Like many of its peers, Lions Gate Entertainment (NYSE:LGF-A) (NYSE:LGF-B) has been the victim of a changing media landscape. The advent of streaming and the ongoing phenomenon of cable-cutting have weighed on the company, and its stock price is roughly the same as it was two years ago.

Going into its fourth-quarter earnings report, investors were looking for signs that the company's transition was gaining traction -- and they were not disappointed.

Julia Robert as "Isabel" and Owen Wilson as "Nate" starring in the film Wonder.

Julia Roberts as "Isabel" and Owen Wilson as "Nate" starring in the film Wonder. Image source: Lions Gate.

Lions Gate results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$1.04 billion

$1.26 billion

(17.2%)

Operating income

$48.4 million

$71.3 million

(32.1%)

Diluted earnings per share

$0.41

$0.28

46%

Data source: Lions Gate Fourth-Quarter 2018 Financial Release. Chart by author.

What happened at Lions Gate this quarter?

Lions Gate reported revenue of $1.04 billion, down 17% year over year, but exceeding analysts' consensus estimates for $1.03 billion. The company reported adjusted operating income of $136 million, down 16% compared to the prior-year quarter, but better than analyst expectations for $121.5 million. Adjusted earnings per share of $0.25 was less than half the $0.59 produced in the year-ago quarter, but also exceeded estimates of a loss of $0.01 per share.

The company's motion picture business generated revenue of $425 million, down 35% year over year, and profit slipped 44% to $29 million compared to the prior-year quarter. The segment was negatively affected by tough year-over-year comps, having received material contributions from La La Land, Deep Water Horizon, The Shack, and John Wick Chapter 2 in the fourth quarter of last year.

Television production revenue of $253 million increased 4% compared to the year-ago quarter, but the segment's profit of $23 million jumped 77% year over year. The improvements were the result of timing of both scripted and unscripted shows.

Media networks revenue of $366 million declined 1% versus the prior-year quarter, and profits for the unit of $115 million declined 8% year over year, due to difficult comps. In the year-ago quarter, the company licensed a significant amount of the original content library from its Starz premium cable channel. Additionally, Starz's growth actually increased 3% during the quarter, despite a temporary service disruption with a cable operator. Excluding that disruption, revenue would have been up 5%.

Lions Gate also announced that it had extended an existing deal with Amazon (NASDAQ:AMZN) Prime Video, which will launch StarzPlay on Amazon's platform in both the U.K. and Germany. This service is already available in the U.S. and allows Prime members to add channel subscriptions -- like Starz -- for a low monthly subscription fee.

"Our strong quarter capped a successful year in which we exceeded our internal and consensus financial expectations with significant contributions across our film, television and Starz platforms," said Lions Gate CEO Jon Feltheimer. "We enter fiscal 2019 well positioned to continue growing our worldwide content platform, deepening our key talent relationships, and rolling out Starz as a truly global consumer brand."

Mila Kunis as "Aubrey" and Kate McKinnon as "Morgan" in the movie The Spy Who Dumped Me.

Mila Kunis as "Aubrey" and Kate McKinnon as "Morgan" in the movie The Spy Who Dumped Me. Image source: Lions Gate.

Looking ahead

For the upcoming first quarter, analysts expect Lions Gate to deliver revenue of $951.27 billion, which would represent a 5.4% decline year over year, and earnings per share of $0.06, only about a third of the $0.18 generated in the prior-year quarter. 

The company doesn't provide quarterly guidance, but it reiterated its forecast to deliver a three-year adjusted OIBDA (operating income before depreciation and amortization) compound annual growth rate in the mid to high single-digits.

Lions Gate continues to take steps to transition from a company that creates content into a creation and distribution powerhouse. The company continues to invest in high-quality programming that it believes will pay dividends over the long term. While it expects results to be flat for the coming year, it anticipates growth will return in 2020.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon and Lions Gate Entertainment Class A. The Motley Fool owns shares of and recommends Amazon, Lions Gate Entertainment Class A, and Lions Gate Entertainment Class B. The Motley Fool has a disclosure policy.