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Lions Gate Breezes Past Estimates

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Strong top-line performance aided Lions Gate Entertainment Corp. (LGF) to post stellar third-quarter fiscal 2013 results. The company’s quarterly earnings reached 37 cents a share, improving significantly from the loss of a penny registered in the comparable year-ago quarter and came way ahead of the Zacks Consensus Estimate of 24 cents. Including one time items, earnings came in at 27 cents a share.

Total revenue for this Zacks Rank #1 (Strong Buy) stock more than doubled during the quarter to $743.6 million, driven by sturdy performance of the theatrical segment, which reflected solid performance of The Twilight Saga: Breaking Dawn –Part 2 and other Films. Moreover revenue gains at home entertainment and international businesses also boosted the results. The reported revenue handily surpassed the Zacks Consensus Estimate of $686 million.

During the quarter, the company reported adjusted EBITDA of $87.2 million, significantly up from $27.3 million in the year-ago quarter. Adjusted EBITDA margin expanded 320 basis points to 11.7%.

Segment Details

Motion Pictures’ revenues of $673.5 million surged 188.7% year over year, reflecting strong performance across Theatrical business (significantly up to $192.9 million from $8.4 million), Home Entertainment (up 72.1% to $221.9 million), International Film (significantly up to $89.5 million from $14.6 million), Television (up to $98.8 million from $22.6 million) and Lions Gate UK (up 120.5% to $36.6 million). However, Mandate Pictures revenues plunged (down 29.7% to $28.2 million).

Television Production revenues decreased 21.9% year over year to $70.1 million, reflecting a decrease of 18.4% in total domestic series licensing revenues to $40.3 million along with a 67.4% decline in Home entertainment releases of television production to $11.1 million, partly offset by an increase of 185.2% in International revenues to $17.4 million.

Other Details

Lions Gate ended the quarter with cash and cash equivalents of $48.2 million with film obligations and production loans of $487.9 million and shareholders’ equity of $192.5 million.  The company generated free cash flow of $125.2 million during the quarter.

The company’s filmed entertainment backlog increased to $1.2 billion, reflecting strong future revenues, which is encouraging.

Lions Gate is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release as well as television programming for cable and broadcast networks. The company has a strong track record of producing small and mid-budget specialty films. Lions Gate competes with other major studios, such as News Corp’s. (NWSA) Fox Entertainment Group, The Walt Disney Company (DIS) and Time Warner Inc. (TWX).

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