What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-02-08 · 306 added, 810 removed, 612 unchanged (65% of the section changed)

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Motion Picture, Television Production, and Media Networks (see further discussion below).

Acquisition of eOne

On December 27, 2023, the Company, and its subsidiaries, Lions Gate Entertainment Inc., a Delaware corporation (“LGEI”), and Lions Gate International Motion Pictures S.à.r.l., a Luxembourg société à responsabilité limitée (“LGIMP” and, with the Company and LGEI, collectively the “Buyers”), completed the previously announced acquisition of all of the issued and outstanding equity interests of the companies constituting the Entertainment One television and film (“eOne”) business from Hasbro, Inc., a Rhode Island corporation (“Hasbro”), pursuant to that certain Equity Purchase Agreement (the “Purchase Agreement”) dated August 3, 2023.

The aggregate cash purchase price was approximately $375.0 million, subject to certain purchase price adjustments, including for cash, debt, and working capital.

Upon closing, the Company paid $331.0 million, net of cash acquired of $54.1 million, which reflects the purchase price of $375.0 million adjusted for estimated cash, debt, transaction costs and working capital.

The preliminary purchase price is subject to further adjustments based on the final determination of the purchase price adjustments.

The acquisition of eOne, a film and television production and distribution company, builds the Company's film and television library, strengthens the Company's scripted and unscripted television business, and continues to expand the Company's presence in Canada and the U.K.

The acquisition was accounted for under the acquisition method of accounting, with the financial results of eOne included in the Company's consolidated results from December 27, 2023.

There was no material revenue or net income from eOne for the period from December 27, 2023 through December 31, 2023.

The Company incurred approximately $5.6 million and $8.8 million of acquisition-related costs that were expensed in restructuring and other during the three and nine months ended December 31, 2023, respectively.

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

Business Combination

On December 22, 2023, the Company entered into a business combination agreement (the “Business Combination Agreement”), with Screaming Eagle Acquisition Corp., a Cayman Islands exempted company (“Screaming Eagle”), SEAC II Corp., a Cayman Islands exempted company and a wholly-owned subsidiary of Screaming Eagle (“New SEAC”), SEAC MergerCo, a Cayman Islands exempted company and a wholly-owned subsidiary of Screaming Eagle, 1455941 B.C.

Unlimited Liability Company, a British Columbia unlimited liability company and a wholly-owned subsidiary of Screaming Eagle, LG Sirius Holdings ULC, a British Columbia unlimited liability company and wholly-owned subsidiary of Lionsgate and LG Orion Holdings ULC, a British Columbia unlimited liability company and wholly-owned subsidiary of Lionsgate (“StudioCo”).

Pursuant to the terms and conditions of the Business Combination Agreement, the Studio Business will be combined with Screaming Eagle through a series of transactions, including an amalgamation of StudioCo and New SEAC under a Canadian plan of arrangement (the “Business Combination”).

Upon consummation of the Business Combination, approximately 87.3% of the total shares of the Studio Business are expected to continue to be held by Lionsgate, while Screaming Eagle public shareholders and founders and common equity financing investors are expected to own an aggregate of approximately 12.7% of the combined company.

In addition to establishing the Studio Business as a standalone publicly-traded entity, the transaction is expected to deliver approximately $350.0 million of gross proceeds to the Company, including $175.0 million in private investments in public equities (“PIPE”) financing.

The transaction is subject to certain closing conditions, including regulatory approvals and approval from the shareholders and public warrant holders of Screaming Eagle, and is expected to close in the

spring of 2024.

The closing of the transaction is subject to the gross proceeds to the Company being equal to a minimum of $350.0 million.

Sloan, a member of the Company’s Board of Directors, is also the Chairman of Screaming Eagle, and owns, directly or indirectly, a material interest in Eagle Equity Partners V, LLC, a Delaware limited liability company, the Screaming Eagle sponsor.

Sloan recused himself from the decisions to approve the Business Combination made by both the board of directors of Screaming Eagle and Lionsgate.

The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with U.S.

Under this method of accounting, Screaming Eagle will be treated as the acquired company and the Studio Business will be treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the financial statements of New SEAC will represent a continuation of the financial statements of the Studio Business, with the Business Combination treated as the equivalent of the Studio Business issuing stock for the historical net assets of Screaming Eagle, accompanied by a recapitalization.

The net assets of Screaming Eagle will be stated at fair value, which approximates historical cost, with no goodwill or other intangible assets recorded.

Operations prior to the Business Combination will be those of the Studio Business.

