What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-02-03 compared with 2021-11-04 · 379 added, 364 removed, 862 unchanged (46% of the section changed)

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COVID-19 Global Pandemic

The impacts associated with the COVID-19 global pandemic and measures to prevent its spread, and the resulting economic uncertainty, continue to affect our business in a number of ways.

We have experienced delays in theatrical distribution of our films, both domestically and internationally, as well as delays in the production of film and television content (resulting in continued changes in future release dates for some titles and series).

While we continue production of films and television series, and theaters have begun to reopen in certain locations with reduced capacity, we are not able to accurately predict when theaters will re-open at scale, at what level consumers will return to movie theaters (and in turn, whether box office numbers will return to pre-pandemic levels), whether productions that have resumed will be paused again, the impact of incremental costs required to adhere to health and safety protocols, or if and when certain of our content will be released.

The impacts associated with the COVID-19 global pandemic (including recent variants) and measures to prevent its spread, and the resulting economic uncertainty, continue to affect our business in a number of ways.

We have experienced continued delays in theatrical distribution of our films, both domestically and internationally, as well as delays in the production of film and television content (resulting in continued changes in future release dates for some titles and series).

While we continue production of films and television series, and theaters have reopened in certain locations with reduced capacity, we are not able to accurately predict when theaters will re-open at scale, at what level consumers will return to movie theaters (and in turn, whether box office numbers will return to pre-pandemic levels), whether productions that have resumed will be paused again, the impact of incremental costs required to adhere to health and safety protocols, or if and when certain of our content will be released.

The full extent of impacts related to the COVID-19 global pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict.

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"Risk Factors" herein.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, including the worldwide closure of most theaters, international travel restrictions and the pausing of motion picture and television productions, during the three and six months ended September 30, 2021 and 2020 we have incurred the following incremental costs which were expensed in the period:

Three Months Ended Six Months Ended

September 30, September 30,

Three Months Ended Nine Months Ended

December 31, December 31,

2021 2020 2021 2020

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Total COVID-19 related charges (benefit) $ (2.6) $ 14.8 $ (1.1) $ 54.3

(1) Amounts reflected in direct operating expense include incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs, net of insurance recoveries, and in the three and six months ended September 30, 2020, these amounts also included film impairment due to changes in performance expectations.

In the three months ended September 30, 2021, insurance recoveries exceeded the incremental costs expensed in the period, resulting in a net benefit included in direct operating expense.

(1) Amounts reflected in direct operating expense include incremental costs associated with the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs, net of insurance recoveries.

In the nine months ended December 31, 2020, these amounts also included film impairment due to changes in performance expectations.

In the three and nine months ended December 31, 2021, insurance recoveries exceeded the incremental costs expensed in the period, resulting in a net benefit included in direct operating expense.

(2) Amounts reflected in distribution and marketing expense primarily consist of contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit.

(3) Amounts reflected in restructuring and other for the three and six months ended September 30, 2021 represent primarily incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic.

In the three and six months ended September 30, 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.

We expect to incur additional incremental costs in future periods.

However, if the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021.

We are in the process of seeking additional insurance recovery for some of these costs.

(3) Amounts reflected in restructuring and other for the three and nine months ended December 31, 2021 represent certain incremental general and administrative costs associated with the COVID-19 global pandemic.

In the three and nine months ended December 31, 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental general and administrative costs associated with the COVID-19 global pandemic.

We expect to incur additional incremental costs in future periods, especially if there is a continued spread of recent and new variants;

however, if the adverse economic impact and disruptions associated with the COVID-19 global pandemic improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021.

We are in the

process of seeking additional insurance recovery for some of these costs.

The ultimate amount of insurance recovery cannot be estimated at this time.

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There are a number of ways in which these uncertainties resulting from the COVID-19 global pandemic have impacted our current results of operations and could continue to impact our future results of operations.

These impacts include the incremental costs and losses discussed in the previous paragraph, lower revenues from the closure or reopenings of movie theaters and postponement of theatrical releases, partially offset by lower theatrical production and marketing costs, or lower box office revenues from pre-pandemic levels due to shifts in viewing;

These impacts include the incremental costs and losses presented in the table above, lower revenues from the closure or reopenings of movie theaters and postponement of theatrical releases, partially offset by lower theatrical production and marketing costs, or lower box office revenues from pre-pandemic levels due to shifts in viewing;

increased expenses associated with new health and safety protocols on motion picture and television productions;

changes in the timing of revenues for motion pictures and television productions associated with delays in production and delivery or release;

and while STARZ experienced an increase in viewership in the prior year of its content, future growth could be impacted by whether productions that have resumed will be paused again, and future consumer viewing patterns as the pandemic eases.

We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any U.S.

changes in the timing of revenues for motion pictures and television productions associated with delays in production, delivery and/or release;

and while STARZ experienced an increase in viewership during the nine months ended December 31, 2020 of its content, future growth could be impacted by whether productions that have resumed will be paused again, and future consumer viewing patterns as the pandemic eases.

We expect that the ultimate impact of these disruptions, including the extent of any adverse impact on our business, results of operations and financial condition, will depend on, among other things, the duration and spread of the pandemic (including recent and new variants), the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any U.S.

Food and Drug Administration ("FDA")-approved COVID-19 vaccines), and global economic conditions related to the COVID-19 global pandemic.

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We have implemented policies, procedures and protocols to address the situation and expect to continue to adjust our current policies and procedures as more information and guidance become available.

In addition, resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus, may result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19.

In addition, resurgences of COVID-19, and the discovery and spread of recent and new variants of the virus, may result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19.

These measures could result in further interruptions to our operations.

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None of the non-U.S.

countries individually comprised greater than 10% of total revenues for the three and six months ended September 30, 2021 and 2020.

countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2021 and 2020.

Motion Picture

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International revenues are derived from (1) licensing of our productions, acquired films, our catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis;

and (2) the direct

distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.

and (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.

Other revenues are derived from, among others, the licensing of our film and television and related content (games, music, location-based entertainment royalties, etc.) to other ancillary markets.

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DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products.

DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising.

marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising.

Marketing costs for Media Networks includes advertising, consumer marketing, distributor marketing support and other marketing costs.

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For motion pictures intended for theatrical release, the discounted cash flow analysis used in the impairment evaluation prior to theatrical release is subjective as key inputs include estimates of future anticipated revenues, estimates of box office performance, which may differ from future actual results.

These estimates are based in part on the historical performance of similar films, test audience results when

available, information regarding competing film releases, and critic reviews.

These estimates are based in part on the historical performance of similar films, test audience results when available, information regarding competing film releases, and critic reviews.

See further discussion of Valuation Assumptions below.

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Revenue from the sale of physical discs (DVDs, Blu-ray or 4K Ultra HD), referred to as "Packaged Media", in the retail market, net of an allowance for estimated returns and other allowances, is recognized on the later of receipt by the customer or “street date” (when it is available for sale by the customer).

We estimate reserves for Packaged Media returns based on previous returns experience, point-of-sale data available from certain retailers, current economic trends, and projected future sales of the

title to the consumer based on the actual performance of similar titles on a title-by-title basis in each of the Packaged Media businesses.

We estimate reserves for Packaged Media returns based on previous returns experience, point-of-sale data available from certain retailers, current economic trends, and projected future sales of the title to the consumer based on the actual performance of similar titles on a title-by-title basis in each of the Packaged Media businesses.

Factors affecting actual returns include, among other factors, limited retail shelf space at various times of the year, success of advertising or other sales promotions, and the near term release of competing titles.

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If we overestimate the impact of future returns in a particular period, then we may record additional revenue in later periods when returns are less than estimated.

An incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related product) for home entertainment products would have had an impact of approximately $0.4 million and $1.0 million, respectively, on our total revenue in the three and six months ended September 30, 2021 (2020 - $0.5 million and $1.0 million, respectively).

An incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related product) for home entertainment products would

have had an impact of approximately $0.5 million and $1.4 million, respectively, on our total revenue in the three and nine months ended December 31, 2021 (2020 - $0.6 million and $1.6 million, respectively).

Revenue from commissions are recognized as such services are provided.

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Goodwill and Indefinite-Lived Intangibles.

At September 30, 2021, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively.

At December 31, 2021, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively.

Our indefinite-lived intangible assets consist of trade names primarily representing the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as of December 8, 2016.

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Components are aggregated into a single reporting unit if they share similar economic characteristics.

Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at September 30, 2021, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $1.97 billion), and our Television (goodwill of $309 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.

Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at December 31, 2021, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $1.97 billion), and our Television (goodwill of $309 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.

Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment each fiscal year or between the annual tests if an event occurs or circumstances change that indicates it is more-likely-than-not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value.

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For our annual goodwill impairment test for fiscal 2021, due to the increase in the market price of our common shares since our most recent quantitative impairment assessment at March 31, 2020, the performance of the Television and Media Networks reporting units in fiscal 2021, and the improvement of overall economic conditions associated with the COVID-19 pandemic as compared to fiscal 2020, we performed a qualitative assessment for all reporting units.

This assessment included consideration of, but not limited to, the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, industry and market conditions, performance and current and projected cash flows of our reporting units, and changes in our share price.

Based upon our qualitative assessment, we concluded that it was more-likely-than-not that the fair value of our reporting units was greater than their carrying value.

During the three and six months ended September 30, 2021, there were no events or circumstances that would indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.

During the three and nine months ended December 31, 2021, there were no events or circumstances that would indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.

Management will continue to monitor all of its reporting units for changes in the business environment that could impact the recoverability in future periods.

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The Company also considered the macroeconomic impact including the uncertainty around the COVID-19 global pandemic, and the resulting uncertain long-term economic impact on discount rates and growth rates, as well as the impact from tax law changes inclusive of the reduction of the federal tax rate since the acquisition of Starz.

During the three and six months ended September 30, 2021, there were no events or circumstances that would indicate that it is more-likely-than-not that the fair value of our indefinite-lived trade names is less than its carrying value.

During the three and nine months ended December 31, 2021, there were no events or circumstances that would indicate that it is more-likely-than-not that the fair value of our indefinite-lived trade names is less than its carrying value.

Finite-Lived Intangible Assets.

At September 30, 2021, the carrying value of our finite-lived intangible assets was approximately $1.26 billion.

At December 31, 2021, the carrying value of our finite-lived intangible assets was approximately $1.22 billion.

Our finite-lived intangible assets primarily relate to customer relationships associated with U.S.

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Impairment would then be measured as the excess of the asset’s carrying value over its fair value.

The Company monitors its finite-lived intangible assets and changes in the underlying circumstances each reporting period for indicators of possible impairments or a change in the useful life or method of amortization of our finite-lived intangible

During the fiscal year ended March 31, 2021, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption and the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our amortizable intangible assets.

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Based on our impairment analysis, the estimated undiscounted cash flows exceeded the carrying amount of the assets and therefore no impairment charge was required.

During the three and six months ended September 30, 2021, there were no events or circumstances that have changed that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.

During the three and nine months ended December 31, 2021, there were no events or circumstances that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.

Determining whether an intangible asset is recoverable or impaired requires various estimates and assumptions, including whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining estimates of future cash flows for the assets involved and, when applicable, the assumptions applied in determining fair value, including discount rates, growth rates, market risk premiums and other assumptions about the economic environment.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the three months ended September 30, 2021 and 2020.

The Media Networks segment results of operations for the three months ended September 30, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of Other

Streaming Services).

The following table sets forth our consolidated results of operations for the three months ended December 31, 2021 and 2020.

The Media Networks segment results of operations for the three months ended December 31, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of Other Streaming Services).

We sold our interest in Pantaya on March 31, 2021.

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Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 2020 Amount Percent

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Media Networks 388.9 406.2 (17.3) (4.3) %

Intersegment eliminations (163.8) (98.1) (65.7) 67.0 %

Intersegment eliminations (217.4) (48.3) (169.1) nm

Total revenues 885.4 836.4 49.0 5.9 %

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Interest expense (44.4) (45.0) 0.6 (1.3) %

Interest and other income 24.1 0.1 24.0 nm

Interest and other income 1.4 0.5 0.9 180.0 %

Other expense (1.9) (2.1) 0.2 (9.5) %

Loss on extinguishment of debt (1.1) — (1.1) n/a

Gain (loss) on investments 1.5 (4.7) 6.2 (131.9) %

Equity interests income (loss) 0.4 (1.9) 2.3 (121.1) %

Income (loss) before income taxes 8.7 (23.2) 31.9 nm

Income tax benefit (provision) (5.6) 1.5 (7.1) nm

Net income (loss) 3.1 (21.7) 24.8 nm

Loss on investments (0.2) — (0.2) n/a

Equity interests loss (2.5) (0.7) (1.8) 257.1 %

Loss before income taxes (39.4) (10.2) (29.2) 286.3 %

Income tax provision (9.5) (7.0) (2.5) 35.7 %

Net loss (48.9) (17.2) (31.7) 184.3 %

Net loss attributable to noncontrolling interest 3.3 3.3 — — %

Net income (loss) attributable to Lions Gate Entertainment Corp.

shareholders $ 7.5 $ (18.4) $ 25.9 nm

Net loss attributable to Lions Gate Entertainment Corp.

shareholders $ (45.6) $ (13.9) $ (31.7) 228.1 %

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Consolidated revenues increased in the three months ended September 30, 2021 due to an increase in Television Production revenue and, to a lesser extent, Motion Picture revenues, partially offset by a slight decrease in Media Networks revenue and increased intersegment eliminations associated with higher Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.

