Bloomberg News

Lions Gate Posts First-Quarter Loss on Marketing Expenses

August 10, 2012

Lions Gate Entertainment Corp., the independent film studio that produced “The Hunger Games,” posted an unexpected first-quarter loss of $44.2 million, citing costs to market five pictures.

The net loss amounted to 33 cents a share and compared with profit of $10.3 million, or 8 cents a share, a year earlier, Vancouver-based Lions Gate said yesterday in a statement. Sales in the fiscal period ended June 30 rose 81 percent to $471.8 million, reflecting the takeover of Summit Entertainment and beating the average analyst estimate of $447.3 million.

Results were hurt by a $90 million increase in movie marketing costs tied to releases, including the horror picture “The Cabin in the Woods” and the comedy “What to Expect When You’re Expecting,” which Lions Gate predicted will be profitable on an “ultimate basis.” The studio also cited expenses of almost $10 million related to the Summit acquisition.

“The takeaway is that Lions Gate expects all of those film titles to be ultimately profitable,” said Tuna Amobi, an analyst with Standard & Poor’s, in an interview. “When they can say that, it’s a big thing. You spend upfront and realize the benefits in a later quarter,” said Amobi, who recommends buying the shares.

In the quarter, analysts were projecting a profit of 18 cents a share excluding items, the average of seven estimates compiled by Bloomberg.

Revenue increased on contributions from Summit and ticket sales of “The Hunger Games.” The film, based on the Suzanne Collins young-adult novel, cost about $78 million to make and generated $684 million in worldwide sales, according to Box Office Mojo. The movie was released on March 23, a week before the first quarter began.

Lions Gate fell as much as 3.8 percent to $12.75 in extended trading yesterday, after declining 2.8 percent to $13.25 at the close in New York. The shares have gained 59 percent this year.

(Lions Gate plans a conference call at 9 a.m. New York time today at +1-800-230-1059 for U.S. callers and +1-612-234-9960 for others.)

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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