On May 13, 2024, the Company consummated the business combination agreement (the “Business Combination Agreement”), with Screaming Eagle Acquisition Corp., a Cayman Islands exempted company (“SEAC”), SEAC II Corp., a Cayman Islands exempted company and wholly-owned subsidiary of SEAC (“New SEAC”), LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of the Company (“Studio HoldCo”), LG Orion Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of the Company (“StudioCo) and other affiliates of SEAC.

Pursuant to the terms and conditions of the Business Combination Agreement, the Studio Business was combined with SEAC through a series of transactions, including an amalgamation of StudioCo and New SEAC under a Canadian plan of arrangement (the “Business Combination”).

In connection with the closing of the business combination, New SEAC changed its name to “Lionsgate Studios Corp.” (referred to as “Lionsgate Studios”) and continues the existing business operations of StudioCo, which consists of the Studio Business of Lionsgate.

The "Studio Business" consists of the businesses of Lionsgate's Motion Picture and Television Production segments, together with substantially all of Lionsgate's corporate general and administrative functions and costs.

Lionsgate Studios became a separate publicly traded company and its common shares commenced trading on Nasdaq under the symbol “LION” on May 14, 2024.

In connection with and prior to the Business Combination, the Company and StudioCo entered into a separation agreement pursuant to which the assets and liabilities of the Company’s Studio Business were transferred to StudioCo such that StudioCo holds, directly or indirectly, all of the assets and liabilities of the Studio Business (the “Separation”).

Following the transaction, approximately 87.8% of the total shares of Lionsgate Studios continue to be held by the Company, while former SEAC public shareholders and founders and common equity financing investors own approximately 12.2% of Lionsgate Studios.

In addition to establishing Lionsgate Studios as a standalone publicly-traded entity, the transaction resulted in approximately $330.0 million of gross proceeds to the Company, including $254.3 million in PIPE financing.

The net proceeds were used to partially pay down amounts outstanding under the Term Loan A and Term Loan B pursuant to the Credit Agreement (see Note 6 to our unaudited consolidated financial statements).

The Business Combination has been accounted for as a reverse recapitalization in accordance with U.S.

Under this method of accounting, SEAC was treated as the acquired company and the Studio Business was treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the financial statements of Lionsgate Studios will represent a continuation of the financial statements of the Studio Business, with the Business Combination treated as the equivalent of the Studio Business issuing stock for the historical net assets of SEAC, substantially consisting of cash held in the trust account, accompanied by a recapitalization.

The historical net assets of SEAC were stated at fair value, which approximates historical cost, with no goodwill or other intangible assets recorded.

Operations prior to the Business Combination are those of the Studio Business.

The Studio Business continues to be a consolidated subsidiary of the Company.

Media Networks Restructuring

In fiscal 2023, we began a plan to restructure our LIONSGATE+ business, which initially included exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan), and identifying additional cost-saving initiatives.

This plan included a strategic review of content performance across Starz’s domestic and international platforms, resulting in certain programming being removed from those platforms and written down to fair value.

In July 2023, in connection with a modification to shorten a long-term distribution contract, the Company decided to shut down the LIONSGATE+ service in Latin America.

While the modified contract covers the cost of the content during the shutdown period, there may be additional charges for remaining contractual commitments when the service is completely shut down in Latin America, which is expected in the quarter ended March 31, 2024.

During the nine months ended December 31, 2023, the Company continued executing its restructuring plan, including its evaluation of the programming on Starz's domestic and international platforms.

In connection with this review, the Company cancelled certain ordered programming, and identified certain other programming with limited strategic purpose which was removed from the Starz platforms and abandoned by the Media Networks segment.

In addition, as a result of the continuing review of its international territories, in order to continue growing the profitability of STARZ and given the economic and industry challenges in the United Kingdom ("U.K."), the Company has made the strategic decision to shut down the LIONSGATE+ service in the U.K.

market, resulting in additional content impairment charges.

As a result of these restructuring initiatives, we recorded content impairment charges related to the Media Networks segment in the three and nine months ended December 31, 2023 of $77.8 million and $317.4 million, respectively, which are included in restructuring and other in the unaudited condensed consolidated statement of operations (three and nine months ended December 31, 2022 - $80.8 million and $293.8 million, respectively) (see Note 14 to our unaudited condensed consolidated financial statements).

We have incurred impairment charges from the inception of the plan through December 31, 2023 amounting to $696.7 million.

Under the current restructuring plan and ongoing strategic content review, the Company estimates it will incur additional charges ranging from approximately $30 million to $55 million related to certain contractual content commitments or programming content impairment charges, among other items, related to territories exited or to be exited and content to be removed from its services.