Motion Picture revenue increased $73.3 million in the current quarter due to a greater number of theatrical and international releases as theaters have begun to reopen in certain locations with varying restrictions.

Television Production revenue increased $138.8 million due to increased intersegment revenues from the licensing of Starz original series, and a greater number of television episodes delivered to third-parties, as compared to the prior year's quarter which was negatively impacted by the pausing of productions associated with the COVID-19 global pandemic.

Media Networks revenue decreased $3.6 million due to a decrease of $13.3 million from the prior year's quarter which included revenue from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line), and a slight decrease of $2.2 million at Starz Networks.

These decreases were mostly offset by increased revenue of $11.9 million at STARZPLAY International.

Consolidated revenues increased $49.0 million in the three months ended December 31, 2021.

Motion Picture revenue increased $25.0 million in the current quarter due to increased television revenue and theatrical revenue, partially offset by lower home entertainment revenue due to fewer releases in the current quarter.

Television Production revenue increased $210.4 million due to increased intersegment revenues from the licensing of Starz original series, and a greater number of television episodes delivered to third-parties, as compared to the prior year's quarter.

The increases in Television Production and Motion Picture revenue were largely offset by increased intersegment eliminations primarily associated with higher Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.

Media Networks revenue decreased $17.3 million due to a decrease of $13.2 million from the prior year's quarter which included revenue from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line), and a decrease of $12.8 million at Starz Networks.

These decreases were offset by increased revenue of $8.7 million at STARZPLAY International.

See further discussion in the Segment Results of Operations section below.

Direct Operating Expenses.

Direct operating expenses by segment were as follows for the three months ended September 30, 2021 and 2020:

Direct operating expenses by segment were as follows for the three months ended December 31, 2021 and 2020:

Three Months Ended

September 30,

2021 2020 Increase (Decrease)

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Other 0.4 nm 0.6 nm (0.2) (33.3) %

Intersegment eliminations (160.7) nm (95.4) nm (65.3) 68.4 %

Intersegment eliminations (215.5) nm (44.3) nm (171.2) nm

$ 517.9 58.5 % $ 459.3 54.9 % $ 58.6 12.8 %

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nm - Percentage not meaningful.

Direct operating expenses increased in the three months ended September 30, 2021 due to higher Television Production and Motion Picture revenue, and higher Media Networks direct operating expense, partially offset by lower COVID-19 related charges (as further described below).

Direct operating expenses increased in the three months ended December 31, 2021 due to higher Television Production revenue and higher Media Networks direct operating expense, partially offset by lower COVID-19 related charges (as further described below).

The increase in Television Production direct operating expense was partially offset by the increase in intersegment eliminations, which primarily relate to Television Production direct operating costs associated with licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.

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COVID-19 Related Charges.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended September 30, 2021 and 2020, we incurred certain incremental costs which were expensed in the periods which are included in consolidated direct operating expense and are excluded from segment direct operating expense.

In the three months ended September 30, 2021, the benefit included in direct operating expense of $(1.0) million represents insurance recoveries which were offset by incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.

In the three months ended September 30, 2020, the costs of $22.3 million include incremental costs associated with film impairment due to changes in performance expectations, the pausing and restarting of productions

including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.

We expect to incur additional incremental costs in future periods.

If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we expect that the incremental costs we incur in fiscal 2022 will decrease as compared to fiscal 2021.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, certain incremental costs were incurred and expensed, and included in consolidated direct operating expense and excluded from segment direct operating expense.

In the three months ended December 31, 2021, the benefit included in direct operating expense of $2.8 million represents insurance recoveries which were offset by incremental costs associated with the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.

In the three months ended December 31, 2020, the costs of $8.6 million include incremental costs associated with the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.

We may incur additional incremental costs for direct operating expense in future periods,

depending on if there is a continued spread of recent and new variants;

We are in the process of seeking additional insurance recovery for some of these costs.

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Distribution and Marketing Expenses.

Distribution and marketing expenses by segment were as follows for the three months ended September 30, 2021 and 2020:

Distribution and marketing expenses by segment were as follows for the three months ended December 31, 2021 and 2020:

Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 2020 Amount Percent

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$ 198.9 $ 176.2 $ 22.7 12.9 %

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 21.5 $ 17.5 $ 4.0 22.9 %

Distribution and marketing expenses increased in the three months ended September 30, 2021, due to increased Media Networks and Motion Picture distribution and marketing expense.

The increase in Media Networks distribution and marketing expense was due to an increase at Starz Networks of $34.7 million, and to a lesser extent, an increase at STARZPLAY International of $17.6 million, partially offset by a decrease of $8.7 million due to the prior year's quarter including distribution and marketing expense from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line).

The increase in Motion Picture distribution and marketing expense is due to increased home entertainment marketing cost and theatrical P&A expense as theaters have begun to reopen in certain locations with varying restrictions.

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 35.0 $ 7.4 $ 27.6 nm

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Distribution and marketing expenses increased in the three months ended December 31, 2021, due to increased Motion Picture distribution and marketing expense.

The increase in Motion Picture distribution and marketing expense is due to increased theatrical P&A expense related to theatrical releases in the quarter, as theaters have reopened in certain locations with varying restrictions.

See further discussion in the Segment Results of Operations section below.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended September 30, 2021 and 2020, we incurred $0.2 million and $6.1 million, respectively, in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the three months ended December 31, 2020, we incurred $5.4 million in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit.

These charges are excluded from segment operating results.

We expect to incur additional incremental costs in future periods.

We may incur additional incremental costs for distribution and marketing expense in future periods, depending on if there is a continued spread of recent and new variants;

General and Administrative Expenses.

General and administrative expenses by segment were as follows for the three months ended September 30, 2021 and 2020:

General and administrative expenses by segment were as follows for the three months ended December 31, 2021 and 2020:

Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 % of Revenues 2020 % of Revenues Amount Percent

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Total general and administrative expenses $ 112.5 12.7% $ 115.6 13.8% $ (3.1) (2.7) %

General and administrative expenses decreased in the three months ended September 30, 2021, resulting from decreases in Corporate, Motion Picture and Television Production general and administrative expenses and decreases in share-based compensation expense and purchase accounting and related adjustments.

General and administrative expenses decreased in the three months ended December 31, 2021, resulting from decreases in Motion Picture, Media Networks, Corporate and Television Production general and administrative expenses, partially offset by increases in share-based compensation expense and purchase accounting and related adjustments.

See further discussion in the Segment Results of Operations section below.

Corporate general and administrative expenses decreased $2.6 million, or 9.6%, primarily due to a decrease in incentive based compensation and professional fees.

The decrease in share-based compensation expense included in general and administrative expense in the three months ended September 30, 2021, as compared to the three months ended September 30, 2020 is primarily due to share-based compensation expense in the prior year's quarter associated with the Company's incentive based compensation program.

Corporate general and administrative expenses decreased $1.6 million, or 6.8%, primarily due to a decrease in incentive based compensation.

The increase in share-based compensation expense included in general and administrative expense in the three months ended December 31, 2021, as compared to the three months ended December 31, 2020 is primarily due to an increase in the number of share-based payment awards incurring expense in the current quarter as compared to the prior year's quarter.

The following table reconciles this amount to total share-based compensation expense:

Three Months Ended

September 30,

(Amounts in millions)

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General and administrative expense $ 22.0 $ 19.3

Restructuring and other (1)

Direct operating expense 0.4 0.5

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Total share-based compensation expense $ 22.6 $ 20.0

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(1) Represents share-based compensation expense included in restructuring and other expenses reflecting the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.

Purchase accounting and related adjustments represent the charge for the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the amortization of the recoupable portion of the purchase price and the expense associated with earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense.

Purchase accounting and related adjustments decreased $0.7 million, or 6.1%, primarily due to the expense associated with the amortization of the discount related to Pilgrim Media Group in the prior year's quarter.

Purchase accounting and related adjustments increased $1.3 million, or 9.0%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.

Depreciation and Amortization Expense.

Depreciation and amortization of $44.4 million in the three months ended September 30, 2021 decreased $5.2 million, from $49.6 million in the three months ended September 30, 2020 due to lower amortization expense related to our customer relationship intangible assets.

Depreciation and amortization of $46.3 million in the three months ended December 31, 2021 increased $0.5 million, from $45.8 million in the three months ended December 31, 2020.

Restructuring and Other.

Restructuring and other decreased $9.9 million in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the three months ended September 30, 2021 and 2020 (see Note 13 to our unaudited condensed consolidated financial statements):

Restructuring and other decreased $1.9 million in the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the three months ended December 31, 2021 and 2020 (see Note 13 to our unaudited condensed consolidated financial statements):

Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 2020 Amount Percent

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Severance (1)

Cash $ 1.3 $ 8.5 $ (7.2) (84.7) %

Accelerated vesting on equity awards (see Note 11 to our unaudited condensed consolidated financial statements) — 2.8 (2.8) (100.0) %

Total severance costs 1.3 11.3 (10.0) (88.5) %

— 0.9 (0.9) (100.0) %

COVID-19 related charges (2)

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_______________________

(1) Severance costs in the three months ended September 30, 2021 and 2020 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.

(2) During the three months ended September 30, 2021, the Company has incurred certain costs primarily related to incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic.

In the three months ended September 30, 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.

(3) Transaction and related costs in the three months ended September 30, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.

(1) Severance costs in the three months ended December 31, 2020 were primarily related to restructuring activities in connection with cost-saving initiatives.

(2) During the three months ended December 31, 2021, the Company has incurred certain incremental general and administrative costs associated with the COVID-19 global pandemic.

In the three months ended December 31, 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental general and administrative costs associated with the COVID-19 global pandemic.

(3) Transaction and related costs in the three months ended December 31, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.

Interest Expense.

Interest expense of $44.0 million for the three months ended September 30, 2021 decreased $1.7 million, from $45.7 million in the three months ended September 30, 2020, due to lower interest expense on the term loans and Senior Notes.

The following table sets forth the components of interest expense for the three months ended September 30, 2021 and 2020:

Interest expense of $44.4 million for the three months ended December 31, 2021 decreased $0.6 million, from $45.0 million in the three months ended December 31, 2020, due to lower interest expense on the Senior Notes and term loans.

The following table sets forth the components of interest expense for the three months ended December 31, 2021 and 2020:

Three Months Ended

September 30,

(Amounts in millions)

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Interest and Other Income.

Interest and other income of $24.1 million for the three months ended September 30, 2021 compared to interest and other income of $0.1 million for the three months ended September 30, 2020, due to insurance recoveries on prior shareholder litigation of $20.2 million and other gains in the current quarter (see Note 15 to our unaudited condensed consolidated financial statements).

Interest and other income of $1.4 million for the three months ended December 31, 2021 compared to interest and other income of $0.5 million for the three months ended December 31, 2020.

Other Expense.

Other expense of $2.7 million for the three months ended September 30, 2021 compared to other expense of $0.7 million for the three months ended September 30, 2020, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).

Other expense of $1.9 million for the three months ended December 31, 2021 compared to other expense of $2.1 million for the three months ended December 31, 2020, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).

Loss on Extinguishment of Debt.

Loss on extinguishment of debt for the three months ended September 30, 2021 of $0.4 million related to the write-off of debt issuance costs.

There was no comparable loss in the three months ended September 30, 2020.

Loss on extinguishment of debt for the three months ended December 31, 2021 of $1.1 million related to the write-off of debt issuance costs associated with the termination of a portion of our revolving credit

There was no comparable loss in the three months ended December 31, 2020.

See Note 5 to our unaudited condensed consolidated financial statements.

Gain (Loss) on Investments.

Gain on investments of $1.5 million for the three months ended September 30, 2021 represented other investment gains of $1.7 million, partially offset by $0.2 million of unrealized losses on equity securities.

This compared to a loss on investments of $4.7 million for the three months ended September 30, 2020, which represented $5.0 million of impairments of equity securities without readily determinable fair values that were written down to their estimated fair value, partially offset by $0.3 million of unrealized gains on equity securities.

Equity Interests Income (Loss).

Equity interests income of $0.4 million in the three months ended September 30, 2021 compared to equity interests loss of $1.9 million in the three months ended September 30, 2020 due to lower losses from our equity method investees in the current quarter.

Income Tax Benefit (Provision).

We had an income tax provision of $5.6 million in the three months ended September 30, 2021, compared to an income tax benefit of $1.5 million in the three months ended September 30, 2020.

