Last Friday, Lions Gate Entertainment (NYSE:LGF) held a wrap party after the close of the trading session. It had reason to celebrate -- it finished the last three months with solid earnings growth and a nice advance in cash flow.

Revenues increased 11% to $254.5 million. Operating income increased 270% to $23.6 million, driven by smaller growth in total operating expenses. Net income was $20.5 million, or $0.17 per diluted share -- more than five times the per-share amount booked last year.

The two weak areas of the studio were home video and theatrical operations, which saw revenue dips of 2% and 8%, respectively. International revenues soared 90%, television sales of movies increased 55%, and sales of television productions increased 27%. Drivers for these various business segments included films such as Saw II, Saw III, and Hostel, as well as television programming such as I Pity The Fool,featuring Mr. T, and the ABC Family series Wildfire. Even older product such as The Punisher, based on a Marvel Entertainment (NYSE:MVL) property, helped out.

Lions Gate was a real king of cash flow this quarter. Net cash provided by continuing operations increased by a whopping 159%, to $54.9 million. Free cash flow jumped by a similar percentage, to $50.7 million. Lions Gate's business model of providing edgy films, backed by compelling promotional campaigns, is paying off. The studio also noted that it has a substantial backlog of filmed entertainment waiting to contribute to company performance in future quarters.

Looking to the coming year, a couple of major releases should enrich the corporate coffers. First up will be the sequel to Hostel, tentatively slated to open this June. I expect good things for Hostel: Part II. The moviegoing public has a significant appetite for graphic horror, in my opinion. If it's as skillfully marketed as the first film, and if the studio can take advantage of the increased summer traffic at the box office, Lions Gate should have a bloody good hit on its hands, one that might surpass the initial entry's $80.6 million worldwide gross (according to

Then we have Saw IV, opening in October. Saw III kept the franchise alive, doing painfully good business on DVD for itself while promoting the first two films in the process (Saw III was released on DVD after the close of this past reporting period, so it should be a driver for home video next time around). Come next Halloween, there will be more mutilating mayhem from this franchise -- and presumably, opportunity for further revenue contribution.

Lions Gate is strong right now -- you've got to love its earnings and cash-flow performance this past quarter. I like it for long-term exposure to the movie industry, and I think the speculative buzz that it might be bought out at some future date possesses logical merit. It's bound to be a volatile holding, and even though it isn't as major as Disney (NYSE:DIS), Viacom (NYSE:VIA), or Time Warner (NYSE:TWX) are, it still remains an interesting investment idea.

More Foolish fun with Lions Gate Entertainment:

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Fool contributor Steven Mallas owns shares of Disney and Marvel Entertainment. As of this writing, he was ranked 10,739 out of 21,682 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.