Missed Guidance Sends Genius Stock Tumbling17 Mar, 2008 By: Erik Gruenwedel
A 15% drop below projected DVD sales in the last weeks of 2007 coupled with cancellation of a significant new retail partner resulted in Genius Products LLC posting a fourth quarter (which ended Dec. 31) loss of $12.2 million.
The news sent shares of the Santa Monica, Calif.-based distributor — 70% owned by The Weinstein Co. (TWC) — plummeting more than 24% to close March 17 at 68 cents per share.
Genius posted a net loss of $19.7 million during the same period last year when the distributor — in melding financial statements prior to the close of its acquisition by TWC — combined results from July 22 to Dec. 31, 2006.
Revenues for the quarter topped $185 million, up 144% from $76 million last year, driven largely by $67.6 million in TWC DVD sales, including Planet Terror, 1408, Michael Moore's healthcare documentary Sicko, Halloween and The Nanny Diaries.
In a call with investors, Genius CEO Trevor Drinkwater said the company distributed 350 titles, or 60 million DVDs, in 2007, of which a significant amount generated just 2% of overall revenues. By comparison, Genius generated the bulk of its DVD revenue from the distribution of 70 TWC titles.
“This move necessitated an aggressive write-off of the remaining portion of our non-branded DVD business,” Drinkwater said. “We had to make the hard decision to move away from those businesses. It ha[d] proven not to be an effective use of our time.”
He said the company shifted a large number of direct-to-video titles from 2007 to 2008. Genius said it would distribute 13 theatrical TWC releases, down from 17 releases last year.
The theatrical releases accounted for 61% of overall 2007 revenues, down from 88% in 2006. Genius is planning on Weinstein box office releases to account for just 35% of revenues in 2008, due to a number of releases not impacting home entertainment until 2009.
The distributor plans to increase Weinstein direct-to-video releases in 2008, for which it will receive an unspecified increased percentage of revenue. Drinkwater said Genius would begin distributing Blu-ray titles in the second half of 2008.
The company is also increasing its stake in video game distribution and direct-response distribution in 2008.
For fiscal 2007, net revenue increased 72%, to $474 million ($651 million gross), from $275 million during the same period last year. Genius had projected full-year revenue from $750 million to $800 million.
It is forecasting revenues from $600 million to $700 million in 2008, based in part on a 10% revenue increase from Weinstein content.