Our income tax benefit (provision) differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, changes in the valuation allowance against our deferred tax assets, and certain minimum taxes and foreign withholding taxes.

Our income tax provision for the three months ended September 30, 2021 and 2020 was also impacted by interest accrual on uncertain tax benefits, and release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Our income tax benefit for the three months ended September 30, 2020 was also impacted by the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Net Income (Loss) Attributable to Lions Gate Entertainment Corp.

Loss on Investments.

Loss on investments of $0.2 million for the three months ended December 31, 2021 compared to a loss on investments of nil for the three months ended December 31, 2020.

Equity Interests Loss.

Equity interests loss of $2.5 million in the three months ended December 31, 2021 compared to equity interests loss of $0.7 million in the three months ended December 31, 2020 due to higher losses from our equity method investees in the current quarter.

Income Tax Provision.

We had an income tax provision of $9.5 million in the three months ended December 31, 2021, compared to an income tax provision of $7.0 million in the three months ended December 31, 2020.

Our income tax provision differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, changes in the valuation allowance against our deferred tax assets, and certain minimum taxes and foreign withholding taxes.

Our income tax provision for the three months ended December 31, 2021 was also impacted by an interest accrual on uncertain tax benefits, additional uncertain tax benefits related to state income taxes identified during state tax audits, and release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Our income tax provision for the three months ended December 31, 2020 was also impacted by an interest accrual on uncertain tax benefits, and release of uncertain tax benefits due to the expiration of statutory limitations and settlements with tax authorities.

Net Loss Attributable to Lions Gate Entertainment Corp.

Shareholders.

Net income attributable to our shareholders for the three months ended September 30, 2021 was $7.5 million, or basic net income per common share of $0.03 on 224.4 million weighted average common shares outstanding and diluted net income per common share of $0.03 on 228.5 weighted average common shares outstanding.

This compares to net loss attributable to our shareholders for the three months

ended September 30, 2020 of $18.4 million, or basic and diluted net loss per common share of $0.08 on 220.4 million weighted average common shares outstanding.

Net loss attributable to our shareholders for the three months ended December 31, 2021 was $45.6 million, or basic and diluted net loss per common share of $0.20 on 225.0 million weighted average common shares outstanding.

This compares to net loss attributable to our shareholders for the three months ended December 31, 2020 of $13.9 million, or basic and diluted net loss per common share of $0.06 on 220.8 million weighted average common shares outstanding.

Segment Results of Operations

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Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended September 30, 2021 and 2020:

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended December 31, 2021 and 2020:

Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 2020 Amount Percent

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Segment profit $ 67.5 $ 50.0 $ 17.5 35.0 %

theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 21.5 $ 17.5 $ 4.0 22.9 %

theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 35.0 $ 7.4 $ 27.6 nm

Direct operating expense as a percentage of revenue 43.0 % 54.6 %

Gross contribution as a percentage of revenue 32.8 % 30.4 %

The table below sets forth Motion Picture revenue by media and product category for the three months ended September 30, 2021 and 2020:

Three Months Ended September 30,

_______________________

nm - Percentage not meaningful.

The table below sets forth Motion Picture revenue by media and product category for the three months ended December 31, 2021 and 2020:

Three Months Ended December 31,

2021 2020 Total Increase (Decrease)

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Includes direct-to-DVD motion pictures, acquired and licensed brands, third-party library product and ancillary-driven platform theatrical releases through our specialty films distribution labels including Lionsgate Premiere, through Good Universe, and with our equity method investees, Roadside Attractions and Pantelion Films, and other titles.

Theatrical revenue increased $16.0 million in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 due to an increase of $9.2 million from our Other Film category , and an increase of $6.8 million from our Feature Film category (The Hitman's Wife's Bodyguard and The Protégé), as theaters have begun to reopen in certain locations with varying restrictions.

In the prior year's quarter, theaters were closed due to circumstances associated with the COVID-19 global pandemic.

Home entertainment revenue increased $11.0 million, or 7.3%, in the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, due to higher digital media revenues of $13.7 million driven by our Feature Film category, partially offset by slightly lower packaged media revenues of $2.7 million.

Digital media revenues in our Feature Film category in the current quarter included revenue from The Hitman's Wife's Bodyguard , as compared to revenue from the premium video-on-demand ("Premium VOD") release of Antebellum in the prior year's quarter.

Television revenue increased $31.8 million, or 53.8%, in the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, driven by an increase in our Feature Film category of $26.9 million due to a greater number of television windows opening (and revenue recognized) than in the prior year's quarter.

International revenue increased $13.8 million, or 30.3%, in the three months ended September 30, 2021, as compared to the three months ended September 30, 2020 driven by an increase in our Feature Film category of $16.7 million due to higher revenue from our fiscal 2021 and 2022 theatrical slates in the current quarter as theaters have begun to reopen in certain locations with varying restrictions.

The prior year's quarter had no new theatrical releases due to circumstances associated with the COVID-19 global pandemic.

If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we currently expect that Motion Picture segment revenues will increase in fiscal 2022 as compared to fiscal 2021.

The extent of the increase, if any, to Motion Picture segment revenues, will depend on, among other things, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, general global economic conditions, the rate at which theaters are able to re-open at scale, the rate of consumers' return to the theaters, and the impact of a potentially crowded marketplace from movies which are awaiting theatrical release in the market.

The evolving and uncertain nature of the situation could result in

further interruptions to our operations, including delays in domestic and international theatrical distribution and production and the pausing of productions, which could impact Motion Picture segment revenues.

Theatrical revenue increased $3.9 million in the three months ended December 31, 2021 as compared to the three months ended December 31, 2020 due to an increase of $3.6 million from our Feature Film category which reflects seven days of revenues from the December 25, 2021 release of American Underdog .

In the prior year's quarter, theaters were mostly closed due to circumstances associated with the COVID-19 global pandemic.

Home entertainment revenue decreased $14.6 million, or 9.2%, in the three months ended December 31, 2021, as compared to the three months ended December 31, 2020, due to lower digital media revenues of $15.3 million in our Feature Film category driven by fewer releases.

In particular, the current quarter included revenue from the release of The Protégé , which compared to revenue in the prior year's quarter from the initial release on a streaming platform of Run and from the premium video-on-demand ("Premium VOD") release of Antebellum .

Television revenue increased $31.9 million, or 88.1%, in the three months ended December 31, 2021, as compared to the three months ended December 31, 2020, driven by an increase in our Feature Film category of $28.8 million due to a greater number of television windows opening (and revenue recognized) than in the prior year's quarter.

If the adverse economic impact and disruptions associated with the COVID-19 global pandemic improve, we currently expect that Motion Picture segment revenues will increase in fiscal 2022 as compared to fiscal 2021.

The extent of the increase, if any, to Motion Picture segment revenues, will depend on, among other things, the duration and spread of the pandemic (including recent and new variants), the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19, and the discovery and spread of recent and new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, general global economic conditions, the rate at which theaters are able to re-open at scale, the rate of consumers' return to the theaters, and the impact of a potentially crowded marketplace from movies which are awaiting theatrical release in the market.

The evolving and uncertain nature of the situation could result in further interruptions to our operations, including continued delays in domestic and international theatrical distribution and production and the pausing of productions, which could impact Motion Picture segment revenues.

Direct Operating Expense.

The increase in direct operating expenses is due to higher Motion Picture revenue, and to a lesser extent, due to higher direct operating expenses as a percentage of motion picture revenue.

The slight increase in direct operating expenses as a percentage of motion picture revenue was driven by the change in the mix of titles and product categories generating revenue in the current quarter as compared to the prior year's quarter.

In particular, the increase was impacted by the higher amortization rate of the fiscal 2022 and 2021 theatrical slate titles generating revenue in the current quarter, as compared to the prior year's quarter, which was impacted by the lower amortization rate of the fiscal 2019 and prior theatrical slate titles generating revenue in the prior year's quarter.

Investment in film write-downs included in Motion Picture segment direct operating expense for the quarter were $0.1 million in the three months ended September 30, 2021, as compared to $0.3 million in the three months ended September 30, 2020.

The decrease in direct operating expenses is due to lower direct operating expenses as a percentage of motion picture revenue, driven by the change in the mix of titles and product categories generating revenue in the current quarter as compared to the prior year's quarter.

In particular, the decrease in direct operating expenses as a percentage of motion picture revenue was impacted by the lower amortization rate of the fiscal 2022 theatrical slate titles generating revenue in the current quarter, as compared to the amortization rate of the fiscal 2021 theatrical slate titles in the prior year's quarter, which reflected higher investment in film write-downs.

Investment in film write-downs included in Motion Picture segment direct operating expense were $1.1 million in the three months ended December 31, 2021, as compared to $13.7 million in the three months ended December 31, 2020.

Distribution and Marketing Expense.

The increase in distribution and marketing expense in the three months ended September 30, 2021 is due to increased home entertainment distribution and marketing expense and theatrical P&A and Premium VOD expense compared to the prior year's quarter, which was impacted by the closure of theaters as a result of circumstances associated with the COVID-19 global pandemic .

In the three months ended September 30, 2021, approximately $4.2 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $1.7 million in the prior year's quarter in the Motion Picture segment.

The increase in distribution and marketing expense in the three months ended December 31, 2021 is due to increased theatrical P&A expense related to theatrical releases in the quarter ( American Underdog ) and P&A incurred in advance for films to be released in subsequent quarters, as compared to the prior year's quarter, which was impacted by the closure of theaters as a result of circumstances associated with the COVID-19 global pandemic .

In the three months ended December 31, 2021, approximately $7.2 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters ( Moonfall and The Unbreakable Boy) , compared to approximately $1.7 million in the prior year's quarter in the Motion Picture segment.

Gross Contribution.

Gross contribution of the Motion Picture segment for the three months ended September 30, 2021 increased as compared to the three months ended September 30, 2020, due to increased revenue which was partially offset by slightly increased direct operating expense as a percentage of Motion Picture revenue.

Gross contribution of the Motion Picture segment for the three months ended December 31, 2021 increased as compared to the three months ended December 31, 2020, due to increased revenue and lower direct operating expense as a percentage of Motion Picture revenue, partially offset by increased distribution and marketing expense.

General and Administrative Expense.

General and administrative expenses of the Motion Picture segment decreased $2.1 million, or 8.5%, primarily due to decreases in salaries and related compensation and incentive based compensation.

General and administrative expenses of the Motion Picture segment decreased $3.5 million, or 13.4%, primarily due to a decrease in incentive based compensation.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the three months ended September 30, 2021 and 2020:

The table below sets forth Television Production gross contribution and segment profit for the three months ended December 31, 2021 and 2020:

Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 2020 Amount Percent

9 unchanged sentences

Gross contribution as a percentage of revenue 6.5 % 17.1 %

________________________

nm - Percentage not meaningful.

The table below sets forth Television Production revenue and changes in revenue by media for the three months ended September 30, 2021 and 2020:

The table below sets forth Television Production revenue and changes in revenue by media for the three months ended December 31, 2021 and 2020:

Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 2020 Amount Percent

9 unchanged sentences

$ 438.6 $ 228.2 $ 210.4 92.2 %

________________________

nm - Percentage not meaningful.

The primary component of Television Production revenue is domestic television revenue.

Domestic television revenue increased in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020, due to an increase of $68.4 million from intersegment revenues driven by the licensing of Starz original series (Power Book III:

Raising Kanan, Hightown Season 2, Heels Season 1, BMF Season 1 among others), and an increase of $43.3 million from a greater number of television episodes delivered to third-parties, both of which were negatively impacted in the prior year's quarter by disruptions associated with the COVID-19 global pandemic and the associated pausing of productions.

International revenue in the three months ended September 30, 2021 increased $9.1 million, or 19.0%, due to revenue in the current quarter from Acapulco Season 1.

Home entertainment revenue in the three months ended September 30, 2021 increased $17.2 million due to digital media revenue in the current quarter for Weeds Seasons 1 - 8.

If the adverse economic impact and disruptions associated with the COVID-19 global pandemic continue to improve, we currently expect that Television Production segment revenues will increase in fiscal 2022 as compared to fiscal 2021.

The extent of the increase, if any, to Television Production segment revenues, will depend on, among other things, the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19 in certain parts of the world, and the discovery and spread of new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, and general global economic conditions.

The evolving and uncertain nature of the situation could result in further interruptions to our operations, including delays in domestic and international distribution and production throughout the U.S., Canada and worldwide, and the pausing of productions, which could impact Television Production segment revenues.

Domestic television revenue increased in the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, due to an increase of $120.9 million from intersegment revenues driven by the licensing of Starz original series (Power Book II:

Ghost Season 2 , Power Book IV:

Force Season 1, Step Up:

High Water Season 3 , Becoming Elizabeth Season 1, among others), and an increase from a greater number of television episodes delivered to third-parties ( Love Life Season 2, Home Economics Season 2, Swimming With Sharks, among others).