The net future cash outlay is estimated to range from approximately $145 million to $170 million, which includes contractual commitments on content in territories being exited or to be exited, and payments on the remaining amounts payable for content removed or that may be removed from its services.

During fiscal 2024, the Company continued executing its Media Networks restructuring plan, which included exiting all international territories except for Canada and India, and included an evaluation of the programming on Starz's domestic and international platforms.

As a result of these restructuring initiatives, the Company recorded content impairment charges related to the Media Networks segment in the three months ended June 30, 2024 and 2023 of $1.9 million and $28.0 million, respectively.

The Company has incurred impairment charges from the inception of the plan through June 30, 2024 amounting to $745.7 million.

Under the current restructuring plan and ongoing strategic content review, the net future cash outlay is estimated to range from approximately $50 million to $55 million, which includes contractual commitments on content in territories being exited or to be exited, and payments on the remaining amounts payable for content removed or that may be removed from its services.

The amounts above will depend on the results of its strategic content review and amounts recoverable from alternative distribution strategies, if any, on content in domestic and foreign markets.

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Accordingly, the Company may incur additional content impairment and other restructuring charges beyond the estimates above.

Industry Strikes

On May 1, 2023, the collective bargaining agreement between the Writers Guild of America (“WGA”) and the Alliance of Motion Picture and Television Producers (“AMPTP”) expired, and on May 2, 2023, the WGA commenced an industry-wide strike.

Subsequently, on September 25, 2023, WGA members voted in favor ratifying a new three-year contract, commencing September 25, 2023 and ending May 1, 2026.

On July 12, 2023, the collective bargaining agreement between the Screen Actors Guild - American Federation of Television and Radio Artists (“SAG-AFTRA”) and the AMPTP expired, and on July 14, 2023, the SAG-AFTRA commenced an industry-wide strike.

Subsequently, on November 9, 2023, the national board of SAG-AFTRA approved an agreement reached on November 8, 2023 between SAG-AFTRA and the AMPTP to end the strike, and SAG-AFTRA union members ratified it shortly thereafter.

We paused certain theatrical and television productions as a result of the strikes.

Consequently, the timing of certain production payments were delayed until productions resume and may increase the variability in payments for investment in film and television programs and licensed program rights in future periods.

In addition, the pausing and restarting of productions resulted in incremental costs, delayed the completion and release of some of our content (investment in films, television programs and licensed programs) and may have been the cause of impairments of our investment in film, television programs or licensed program rights due to the cancellation of certain television shows.

The extent of these costs and delays depends on the ability to reschedule production in a timely and efficient manner.

Our revenues are derived from the Motion Picture, Television Production and Media Networks segments, as described below.

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None of the non-U.S.

countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2023 and 2022.

countries individually comprised greater than 10% of total revenues for the three months ended June 30, 2024 and 2023.

Studio Business

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• Television.

Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television and syndication) of scripted and unscripted series, television movies, mini-series and non-fiction

Television revenues include fixed fee arrangements as well as arrangements in which we earn advertising revenue from the exploitation of certain content on television networks.

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Starz Networks’ revenues are derived from the domestic distribution of our STARZ branded premium subscription video services through over-the-top ("OTT") streaming platforms and distributors, on a direct-to-consumer basis through the Starz App, and through U.S.

multichannel video programming distributors (“MVPDs”) including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”), (in the aggregate, the "Starz Domestic Platform").

• LIONSGATE+.

LIONSGATE+ revenues are primarily derived from OTT distribution of the STARZ branded premium subscription video services outside of the U.S.

The Starz Domestic Platform together with the LIONSGATE+ platforms are referred to as the "Starz Platforms".

and Canada multichannel video programming distributors (“MVPDs”) including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”).

Other revenues are primarily derived from OTT distribution of the STARZ branded premium subscription video services outside of the U.S.

The Starz Networks platforms together with the Other platforms are referred to as the "Starz Platforms".

Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and administration expenses.

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General and administration expenses include salaries and other overhead.

Corporate general and administrative expenses include certain corporate executive expense (such as salaries and wages for the office of the Chief Executive Officer, Chief Financial Officer, General Counsel and other corporate officers), investor relations costs, costs of maintaining corporate facilities, and other unallocated common administrative support functions, including corporate accounting, finance and financial reporting, internal and external audit and tax costs, corporate and other legal support functions, and certain information technology and human resources expense.

reporting, internal and external audit and tax costs, corporate and other legal support functions, and certain information technology and human resources expense.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments.

