Lionsgate Posts Second-Quarter Profit as Starz Adds 1.2M U.S. Subscribers

The Hollywood studio, led by CEO Jon Feltheimer, saw continued traction from Starz as it reaches 27 million customers overall globally.

Lionsgate on Thursday swung to a second-quarter profit on higher overall revenues and continuing growth at Starz.

The premium cable and streaming channel added a record 1.2 million streaming subscribers in the U.S. during the latest quarter to get to 5.6 million streaming customers domestically and 27 million customers in all globally. On Starz, Lionsgate executives offered no direct comment during an analyst call on their escalating carriage dispute with Comcast as both parties cannot agree terms on a renewal deal for Starz.

Lionsgate earlier warned Comcast Xfinity customers they may lose access to new episodes of hit shows like Power, Outlander and Vida if Comcast ultimately decides to replace 17 Starz channels in its TV packages with Epix on Dec. 10. Analysts on Thursday tried with little success to get studio execs to comment on the potential impact on Lionsgate if Comcast does not renew its agreement that makes Starz and Starz Encore available to its cable TV subscribers as part of its main lineup.

"Look, we know on that particular system we have 4 million really passionate viewers just for our top big shows alone (Power and Outlander) and I think, if distributors think about the customer, the idea should be to make sure they can continue enjoying the incredible content that we're offering," said Feltheimer, without referring directly to Comcast.

And in another coded message to Comcast, Feltheimer pointed to recent distribution deals for Starz struck with Dish Networks and AT&T as evidence that win-win agreements can be made in the cord-cutting era. "Rather than watching our traditional business ratchet down with each new unwinding of the television bundle, we're embracing the realities of the evolving marketplace, collaborating with our linear partners to grow our respective businesses and transitioning our customers on an innovative and orderly path to an a la carte environment together at the right time, the right price and in the right way," he said in prepared remarks delivered during the call.

Lionsgate has been looking to potentially spinoff Starz as it expands in the streaming space with popular shows like Power and Outlander. A possible corporate spinoff is only one strategic option under consideration at Lionsgate, however, and picking the right market conditions is thought to be a key concern.

Lionsgate has, in part, also been reacting to outside calls from Wall Street players looking to unlock hidden value at Starz. The deal chatter also follows the steady integration of Starz and Lionsgate TV and the studio investing heavily in the global rollout of the premium streaming service.

Feltheimer conceded to analysts that, from a "value perspective," Starz looked more lucrative to shareholders if sold or split off. But he argued the ongoing international launch of Starz could not have succeeded if it did not have strong backing from Lionsgate's library and new original TV series.

"I'm concerned that we're not getting the value in our stock, but I've never seen our team work together as closely as we do in our company," the exec told analysts.

Lionsgate during the latest quarter posted net income attributable to shareholders at $1.8 million, which compared to a year-earlier $144.1 million loss for the three months ending Sept. 30. The year-earlier second quarter included a $114.1 million charge for litigation settlements.

Shares in the studio jumped by nearly 6 percent to $8.80 in after-hours trading following the release of Lionsgate's latest financial results.

The indie studio posted a per-share profit of 1 cent, against a loss of 67 cents per share in the year-ago period, and an adjusted per-share profit of 22 cents, which beat an analyst forecast for the studio of per-share earnings at 20 cents.

Overall revenues came to $983.5 million, against a year-earlier $901.1 million, and beat analysts' consensus of $914.7 million by 8 percent. Media networks revenue, which is mostly Starz, fell slightly to $374 million during the second quarter, against a year-earlier $377.3 million.

Motion picture group revenue jumped to $405.8 million, against a year-earlier $379 million, as Lionsgate had box office contributions from such releases as Scary Stories to Tell in the Dark, Angel Has Fallen and Rambo: Last Blood. TV production revenues rose sharply to $274 million, compared to a year-ago sum of $152.1 million, on the timing of episode deliveries.

The Hollywood studio behind movie tentpoles like the John Wick franchise has been eyed as a possible takeover target since its stock price fell in the past year.

Nov. 7, 3:45 p.m. Updated with comments from an analyst call by top Lionsgate executives.