International revenue in the three months ended December 31, 2021 increased $29.8 million, or 114.6%, due to higher intersegment revenues from STARZPLAY International from the licensing of Starz original series ( Step Up:

High Water Season 3, Power Book IV:

Force Season 1, and Power Book II:

Ghost Season 2).

Home entertainment revenue in the three months ended December 31, 2021 decreased $46.6 million due to significant digital media revenue in the prior year's quarter for Power Season 6 and the second syndication license of Mad Men Seasons 1 to 7.

Other revenue increased $6.5 million in the three months ended December 31, 2021 as compared to the three months ended December 31, 2020.

The increase is due to revenue of 3 Arts Entertainment, which was negatively impacted in the three months ended December 31, 2020 as a result of the COVID-19 global pandemic related disruptions.

While television production has resumed, the extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases fully returning to and remaining at pre COVID-19 levels.

If the adverse economic impact and disruptions associated with the COVID-19 global pandemic improve, we currently expect that Television Production segment revenues will increase in fiscal 2022 as compared to fiscal 2021.

The extent of the increase, to Television Production segment revenues, will depend on, among other things, the duration and spread of the pandemic (including recent and new variants), the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19, and the discovery and spread of recent and new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, and general global economic conditions.

The evolving and uncertain nature of the situation could result in further interruptions to our operations, including continued delays in domestic and international distribution and production throughout the U.S., Canada and worldwide, and the pausing of productions, which could impact Television Production segment revenues.

Direct Operating Expense.

Direct operating expense of the Television Production segment in the three months ended September 30, 2021 increased $121.8 million, or 72.2% due to the increase in Television Production revenues.

Direct operating expenses as a percentage of television production revenue remained relatively consistent in the current quarter as compared to the prior year's quarter.

Direct operating expense of the Television Production segment in the three months ended December 31, 2021 increased $219.8 million, or 120.4% due to the increase in Television Production revenues.

Direct operating expenses as a percentage of television production revenue increased primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter, and in particular, the current quarter included a greater number of deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue.

Gross Contribution.

Gross contribution of the Television Production segment for the three months ended September 30, 2021 increased as compared to the three months ended September 30, 2020, due to increased television production revenue.

Gross contribution of the Television Production segment for the three months ended December 31, 2021 decreased as compared to the three months ended December 31, 2020, due to higher direct operating expense as a percentage of television production revenue.

General and Administrative Expense.

General and administrative expenses of the Television Production segment decreased $1.8 million, or 15.9%, primarily due to a decrease in incentive based compensation.

General and administrative expenses of the Television Production segment decreased $0.2 million, or 2.1%.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the three months ended September 30, 2021 and 2020.

The table below sets forth Media Networks gross contribution and segment profit for the three months ended December 31, 2021 and 2020.

We sold our interest in Pantaya on March 31, 2021.

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Three Months Ended

September 30, Increase (Decrease)

December 31, Increase (Decrease)

2021 2020 Amount Percent

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Three Months Ended Three Months Ended

September 30, 2021 September 30, 2020

December 31, 2021 December 31, 2020

Starz Networks STARZPLAY International Total Media Networks Starz Networks STARZPLAY International Other Streaming Services Total Media Networks

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The table below sets forth, for the periods presented, subscriptions to our Media Networks and STARZPLAY Arabia services.

September 30, September 30,

December 31, December 31,

(Amounts in millions)

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(1) Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee.

(2) Due to the March 31, 2021 sale of Pantaya, total domestic and international subscribers, OTT subscribers and total global subscribers amounts have been adjusted from amounts previously reported for September 30, 2020 to exclude Pantaya in order to be consistent with the presentation at September 30, 2021.

Subscribers of Pantaya (all OTT) at September 30, 2020 amounted to 0.8 million.

(2) Due to the March 31, 2021 sale of Pantaya, total domestic and international subscribers, OTT subscribers and total global subscribers amounts have been adjusted from amounts previously reported for December 31, 2020 to exclude Pantaya in order to be consistent with the presentation at December 31, 2021.

Subscribers of Pantaya (all OTT) at December 31, 2020 amounted to 0.9 million.

(3) OTT subscribers includes subscribers of STARZPLAY Arabia, as presented above.

The slight decrease in Media Networks' revenue of $3.6 million was due to a decrease of $13.3 million due to the prior year's quarter including revenue from Pantaya (representing substantially all of Other Streaming Services), which was sold on March 31, 2021, and lower Starz Networks revenue of $2.2 million primarily due to declines in revenue from traditional linear services of $28.8 million, which were partially offset by higher OTT revenue resulting from increased subscriptions of $26.2 million.

These decreases were partially offset by higher STARZPLAY International revenue of $11.9 million, as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since September 30, 2020.

During the three months ended September 30, 2021 and 2020, the following original series premiered on STARZ:

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

Power Book III:

Raising Kanan Season 1

P-Valley Season 1

Heels Season 1

The decrease in Media Networks' revenue of $17.3 million was due to a decrease of $13.2 million due to the prior year's quarter including revenue from Pantaya (representing substantially all of Other Streaming Services), which was sold on March 31, 2021, and lower Starz Networks revenue of $12.8 million primarily due to declines in revenue from traditional linear services of $31.2 million, which were partially offset by higher OTT revenue resulting from increased subscriptions of $17.7 million.

These decreases were partially offset by higher STARZPLAY International revenue of $8.7 million, as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since December 31, 2020.

During the three months ended December 31, 2021 and 2020, the following original series premiered on STARZ:

Three Months Ended December 31, 2021 (1)

Three Months Ended December 31, 2020 (2)

Hightown Season 2

Inside the NXIVM Cult

Power Book II:

Ghost Season 2

BMF - Black Mafia Family Season 1

The Spanish Princess Season 2

___________________

(1) In addition, BMF - Black Mafia Family Season 1 premiered on September 26, 2021, with the majority of episodes airing during the three months ended December 31, 2021.

(2) In addition, while Power Book II:

Ghost Season 1 premiered in the three months ended September 30, 2020, the series returned with a mid-season premiere in December 2020.

Direct Operating and Distribution and Marketing Expenses .

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In addition, the launch of the STARZPLAY international service has and will continue to result in an increase in expenses as the service continues to expand.

The increase in Media Networks direct operating expenses is due to an increase of $25.6 million at Starz Networks, and an increase of $16.2 million at STARZPLAY International in the three months ended September 30, 2021.

The increase in Media Networks direct operating expenses is due to an increase of $29.4 million at Starz Networks, and an increase of $13.5 million at STARZPLAY International in the three months ended December 31, 2021.

These increases were partially offset by a decrease of $3.1 million due to the prior year's quarter including direct operating expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.

The increase in Starz Networks direct operating expense was primarily due to higher programming cost amortization related to our Starz Originals of $55.3 million due to a higher number of, and more expensive, series premieres, partially offset by lower programming amortization of $28.6 million related to fewer theatrical releases under our programming output agreement with Sony, and lower programming cost amortization of $3.3 million related to our library content.

The increase in Starz Networks direct operating expense was primarily due to higher programming cost amortization related to our Starz Originals of $49.5 million due to a higher number of, and more expensive, series' episode premieres, partially offset by lower programming amortization of $24.0 million related to fewer theatrical releases under our programming output agreement with Sony.

Direct operating expenses at STARZPLAY International increased as a result of the continued expansion of STARZPLAY International.

The increase in Media Networks distribution and marketing expense is due to an increase of $34.7 million at Starz Networks due to increased advertising and marketing due to increased spend to drive growth in our subscribers and increased spend on our Starz Originals, and an increase of $17.6 million at STARZPLAY International due to increased advertising and marketing to drive growth in subscribers.

These increases were partially offset by a decrease of $8.7 million due to the prior year's quarter including distribution and marketing expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.

The slight decrease in Media Networks distribution and marketing expense is due to a decrease of $10.6 million due to the prior year's quarter including distribution and marketing expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.

This decrease was partially offset by an increase of $9.1 million at Starz Networks due to increased advertising and marketing due to increased spend to drive growth in our subscribers.

Gross Contribution.

The decrease in gross contribution of the Media Networks segment compared to the prior year's quarter was due to decreases at Starz Networks of $62.5 million and STARZPLAY International of $21.9 million driven by higher advertising and marketing expense and direct operating expense as described above.

The decrease in gross contribution of the Media Networks segment compared to the prior year's quarter was due to a decrease at Starz Networks of $51.3 million driven by higher direct operating expense and advertising and marketing expense and a decrease in revenue as described above.

General and Administrative Expense.

General and administrative expenses of the Media Networks segment in the three months ended September 30, 2021 increased slightly from the prior year's quarter, driven by increases at STARZPLAY International of $1.5 million and Starz Networks of $0.6 million, offset by a decrease of $1.3 million due to the prior year's quarter including general and administrative expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.

Six Months Ended September 30, 2021 Compared to Six Months Ended September 30, 2020

General and administrative expenses of the Media Networks segment in the three months ended December 31, 2021 decreased slightly from the prior year's quarter, driven by a decrease of $2.5 million due to the prior year's quarter including general and administrative expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021, and a decrease at Starz Networks of $0.9 million.

These decreases were partially offset by an increase at STARZPLAY International of $1.6 million.

Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the six months ended September 30, 2021 and 2020.

The Media Networks segment results of operations for the six months ended September 30, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of Other Streaming Services).

The following table sets forth our consolidated results of operations for the nine months ended December 31, 2021 and 2020.

The Media Networks segment results of operations for the nine months ended December 31, 2020 included our formerly majority owned premium Spanish language streaming services business, Pantaya (representing substantially all of Other Streaming Services).

We sold our interest in Pantaya on March 31, 2021.

See Note 2 to our unaudited condensed consolidated financial statements for further information.

Six Months Ended

September 30, Increase (Decrease)

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

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Loss on extinguishment of debt (28.2) — (28.2) n/a

Gain on investments 1.5 0.4 1.1 275.0 %

Equity interests income (loss) 1.1 (4.5) 5.6 (124.4) %

Income (loss) before income taxes (36.4) 24.3 (60.7) (249.8) %

Income tax benefit (provision) (12.1) 0.2 (12.3) nm

Net income (loss) (48.5) 24.5 (73.0) (298.0) %

Gain on investments 1.2 0.3 0.9 nm

Equity interests loss (1.4) (5.1) 3.7 (72.5) %

Income (loss) before income taxes (75.8) 14.0 (89.8) nm

Income tax provision (21.6) (6.7) (14.9) nm

Net income (loss) (97.4) 7.3 (104.7) nm

Net loss attributable to noncontrolling interest 13.9 11.5 2.4 20.9 %

Net income (loss) attributable to Lions Gate Entertainment Corp.

shareholders $ (37.9) $ 32.7 $ (70.6) (215.9) %

shareholders $ (83.5) $ 18.8 $ (102.3) nm

_______________________

nm - Percentage not meaningful.

Consolidated revenues increased in the six months ended September 30, 2021, due to an increase in Television Production revenue, and to a lesser extent, increases in Motion Picture and Media Networks revenues, partially offset by increased intersegment eliminations associated with higher Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.

Motion Picture revenue increased $83.8 million in the current period due to a greater number of theatrical and international releases as theaters have begun to reopen in certain locations with varying restrictions.

Consolidated revenues increased $279.4 million in the nine months ended December 31, 2021.

Motion Picture revenue increased $108.7 million in the current period due to a greater number of theatrical and international releases as theaters have reopened in certain locations with varying restrictions, and increased television revenue.

These increases were partially offset by lower home entertainment revenue.

Television Production revenue increased $539.8 million due to increased intersegment revenues from the licensing of Starz original series, and a greater number of television episodes delivered to third-parties as compared to the prior year's period, which was negatively impacted by the pausing of productions associated with the COVID-19 global pandemic.

Media Networks revenue increased $11.5 million due to increased revenue across STARZPLAY International of $26.1 million and Starz Networks of $10.2 million, partially offset by a decrease of $24.8 million due to the prior year's period including revenue from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line).

The increases in Television Production and Motion Picture revenue were partially offset by increased intersegment eliminations primarily associated with higher Television Production revenues (a substantial portion of intersegment eliminations relates to Television Production revenue) for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.

Media Networks revenue decreased $5.8 million due to a decrease of $38.0 million due to the prior year's period including revenue from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line), and a slight decrease in revenue at Starz Networks of $2.6 million.

These decreases were mostly offset by increased revenue at STARZPLAY International of $34.8 million.

See further discussion in the Segment Results of Operations section below.

Direct Operating Expenses.

Direct operating expenses by segment were as follows for the six months ended September 30, 2021 and 2020:

Six Months Ended

September 30,

Direct operating expenses by segment were as follows for the nine months ended December 31, 2021 and 2020:

Nine Months Ended

2021 2020 Increase (Decrease)

11 unchanged sentences

nm - Percentage not meaningful.

Direct operating expenses increased in the six months ended September 30, 2021 due to higher Television Production and Motion Picture revenue, and higher Media Networks direct operating expense, partially offset by lower COVID-19 related charges (as further described below).