For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on May 25, 2023, as amended on July 20, 2023 (the "Form 10-K").

Accounting for Films and Television Programs and Licensed Program Rights

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In addition, in the normal course of our business, some films and titles are more successful or less successful than anticipated.

regularly reviews and revises when necessary, its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value (see below).

Management regularly reviews and revises when necessary, its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value (see below).

An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results in an impairment requiring a write-down of the film cost to the title’s fair value.

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The estimates of fair value for the allocation between windows of exploitation on the Starz Platform and ancillary markets is based on historical experience of the values of similar titles licensed in subsequent windows and estimates of future revenues in ancillary markets.

Management believes these are reasonably reliable estimates of these values, however, these estimates involve uncertainty and management judgment.

The cost of licensed program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on a title-by-title or episode-by-episode basis using an accelerated or straight-line method based on the expected and historical viewership patterns, or the current and anticipated number of exhibitions over the license period or estimated life for owned or produced programs.

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As a result of the Media Networks restructuring initiatives discussed in "Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", we recorded content impairment charges related to the Media Networks segment in the three and nine months ended December 31, 2023 of $77.8 million and $317.4 million, respectively, which are included in restructuring and other in the unaudited condensed consolidated statement of operations (three and nine months ended December 31, 2022 - $80.8 million and $293.8 million, respectively) (see Note 3 and Note 14 to our unaudited

condensed consolidated financial statements).

We have incurred impairment charges from the inception of the plan through December 31 2023 amounting to $696.7 million.

unaudited condensed consolidated statement of operations (three months ended June 30, 2023 - $28.0 million) (see Note 3 and Note 14 to our unaudited condensed consolidated financial statements).

We have incurred impairment charges from the inception of the plan through June 30, 2024 amounting to $745.7 million.

Valuation Assumptions.

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Media Networks fixed fee or minimum guarantee programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor.

Subscribers through the Starz App are billed in advance of the start of their monthly or annual membership and revenues are recognized ratably over each applicable membership period.

Payments to distributors for marketing support

costs for which Starz receives a discrete benefit are recorded as distribution and marketing costs, and payments to distributors for which Starz receives no discrete benefit are recorded as a reduction of revenue.

Goodwill and Indefinite-Lived Intangibles.

At December 31, 2023, the carrying value of goodwill and indefinite-lived intangible assets was $801.4 million and nil, respectively, net of impairment charges recorded and reflecting the reassessment of the estimated useful life of our indefinite-lived intangible assets in the second quarter ended September 30, 2023, as further discussed below.

Through September 30, 2023, our indefinite-lived intangible assets consisted of trade names representing the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as of December 8, 2016 (see further discussion under Indefinite-Lived Intangibles Other Than Goodwill Impairment Assessment below).

Subscribers through the Starz App are billed in advance of the start of their monthly or annual membership

and revenues are recognized ratably over each applicable membership period.

Payments to distributors for marketing support costs for which Starz receives a discrete benefit are recorded as distribution and marketing costs, and payments to distributors for which Starz receives no discrete benefit are recorded as a reduction of revenue.

At June 30, 2024, the carrying value of goodwill was $812.1 million.

Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (component level).

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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 December 31, 2023, were Motion Picture (goodwill of $395 million), Media Networks (no remaining goodwill balance subsequent to the impairment discussed below), and our Television (goodwill of $314 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.

Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at June 30, 2024, were Motion Picture (goodwill of $395 million), Media Networks (no remaining goodwill balance), and our Television (goodwill of $324 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.

Goodwill is not amortized but is 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 is less than its carrying value.

We perform our annual impairment test as of January 1 in each fiscal year.

A goodwill or indefinite-lived intangible asset impairment loss would be recognized for the amount that the carrying amount of a reporting unit, including goodwill or an indefinite-lived intangible asset, exceeds its fair value.

An entity may perform a qualitative assessment of the likelihood of the existence of a goodwill or indefinite-lived intangible asset impairment.

The qualitative assessment is an evaluation, based on all identified events and circumstances which impact the fair value of the reporting unit or indefinite-lived intangible asset, of whether or not it is more-likely-than-not that the fair value is less than the carrying value of the reporting unit or indefinite-lived intangible asset.

If we believe that as a result of our qualitative assessment it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is greater than its carrying amount, a quantitative impairment test is not required but may be performed at the option of the Company.

A quantitative assessment requires determining the fair value of our reporting units or indefinite-lived intangible assets.

A goodwill impairment loss would be recognized for the amount that the carrying amount of a reporting unit exceeds its fair value.

An entity may perform a qualitative assessment of the likelihood of the existence of a goodwill impairment.

