Movie Gallery (MOVI) meets consensus; revenues increase 15% in quarter

May.13.05 | About: Movie Gallery (MVGRQ)

Movie Gallery (ticker: MOVI) reported results on May 12, 2005 for
the first quarter 2005.  Here are some details:

Results 1Q05 vs. 1Q04:

  • EPS: $0.58 vs. $0.54 (+7%)
  • Consensus EPS was $0.58
  • Revenue: $233.8M vs. $203.3M (+15%)
  • Consensus revenue was $227.4M
  • Gross profit: $155.2M vs. $140.6M (+10%)
  • Gross margin: 66.4% vs. 69.2% (-280bps)
  • Net Income: $18.4M vs. $18.3M (+1%)
  • Net margin: 7.9% vs. 9% (-110bps)
  • Adjusted EBITDA: $39.2M vs. $34.3M (+14%)
  • Adjusted EDITA margin: 16.8% vs. 16.9% (-10bps)
  • Cash: $22.6M vs. $25.5M (-11%)
  • Debt: $0.0M vs. $0.0M (0%)
  • Free cash flow: $-0.6M vs. $-16.9M (-97%)
  • Dividend per share: $0.03 vs. $0.03 (0%)

Revenue breakdown 1Q05 vs. 1Q04:

  • Rentals: $216.7M vs. $186.8M (+16%)
  • Product sales: $17.1M vs. $16.5M (+3%)

Operating statistics 1Q05 vs. 1Q04:

  • Store count: 2543 vs. 2240 (+14%)
  • Same-stores revenues increase: 1.5% vs. 2% (-50bps)

Hollywood Entertainment Q1 results:

  • Same-store revenues: +3.6%
  • Total revenues: $476.0M
  • Net cash provided by operating activities: $15.6M
  • Adjusted EBITDA of $61.9M

2Q05 Guidance (comments from MOVI's press release):

Movie Gallery's first-quarter results further demonstrate our ability to generate sustainable growth while producing consistent profitability," added Malugen. "I believe that Movie Gallery's strong financial and operational performance, together with the transformational acquisition of Hollywood, positions us for even greater long-term success. Throughout the remainder of the year, we will be working to integrate the various functions of the Movie Gallery and Hollywood businesses. While this integration involves a variety of issues that we still need to address and numerous opportunities that we still need to explore before giving specific guidance, I am very confident this will be a powerful combination indeed.

Quick comments:

  • Store count above excludes 2,207 Hollywood Entertainment stores which were integrated two weeks ago
  • DVD rentals comprised 85% of revenues in Q1 versus 70% in 1Q04
  • Game business was down 15% in Q1
  • The combined Movie Gallery/Hollywood Entertainment will have $2.5+ billion in revenues and 4,500+ stores
  • Last week, MOVI announced the departures of: Bruce Giesbrecht, CEO and President of Hollywood Video; and Randall Baumberger, the CEO of the separate Game Crazy organization
  • Merger integration has already led to the elimination of 32 senior positions, representing a cost savings of $3.5 million
  • MOVI expects to open 80-90 stores in Q2