Direct operating expenses increased in the nine months ended December 31, 2021 due to higher Television Production and Motion Picture revenue, and higher Media Networks direct operating expense, partially offset by lower COVID-19 related charges (as further described below).

The increase in Media Networks direct operating expense was driven by an increase at STARZPLAY International of $31.4 million.

The increase in Media Networks direct operating expense was driven by increases at STARZPLAY International of $44.8 million and at Starz Networks of $33.4 million.

See further discussion in the Segment Results of Operations section below.

COVID-19 Related Charges.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the six months ended September 30, 2021 and 2020, we incurred certain incremental costs which were expensed in the periods which are included in consolidated direct operating expense and are excluded from segment direct operating expense.

In the six months ended September 30, 2021, the charges of $0.5 million represent incremental costs associated with the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic, which were mostly offset by insurance recoveries.

In the six months ended September 30, 2020, the charges of $28.0 million include incremental costs associated with film impairment due to changes in performance expectations, the pausing and restarting of productions including certain cast and crew, idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.

expect to incur additional incremental costs in future periods.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, certain incremental costs were incurred and expensed and included in consolidated direct operating expense and excluded from segment direct operating expense.

In the nine months ended December 31, 2021, the benefit included in direct operating expense of $2.3 million represents insurance recoveries which were offset by incremental costs associated with the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.

In the nine months ended December 31, 2020, the charges of $36.6 million include incremental costs associated with film impairment due to changes in performance

expectations, the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic.

We may incur additional incremental costs for direct operating expenses in future periods, depending on if there is a continued spread of recent and new variants;

We are in the process of seeking additional insurance recovery for some of these costs.

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Distribution and Marketing Expenses.

Distribution and marketing expenses by segment were as follows for the six months ended September 30, 2021 and 2020:

Six Months Ended

September 30, Increase (Decrease)

Distribution and marketing expenses by segment were as follows for the nine months ended December 31, 2021 and 2020:

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

7 unchanged sentences

$ 633.4 $ 484.6 $ 148.8 30.7 %

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 79.3 $ 17.5 $ 61.8 353.1 %

Distribution and marketing expenses increased in the six months ended September 30, 2021, due to increased Motion Picture and Media Networks distribution and marketing expense.

The increase in Motion Picture distribution and marketing expense is due to increased theatrical P&A as theaters have begun to reopen in certain locations with varying restrictions.

The increase in Media Networks distribution and marketing expense was due to an increase at Starz Networks of $52.9 million, and to a lesser extent, an increase at STARZPLAY International of $16.6 million, partially offset by a decrease of $18.8 million due to the prior year's period including distribution and marketing expense from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line).

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 114.3 $ 24.9 $ 89.4 nm

_______________________

nm - Percentage not meaningful.

Distribution and marketing expenses increased in the nine months ended December 31, 2021, due to increased Motion Picture and Media Networks distribution and marketing expense.

The increase in Motion Picture distribution and marketing expense is due to increased theatrical P&A related to theatrical releases in the period as theaters have reopened in certain locations with varying restrictions.

The increase in Media Networks distribution and marketing expense was due to an increase at Starz Networks of $61.9 million due to increased spend on our Starz Originals and to drive growth in subscriptions and an increase in operating expense related to continued growth in the OTT service, and to a lesser extent, an increase at STARZPLAY International of $16.1 million, partially offset by a decrease of $29.5 million due to the prior year's period including distribution and marketing expense from Pantaya, which was sold on March 31, 2021 (reflecting substantially all of our former Other Streaming Services product line).

See further discussion in the Segment Results of Operations section below.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the six months ended September 30, 2021 and 2020, we incurred $0.3 million and $10.7 million, respectively, in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, during the nine months ended December 31, 2021 and 2020, we incurred $0.3 million and $16.1 million, respectively, in costs primarily related to contractual marketing spends for film releases and events that have been canceled or delayed and thus will provide no economic benefit.

These charges are excluded from segment operating results.

We expect to incur additional incremental costs in future periods.

We may incur additional incremental costs for distribution and marketing expenses in future periods, depending on if there is a continued spread of recent and new variants;

General and Administrative Expenses.

General and administrative expenses by segment were as follows for the six months ended September 30, 2021 and 2020:

Six Months Ended

September 30, Increase (Decrease)

General and administrative expenses by segment were as follows for the nine months ended December 31, 2021 and 2020:

Nine Months Ended

December 31, Increase (Decrease)

2021 % of Revenues 2020 % of Revenues Amount Percent

9 unchanged sentences

Total general and administrative expenses $ 353.1 13.2% $ 343.3 14.3% $ 9.8 2.9 %

General and administrative expenses increased in the six months ended September 30, 2021, resulting from increases in share-based compensation expense, purchase accounting and related adjustments, and a slight increase in Media Networks general and administrative expenses, partially offset by decreased Motion Picture, Corporate and Television Production general and administrative expenses.

General and administrative expenses increased in the nine months ended December 31, 2021, resulting from increases in share-based compensation expense and purchase accounting and related adjustments, partially offset by decreased Motion Picture, Corporate, Television Production and Media Networks general and administrative expenses.

See further discussion in the Segment Results of Operations section below.

Corporate general and administrative expenses decreased $6.4 million, or 8.3%, primarily due to decreases in incentive based compensation and professional fees.

The increase in share-based compensation expense included in general and administrative expense in the six months ended September 30, 2021, as compared to the six months ended September 30, 2020 is primarily due to higher fair values associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved.

Additionally, the increase in share-based compensation expense is due to an increase in the number of share-based payment awards incurring expense in the current period as compared to the prior year's period.

The increase in share-based compensation expense included in general and administrative expense in the nine months ended December 31, 2021, as compared to the nine months ended December 31, 2020 is primarily due to an increase in the number of share-based payment awards incurring expense in the current period as compared to the prior year's period partially offset by share-based compensation expense in the prior year's period associated with the Company's incentive based compensation program.

The following table reconciles this amount to total share-based compensation expense:

Six Months Ended

September 30,

Nine Months Ended

(Amounts in millions)

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Depreciation and Amortization Expense.

Depreciation and amortization of $87.8 million for the six months ended September 30, 2021 decreased $9.3 million, from $97.1 million in the six months ended September 30, 2020 due to lower amortization expense related to our customer relationship intangible assets.

Depreciation and amortization of $134.1 million for the nine months ended December 31, 2021 decreased $8.8 million, from $142.9 million in the nine months ended December 31, 2020 due to lower

amortization expense related to our customer relationship intangible assets.

Restructuring and Other.

Restructuring and other decreased $9.7 million in the six months ended September 30, 2021 as compared to the six months ended September 30, 2020, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the six months ended September 30, 2021 and 2020 (see Note 13 to our unaudited condensed consolidated financial statements):

Six Months Ended

September 30, Increase (Decrease)

Restructuring and other decreased $11.7 million in the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the nine months ended December 31, 2021 and 2020 (see Note 13 to our unaudited condensed consolidated financial statements):

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

11 unchanged sentences

_______________________

(1) Severance costs in the six months ended September 30, 2021 and 2020 were primarily related to restructuring activities in connection with cost-saving initiatives and recent acquisitions.

(2) During the six months ended September 30, 2021, the Company has incurred certain costs primarily related to incremental costs required to adhere to health and safety protocols and other incremental costs associated with the COVID-19 global pandemic.

In the six months ended September 30, 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental costs associated with the COVID-19 global pandemic.

(3) Transaction and related costs in the six months ended September 30, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.

(1) Severance costs in the nine months ended December 31, 2021 and 2020 were primarily related to restructuring activities in connection with cost-saving initiatives.

(2) During the nine months ended December 31, 2021, the Company has incurred certain incremental general and administrative costs associated with the COVID-19 global pandemic.

In the nine months ended December 31, 2020, these costs were primarily related to transitioning the Company to a remote-work environment and other incremental general and administrative costs associated with the COVID-19 global pandemic.

(3) Transaction and related costs in the nine months ended December 31, 2021 and 2020 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.

Interest Expense.

Interest expense of $85.7 million in the six months ended September 30, 2021 decreased $4.5 million from the six months ended September 30, 2020, due to lower interest expense on the term loans, Senior Notes and other cash-based interest related to payments associated with the Company's interest rate swaps.

These decreases were partially offset by an increase in amortization of debt financing costs, and other non-cash interest due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).

The following table sets forth the components of interest expense for the six months ended September 30, 2021 and 2020:

Six Months Ended

September 30,

Interest expense of $130.0 million in the nine months ended December 31, 2021 decreased $5.2 million from the nine months ended December 31, 2020, due to lower interest expense on the Senior Notes, term loans, and other cash-based interest related to payments associated with the Company's interest rate swaps.

These decreases were partially offset by an increase in other non-cash interest due to the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).

The following table sets forth the components of interest expense for the nine months ended December 31, 2021 and 2020:

Nine Months Ended

(Amounts in millions)

9 unchanged sentences

Interest and Other Income.

Interest and other income of $28.0 million for the six months ended September 30, 2021 compared to interest and other income of $1.8 million for the six months ended September 30, 2020, due to insurance recoveries on prior shareholder litigation of $22.7 million in the current period and other gains (see Note 15 to our unaudited condensed consolidated financial statements).

Interest and other income of $29.4 million for the nine months ended December 31, 2021 compared to interest and other income of $2.2 million for the nine months ended December 31, 2020, due to insurance recoveries on prior shareholder litigation of $22.7 million in the current period and other gains (see Note 15 to our unaudited condensed consolidated financial statements).

Other Expense.

Other expense of $4.3 million for the six months ended September 30, 2021 compared to other expense of $2.3 million for the six months ended September 30, 2020, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).

Other expense of $6.2 million for the nine months ended December 31, 2021 compared to other expense of $4.5 million for the nine months ended December 31, 2020, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).

Loss on Extinguishment of Debt.

Loss on extinguishment of debt for the six months ended September 30, 2021 related to the write-off of a portion of debt issuance costs (including a portion of call premiums) associated with the redemption of the 5.875% Senior Notes and 6.375% Senior Notes and associated issuance of the 5.500% Senior Notes, the amendment of our credit agreement to extend the maturity of a portion of our revolving credit commitments and a portion of our outstanding term A loans, and repurchases of the Term Loan B.

There was no comparable loss in the six months ended September 30, 2020.

Loss on extinguishment of debt for the nine months ended December 31, 2021 related to the write-off of a portion of debt issuance costs (including a portion of call premiums) associated with the redemption of the 5.875% Senior Notes and 6.375% Senior Notes and associated issuance of the 5.500% Senior Notes, the amendment of our credit agreement to extend the maturity of a portion of our revolving credit commitments and a portion of our outstanding term A loans, repurchases of the Term Loan B, and the termination of a portion of our revolving credit commitments.

There was no comparable loss in the nine months ended December 31, 2020.

See Note 5 to our unaudited condensed consolidated financial statements.

Gain on Investments.

Gain on investments of $1.5 million for the six months ended September 30, 2021 represented $2.2 million of other investment gains which were partially offset by $0.7 million of unrealized losses on equity securities.

This compared to a gain on investments of $0.4 million for the six months ended September 30, 2020, which represented a gain on sale of equity securities without readily determinable fair values of $4.6 million and $0.8 million of unrealized gains on equity securities, offset by $5.0 million of impairments of equity securities without readily determinable fair values that were written down to their estimated fair value.

Equity Interests Income (Loss).

Equity interests income of $1.1 million in the six months ended September 30, 2021 compared to equity interests loss of $4.5 million in the six months ended September 30, 2020 due to lower losses from our equity method investees.

Income Tax Benefit (Provision).

We had an income tax provision of $12.1 million in the six months ended September 30, 2021, compared to an income tax benefit of $0.2 million in the six months ended September 30, 2020.

Our income tax provision for the six months ended September 30, 2021 and 2020 was also impacted by interest accrual on uncertain tax benefits, and release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Our income tax benefit for the six months ended September 30, 2020 was also impacted by the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Gain on investments of $1.2 million for the nine months ended December 31, 2021 compared to a gain on investments of $0.3 million for the nine months ended December 31, 2020.

Equity Interests Loss.

Equity interests loss of $1.4 million in the nine months ended December 31, 2021 compared to equity interests loss of $5.1 million in the nine months ended December 31, 2020 due to lower losses from our equity method investees.

Income Tax Provision.

We had an income tax provision of $21.6 million in the nine months ended December 31, 2021, compared to an income tax provision of $6.7 million in the nine months ended December 31, 2020.

Our income tax provision for the nine months ended December 31, 2021 was also impacted by an interest accrual on uncertain tax benefits, additional uncertain tax benefits related to state income taxes identified during state tax audits, and release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Our income tax provision for the nine months ended December 31, 2020 was also impacted by an interest accrual on uncertain tax benefits, and release of uncertain tax benefits due to the expiration of statutory limitations and settlements with tax authorities.

Net Income (Loss) Attributable to Lions Gate Entertainment Corp.

Shareholders.

