresponding GAAP metrics are provided below.
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before interest, income tax provision or benefit, and depreciation and amortization.
Adjusted EBITDA represents EBITDA as defined above adjusted for stock-based compensation, purchase accounting and related adjustments, restructuring and other items, non-cash imputed interest charge, start-up losses of new business initiatives, and backstopped prints and advertising expense.
Free Cash Flow
Free cash flow is defined as net cash flows provided by (used in) operating activities, less purchases of property and equipment, plus or minus the net increase or decrease in production loans, and plus or minus excess tax benefits on equity-based compensation awards if applicable. The adjustment for the production loans is made because the GAAP based cash flows from operations reflects a non-cash reduction of cash flows for the cost of films and television programs associated with production loans prior to the time the Company actually pays for the film or television program. The Company believes that it is more meaningful to reflect the impact of the payment for these films and television programs in its free cash flow when the payments are actually made.
Adjusted Net Income Attributable to Lions Gate Entertainment Corp. Shareholders, and Adjusted Earnings Per Share
Adjusted net income attributable to Lions Gate Entertainment Corp. shareholders is defined as net income attributable to Lions Gate Entertainment Corp. shareholders, adjusted for stock-based compensation, purchase accounting and related adjustments, restructuring and other items, non-cash imputed interest charge net of related interest income, start-up losses of new business initiatives, and backstopped prints and advertising expense, net of taxes at the applicable statutory rate and net of the amounts attributable to noncontrolling interest.
Adjusted earnings per share is defined as adjusted net income attributable to Lions Gate Entertainment Corp. shareholders per weighted average shares outstanding.
LIONS GATE ENTERTAINMENT CORP. RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2016 | 2015 | ||||||
(Amounts in thousands) | |||||||
Net income | $ | 840 | $ | 40,684 | |||
Depreciation and amortization | 5,616 | 1,830 | |||||
Interest, net | 14,285 | 12,025 | |||||
Income tax provision (benefit) | (26,302) | 2,844 | |||||
EBITDA | $ | (5,561) | $ | 57,383 | |||
Stock-based compensation | 22,180 | 16,879 | |||||
Restructuring and other items(1) | 7,431 | — | |||||
Non-cash imputed interest charge(2) | 621 | — | |||||
Purchase accounting and related adjustments(3) | 5,554 | — | |||||
Start-up losses of new business initiatives(4) | 10,376 | 714 | |||||
Backstopped prints and advertising expense(5) | 144 | (3,934) | |||||
Adjusted EBITDA | $ | 40,745 | $ | 71,042 | |||
(1) | Restructuring and other items includes restructuring and severance costs, certain transaction related costs, and certain unusual items, when applicable, included in general and administrative expense. Amounts in the three months ended June 30, 2016 primarily represent professional fees associated with the proposed merger with Starz. |
(2) | Non-cash imputed interest charge represents a charge associated with the interest cost of long-term accounts receivable for Television Production licensed product that become due beyond one-year. |
(3) | Purchase accounting and related adjustments represent the incremental amortization expense associated with the non-cash fair value adjustments on television assets of $4.3 million included in direct operating expense resulting from the application of purchase accounting and the charge of $1.3 million included in general and administrative expense related to the accretion of the noncontrolling interest discount. |
(4) | Start-up losses of new business initiatives represent losses associated with the Company's direct to consumer initiatives including its subscription video-on-demand platforms and Atom Tickets, the first-of-its-kind theatrical mobile ticketing platform and app. For the three months ended June 30, 2016, $6.8 million represents the negative gross contribution (i.e., revenue less direct operating and distribution and marketing expenses) of the consolidated business, $2.7 million is included in the Company's consolidated general and administrative expense and $0.8 million is included in equity interests income. For the three months ended June 30, 2015, $0.7 million is included in equity interests income. |
