By Richard Verrier, Los Angeles Times
5:00 AM PDT, May 1, 2013
DreamWorks Animation has a bunch of cavemen to thank for getting some fresh Wall Street love.
Analysts responded positively to news that the Glendale studio had scored with its prehistoric feature "The Croods," which helped drive first-quarter profit to $5.6 million. The results sailed past Wall Street expectations.
The unexpectedly good numbers coming from DreamWorks triggered investors to snap up the company's stock. After closing at $19.28 on Tuesday, shares climbed 7% in after-hours trading after the studio reported financial results.
"We were pleasantly surprised by the numbers," said David Miller, a senior analyst at B. Riley & Co. in Los Angeles. Miller recently upgraded his rating on the company's stock from "sell" to a "buy" following the strong box-office performance of "The Croods," which was released in March and is expected to reach $550 million in worldwide ticket sales.
Also generating a buzz on Wall Street was news that DreamWorks signed an agreement to license its movie characters to a resort in Macao, China. And even Jeffrey Katzenberg, the Hollywood mogul who serves as DreamWorks chief executive, hinted at some other big deals in the coming months.
Katzenberg told analysts that the company was close to a television deal but declined to elaborate. People with knowledge of the situation confirmed that DreamWorks was in talks with AwesomenessTV, a popular YouTube network targeting teens and tweens with original shows. The talks were first reported by the online blog All Things D.
During the first quarter, Dreamworks Animation reported net income of $5.6 million, or 7 cents a share, on revenue of $135 million. That compared with net income of $9.1 million, or 11 cents a share, and revenue of $136.1 million, during the same period a year earlier, the company said.
Despite a nearly 40% decline in profit, the company's results exceeded what industry analysts had projected. Analysts had forecast a loss of 3 cents a share.
Katzenberg cited the success of "The Croods," which is the best-performing original film at DreamWorks since the release of "Kung Fu Panda" five years ago, saying, "It's great to be back in the home run business."
In an interview with The Times, he praised his new distribution partner, Twentieth Century Fox, for its role in distributing the movie: "What a great start to a new partnership," he said.
Because "The Croods" was released late in the quarter, it contributed only $4 million of revenue but will be a key driver of results in the second quarter. The studio's next movie, "Turbo," will be released July 7.
The first-quarter results were an improvement from the previous quarter, when DreamWorks lost $83 million in part because of poor results from last year's "Rise of the Guardians," for which the studio took an $87-million write-down. DreamWorks also took a charge of $54 million in the fourth quarter related to the company's decision to return the animated movie project "Me & My Shadow" to development.
Fueling results in the first quarter were stronger-than-expected DVD sales from "Rise of the Guardians" and "Madagascar 3: Europe's Most Wanted," as well as $28 million in revenue from Classic Media library titles, which DreamWorks acquired last year.
DreamWorks also said it took a $2.5-million charge related to restructuring costs. The studio earlier this year said it was laying off up to 20% of its workforce.
Dreamworks also announced a deal with Sands China, a subsidiary of the company that owns the Venetian and the Palazzo hotel-casinos in Las Vegas, to license its characters for a DreamWorks Experience at the Cotai Strip Resorts in the Chinese city of Macao.
The agreement will give resort patrons various opportunities to mingle with Po, Shrek, Alex the lion, Hiccup and other characters from DreamWorks Animation movies. Edward Tracy, president and CEO of Sands China Ltd., said, "This innovative offering changes the landscape of family-friendly entertainment in Macao and is sure to be a big draw for guests of all ages."
The company already has similar deals with Royal Caribbean Cruises and Gaylord Hotels in the U.S., and with theme parks in New Jersey and Russia.
DreamWorks Animation last year became a partner in a joint venture with Chinese media companies to build an animation studio in Shanghai. DreamWorks also is helping design a Broadway-style entertainment district in Shanghai, where its new Oriental DreamWorks studio will be based.
Times staff writer Dawn C. Chmielewski contributed to this report.
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