Net loss attributable to our shareholders for the six months ended September 30, 2021 was $37.9 million, or basic and diluted net loss per common share of $0.17 on 223.1 million weighted average common shares outstanding.

This compares to net income attributable to our shareholders for the six months ended September 30, 2020 of $32.7 million, or basic net income per common share of $0.15 on 220.0 million weighted average common shares outstanding and diluted net income per common share of $0.15 on 220.6 million weighted average common shares outstanding.

Net loss attributable to our shareholders for the nine months ended December 31, 2021 was $83.5 million, or basic and diluted net loss per common share of $0.37 on 223.7 million weighted average common shares outstanding.

This compares to net income attributable to our

shareholders for the nine months ended December 31, 2020 of $18.8 million, or basic net income per common share of $0.09 on 220.3 million weighted average common shares outstanding and diluted net income per common share of $0.09 on 221.4 million weighted average common shares outstanding.

Segment Results of Operations

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Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the six months ended September 30, 2021 and 2020:

Six Months Ended

September 30, Increase (Decrease)

The table below sets forth Motion Picture gross contribution and segment profit for the nine months ended December 31, 2021 and 2020:

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

12 unchanged sentences

nm - Percentage not meaningful.

The table below sets forth Motion Picture revenue by media and product category for the six months ended September 30, 2021 and 2020:

Six Months Ended September 30,

The table below sets forth Motion Picture revenue by media and product category for the nine months ended December 31, 2021 and 2020:

Nine Months Ended December 31,

2021 2020 Total Increase (Decrease)

19 unchanged sentences

Theatrical revenue increased $44.1 million in the six months ended September 30, 2021 as compared to the six months ended September 30, 2020 due to an increase of $33.7 million from our Feature Film category ( The Hitman's Wife's Bodyguard and Spiral), and an increase of $10.4 million from our Other Film category, as theaters have begun to reopen in certain locations with varying restrictions.

In the prior year's period, theaters were closed due to circumstances associated with the COVID-19 global pandemic.

Home entertainment revenue decreased $10.2 million, or 3.2%, in the six months ended September 30, 2021, as compared to the six months ended September 30, 2020, due to lower packaged media revenues of $8.3 million, and to a lesser extent, lower digital media revenues of $1.9 million driven by our Feature Film category, as a result of fewer home entertainment releases from our fiscal 2021 theatrical slate due to circumstances associated with the COVID-19 global pandemic.

Television revenue increased $24.0 million, or 20.4%, in the six months ended September 30, 2021, as compared to the six months ended September 30, 2020, driven by an increase in our Feature Film category of $19.4 million due to a greater number of television windows opening (and revenue recognized) than in the prior year's period.

International revenue increased $24.2 million, or 24.7%, in the six months ended September 30, 2021, as compared to the six months ended September 30, 2020 due to an increase in our Feature Film category of $36.9 million, offset by a decrease in Other Film of $12.7 million.

The increase in Feature Film related to higher revenue from our fiscal 2022 and 2021 theatrical slates in the current period as theaters have begun to reopen in certain locations with varying restrictions, while the prior year's period had no new theatrical releases due to circumstances associated with the COVID-19 global pandemic.

able to re-open at scale, the rate of consumers' return to the theaters, and the impact of a potentially crowded marketplace from movies which are awaiting theatrical release in the market.

The evolving and uncertain nature of the situation could result in further interruptions to our operations, including delays in domestic and international theatrical distribution and production and the pausing of productions, which could impact Motion Picture segment revenues.

Theatrical revenue increased $47.9 million in the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020 due to an increase of $37.3 million from our Feature Film category driven by a greater number of releases ( The Hitman's Wife's Bodyguard, Spiral, American Underdog), and an increase of $10.6 million from our Other Film category, as theaters have reopened in certain locations with varying restrictions.

In the prior year's period, theaters were mostly closed due to circumstances associated with the COVID-19 global pandemic.

The increase in the Feature Film category reflects seven days of revenues from the December 25, 2021 release of American Underdog .

Home entertainment revenue decreased $24.8 million, or 5.2%, in the nine months ended December 31, 2021, as compared to the nine months ended December 31, 2020, due to lower digital media revenues of $19.2 million and lower packaged media revenues of $13.0 million from our Feature Film category, driven by fewer home entertainment releases from our fiscal 2021 theatrical slate due to circumstances associated with the COVID-19 global pandemic, as compared to the revenues generated from our larger fiscal 2020 theatrical slate in the prior year's period.

These decreases were partially offset by an increase of $7.8 million in digital media revenue from our Other Film category.

Television revenue increased $55.8 million, or 36.3%, in the nine months ended December 31, 2021, as compared to the nine months ended December 31, 2020, driven by an increase in our Feature Film category of $48.2 million due to a greater number of television windows opening (and revenue recognized) than in the prior year's period.

International revenue increased $28.5 million, or 19.5%, in the nine months ended December 31, 2021, as compared to the nine months ended December 31, 2020 due to an increase in our Feature Film category of $34.2 million, offset by a decrease in Other Film of $5.7 million.

The increase in Feature Film related to higher revenue from our fiscal 2022 and 2021 theatrical slates in the current period as theaters have reopened in certain locations with varying restrictions, while the prior year's period had no new significant theatrical releases due to circumstances associated with the COVID-19 global pandemic.

availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19, and the discovery and spread of recent and new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, general global economic conditions, the rate at which theaters are able to re-open at scale, the rate of consumers' return to the theaters, and the impact of a potentially crowded marketplace from movies which are awaiting theatrical release in the market.

Direct Operating Expense.

The increase in direct operating expenses is due to higher Motion Picture revenue.

Investment in film write-downs included in Motion Picture segment direct operating expense in the six months ended September 30, 2021 were $0.1 million, as compared to $0.9 million in the six months ended September 30, 2020.

The decrease in direct operating expenses as a percentage of motion picture revenue was driven by the change in the mix of titles and product categories generating revenue in the current period as compared to the prior year's period.

In particular, the decrease was due to the lower amortization rate of the fiscal 2022 theatrical slate titles generating revenue in the current period, as compared to the amortization rate of the fiscal 2021 theatrical slate titles in the prior year's period, which reflected higher investment in film write-downs.

Investment in film write-downs included in Motion Picture segment direct operating expense in the nine months ended December 31, 2021 were $1.2 million, as compared to $14.6 million in the nine months ended December 31, 2020.

Distribution and Marketing Expense.

The increase in distribution and marketing expense in the six months ended September 30, 2021 is due to higher theatrical P&A and Premium VOD expense compared to the prior year's period, which was impacted by the closure of theaters as a result of circumstances associated with the COVID-19 global pandemic.

Theatrical P&A and Premium VOD expense in the six months ended September 30, 2021 includes expense associated with the release of The Hitman's Wife's Bodyguard, The Protégé, Spiral and Voyagers.

In the six months ended September 30, 2021, approximately $5.6 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $1.7 million in the prior year's period in the Motion Picture segment.

The increase in distribution and marketing expense in the nine months ended December 31, 2021 is due to increased theatrical P&A and Premium VOD expense related to theatrical releases in the period and P&A incurred in advance for films to be released in subsequent quarters, as compared to the prior year's period, which was impacted by the closure of theaters as a result of circumstances associated with the COVID-19 global pandemic.

Theatrical P&A and Premium VOD expense in the nine months ended December 31, 2021 includes expense associated with the release of American Underdog, The Hitman's Wife's Bodyguard, The Protégé, Spiral, and Voyagers.

In the nine months ended December 31, 2021, approximately $10.3 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters ( Moonfall, The Unbreakable Boy, and The Unbearable Weight of Massive Talent ), compared to approximately $3.6 million in the prior year's period in the Motion Picture segment.

Gross Contribution.

Gross contribution of the Motion Picture segment for the six months ended September 30, 2021 decreased as compared to the six months ended September 30, 2020 due to higher Motion Picture distribution and marketing expense as a percentage of Motion Picture revenue.

Gross contribution of the Motion Picture segment for the nine months ended December 31, 2021 decreased as compared to the nine months ended December 31, 2020 due to higher Motion Picture distribution and marketing expense as a percentage of Motion Picture revenue, partially offset by higher Motion Picture revenue and lower direct operating expense as a percentage of Motion Picture revenue.

General and Administrative Expense.

General and administrative expenses of the Motion Picture segment in the six months ended September 30, 2021 decreased $6.5 million, or 12.1%, primarily due to decreases in incentive based compensation, salaries and related compensation and professional fees.

General and administrative expenses of the Motion Picture segment in the nine months ended December 31, 2021 decreased $10.0 million, or 12.5%, primarily due to decreases in incentive based and salaries and related compensation.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the six months ended September 30, 2021 and 2020:

Six Months Ended

September 30, Increase (Decrease)

The table below sets forth Television Production gross contribution and segment profit for the nine months ended December 31, 2021 and 2020:

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

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Gross contribution as a percentage of revenue 6.9 % 17.0 %

The table below sets forth Television Production revenue and changes in revenue by media for the six months ended September 30, 2021 and 2020:

Six Months Ended

September 30, Increase (Decrease)

The table below sets forth Television Production revenue and changes in revenue by media for the nine months ended December 31, 2021 and 2020:

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

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The primary component of Television Production revenue is domestic television revenue.

Domestic television revenue increased in the six months ended September 30, 2021, as compared to the six months ended September 30, 2020, due to an increase of $188.0 million from intersegment revenues from the licensing of Starz original series (Power Book III:

Raising Kanan, Heels Season 1 , BMF Season 1 , Blindspotting Season 1 among others), an increase of $89.3 million from a greater number of television episodes delivered to third-parties, and increased revenue of $23.7 million from reality television series, all of which were negatively impacted in the prior year's period by disruptions associated with the COVID-19 global pandemic and the associated pausing of productions.

International revenue in the six months ended September 30, 2021 increased $30.1 million, or 31.9% as compared to the six months ended September 30, 2020 due to revenue in the current period from Dear White People Season 4, Acapulco Season 1, and higher intersegment revenues of $13.7 million from STARZPLAY International from the licensing of Starz original series.

Home entertainment revenue in the six months ended September 30, 2021 decreased $2.6 million due to digital media revenue in the prior year's period for Mad Men Seasons 1 - 7, which compared to digital media revenue in the current period from Weeds Seasons 1 - 8 and Welcome to Flatch Season 1.

Other revenue increased in the six months ended September 30, 2021 as compared to the six months ended September 30, 2020.

The increase is primarily due to revenue of 3 Arts Entertainment, which was negatively impacted in the six months ended September 30, 2020 as a result of the COVID-19 global pandemic related disruptions.

While television production has mostly resumed, the extent of the future impact on other revenue of the COVID-19 global pandemic is uncertain and will depend on film and television productions and releases fully returning to and remaining at pre COVID-19 levels.

Domestic television revenue increased in the nine months ended December 31, 2021, as compared to the nine months ended December 31, 2020, due to an increase of $308.9 million from intersegment revenues from the licensing of Starz original series (Power Book III:

Raising Kanan, Power Book IV:

Force, Heels Season 1 , BMF Season 1 , Step Up:

Highwater Season 3 , Blindspotting Season 1 among others), and an increase from a greater number of television episodes delivered to third-parties ( Love Life Season 2, Home Economics Season 2, Acapulco Season 1, Dear White People Season 4 , among others), both of which were negatively impacted in the prior year's period by disruptions associated with the COVID-19 global pandemic and the associated pausing of productions.

International revenue in the nine months ended December 31, 2021 increased $59.8 million, or 49.7% as compared to the nine months ended December 31, 2020 due to higher intersegment revenues of $30.5 million from STARZPLAY International from the licensing of Starz original series ( Power Book III:

Raising Kanan Season 1, Heels Season 1, and Step Up:

High Water Season 3), and revenue from third-parties in the current period for Dear White People Season 4, and Acapulco Season 1.

Home entertainment revenue in the nine months ended December 31, 2021 decreased $49.0 million due to digital media revenue in the prior year's period for the second syndication license of Mad Men Seasons 1 to 7 and digital media revenue for Power Season 6, which compared to digital media revenue in the current period from Weeds Seasons 1 to 8 and Welcome to Flatch Season 1.

Other revenue increased $20.6 million in the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020.

The increase is primarily due to revenue of 3 Arts Entertainment, which was negatively impacted in the nine months ended December 31, 2020 as a result of the COVID-19 global pandemic related disruptions.

The extent of the increase to Television Production segment revenues, will depend on, among other things, the duration and spread of the pandemic (including recent and new variants), the impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the continued effectiveness of actions taken to contain or mitigate the outbreak (including the availability, effectiveness and/or public acceptance of any FDA-approved COVID-19 vaccines), potential resurgences of COVID-19, and the discovery and spread of recent and new variants of the virus which could result in the re-imposition of certain restrictions and may lead to more restrictions being implemented again to reduce the spread of COVID-19, and general global economic conditions.

Direct Operating Expense.

Direct operating expense of the Television Production segment in the six months ended September 30, 2021 increased $343.9 million, or 110.3% due to the increase in Television Production revenues.

