Pulling back to 9-month lows this afternoon, shares of film studio Lions Gate Entertainment (LGF.A 26.81, -3.76 -12.3%) trade firmly lower despite a strong Q3 revenue showing with strength out of the Motion Picture segment and the Television Production segment. Investors are scrutinizing the studio’s guidance that Fiscal Year 2019 Motion Picture segment growth profits will be down before returning to growth in FY 2020.
It appears a setback is afoot at Lionsgate. The weakness today stems from comments made on the conference call last night wherein management highlighted the growth that was originally anticipated in FY19 will now likely be pushed back a year to FY20. As the company ramps investment in content and its over-the-top platform PANTAYA (first-run movies from Lionsgate, Pantelion, and Hemisphere Media), returns will likely be pushed out slightly longer than the company had anticipated.
Specifically, Lionsgate thinks the CAGR for the three years ended FY2020 will more likely be in the mid-to-high single digit range. Lionsgate also anticipates growth in the TV and Media Networks segments will be somewhat offset by the aforementioned weakness in the Motion Picture Group, where timing of releases and a smaller film slate will offset gains in other areas.
Swinging back to earnings, Lionsgate reported a Q3 beat; earnings of $0.48 per share and revenues of $1.14 billion, up 51% compared to a year ago, were good enough to beat market expectations in both regards. However, with Lionsgate’s acquisition of Starz, fiscal Q3 2018 results are not directly comparable to the prior reporting periods.
The surge in revenues was due mostly to the growth out of the Motion Picture business, which saw revenues grow about 14% to $539.1 million with strong box office showings from Wonder, and continued strong international performances from La La Land and American Assassin.
Television Production revenues were mostly flat at $227.3 million compared to $231.0 million as year ago as increased revenues from deliveries of television series were partially offset by a decrease in syndicated licensing revenues.
The Media Networks segment saw growth of 6% to $382.9 million driven by higher OTT revenue growth and revenues from worldwide digital media licensing arrangements, but offset in part by subscriber losses at certain MVPD's. The Starz business ended the quarter with 24 million subscribers.
The company’s backlog, or already contracted future revenue on the licensing of film and television product not yet recorded, was $1.2 billion at December 31, 2017.
The film slate shakeup and the CAGR guidance pushes the stock lower into the weekend. Into the print, LGF.A was down about 8.1% thus far in 2018 as weakness in the last week has exacerbated the decline.