LIONSGATE REPORTS RESULTS FOR SECOND QUARTER 2016

SANTA MONICA, Calif. and VANCOUVER, Nov. 9, 2015 /PRNewswire/ -- Lionsgate LGF today reported revenue of $476.8 million, adjusted EBITDA of negative $8.1 million, adjusted net loss of $28.4 million or adjusted net loss per share of $0.19, and net loss of $42.1 million or net loss per share of $0.28 for the fiscal 2016 second quarter ended September 30, 2015.

The Company's financial results in the quarter were affected by timing of episodic television deliveries and the shift of the wide release of the film Sicario into October.  Although the move contributed to the film's solid box office performance, it resulted in its marketing costs being recorded in the September quarter without significant offsetting revenue benefit.  In addition, the wide release American Ultra underperformed during the quarter.  The Company also recorded a write-down of $7.2 million on The Last Witch Hunter, a film released after the quarter.

"Although this quarter will be the lightest of the year due to timing and softer-than-anticipated performance of some of our recent film releases, our robust film and television pipelines position us for a very strong second half of the year," said Lionsgate Chief Executive Officer Jon Feltheimer.

Adjusted EBITDA of negative $8.1 million for the quarter compared to adjusted EBITDA of $59.0 million in the prior year quarter.  Adjusted net loss of $28.4 million or adjusted net loss per share of $0.19 for the quarter compared to adjusted net income of $33.0 million or adjusted EPS of $0.24 in the prior year quarter. 

Net loss for the quarter was $42.1 million or net loss per share of $0.28 on 148.3 million weighted average number of common shares outstanding compared to net income of $20.8 million or EPS of $0.15 on 137.4 million weighted average number of common shares outstanding during the prior year quarter.

Revenue of $476.8 million for the quarter compared to $552.9 million in the prior year quarter.

Lionsgate Increases Quarterly Cash Dividend

During the quarter, the Company increased its quarterly cash dividend by 29% from $0.07 to $0.09 per common share payable on November 10, 2015 to shareholders of record as of September 30, 2015.

Company Reports Combined Cash Balance and Availability of Over $970 Million and Filmed Entertainment Backlog of $1.2 Billion

The Company reported a combined cash balance and availability on its revolving credit facility of over $970 million at September 30, 2015.

Lionsgate's filmed entertainment backlog, or already contracted future revenue not yet recorded, was approximately $1.2 billion at September 30, 2015.

Overall Motion Picture segment revenue for the quarter was $354.0 million compared to $398.0 million in the prior year quarter.  Theatrical revenue declined to $26.3 million with only two wide releases in the quarter, American Ultra and Shaun the Sheep.

As noted above, the wide release of the critically-acclaimed revenge thriller Sicario was moved to October 2^nd and its performance will be reflected in a third quarter that also includes the release of the eagerly-anticipated fourth installment of the Company's global blockbuster Hunger Games franchise, The Hunger Games: Mockingjay – Part 2.  Mockingjay 2 will roll out in 86 territories around the world on November 20th, the biggest simultaneous global launch in the Company's history.

Scheduled wide releases in the fourth quarter include the next film in the hit Divergent series, Allegiant, the visual effects-driven Gods of Egypt and the buddy comedy Dirty Grandpa, starring Robert De Niro and Zac Efron.

Lionsgate's home entertainment revenue from motion picture and television production for the quarter was $153.5 million compared to $164.4 million in the prior year quarter due to fewer wide release theatrical titles and product mix.  The hit film Insurgent performed well on packaged media, VOD and electronic sell-through during the quarter.

Television revenue included in the Motion Picture segment of $59.9 million in the quarter compared to $69.4 million in the prior year quarter.

International Motion Picture segment revenue for the quarter was $107.8 million compared to $112.9 million in the prior year quarter. 

Television production segment revenue was $122.8 million in the quarter compared to $154.9 million in the prior year quarter due to timing of episodic deliveries.  Deliveries of the critically-acclaimed hit series Orange is the New Black, Nashville and The Royals are expected to drive revenue growth in the second half of the year.  The Company continues to deepen its pipeline of original new series including Casual and Freddie Wong/RocketJump for Hulu, Broke for AMC, Guilt for ABC Family and Graves for Epix.

Lionsgate senior management will hold its analyst and investor conference call to discuss its fiscal 2016 second quarter financial results at 9:00 A.M. ET/6:00 A.M. PT on Tuesday, November 10, 2015.  Interested parties may participate live in the conference call by calling 1-800-230-1059 (612-234-9959 outside the U.S. and Canada).  A full digital replay will be available from Tuesday morning, November 10, through Tuesday, November 17, by dialing 1-800-475-6701 (320-365-3844 outside the U.S. and Canada) and using access code 371505.

