LOS ANGELES (Reuters) - U.S. independent film and television studio Lions Gate Entertainment Corp reported a sharply lower, third-quarter net profit on Monday, missing Wall Street expectations, on higher marketing costs as the company expanded its slate of films.
Net income fell 88 percent to $2 million, or 2 cents per share, in the quarter ended December 31, 2007, compared with $20.5 million, or 17 cents per share, in the year-ago third quarter.
Revenue rose 14 percent to $290.9 million, driven by the box office successes of “Saw IV” and “Why Did I Get Married?” and DVD sales of “3:10 to Yuma.”
Analysts, on average, had expected net income of 5 cents per share and revenue of $286.2 million, according to Reuters Estimates.
Co-chairman and Chief Executive Jon Feltheimer said in a statement that the company was on track to reach its fiscal year forecast for a net loss of $50 million on revenue of more than $1.2 billion and free cash flow of more than $110 million.
The movie division contributed $254 million to the revenue line in the quarter, but higher marketing expenses, which rose to $46 million from $32 million a year earlier, ate into net profit. Last year, the division brought in $221.6 million in revenue.
The increase in costs came from the company’s expansion of its film slate to 20 films, including 15 wide releases. Lions Gate has partnered with a film fund to share profits and cover added expenses from the larger slate.
The company contributed half the film fund’s $300 million capital but will expense the fund’s total value on its books — another factor expected to weigh on results.
Revenue from home entertainment fell to $105 million from $113.6 million a year earlier.
International revenue reached $53.8 million from “Saw VI,” “Saw III,” “Good Luck, Chuck,” “War,” “Catacombs” and the special edition of “Dirty Dancing” from $27.6 million a year ago.
Its filmed entertainment backlog, representing earned revenue that has not yet been booked, grew to $416.6 million from $347.4 million a year ago.
Television production revenue was $36.8 million from $32.9 million last year, driven by deliveries of episodes of “Mad Men” to AMC, “Weeds” to Showtime and “Wildfire” to ABC Family.
Lions Gate’s television production arm apparently avoided impact from the three-month Writers Guild of America strike by cutting an interim deal to allow writers on those show to keep working.
Shares of Lions Gate were unchanged in after-hours trade on Monday, after closing at $9.51 in regular trade on the New York Stock Exchange.
Reporting by Gina Keating, editing by Richard Chang, Leslie Gevirtz