Direct operating expenses as a percentage of television production revenue increased primarily due to the mix of titles generating revenue in the current period as compared to the prior year's period, and in particular, due to the recent ramp up of production, the current period included a greater number of deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue.

Due to the increase in cost associated with production and changes in season orders, the current

period also included increased write-downs to fair value of investment in film and television programs amounting to $26.6 million in aggregate.

Direct operating expense of the Television Production segment in the nine months ended December 31, 2021 increased $563.8 million, or 114.1% due to the increase in Television Production revenues.

Direct operating expenses as a percentage of television production revenue increased primarily due to the mix of titles generating

revenue in the current period as compared to the prior year's period, and in particular, the current period included a greater number of deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue.

Due to the increase in cost associated with production and changes in season orders, the current period also included increased write-downs to fair value of investment in film and television programs amounting to $28.1 million in aggregate.

This compared to lower direct operating expenses as a percentage of television revenue in the prior year's period, which included fewer deliveries of newer shows primarily associated with the pausing of productions due to the COVID-19 global pandemic related disruptions.

Gross Contribution.

Gross contribution of the Television Production segment for the six months ended September 30, 2021 decreased as compared to the six months ended September 30, 2020, due to higher direct operating expenses as a percentage of television production revenue.

Gross contribution of the Television Production segment for the nine months ended December 31, 2021 decreased as compared to the nine months ended December 31, 2020, due to higher direct operating expenses as a percentage of television production revenue.

General and Administrative Expense.

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Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the six months ended September 30, 2021 and 2020.

The table below sets forth Media Networks gross contribution and segment profit for the nine months ended December 31, 2021 and 2020.

We sold our interest in Pantaya on March 31, 2021.

See Note 2 to our unaudited condensed consolidated financial statements for further information.

Six Months Ended

September 30, Increase (Decrease)

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

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The following table sets forth the Media Networks segment profit by product line:

Six Months Ended Six Months Ended

September 30, 2021 September 30, 2020

Nine Months Ended Nine Months Ended

December 31, 2021 December 31, 2020

Starz Networks STARZPLAY International Total Media Networks Starz Networks STARZPLAY International Other Streaming Services Total Media Networks

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Segment profit $ 241.7 $ (119.6) $ 122.1 $ 339.5 $ (88.5) $ (4.7) $ 246.3

The increase in Media Networks' revenue of $11.5 million was due to higher STARZPLAY International revenue of $26.1 million, and increased Starz Networks' revenue of $10.2 million, partially offset by a decrease of $24.8 million due to the prior year's period including revenue from Pantaya (representing substantially all of Other Streaming Services), which was sold on March 31, 2021.

STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since September 30, 2020.

Starz Networks' revenue primarily increased as a result of higher OTT revenue of $69.4 million resulting from increased subscriptions, which was partially offset by declines in revenue of $59.9 million from traditional linear services.

During the six months ended September 30, 2021 and 2020, the following original series premiered on STARZ:

Six Months Ended September 30, 2021 Six Months Ended September 30, 2020

The decrease in Media Networks' revenue of $5.8 million was due to a decrease of $38.0 million due to the prior year's period including revenue from Pantaya (representing substantially all of Other Streaming Services), which was sold on March 31, 2021, and a slight decrease in Starz Networks' revenue of $2.6 million, mostly offset by higher STARZPLAY International revenue of $34.8 million.

Starz Networks' revenue decreased slightly as a result of declines in revenue of $91.1 million from traditional linear services, which were mostly offset by higher OTT revenue of $87.1 million resulting from increased subscriptions.

During the nine months ended December 31, 2021 and 2020, the following original series premiered on STARZ:

Nine Months Ended December 31, 2021 Nine Months Ended December 31, 2020

First Quarter:

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BMF - Black Mafia Family Season 1

Third Quarter:

Hightown Season 2

Inside the NXIVM Cult

Power Book II:

Ghost Season 2

The Spanish Princess Season 2

___________________

(1) In addition, BMF - Black Mafia Family Season 1 premiered on September 26, 2021, with the majority of episodes airing during the three months ended December 31, 2021.

(2) In addition, while Power Book II:

Ghost Season 1 premiered in the three months ended September 30, 2020, the series returned with a mid-season premiere in December 2020.

Direct Operating and Distribution and Marketing Expenses .

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In addition, the launch of the STARZPLAY international service has and will continue to result in an increase in expenses as the service continues to expand.

The increase in Media Networks direct operating expenses is due to an increase at STARZPLAY International of $31.4 million, and a slight increase at Starz Networks of $3.9 million in the six months ended September 30, 2021.

The increase in Media Networks direct operating expenses is due to increases at STARZPLAY International of $44.8 million, and at Starz Networks of $33.4 million in the nine months ended December 31, 2021.

These increases were partially offset by a decrease of $8.0 million due to the prior year's period including direct operating expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.

Direct operating expenses at STARZPLAY International increased as a result of the continued expansion of STARZPLAY International.

The increase in Starz Networks direct operating expense was primarily due to higher programming cost amortization related to our Starz Originals of $46.2 million due to a higher number of, and more expensive, series premieres, partially offset by lower programming amortization of $39.6 million related to theatrical releases under our programming output agreement with Sony, and lower programming cost amortization of $6.5 million related to our library content.

The increase in Media Networks distribution and marketing expense is due to an increase of $52.9 million at Starz Networks due to an increase in operating expense related to continued growth in the OTT service and increased advertising and marketing due to increased spend on our Starz Originals and increased spend to drive growth in our subscriptions, and an increase of $16.6 million at STARZPLAY International due to increased advertising and marketing to drive growth in subscribers.

The increase in Starz Networks direct operating expense was primarily due to higher programming cost amortization related to our Starz Originals of $95.7 million due to a higher number of, and more expensive, series premieres, partially offset by lower programming amortization of $63.6 million related to theatrical releases under our programming output agreement with Sony.

The increase in Media Networks distribution and marketing expense is due to an increase of $61.9 million at Starz Networks due to increased spend on our Starz Originals and increased spend to drive growth in our subscriptions and an increase in operating expense related to continued growth in the OTT service, and an increase of $16.1 million at STARZPLAY International due primarily to increased advertising and marketing to drive growth in subscribers.

These increases were partially offset by a decrease of $29.5 million due to the prior year's period including distribution and marketing expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.

Gross Contribution.

The decrease in gross contribution compared to the six months ended September 30, 2020 was due to decreases at Starz Networks of $46.6 million and STARZPLAY International of $21.9 million, driven by higher advertising and marketing expense and direct operating expense as described above.

The decrease in gross contribution compared to the nine months ended December 31, 2020 was due to decreases at Starz Networks of $97.9 million and STARZPLAY International of $26.1 million, driven by higher direct operating expense and distribution and marketing expense, partially offset by higher STARZPLAY International revenue, all as

described above.

General and Administrative Expense.

General and administrative expenses of the Media Networks segment in the six months ended September 30, 2021 increased slightly from the prior year's period, driven by increases of $3.4 million at STARZPLAY International and $0.7 million at Starz Networks, offset by a decrease of $2.7 million due to the prior year's period including general and administrative expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021.

General and administrative expenses of the Media Networks segment in the nine months ended December 31, 2021 decreased slightly from the prior year's period, driven by a decrease of $5.2 million due to the prior year's period including general and administrative expense from Pantaya (representing substantially all of our former Other Streaming Services product line), which was sold on March 31, 2021, offset by an increase of $5.0 million at STARZPLAY International.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Our liquidity and capital resources have been provided principally through cash generated from operations, corporate debt, our production and related loans, our $220.0 million non-recourse senior secured revolving credit facility due January 2025 based on collateral consisting of certain of the Company’s tax credit receivables (the "Production Tax Credit Facility"), our $140.0 million senior secured amortizing term credit facility due July 2026 (the "IP Credit Facility") based on the collateral consisting solely of the Company’s rights in certain library titles, the monetization of trade accounts receivable, and other financing obligations collateralized by certain contractual payments to be received in the future.

As of September 30, 2021, we had cash and cash equivalents of $442.6 million.

Our debt at September 30, 2021, excluding production and related loans and IP Credit Facility and other financing obligations discussed above, consisted of the following:

Our liquidity and capital resources have been provided principally through cash generated from operations, corporate debt, our production and related loans, our $220.0 million non-recourse senior secured revolving credit facility due January 2025 based on collateral consisting of certain of the Company’s tax credit receivables (the "Production Tax Credit Facility"), and our $140.0 million senior secured amortizing term credit facility due July 2026 (the "IP Credit Facility") based on the collateral consisting solely of the Company’s rights in certain library titles, and the monetization of trade accounts receivable.

As of December 31, 2021, we had cash and cash equivalents of $314.4 million.

Our corporate debt at December 31, 2021, excluding production and related loans and the IP Credit Facility discussed above, consisted of the following:

• Senior Credit Facilities:

◦ Revolving Credit Facility.

As of September 30, 2021, we had a $1.5 billion revolving credit facility (with no amounts outstanding at September 30, 2021).

A portion of the revolving credit commitments, amounting to $1.25 billion, is due April 2026 (the "2026 Revolving Credit Facility"), and a portion of the revolving credit commitments, amounting to $250.0 million, was due March 2023 (the "2023 Revolving Credit Facility, and together with the 2026 Revolving Credit Facility, the "Revolving Credit Facility").

Subsequent to September 30, 2021, the Company terminated the remaining portion of the revolving credit commitments, amounting to $250.0 million, under the 2023 Revolving Credit Facility (the "Termination").

After giving effect to the Termination, the Company's remaining revolving credit commitments under its Credit Agreement amounted to $1.25 billion under the 2026 Revolving Credit Facility (see Note 18 - Subsequent Events to our unaudited condensed consolidated financial statements).

We have a $1.25 billion revolving credit facility (with no amounts outstanding at December 31, 2021) due April 2026 (the "Revolving Credit Facility").

◦ Term Loan A.

We have a term loan A facility, of which a portion of its outstanding loans, amounting to $444.9 million at September 30, 2021 is due April 2026 (the "2026 Term Loan A") and a portion of its outstanding loans, amounting to $204.3 million at September 30, 2021 is due March 2023 (the "2023 Term Loan A" and together with the 2026 Term Loan A, the "Term Loan A").

We have a term loan A facility, of which a portion of its outstanding loans, amounting to $444.9 million at December 31, 2021 is due April 2026 (the "2026 Term Loan A") and a portion of its outstanding loans, amounting to $199.0 million at December 31, 2021 is due March 2023 (the "2023 Term Loan A" and together with the 2026 Term Loan A, the "Term Loan A").

◦ Term Loan B.

We have a term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), with $850.4 million outstanding at September 30, 2021.

We have a term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), with $847.3 million outstanding at December 31, 2021.

• Senior Notes:

◦ 5.500% Senior Notes.

We have $1.0 billion outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at September 30, 2021.

We have $1.0 billion outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at December 31, 2021.

Our principal uses of cash in operations include the funding of film and television productions, film and programming rights acquisitions, and the distribution and marketing of films and television programs.

We also use cash for debt service (i.e.

principal and interest payments) requirements, equity method or other equity investments, quarterly cash dividends, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of businesses.

In addition, the Company has a redeemable noncontrolling interest balance of $243.2 million as of September 30, 2021 related to its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests (see Note 8 to our unaudited condensed consolidated financial statements).

principal and interest payments) requirements, equity method or other equity investments, quarterly cash dividends when declared, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of or investment in businesses.

In addition, the Company has a redeemable noncontrolling interest balance of $255.0 million as of December 31, 2021 related to its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests (see Note 8 to our unaudited condensed consolidated financial statements).

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise.

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While we cannot predict the outcome of the disruptions associated with the COVID-19 global pandemic on our operating results, cash flows and financial position, we currently expect that as production activity increases and theaters begin to reopen, our cash requirements for productions and marketing spends will increase in fiscal 2022 as compared to fiscal 2021.

However, we currently believe that cash flow from operations, cash on hand, revolving credit facility availability, the monetization of trade accounts receivable, tax-efficient financing, the availability of our Production Tax Credit Facility and IP Credit Facility, and available production or license financing will be adequate to meet known operational cash and debt service (i.e.

principal and interest payments) requirements for the foreseeable future, including the funding of future film and television production, film and programming rights acquisitions and theatrical and home entertainment release schedules, and future equity method or other investment funding requirements, and international expansion.

5 unchanged sentences

Our ability to obtain any additional financing will depend on, among other things, our business plans, operating performance and the condition of the capital markets at the time we seek financing.

Additionally, circumstances related to the COVID-19 global pandemic has caused disruption in the capital markets, which could make financing more difficult and/or expensive, and we may not be able to obtain such financing.

Additionally, circumstances related to the COVID-19 global pandemic, inflation and rising interest rates has caused disruption in the capital markets, which could make financing more difficult and/or expensive, and we may not be able to obtain such financing.

