Lions Gate Entertainment (NYSE: LGF), whose bigger colleagues include Disney (NYSE: DIS), General Electric's (NYSE: GE) Universal, Time Warner (NYSE: TWX), Viacom (NYSE: VIA), and Sony (NYSE: SNE), publicized its Q2 earnings after the bell on Monday. There was good news and bad news.
The good news was that the company narrowed its loss compared to last year's results. Lions Gate booked a net loss of $0.41 per share this year versus a net loss of $0.49 per share in the year-ago period. The bad news, however, is that the results did not meet expectations. I mean, they really didn't meet expectations, as the call was for a loss of $0.15 per share. That's just how the movie business goes sometimes.
However, let's look at the cash flow, because we can find some comfort there. Operational cash flow for the quarter was positive this year instead of being negative, and free cash flow, which is the ultimate goal of any business, increased over three times to nearly $74 million.
And I'll steer you to another positive statistic -- filmed entertainment backlog increased to what management is calling a record $456.5 million. I know, I also tend to dismiss terms like "record" when I see them in a press release, but at least in this case it refers to revenues that will ultimately be recognized down the line.
I see that the company's film slate during the quarter didn't perform that well, and that theatrical revenues declined by 25%. Hopefully the new Saw sequel will help things out in the next reporting period. Overall motion picture sales increased 29%, however.
Like I just said, this is the movie business, and you have to keep in mind that content production is always a hit-or-miss game. The goal is to keep budgets and marketing costs as low as possible. Finding concepts that will resonate with the public without requiring enormous sums of capital is tricky, but it can be done -- depends on how much management wants it. Do I think Lions Gate's management wants it? Well, they could work a little harder, let me put it that way.
I've always liked Lions Gate Entertainment since it is a closer play on the movie business than say a Disney, and I think it will be bought out someday. For now, I think the second quarter was decent enough -- not stellar, mind you, but it could have been worse. I hope the powers that be will continue to cut costs; that has to be a priority, and they haven't done enough, as far as I'm concerned. There's always bloat when it comes to Hollywood.
In terms of the stock's current value, it isn't a bad price for what you get with the business, but I've been thinking of the shares lately as mostly a trading vehicle. If I were to play the stock now, I'd wait for a pullback and then use a tight stop.
Disclosure: I own Disney, GE; positions can change at any time.
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