The qualitative assessment is an evaluation, based on all identified events and circumstances which impact the fair value of the reporting unit of whether or not it is more-likely-than-not that the fair value is less than the carrying value of the reporting unit.

If we believe that as a result of our qualitative assessment it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a quantitative impairment test is not required but may be performed at the option of the Company.

A quantitative assessment requires determining the fair value of our reporting units.

The determination of fair value requires considerable judgment and requires assumptions and estimates of many factors, including revenue and market growth, operating margins and cash flows, market multiples and discount rates.

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Goodwill Impairment Assessments:

During the second quarter ended September 30, 2023, due to the continuing difficult macro and microeconomic conditions, industry trends, and their impact on the performance and projected cash flows of the Media Networks segment, including its growth in subscribers and revenue worldwide, and the expanded restructuring activities discussed in Note 14 to our unaudited condensed consolidated financial statements, along with recent market valuation multiples, we updated our quantitative impairment assessment for the Media Networks reporting unit goodwill based on the most recent data and expected growth trends.

The DCF analysis components of the fair value estimates were determined primarily by discounting estimated future cash flows, which included a weighted average perpetual nominal growth rate of 1.5%, at a weighted average cost of capital (discount rate) of 10.5%, which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a whole.

The Media Networks reporting unit goodwill was established in connection with the acquisition of Starz as of December 8, 2016.

Based on our quantitative impairment assessment, we determined that the fair value of our Media Networks reporting unit which was previously disclosed as a reporting unit "at risk" of impairment, was less than its carrying value (after the

impairment write-down of its indefinite-lived intangible assets discussed below).

The analysis resulted in a goodwill impairment charge of $493.9 million in the second quarter ended September 30, 2023, representing all of our remaining Media Networks reporting unit goodwill, which is recorded in the "goodwill and intangible asset impairment" line item in the unaudited condensed consolidated statement of operations in the nine months ended December 31, 2023 (see Note 5 to the unaudited condensed consolidated financial statements).

During each quarter in the nine months ended December 31, 2023, we performed qualitative goodwill impairment assessments for all our other reporting units (Motion Picture, and our Television and Talent Management businesses, both of which are part of our Television Production segment).

Our qualitative assessment considered the market price of the Company’s common shares, the recent performance of these reporting units, and updated forecasts of performance and cash flows, as well as the current micro and macroeconomic environments in relation to the current and expected performance of these reporting units, and industry considerations, and determined that since the quantitative assessment performed in the quarter ended September 30, 2022 and our qualitative assessment performed for fiscal 2023, there were no events or circumstances that rise to a level that would more-likely-than-not reduce the fair value of those reporting units below their carrying values;

For our annual goodwill impairment test for fiscal 2024, we performed qualitative goodwill impairment assessments for our reporting units with a remaining goodwill balance (Motion Picture, and our Television and Talent Management businesses, both of which are part of our Television Production segment).

Our qualitative assessment considered the market price of the Company’s common shares, the recent performance of these reporting units, and updated forecasts of performance and cash flows, as well as the current micro and macroeconomic environments in relation to the current and expected performance of these reporting units, and industry considerations, and determined that since the date of the most recent quantitative assessment performed over these reporting units, there were no events or circumstances that rise to a level that would more-likely-than-not reduce the fair value of those reporting units below their carrying values;

therefore, a quantitative goodwill impairment analysis was not required for these reporting units.

In fiscal 2023, during the second quarter ended September 30, 2022, we updated our quantitative impairment assessment for all of our reporting units based on the most recent data and expected growth trends.

The DCF analysis components of the fair value estimates were determined primarily by discounting estimated future cash flows, which included weighted average perpetual nominal growth rates ranging from 1.5% to 3.5%, at a weighted average cost of capital (discount rate) ranging from 10.5% to 13.0%, which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a whole.

Based on our quantitative impairment assessment, the Company determined that the fair value of our reporting units exceeded the carrying values for all of our reporting units, except the Media Networks reporting unit which was previously disclosed as a reporting unit "at risk" of impairment.

The analysis resulted in a goodwill impairment charge of $1.475 billion in the second quarter of fiscal 2023, related to our Media Networks reporting unit goodwill.

Since the impairment charge reduced the carrying value of the Media Networks reporting unit to its fair value, at September 30, 2022 the fair value and carrying value of the Media Networks reporting unit were equal and thus it continued to be considered "at risk" of impairment.

During the three months ended June 30, 2024, there were no events or circumstances that have changed 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 further changes in the business environment that could impact the recoverability in future periods.