We may also dispose of businesses or assets, including individual films or libraries, and use the net proceeds from such dispositions to fund operations or such acquisitions, or to repay debt.

1 unchanged sentence

In addition, a net first lien leverage maintenance covenant and an interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested quarterly.

As of September 30, 2021, the Company was in compliance with all applicable covenants.

As of December 31, 2021, the Company was in compliance with all applicable covenants.

The 5.500% Senior Notes contain certain restrictions and covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations.

As of September 30, 2021, the Company was in compliance with all applicable covenants.

As of December 31, 2021, the Company was in compliance with all applicable covenants.

Share Repurchase Plan.

3 unchanged sentences

Such purchases will be structured as permitted by securities laws and other legal requirements.

During the three and six months ended September 30, 2021, the Company did not repurchase any common shares.

During the three and nine months ended December 31, 2021, the Company did not repurchase any common shares.

The amount of dividends, if any, that we pay to our shareholders is determined by our Board of Directors, at its discretion, and is dependent on a number of factors, including our financial position, results of operations, cash flows, capital requirements and restrictions under our credit agreements, and shall be in compliance with applicable law.

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Capacity to Pay Dividends.

At September 30, 2021, the capacity to pay dividends under the Senior Credit Facilities and the Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $48.5 million and accumulated deficit of $143.0 million were deemed free of restrictions from paying dividends at September 30, 2021.

At December 31, 2021, the capacity to pay dividends under the Senior Credit Facilities and the Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $97.4 million and accumulated deficit of $200.2 million were deemed free of restrictions from paying dividends at December 31, 2021.

Discussion of Operating, Investing, Financing Cash Flows

Cash, cash equivalents and restricted cash decreased by $78.4 million for the six months ended September 30, 2021 and increased by $142.8 million for the six months ended September 30, 2020, before foreign exchange effects on cash.

Cash, cash equivalents and restricted cash decreased by $207.2 million for the nine months ended December 31, 2021 and increased by $227.4 million for the nine months ended December 31, 2020, before foreign exchange effects on cash.

Components of these changes are discussed below in more detail.

Operating Activities.

Cash flows provided by (used in) operating activities for the six months ended September 30, 2021 and 2020 were as follows:

Six Months Ended

September 30,

Cash flows provided by (used in) operating activities for the nine months ended December 31, 2021 and 2020 were as follows:

Nine Months Ended

2021 2020 Net Change

5 unchanged sentences

Cash interest (92.9) (104.7) 11.8

Interest and other income and expense, net 23.2 (2.2) 25.4

Current income tax (provision) benefit (19.0) (6.7) (12.3)

Other non-cash charges included in operating activities 74.2 31.7 42.5

Other amortization 71.5 51.7 19.8

Cash flows from operations before changes in operating assets and liabilities 1,372.5 1,151.0 221.5

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Net Cash Flows Provided By (Used In) Operating Activities $ (489.8) $ 159.3 $ (649.1)

Cash flows used in operating activities for the six months ended September 30, 2021 were $332.5 million compared to cash flows provided by operating activities of $203.5 million for the six months ended September 30, 2020.

The increase in cash used in operating activities for the six months ended September 30, 2021 as compared to the six months ended September 30, 2020 is due to greater cash used from changes in operating assets and liabilities as shown above, partially offset by increased cash flows from operations before changes in operating assets and liabilities.

Cash flows used in operating activities for the nine months ended December 31, 2021 were $489.8 million compared to cash flows provided by operating activities of $159.3 million for the nine months ended December 31, 2020.

The increase in cash used in operating activities is due to greater cash used from changes in operating assets and liabilities as shown above, partially offset by increased cash flows from operations before changes in operating assets and liabilities, which includes the receipt of $24.9 million from insurance recoveries on prior shareholder litigation reflected in the interest and other income and expense, net line item above.

The greater use of cash from changes in operating assets and liabilities was driven by increased cash used for investment in films and television programs and program rights, and increases in accounts receivable, net and other assets.

These decreases were partially offset by greater cash provided by changes in other operating assets and liabilities and lower cash used for accounts payable and accrued liabilities as reflected above, and the receipt of $24.9 million from insurance recoveries on prior shareholder litigation.

In addition, cash flows used in operating activities for the six months ended September 30, 2021 included a net use of cash of approximately $46.2 million from the monetization of accounts receivables programs, as compared to a net benefit of approximately $0.9 million for the six months ended September 30, 2020 (see Note 17 to our unaudited condensed consolidated financial statements).

These decreases were partially offset by greater cash provided by changes in other operating assets and liabilities as reflected above.

In addition, cash flows used in operating activities for the nine months ended December 31, 2021 included a net use of cash of approximately $125.8 million from the monetization of accounts receivables programs, as compared to a net benefit of approximately $23.5 million for the nine months ended December 31, 2020 (see Note 17 to our unaudited condensed consolidated financial statements).

Investing Activities.

Cash flows used in investing activities for the six months ended September 30, 2021 and 2020 were as follows:

Six Months Ended

September 30,

Cash flows used in investing activities for the nine months ended December 31, 2021 and 2020 were as follows:

Nine Months Ended

(Amounts in millions)

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Net Cash Flows Used In Investing Activities $ (75.1) $ (20.9)

Cash used in investing activities of $61.8 million for the six months ended September 30, 2021 compared to cash used in investing activities of $12.2 million for the six months ended September 30, 2020, primarily due to cash used for the acquisition of a film library and related assets and investment in equity method investees as reflected above, offset by proceeds from the sale of Pantaya (see Note 2 to our unaudited condensed consolidated financial statements).

Cash used in investing activities of $75.1 million for the nine months ended December 31, 2021 compared to cash used in investing activities of $20.9 million for the nine months ended December 31, 2020, primarily due to cash used for the acquisition of a film library and related assets and investment in equity method investees and other as reflected above, offset by proceeds from the sale of Pantaya (see Note 2 to our unaudited condensed consolidated financial statements) during the nine months ended December 31, 2021.

Financing Activities.

Cash flows provided by (used in) financing activities for the six months ended September 30, 2021 and 2020 were as follows:

Six Months Ended

September 30,

Cash flows provided by financing activities for the nine months ended December 31, 2021 and 2020 were as follows:

Nine Months Ended

(Amounts in millions)

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Net proceeds from production and related loans 517.4 167.3

IP Credit Facility and other financing advances 213.6 —

IP Credit Facility and other financing advances, net of debt issuance costs 211.6 —

IP Credit Facility and other financing repayments (80.3) —

Net proceeds from IP Credit Facility and other financing 131.3 —

Repurchase of common shares — (2.2)

Other financing activities (54.0) (25.2)

Net Cash Flows Provided By (Used In) Financing Activities $ 315.9 $ (48.5)

Cash flows provided by financing activities of $315.9 million for the six months ended September 30, 2021 compared to cash flows used in financing activities of $48.5 million for the six months ended September 30, 2020.

Cash flows provided by financing activities for the six months ended September 30, 2021 primarily reflects net production and related loan borrowings of $375.5 million as production activity increased in the period, net IP Credit Facility and other financing advances of $213.6 million, offset by net debt repayments and repurchases of $228.4 million.

In addition, other financing activities in the six months ended September 30, 2021 includes $14.4 million for interest rate swap settlement payments due to an other-than-insignificant financing element on a portion of our interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements) and tax withholding required on equity awards of $33.2 million.

Net debt repayments and repurchases of $228.4 million in the six months ended September 30, 2021 included the below transactions and associated debt issuance and redemption costs, along with required repayments on our term loans:

Net Cash Flows Provided By Financing Activities $ 357.7 $ 89.0

Cash flows provided by financing activities of $357.7 million for the nine months ended December 31, 2021 compared to cash flows provided by financing activities of $89.0 million for the nine months ended December 31, 2020.

Cash flows provided by financing activities for the nine months ended December 31, 2021 primarily reflects net production and related loan borrowings of $517.4 million as production activity increased in the period, and net IP Credit Facility and other financing advances of $131.3 million, offset by net debt repayments and repurchases of $237.0 million.

In addition, other financing activities in the nine months ended December 31, 2021 includes $21.5 million for interest rate swap settlement payments due to an other-than-insignificant financing element on a portion of our interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements) and tax withholding required on equity awards of $34.7 million.

Net debt repayments and repurchases of $237.0 million in the nine months ended December 31, 2021 included the below transactions and associated debt issuance and redemption costs, along with required repayments on our term loans:

• On April 1, 2021, we redeemed in full all $518.7 million outstanding principal amount of our 5.875% Senior Notes and all $545.6 million outstanding principal amount of our 6.375% Senior Notes, and paid a prepayment premium of $15.2 million and $17.4 million on the 5.875% Senior Notes and 6.375% Senior Notes, respectively, plus accrued and unpaid interest to the date of redemption.

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• On April 6, 2021, we amended our Credit Agreement to, among other things, extend the maturity of a portion of our revolving credit commitments, amounting to $1.25 billion, and a portion of our outstanding term A loans, amounting to $444.9 million to April 6, 2026.

• During the six months ended September 30, 2021, the Company completed a series of repurchases of the Term Loan B and, in aggregate, paid $95.3 million to repurchase $96.0 million principal amount of the Term Loan B.

Cash flows used in financing activities of $48.5 million for the six months ended September 30, 2020 primarily reflects net debt repayments of $34.1 million, and net production and related loan borrowings of $3.7 million, which reflected minimal activity in the period due to the delay of productions associated with the COVID-19 global pandemic.

• During the nine months ended December 31, 2021, the Company completed a series of repurchases of the Term Loan B and, in aggregate, paid $95.3 million to repurchase $96.0 million principal amount of the Term Loan B.

Cash flows provided by financing activities of $89.0 million for the nine months ended December 31, 2020 primarily reflects net production and related loan borrowings of $167.3 million, as production activity increased in the prior year's period, and net debt repayments of $50.9 million representing required repayments on our term loans.

In addition, other financing activities in the nine months ended December 31, 2020 includes $15.4 million for interest rate swap settlement payments due to an other-than-insignificant financing element on a portion of our interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).

See Note 5 to our unaudited condensed consolidated financial statements for a discussion of our debt.

Production and Related Loans, IP Credit Facility and Other Financing Obligations

See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our production and related loans, IP Credit Facility and other financing obligations.

Production and Related Loans and IP Credit Facility

See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our production and related loans and IP Credit Facility.

Table of Debt and Contractual Commitments

The following table sets forth our future annual repayment of debt, and our contractual commitments as of September 30, 2021:

Six Months Ending March 31, Year Ending March 31,

The following table sets forth our future annual repayment of debt, and our contractual commitments as of December 31, 2021:

Three Months Ending March 31, Year Ending March 31,

2022 2023 2024 2025 2026 Thereafter Total

(Amounts in millions)

Future annual repayment of debt recorded as of September 30, 2021 (on-balance sheet arrangements)

Future annual repayment of debt recorded as of December 31, 2021 (on-balance sheet arrangements)

Revolving credit facility $ — $ — $ — $ — $ — $ — $ —

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Program rights and film obligations include minimum guarantees, theatrical marketing obligations, and accrued licensed program rights obligations.

Production and related loans include individual

loans for the production of film and television programs that we produce or license and our Production Tax Credit Facility.

Production and related loans include individual loans for the production of film and television programs that we produce or license and our Production Tax Credit Facility.

Repayment dates of our individual production loans are based on anticipated delivery or release date of the related film or contractual due dates of the obligation.

Production Tax Credit Facility amounts represent outstanding amounts under our Production Tax Credit Facility at September 30, 2021, and the repayment date represents the maturity date of the Production Tax Credit Facility (January 27, 2025), however net advances and payments under the Production Tax Credit Facility can fluctuate depending on the amount of collateral available.

IP Credit Facility amounts represent outstanding amounts under our IP Credit Facility at September 30, 2021, and repayment dates are based on the projected future cash flows generated from the exploitation of the rights, subject to a minimum guaranteed payment amount, as applicable.

Other financing obligations include other financing collateralized by certain contractual payments to be received in the future.

Production Tax Credit Facility amounts represent outstanding amounts under our Production Tax Credit Facility at December 31, 2021, and the repayment date represents the maturity date of the Production Tax Credit Facility (January 27, 2025), however net advances and payments under the Production Tax Credit Facility can fluctuate depending on the amount of collateral available.

IP Credit Facility amounts represent outstanding amounts under our IP Credit Facility at December 31, 2021, and repayment dates are based on the projected future cash flows generated from the exploitation of the rights, subject to a minimum guaranteed payment amount, as applicable.

See Note 6 to our unaudited condensed consolidated financial statements.

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Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog).

As disclosed in Note 9 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.6 billion at September 30, 2021 (March 31, 2021 - $1.6 billion).

The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.0 billion at September 30, 2021 (March 31, 2021 - $1.2 billion).

As disclosed in Note 9 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.8 billion at December 31, 2021 (March 31, 2021 - $1.6 billion).

The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.3 billion at December 31, 2021 (March 31, 2021 - $1.2 billion).

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis