Lions Gate Entertainment Management Discusses Q1 2013 Results - Earnings Call Transcript

Lions Gate Entertainment (LGF)

Q1 2013 Earnings Call

August 10, 2012 9:00 am ET


Peter D. Wilkes - Senior Vice President of Investor Relations and Executive Communications

Jon Feltheimer - Chief Executive Officer and Director

Kevin Beggs - President of Television Programming & Production

James Keegan - Chief Administrative Officer, Chief Financial Officer and Chief Accounting Officer

Steven Beeks - President

Michael R. Burns - Vice-Chairman

Patrick Wachsberger - Co-Chairs of Lionsgate's Motion Picture Group


David W. Miller - Caris & Company, Inc., Research Division

Benjamin Mogil - Stifel, Nicolaus & Co., Inc., Research Division

Alan S. Gould - Evercore Partners Inc., Research Division

James M. Marsh - Piper Jaffray Companies, Research Division

David Bank - RBC Capital Markets, LLC, Research Division

Caroline C. Anastasi - JP Morgan Chase & Co, Research Division

Douglas Creutz - Cowen and Company, LLC, Research Division

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

Tuna N. Amobi - S&P Equity Research

David Carl Joyce - ISI Group Inc., Research Division



Ladies and gentlemen, good morning. Thank you for standing by, and welcome to Lionsgate Fiscal 2013 First Quarter Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded.

Now I'd like to turn the conference over to our host, Senior Vice President of Investor Relations, Mr. Peter Wilkes. Please go ahead.

Peter D. Wilkes

Thank you for joining us on the call this morning. Jon Feltheimer, our CEO, will lead off with opening remarks. We'll then open the call to Q&A. Joining us for Q&A will be Michael Burns, our Vice Chairman; Patrick Wachsberger, co-Chair of our Motion Picture Group; Steve Beeks, co-COO and President of the Motion Picture Group; Kevin Beggs, President of Lionsgate's Television Group; Jim Keegan, our CFO; and Rick Prell, our Chief Accounting Officer.

The matters discussed on this call include forward-looking statements, including those regarding performance of future fiscal years. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including risk factors as set forth in Lionsgate's 10-K filed with the SEC on May 30, 2012. The company undertakes no obligation to publicly release any revisions to the forward-looking statements that may be made to reflect any future events or circumstances.


Jon Feltheimer

Thank you, Peter, and thank you, all, for joining us this morning.

Having completed the first quarter of the first full year of our operations as an integrated company, we are right where we expected to be for the year and our 3-year plan. More than 2/3 of the profitability of the first Hunger Games lies ahead of us, and this translates into a typically back-loaded year, where our profitability will grow every quarter, keeping us on track for our 3-year guidance of $900 million in EBITDA.

We released 5 films in the quarter, and all of them will be profitable. However, this quarter was atypical relative to what you can expect for the rest of the year due to the marketing costs associated with these 5 films, the $18 million in prerelease marketing costs for films slated for release later in the year, as well as some primarily noncash stock-based compensation.

In addition, you may have noted the noncash charge for paying down our Summit debt early, as well as the impact in the quarter of $16 million in marketing costs associated with the releases of Lionsgate U.K., which, as you will hear in a few minutes, is having a tremendous year. Although our costs were partially offset by the Hunger Games' profitability in the quarter, you will see a more meaningful contribution from the film beginning in the second quarter.

Turning to the quarter's operational highlights. The Hunger Games is nearing the end of its very successful theatrical run as the 12th highest grossing film of all time. Its growth into a transformative franchise continues. The trilogy's book sales have more than doubled this year, passing the $50 million mark, and our motion picture event of the year will become the biggest home entertainment rollout in our company's history next week.

We finalized the remaining release schedule for the franchise and will release a Hunger Games sequel every November for the next 3 years, beginning with the November 22, 2013, release of The Hunger Games: Catching Fire, which begins shooting next month. Coupled with this November's release of Twilight: Breaking Dawn 2, this gives us significant forward visibility from our film business. The rest of the branded and franchised properties that comprise a large portion of our film slate are in equally strong shape. We anticipate a strong opening next Friday for The Expendables 2, which is tracking well and gives every indication of following in the footsteps of the original.

Ender's Game has already completed principal photography, and we'll be looking at it next month before it enters postproduction to complete its visual effects. With Ender's Game and Catching Fire back to back, we will have a 6-week continuous run in IMAX theaters next November and December.

Red 2, the sequel to another Summit franchise, will begin production next month for a summer 2013 release. Catherine Zeta-Jones and Anthony Hopkins will join the cast of Bruce Willis, Helen Mirren, Jon Malkovich and Mary-Louise Parker returning from the original film that grossed more than $200 million at the worldwide box office. By testing the summer for the first time with Madea's Witness Protection, we found another great release period for Tyler Perry, whose brand continues to demonstrate its remarkable resilience. With nearly $65 million at the North American box office and counting, Witness Protection is Tyler's second-highest grossing film ever.

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