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consumer consumption levels of our content;

adverse macroeconomic conditions related to higher inflation and interest rates and currency rate fluctuations, and the impact on the global economy from wars, terrorism and multiple international conflicts, and future bank failures;

adverse macroeconomic conditions related to higher inflation and interest rates and currency rate fluctuations, and the impact on the global economy

from wars, terrorism and multiple international conflicts, and future bank failures;

volatility in the equity and debt markets which could result in higher weighted-average cost of capital;

capital market transactions;

the duration and potential impact of strikes of unions which we rely on, on our ability to produce, acquire and distribute our content;

the duration and potential impact of strikes of unions on our ability to produce, acquire and distribute our content;

the commercial success of our television programming and motion pictures;

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If our assumptions are not realized, it is possible that additional impairment charges may need to be recorded in the future.

Indefinite-Lived Intangibles Other Than Goodwill Impairment Assessment:

Through September 30, 2023, our indefinite-lived intangible assets consisted of trade names representing the estimated fair value of the Starz brand name determined in connection with the acquisition of Starz as of December 8, 2016, amounting to $250.0 million related to the Media Networks reporting unit before the impairment charge recorded in the second quarter ended September 30, 2023 discussed below.

During the second quarter ended September 30, 2023, due to the events and their impact discussed above related to our Media Networks reporting unit, we performed a quantitative impairment assessment of our indefinite-lived trade names.

The fair value of the Company's indefinite-lived trade names was estimated based on the present value of the hypothetical cost savings that could be realized by the owner of the tradenames as a result of not having to pay a stream of royalty payments to another party.

These cost savings were calculated based on a DCF analysis of the hypothetical royalty payment that a licensee would be required to pay in exchange for use of the tradenames, reduced by the tax effect realized by the licensee on the royalty payments.

Based on the quantitative impairment assessment of our trade names, we recorded an impairment charge of $170.0 million in the second quarter ended September 30, 2023 related to the Company's Starz business, which was recorded in the "goodwill and intangible asset impairment" line item in the unaudited condensed consolidated statement of operations in the nine months ended December 31, 2023.

After the Company performed its quantitative impairment assessment, during the second quarter ended September 30, 2023, the Company then reassessed the estimated useful life of the trade names with a remaining carrying value of $80.0 million, net of the impairment charge discussed above.

The Company concluded that based upon the most recent factors, including current macro and microeconomic conditions, market competition and historical Company and industry trends, the trade names now have a finite estimated remaining useful life of 10 years.

Accordingly, beginning in the third quarter ended December 31, 2023, the trade names are being accounted for as finite-lived intangible assets and amortized over their estimated remaining useful life.

This resulted in an increase to amortization expense of $2.0 million for the three and nine months ended December 31, 2023 with a corresponding reduction of income before income taxes, net loss, and net loss attributable to Lions Gate Entertainment Corp.

shareholders.

This resulted in a decrease to basic and diluted net loss per share for the three months ended December 31, 2023 by $0.01 per share, and a decrease to basic and diluted net loss per share for the nine months ended December 31, 2023 by $0.01 per share.

There was no tax benefit from the change due to changes in the Company’s valuation allowance on deferred taxes.

Finite-Lived Intangible Assets.

At December 31, 2023, the carrying value of our finite-lived intangible assets was approximately $950.5 million.

At June 30, 2024, the carrying value of our finite-lived intangible assets was $954.0 million.

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

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The amount of our customer relationship asset related to these Traditional Affiliate relationships reflects the estimated fair value of these customer relationships determined in connection with the acquisition of Starz on December 8, 2016, net of amortization recorded since the date of the Starz acquisition.

Beginning in the third quarter ended December 31, 2023, our finite-lived intangible assets also include the trade names previously accounted for as indefinite-lived intangible assets as discussed above.

Beginning October 1, 2023, our finite-lived intangible assets also include the trade names previously accounted for as indefinite-lived intangible assets.

Identifiable intangible assets with finite lives are amortized to depreciation and amortization expense over their estimated useful lives, ranging from 5 to 16 years.

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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 assets.

During the second quarter ended September 30, 2023, for the Company's finite-lived customer relationship intangible assets related to our Media Networks reporting unit, which represented $956.8 million as of September 30, 2023, the Company performed a comparison of undiscounted future cash flows expected to be generated over the remaining useful life of an asset to the carrying value of the asset.

For fiscal 2024, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption, and continuing difficult macro and microeconomic conditions, we performed an impairment analysis of our amortizable intangible assets.

The impairment analysis requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset.

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 third quarter ended December 31, 2023, there were no events or circumstances that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.