(5) | Backstopped prints and advertising expense ("P&A") represents the amount of theatrical marketing expense for third party titles that the Company funded and expensed for which a third party provides a first dollar loss guarantee (subject to a cap) that such expense will be recouped from the performance of the film (which results in minimal risk of loss to the Company). The amount represents the P&A expense incurred and expensed net of the impact of expensing the P&A cost over the revenue streams similar to a participation expense (i.e., the P&A under these arrangements are being expensed similar to a participation cost for purposes of the adjusted measure). |
LIONS GATE ENTERTAINMENT CORP. RECONCILIATION OF FREE CASH FLOW TO NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2016 | 2015 | ||||||
(Amounts in thousands) | |||||||
Net Cash Flows Provided By (Used In) Operating Activities | $ | 143,089 | $ | (30,883) | |||
Purchases of property and equipment | (2,906) | (3,248) | |||||
Net borrowings under and (repayment) of production loans | (159,467) | 128,811 | |||||
Excess tax benefits on equity-based compensation awards | — | 45 | |||||
Free Cash Flow, as defined | $ | (19,284) | $ | 94,725 | |||
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS, AND BASIC AND DILUTED EPS TO ADJUSTED NET INCOME ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS, AND ADJUSTED BASIC AND DILUTED EPS | |||||||||||||||||||
Three Months Ended June 30, 2016 | |||||||||||||||||||
(Amounts in thousands, except per share amounts) | |||||||||||||||||||
Income (loss) | Net income (1) | Net income | Basic EPS* | Diluted EPS* | |||||||||||||||
As reported | $ | (25,462) | $ | 840 | $ | 1,254 | $ | 0.01 | $ | 0.01 | |||||||||
Stock-based compensation | 22,180 | 14,084 | 14,084 | 0.10 | 0.10 | ||||||||||||||
Restructuring and other items(3) | 7,431 | 4,730 | 4,730 | 0.03 | 0.03 | ||||||||||||||
Non-cash imputed interest charge(4) | (141) | (90) | (90) | — | — | ||||||||||||||
Purchase accounting and related adjustments(5) | 6,368 | 4,915 | 2,527 | 0.02 | 0.02 | ||||||||||||||
Start-up losses of new business initiatives(6) | 10,934 | 6,943 | 6,943 | 0.05 | 0.04 | ||||||||||||||
Backstopped prints and advertising expense | 144 | 91 | 91 | — | — | ||||||||||||||
As adjusted for items above | $ | 21,454 | $ | 31,513 | $ | 29,539 | $ | 0.20 | $ | 0.19 | |||||||||
Three Months Ended June 30, 2015 | |||||||||||||||||||
(Amounts in thousands, except per share amounts) | |||||||||||||||||||
Income before | Net income (1) | Net income | Basic EPS* | Diluted EPS* | |||||||||||||||
As reported | $ | 43,528 | $ | 40,684 | $ | 40,684 | $ | 0.28 | $ | 0.26 | |||||||||
Stock-based compensation | 16,879 | 10,689 | 10,689 | 0.07 | 0.07 | ||||||||||||||
Start-up losses of new business initiatives(6) | 714 | 460 | 460 | — | — | ||||||||||||||
Backstopped prints and advertising expense | (3,934) | (2,491) | (2,491) | (0.02) | (0.02) | ||||||||||||||
As adjusted for items above | $ | 57,187 | $ | 49,342 | $ | 49,342 | $ | 0.33 | $ | 0.32 | |||||||||
______________________________________
* Basic and Diluted EPS amounts may not add precisely due to rounding
(1) | Represents amounts net of the tax impact calculated using the statutory tax rate applicable to each adjustment. |
(2) | Represents the net income amount adjusted for the portion attributable to noncontrolling interest, if any. |
(3) | Restructuring and other items include amounts presented in Adjusted EBITDA. |
(4) | Represents the non-cash imputed interest charge presented in Adjusted EBITDA net of the related interest income. The amount is a deduction from net income because the interest income exceeded the charge in the quarter. |
(5) | Purchase accounting and related adjustments include amounts presented in Adjusted EBITDA, plus $0.8 million of incremental depreciation and amortization expense associated with the non-cash fair value adjustments to property and equipment and intangible assets resulting from the application of purchase accounting related to the acquisition of Pilgrim Studios. |
(6) | Start-up losses of new business initiatives include amounts presented in Adjusted EBITDA, plus $0.6 million for the depreciation expense associated with these entities for the three months ended June 30, 2016. |
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SOURCE Lionsgate