ABOUT LIONSGATE

Lionsgate is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, new channel platforms, video games and international distribution and sales. The Company currently has over 30 television shows on more than 20 networks spanning its primetime production, distribution and syndication businesses, including such critically-acclaimed hits as Orange is the New Black, the multiple Emmy Award-winning drama Mad Men, the broadcast network series Nashville, the syndication success The Wendy Williams Show, the drama series Manhattan and the breakout comedy The Royals.

Its feature film business has been fueled by such successes as the blockbuster first three installments of The Hunger Games franchise, the first two installments of the Divergent franchise, Sicario, The Age of Adaline, John Wick, CBS Films/Lionsgate's The Duff, Now You See Me, Roadside Attractions' Love & Mercy and Mr. Holmes 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 rate. The Company 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 the 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.

For further information, please contact:
Peter D. 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, 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 November 9, 2015, 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.

 

 

 

 

 

EBITDA is defined as earnings before interest, income tax provision or benefit, and depreciation and amortization. EBITDA is a non-GAAP financial measure.

Adjusted EBITDA represents EBITDA as defined above adjusted for stock-based compensation, restructuring and other items, start-up losses of new business initiatives, loss on extinguishment of debt, and backstopped prints and advertising expense. Adjusted EBITDA is a non-GAAP financial measure.

We believe EBITDA and Adjusted EBITDA to be meaningful indicators of our performance that provide useful information to investors regarding our financial condition and results of operations. EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. While we consider EBITDA and Adjusted EBITDA to be important measures of comparative operating performance, they should be considered in addition to, but not as a substitute for, net income (loss) and other measures of financial performance reported in accordance with GAAP. EBITDA and Adjusted EBITDA do not reflect cash available to fund cash requirements. Not all companies calculate EBITDA or Adjusted EBITDA in the same manner and the measures, as presented, may not be comparable to similarly-titled measures presented by other companies.

 

 

Free cash flow is defined as net cash flows used in operating activities, less purchases of property and equipment, plus or minus the net increase or decrease in production loans, 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.

Free cash flow is a non-GAAP financial measure as defined in Regulation G promulgated by the Securities and Exchange Commission. This non-GAAP financial measure is in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

We believe this non-GAAP measure provides useful information to investors regarding cash that our operating businesses generate whether classified as operating or financing activity (related to the production of our films and television programs) within our GAAP based statement of cash flows, before taking into account cash movements that are non-operational. Free cash flow is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry. Not all companies calculate free cash flow in the same manner and the measure as presented may not be comparable to similarly titled measures presented by other companies.

 

 

This reconciliation is provided to illustrate the difference between our EBITDA and free cash flow which are both separately reconciled to their corresponding GAAP metrics.

 

 

Adjusted income (loss) before income taxes, adjusted net income (loss) and adjusted basic and diluted EPS are adjusted for the following items (the adjustment to net income (loss) is net of the tax impact calculated using the statutory tax rate applicable to each adjustment):

(1) Stock-based compensation: Adjustments for stock-based compensation represents compensation expenses associated with stock options, restricted share units, cash and equity settled SARs.

(2) Restructuring and other items:  Adjustments for restructuring and severance costs, certain unusual items, and certain transaction related costs, when applicable.  Amounts in the three and six months ended September 30, 2015 represent pension withdrawal costs of $2.7 million related to an underfunded multi-employer pension plan and professional fees associated with certain strategic transactions. Amounts in the six months ended September 30, 2014 primarily represent  severance costs associated with the integration of the marketing operations of the Company's Lionsgate and Summit film labels and costs related to the move of our international sales and distribution organization to the United Kingdom. A portion of these costs are non-cash charges resulting from the acceleration of vesting of stock awards.

(3) Start-up losses of new business initiatives:  Adjustments for losses associated with the Company's direct to consumer initiatives including subscription video-on-demand platforms and Atom Tickets, a theatrical movie discovery service.

(4) Backstopped prints and advertising expense: This adjusts income (loss) before income taxes and net income (loss) to eliminate 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 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). The amount is subtracted in the three and six months ended September 30, 2015 because there was no additional backstopped P&A expense incurred in the period and the amount represents the estimated amortization of the amounts previously added back.

(5) Loss on extinguishment of debt: This adjusts income before income taxes and net income to eliminate the loss on extinguishment of debt.

We believe that these non-GAAP measures provide useful information to investors regarding the Company's results as compared to historical periods. The Company uses these measures, among other measures, to evaluate the operating performance of the Company. The Company believes that the adjusted results provide relevant and useful information for investors because they clarify the Company's actual operating performance and allow investors to review our operating performance in the same way as our management. Since these measures are not calculated in accordance with generally accepted accounting principles, they should not be considered in isolation of, or as a substitute for income (loss) before income taxes, net income (loss), basic and diluted EPS. Not all companies calculate adjusted income (loss) before income taxes, adjusted net income (loss), and adjusted basic and diluted EPS in the same manner and the measures as presented may not be comparable to similarly titled measures presented by other companies.

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SOURCE Lionsgate