Lionsgate, the Santa Monica studio and owner of the Starz cable network, came in well above market expectations as it reported results for its third quarter Thursday. It pulled in $1 billion in revenue and $16.6 million in net income, for adjusted earnings per share of $0.26.
The results reflected a welcome development for a smaller studio trying to survive in an industry pushed to prioritize streaming over theatrical and linear television. That Wall Street-driven new normal arguably penalizes smaller-scale entertainment companies while encouraging consolidation and mergers.
Wall Street had predicted a loss of two cents per share for the third quarter, against a loss of $0.12 per share in the prior quarter and earnings of $0.02 per share in the same quarter a year ago, according to a survey by Zacks Investment Research.
“We reported a strong financial quarter with record trailing 12-month library revenues affirming the value of our intellectual properties,” said Lionsgate CEO Jon Feltheimer.
The mini-major has been mostly on the sidelines in terms of theatrical exhibition, partially due to ever-shifting COVID concerns, with last quarter’s only theatrical releases being “Prey for the Devil” and “Alice, Darling.” This year is expected to be critical for the studio in that department. Lionsgate has several offerings from some of its biggest active IP, including sequels to “John Wick,” “Expendables” and “Saw” along with a “Hunger Games” prequel arriving at year’s end.
Starz has built a reputation for rescuing canceled shows with completed seasons such as the second season of HBO’s “Minx” and the first season of Showtime’s preemptively canceled “Three Women.” The network also hosts popular shows such as “Power” and “Outlander.” It’s even reviving a show it canceled, bringing back the “Spartacus” franchise after 10 years.
The cable channel has also been a solid revenue generator, with a subscriber total of over 37 million worldwide, or 26 million not counting STARZPLAY Arabia. The company said plans to spin off Starz and the studio into two separate companies remained on track and expected to complete the process by September.
Lionsgate shares closed down 5% to $8.25 in the regular session Thursday, but regained those losses in early after-market trading following the release of earnings, rising 5.5% to $8.70.
“We enter our fourth quarter with encouraging signs across all of our businesses: a rebounding domestic box office just as we bring our biggest slate in years to theatres; renewals of six key Lionsgate Television series during or immediately,” said Feltheimer in the company’s release announcing its earnings.
The company is under pressure to make some moves to shore up its finances. Fitch Ratings recently revised the outlook on Lionsgate debt from “stable” to “negative,” reflecting uncertainty about theatrical performance and a belief that exhibition will not return to pre-COVID levels.
