Don't Panic Over Lions Gate's Bottom-Line Loss

Cross-platform content producer Lions Gate Entertainment (NYSE: LGF-A) (NYSE: LGF-B) reported financial results after the closing bell on Thursday, covering the first quarter of fiscal 2020. The company posted modest top-line growth alongside deeper bottom-line losses. The entertainment giant is absorbing higher operating costs as its streaming-video services expand around the world.

Here's a closer look at Lions Gate's latest report.

Lions Gate's second-quarter results: The raw numbers

Data source: Lions Gate. GAAP = generally accepted accounting principles.

What happened with Lions Gate this quarter?

• Lions Gate generated $67 million of adjusted operating income before depreciation and amortization in the second quarter, down from $117 million in the year-ago period. This non-GAAP metric, often shortened to OIBDA, measures Lions Gate's total segment profits in a way that resembles how management looks at the company's operating profits.
• The motion picture division saw sales rise 9% to $398 million. The third release in the John Wick franchise accounted for most of the gains here, having grossed $320 million on a global level.
• TV production sales held fairly steady at $280 million. The segment's profits increased by 60% to $25 million thanks to shifting broadcast schedules for some of Lions Gate's most popular series.
• In the media networks segment, revenue grew 5% to $372 million. The Starz Networks premium cable channels provided a stable operating base, lifting revenue by 3%. Sales of streaming services soared 72% to $6.4 million, while the Starzplay International service boosted its top-line contribution from $100,000 to $3.1 million.

Image source: Getty Images.

What management had to say

In the earnings call, Lions Gate CEO Jon Feltheimer noted that his company must be willing to change along with a rapidly evolving entertainment industry.

"I want to spend a moment talking about how we're positioning ourselves in a world that is changing faster than ever before in which talent cost continue to increase and media consolidation has created scale of previously unimaginable proportions," Feltheimer said. "We continue to play our own game to find success according to our own terms and create value according to our own benchmarks. And as we continue to build upon a unique, non-replicable portfolio of assets that includes deep film and television pipelines, a 17,000-title library, and a premium global subscription platform, we will continue to create value that is incremental, enduring, and increasingly well-understood."

Looking ahead

Lions Gate is not known for issuing detailed financial guidance. Instead, Feltheimer discussed the long-term prospects of each business segment in broad terms.

• In the motion picture division, Lions Gate wants to scale its production efforts to expand its market share. Mid-budget action movies like the John Wick films are getting the job done, and investors should expect more of this content type.
• The television segment is turning into a producer of high-quality content for a variety of broadcasting platforms. "We like our role better than ever," Feltheimer said.
• The Starz group will continue to roll out streaming-video services globally while focusing on "premium programming for women" in the domestic market.