Lionsgate saw a significant downward turn in its third quarter earnings, with the company suffering a quarterly loss of $163 million amid box office struggles and lingering impacts of last year’s strikes on its television division.
In a statement, CEO Jon Feltheimer acknowledged the poor results.
“In a transitional, disrupted and difficult year for our industry, we reported disappointing financial results in the quarter,” Feltheimer said. “Our performance underscores the need to adhere even more rigorously to the risk mitigated business models, slate diversification and strict financial discipline that have always served us well.”
“The combination of a return to strong content slates, the continued stellar performance of our film and television library and sure-handed execution will put us back on the path to solid growth and shareholder value creation,” he continued.
Here are the top line results:
Revenue: $948 million, down 7% year-over-year from $1.02 billion.
Net Loss: $163.3 million, a marked improvement from a net loss of $886.2 million in the prior-year period.
EPS Projections Missed: Adjusted net loss attributable to Lionsgate shareholders in the quarter was $102.5 million, or 43 cents adjusted diluted net loss per share, worse than the 35 cent loss projected by Zacks Investment Research.
Segment profit for the TV division came in at $24.4 million on revenue of $416.6 million.
The media networks revenue, which consists primarily of Starz Networks, fell to $347 million, against a year-earlier $416.5 million.
“Borderlands” bust
The sharpest drop seen on Lionsgate’s report was in its motion picture division, where segment profit plummeted from $67.5 million a year ago to just $2.6 million now. Lionsgate attributed the falloff to the severe underperformance of multiple films released this past quarter, most notably the action-comedy “Borderlands,” directed by Eli Roth, which was a $110 million co-production that only grossed $32.9 million worldwide.
The cost of “Borderlands” and other productions weighed against the $407 million in revenue generated by the motion picture division, which ticked up 3% year-over-year.
“On ‘Borderlands,’ nearly everything that could go wrong did go wrong,” Feltheimer said on an earnings call on Thursday. “It sat on the shelf for too long during the pandemic, and reshoots and rising interest rates took it outside the safety zone of our usual strict financial models.”
But Feltheimer chalked up the recent slump to quality issues and asserted that “our business model still works: risk-mitigated film and television slates, efficient production and marketing spends, a diversified portfolio of assets, and a strong library that serves as the ballast of our business, generating nearly $900 million in trailing 12-month revenue in the quarter.”
M&A still looms
While Feltheimer expressed his optimism for a turnaround in 2025, Hollywood is bracing for another wave of consolidation following Tuesday’s election results, anticipating a Trump Administration that will approve mergers at a rapid pace. Feltheimer acknowledged that Lionsgate could be one of the major companies involved.
“It is obvious there is huge dislocation about to happen in the business,” he said. “People are going to question whether this vertical integration works…and there is going to be a lot of relocation.”
Lionsgate is hoping to turn its fortunes around in 2025 with films like the “John Wick” spinoff “Ballerina,” the Aziz Ansari/Keanu Reeves comedy “Good Fortune,” the horror sequel “Saw XI,” and Antoine Fuqua’s music biopic “Michael,” which just moved its release from April to October.
The company also recently completed the separation of Starz from its studio business, pending regulatory approval, listing Lionsgate Studios on NASDAQ and is looking to build TV revenue by increasing production output and launching new ad-supported streaming channels.
“After the separation [of Lionsgate and Starz] there will be a lot of optionality and flexibility,” Feltheimer said. “Will both of the sides of our business be involved in that conversation? I would say that is extremely likely.”
Lionsgate Entertainment’s stock price closed Thursday at $8 a share and has been holding steady there in after-hours trading. Lionsgate Studios, was up almost $5 a share in after-hours trading at $6.58 a share.
