Image Entertainment (DISK) increases guidance; reports solid quarter and improved balance sheet

Includes: DISK, LGF.A
by: David Strahlberg

Image Entertainment (OTC:DISK) reported results on February 10, 2005 for
the fiscal third quarter 2005.  Below are some highlights.

F3Q05 vs. F3Q04 Results

  • Operating EPS: $0.10 vs. ($0.45)
  • Total revenues: $34.4M vs. $22.8M (+51%)
  • Domestic revenues: $33.1M vs. $21.3M (+56%)
  • International & broadcast revenues: $1.3M vs. $1.5M (-15%)
  • Gross Profit: $2.2M vs. ($0.2M)
  • Gross Margin (current Q): 6.4%
  • Net Income: $1.9M vs. ($7.2M)
  • Cash: $3.3M vs. $0.5M
  • Debt: $1.9M vs. $13M

Fiscal 2005 Guidance:

  • Revenue growth of 36%-39%
  • Total revenues: $116M - $118M

Quick comments:

  • Raised $14.2M in private placement offering of 2.9M shares in December
  • Paid down the balance on credit line, resulting in $23M borrowing availability
  • Opened London office on February 1, 2005 to strengthen international presence
  • Visibility on exclusive programming has increased from 3-6 months to 6-12 months
  • Own digital rights to around 300 titles
  • Not likely to penetrate children's segment; too dominated by Disney (NYSE:DIS)
  • Opportunity to enter the low-budget horror segment as Lion's Gate (LGF) moves upstream