During the quarter ended June 30, 2024, 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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otherwise, a valuation allowance is applied.

In order to realize the benefit of our deferred tax

assets, we will need to generate sufficient taxable income in the future in each of the jurisdictions which have these deferred tax assets.

In order to realize the benefit of our deferred tax assets, we will need to generate sufficient taxable income in the future in each of the jurisdictions which have these deferred tax assets.

However, the assessment as to whether there will be sufficient taxable income in a jurisdiction to realize our net deferred tax assets in that jurisdiction is an estimate which could change in the future depending primarily upon the actual performance of our Company.

We will be required to continually evaluate the more likely than not assessment that our net deferred tax assets will be realized, and if operating results deteriorate in a particular jurisdiction, we may need to record a valuation allowance for all or a portion of our deferred tax assets through a charge to our income tax benefit (provision).

As of March 31, 2023, we had a valuation allowance of $455.7 million against certain U.S.

As of March 31, 2024, we had

a valuation allowance of $808.3 million against certain U.S.

and foreign deferred tax assets that may not be realized on a more likely than not basis.

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Significant judgment is required in determining our expected annual effective tax rate and in evaluating our tax positions.

Our effective tax rates differ from the federal statutory rate and are affected by many factors, including the overall level of pre-tax income (loss), the mix of our pre-tax income (loss) generated across the various jurisdictions in which we operate, any changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, changes in valuation allowances against our deferred tax assets, tax planning strategies available to us and other discrete items.

Our effective tax rates differ from the U.S.

federal statutory income tax rate and is affected by many factors, including the overall level of income (loss) before taxes and its mix across the jurisdictions in which we conduct operations, changes in tax laws and regulations, changes in valuation allowances against our deferred tax assets, changes in unrecognized tax benefits, tax planning strategies available to us, and other discrete items.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the three months ended December 31, 2023 and 2022:

The following table sets forth our consolidated results of operations for the three months ended June 30, 2024 and 2023.

Due to the acquisition of eOne, the three months ended June 30, 2024 includes the results of operations of eOne (acquired December 27, 2023), see Note 2 to our unaudited condensed consolidated financial statements for further details.

Three Months Ended

December 31, Change

June 30, Change

2024 2023 Amount Percent

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Total expenses 815.9 925.4 (109.5) (11.8) %

Operating income (loss) (43.5) 7.8 (51.3) nm

Operating income (loss) 18.8 (16.8) 35.6 (211.9) %

Interest expense (68.8) (62.0) (6.8) 11.0 %

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Other expense (3.1) (5.7) 2.6 (45.6) %

Gain on extinguishment of debt — 38.2 (38.2) (100.0) %

Gain on investments, net 4.4 43.4 (39.0) (89.9) %

Equity interests income (loss) 4.2 — 4.2 n/a

Income (loss) before income taxes (102.7) 20.8 (123.5) nm

Gain (loss) on extinguishment of debt (5.9) 21.2 (27.1) (127.8) %

Equity interests income (loss) 0.9 (0.3) 1.2 nm

Loss before income taxes (53.0) (61.7) 8.7 (14.1) %

Income tax provision (10.1) (9.8) (0.3) 3.1 %

Net income (loss) (107.4) 15.2 (122.6) nm

Net loss (63.1) (71.5) 8.4 (11.7) %

Net loss attributable to noncontrolling interest 3.7 0.8 2.9 362.5 %

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

shareholders $ (106.6) $ 16.6 $ (123.2) nm

Net loss attributable to Lions Gate Entertainment Corp.

shareholders $ (59.4) $ (70.7) $ 11.3 (16.0) %

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nm - Percentage not meaningful.

Consolidated revenues decreased $25.0 million in the three months ended December 31, 2023 reflecting a decrease of $202.6 million from our Studio Business, offset by an increase of $36.9 million from our Media Networks business, and lower intersegment eliminations of $140.7 million.

Intersegment eliminations relate to the licensing of product from our Studio Business (primarily our Television Production segment as discussed below) to the Media Networks segment.

Motion Picture revenue increased $154.4 million in the current quarter due primarily to higher theatrical and international revenue associated with the release of The Hunger Games:

The Ballad of Songbirds & Snakes , and higher television and home entertainment revenue.

Motion Picture revenue included $36.6 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing an increase of $20.4 million from the three months ended December 31, 2022.

Television Production revenue decreased $357.0 million due to decreased domestic and international television revenue from lower intersegment revenues from the licensing of Starz original series, and lower third-party domestic television revenue, digital media home entertainment and other revenue.

