Genius/Weinstein Post Q3 Loss, Record Revenues21 Nov, 2006 By: Erik Gruenwedel
Genius Products' association with The Weinstein Company (TWC) paid accounting dividends in the third quarter (ended Sept. 30) as the Santa Monica, Calif.-based distributor realized record pro forma net revenues of $98.8 million (less $35.7 million in sales returns, discounts and allowances) compared to (non-pro forma) net revenues of $8.1 million during the same period last year.
For the quarter, Genius posted a net loss of $5.1 million, compared to a loss of $3.8 million last year.
The quarterly results were complicated due to TWC and Genius formally completing their distribution transaction July 21. As a result the company utilized multiple accounting methods to account for the 21-day period prior to the closing and 71 days after the deal closure.
For the 21-day period, DVD sales of TWC's The Matador and The Libertine, among other titles, helped Genius post net revenues of $17.3 million. The period also recorded $5.9 million in costs associated with the August (post 71-day period) DVD release of Scary Movie 4.
In addition, TWC paid Genius more than $50 million for its 70% stake (70% multiplied by Genius' pre-TWC net book value of $71.4 million) in the new company. The $50,033,502 payment was officially recorded as an extraordinary gain and helped Genius post previously reported quarterly net income of $47 million.
“This is why our results are difficult to follow,” said John Mueller, EVP and CFO, in an investor call.
Mueller said the combined results prior to and after the TWC deal were done in order to contrast them with previous quarterly results.
Genius president and CEO Trevor Drinkwater said recent content deals with ESPN, World Wrestling Entertainment, Discovery Communications and ImaginAsian combined with titles from TWC underscored the distributors' strategy to focus on four content “verticals,” including sports, family/faith, lifestyle and independent film.
“We continued to successfully execute our growth strategy by leveraging our relationship with TWC and greatly diversifying our content portfolio,” said Drinkwater.
The company plans to distribute from 250 to 300 new titles in 2007, with gross revenues projected from $700 million to $800 million, including revenues from the recently announced exclusive rental rev-share deal with Blockbuster Inc.
“The servicing of this alliance should secure a stable revenue stream for Genius Products over the next fours years out of the rental channel and open an opportunity to expose an ever-increasing lineup of non-theatrical releases,” said Stephen Bannon, chairman of Genius.
Bannon and Drinkwater did not elaborate what the “stable revenue stream” from Blockbuster might be. Drinkwater said the deal would focus on titles such as The Shawshank Redemption, which he said outperformed theatrically at video and would likely be ignored by the major studios.
“This gives us the opportunity to expose significant amounts of direct-to-video or limited theatrical titles in a way that we believe would have been very difficult without this agreement,” said Drinkwater.
Genius expects to generate 25% of 2007 revenues from non-TWC titles and 50% by the end of 2008.