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Lionsgate Earnings Beat Expectations After Strong Starz Growth

Lionsgate revenue and earnings topped projections, thanks to growth from its premium cable channel, Starz.

The company reported strong gains at Starz of 1.3 million subscribers for a total of 25.1 million domestic subscribers during its second quarter ending Sept. 30. The studio also topped Wall Street estimates by reporting revenue of $901 million and a net loss $144.1 million. The loss stemmed from settling shareholder litigation, with $54.8 million from a previously disclosed settlement. The litigation was filed in 2016 over the acquisition of Starz.

Lionsgate generated earnings of 22 cents after the settlement, $99.5 million in free cash flow during the quarter and operating income before depreciation and amortization of $128.8 million. Projections had been anticipating $892.3 million in revenues, 13 cents in earnings per share and operating income of $97.4 million.

“We’re pleased to report a strong quarter with robust free cash flow and outstanding growth at Starz,” said Lionsgate CEO Jon Feltheimer. “Our great results at Starz reflect our slate of hit premium programming, strong over the top subscriber growth and retention, and healthy gains in our MVPD business. Coupled with the global expansion strategy we have begun to execute, we see a very clear path to outsized value creation for our platform.”

Lionsgate made the earnings announcement Thursday at the close of trading on the New York Stock Exchange. Shares of Lionsgate surged in after-hours trading by 4.5% to $20 share.

Two years ago, Lionsgate paid $4.1 billion to buy the premium cable service with the goal of competing effectively with the top-tier conglomerates. It bought management-production powerhouse 3 Arts Entertainment in May for a price estimated at $170 million.

Media networks segment revenues increased by 5% to $377.3 million due to strong OTT subscriber revenue. Segment profits rose 19% to $122.7 million from the prior year quarter.

Motion picture segment revenues decreased by 2% to $379 million, while segment profits were up 45% to $12.9 million after strong ancillary performance of previously released theatrical titles.

On the television side, production revenues were $152.1 million in the quarter. Segment profits came in at $9.4 million compared to the prior year quarter that included licensing of several major Starz original series.

During the conference call with analysts, Lionsgate TV Group chairman Kevin Beggs said the company is considering a potential sequel to “Orange Is the New Black,” the series created by Jenji Kohan and starring Taylor Schilling, Laura Prepon, Uzo Aduba, and Danielle Brooks. The seventh and final season of the show airs next year on Netflix.

“We’re ending on a high note,” Beggs said. “Keep in mind we own that series and will be distributing it for years to come. We’re already in discussions and, when the timing is right, we’ll talk further with Jenji about a potential sequel.”

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