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Image Q1 Margins Up, Losses Too

14 Aug, 2007 By: Erik Gruenwedel

Image Entertainment posted a first-quarter (ended June 30) loss of almost $2.6 million, compared to a loss of $2.3 million during the same period last year. Ongoing merger, restructuring and legal expenses all contributed to the drop.

Revenue for the quarter dropped 6.6% to $20.9 million from $22.3 million last year.

Chatsworth, Calif.-based Image increased quarterly profit margins to 25.4% from 18.6% last year due to a series of niche DVD releases from Discovery Channel and Criterion Collection.

“This reflects on the company's efforts to focus on higher profit margin programming through a more narrow range of programming acquisitions,” Martin Greenwald, president and CEO of Image, said in an analyst call.

He said the DVD marketplace continued to be a challenging environment with a shift toward larger diversified brick-and-mortar retailers and increased online competition.

“Amazon, Netflix and Blockbuster Online are rapidly becoming far more of a presence in the marketplace, and it tends to drive out the weaker performing brick-and-mortar locations,” Greenwald said.

Digital sales, which include Egami Media, digital downloads and video-on-demand, totaled $495,000 compared to $260,000 last year.

“Although those revenues are currently slightly more than a rounding error, I envision continued acceleration in this segment of our business,” Greenwald said. “It is clear digital delivery platforms are poised for explosive growth in the coming quarters and represent a true paradigm shift in distribution.”

Selling expenses were 9.8% of revenue, down from 10.5% of revenue last year for actual savings of $300,000 for the quarter. A significant factor in the reduction was the elimination of 16 employees compared to last year.

Company executives said Image is in the process of finalizing a shareholder proxy regarding its pending acquisition by BTP Acquisition Co. LLC, an investor group led by film financier and producer David Bergstein.

“We are still confident that a closing can take place in the next 45 to 60 days,” Greenwald said.

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