Feltheimer: Franchise combo to generate high cash flow
In a move underlining the synergy between Lionsgate and its Summit subsidiary, Lionsgate will debut the trailer for “The Twilight Saga: Breaking Dawn Part 2″ when it opens “The Hunger Games” on March 23.The Friday morning announcement was part of an upbeat earnings call with Wall Street analysts, leading to a jump in Lionsgate stock. Shares rose over 7%, jumping 83 cents to $11.84 after trading as high as $12.24 as several issued positive reports such as James Marsh of Piper Jaffray lifting his price target from $12 to $14. “Beyond the Hunger Games, we see an increasingly impressive slate coming together, including the final installment of ‘Twilight’ and potential hit ‘Ender’s Game,'” said Marsh of Piper Jaffray. “Domestic box office for the company’s slate could surpass $1 billion over the next year, versus an average of $350 million over the past 8 years. We are raising our DBO expectations for Hunger Games to $180M from $150M and increasing our Fiscal 2013 EBITDA to $180 million from $140 milion.” Lionsgate CEO Jon Feltheimer revealed the dating of the trailer during Friday morning’s earnings call with analysts. The minimajor had released earnings after the market closed Thursday. Feltheimer said the combo of the “Twilight” and “Hunger Games” franchises will generate “highly visible” cash flows in coming years. “Now we have a strong pipeline of young-adult franchises,” he added. Lionsgate completed its $412.5 million leveraged buyout of Summit on Jan. 13, 10 months before the fifth “Twilight” film opens. Feltheimer also touted “Hunger Games” during the call, pointing out that it was 42 days until the opneing and noting that total sales of the Suzanne Collins’ book trilogy have grown by 7.5% to 23.5 million. Lionsgate plans to open “Catching Fire,” based on the second “Hunger Games” title, in November, 2013. The four “Twilight” films topped $2.5 billion in worldwide grosses last month. Former Summit topper Rob Friedman, newly minted co-chair of the Lionsgate motion picture group, said during the call that there could be a sixth “Twilight” film, but only if author Stephenie Meyer turns out another book. “It’s totally in her hands,” said Friedman, noting that Meyer is also a producer on the films. Feltheimer said last month that Lionsgate would like to produce TV programming based on the vampire-romance series. Lionsgate execs also emphasized Friday that there were no immediate changes in store in two areas — foreign sales operations, and home entertaniment. Summit’s DVD titles go through Universal while Lionsgate’s are through Fox. Lionsgate president Steve Beeks said there will be some consolidation in the future in the home entertainment distribution operations. Friedman also said both studios shared many similarities in terms of culture and a sense of independence. “We don’t see a lot of dramatic changes,” he added. Felheimer also highlighted license deals to Amazon.com, Netflix in the U.K. Hulu as propelling “a very big” sales and licensing quarter. “We’ve created a whole new revenue stream for serialized shows like Mad Men and Weeds,” he added. Lionsgate execs also touted the Charlie Sheen series “Anger Management” for the FX Network, noting that its deal with FX will trigger 90 additional episodes if the first 10 episodes are successful. “The early results are very promising,” Feltheimer said. On Thursday, Lionsgate reported a narrowed quarterly loss of $1.7 million, or a penny a share, for its third quarter ended Dec. 31, compared with a $6 million loss for the year-ago period. The analyst consensus had been for a profit of 9¢ a share. EBIDTA surged 60% to $16.3 million. Doug Cruetz of Cowen & Co. issued a report Friday rating the stock as “overperform, citing lower “perceived messiness surrounding the stock,” due to the end of the long fight with Carl Icahn fight and a transition to profitability; positive margin trends in television production and the home video business, with the latter being driven by significant growth in digital distribution; the launch of “Hunger Games”; and what appears to be an attractive business combination with the acquisition of Summit. Analyst Alan Gould of Evercore said between his estimate of 3 cents a share and the actual results was mostly $5.4 million of corporate defense and acquisition related charges.
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