Television Production revenue included $97.1 million of revenue from licensing Television Production segment product to our Media Networks segment, representing a decrease of $161.1 million from the three months ended December 31, 2022.

The decrease in intersegment eliminations of $140.7 million is primarily associated with lower Television Production revenues of $161.1 million, for licenses of original series to Starz Networks and LIONSGATE+, partially offset by higher Motion Picture revenues of $20.4 million reflecting the licensing of certain recent theatrical releases to Starz, both in the Media Networks segment as discussed above.

Media Networks revenue increased $36.9 million reflecting increased revenue at LIONSGATE+ of $35.9 million, and at Starz Networks of $1.0 million.

Consolidated revenues decreased $73.9 million in the three months ended June 30, 2024 reflecting a decrease of $36.6 million from our Studio Business, a decrease of $31.0 million from our Media Networks business, and higher intersegment eliminations of $6.3 million.

Studio Business revenues for the three months ended June 30, 2024 included approximately $101.6 million of revenues from eOne (acquired December 27, 2023, therefore the three months ended June 30, 2023 included no comparable revenues).

Intersegment eliminations relate to the licensing of product from our Studio Business to the Media Networks segment.

Motion Picture revenue decreased $59.2 million due to lower theatrical, home entertainment and international revenue, primarily due to revenue in the prior year's quarter from John Wick:

Chapter 4 , partially offset by increased television revenue.

Motion Picture revenues for the three months ended June 30, 2024 included approximately $25.1 million of revenues from eOne.

Motion Picture revenue included $64.2 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing an increase of $47.7 million from the three months ended June 30, 2023.

Television Production revenue increased $22.6 million due to increased domestic television, international, and home entertainment digital revenue.

Television Production revenues for the three months ended June 30, 2024 included approximately $76.5 million of revenues from eOne.

Television Production revenue included $39.6 million of revenue from licensing Television Production segment product to our Media Networks segment, representing a decrease of $41.4 million from the three months ended June 30, 2023.

The increase in intersegment eliminations of $6.3 million is primarily associated with higher Motion Picture intersegment revenues of $47.7 million reflecting the licensing of certain recent theatrical releases to Starz, partially offset by lower Television Production intersegment revenues of $41.4 million for licenses of original series to the Starz Platforms.

Media Networks revenue decreased $31.0 million, and reflected decreases in international revenue of $34.7 million due to exiting additional international territories, partially offset by an increase of $3.7 million at Starz Networks.

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 December 31, 2023 and 2022:

Direct operating expenses by segment were as follows for the three months ended June 30, 2024 and 2023:

Three Months Ended

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Media Networks 166.2 47.5 206.4 54.2 (40.2) (19.5) %

COVID-19 related charges (benefit) (0.1) nm (1.8) nm 1.7 (94.4) %

Other 2.8 nm 0.6 nm 2.2 366.7 %

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nm - Percentage not meaningful

Direct operating expenses decreased in the three months ended December 31, 2023 due to lower direct operating expenses for our Studio Business and Media Networks segment, partially offset by lower intersegment eliminations.

The decrease at the Studio Business reflects lower direct operating expenses of the Television Production segment associated with lower Television Production revenues, partially offset by higher direct operating expenses of the Motion Picture segment due to higher Motion Picture revenues.

The decrease in Media Networks direct operating expense was driven by a decrease at Starz Networks of $24.9 million due to lower programming cost amortization, partially offset by an increase at LIONSGATE+ of $18.5 million.

The decrease in intersegment eliminations is due to lower Television Production revenue from licenses of original series to Starz Networks and LIONSGATE+, partially offset by increased Motion Picture revenue from licenses of recent theatrical

releases to Starz Networks and LIONSGATE+, as discussed above.

Direct operating expenses decreased in the three months ended June 30, 2024, due to lower direct operating expenses of our Media Networks segment and Studio Business, and higher intersegment eliminations.

The decrease in Media Networks direct operating expense was driven by decreases at Starz Networks of $15.0 million due to lower programming cost amortization, and decreases of $25.2 million due to the territories exited, or to be exited.

The decrease at the Studio Business reflects lower direct operating expenses of the Motion Picture segment due to lower Motion Picture revenues, partially offset by higher direct operating expenses of the Television Production segment due to increased revenues from Television Production.

The increase in intersegment eliminations is due to higher Motion Picture revenue from licenses of original series to the Starz Platforms, as discussed above.

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

COVID-19 Related Charges (Benefit).

We incurred certain incremental costs associated with the COVID-19 global pandemic.

In the three months ended December 31, 2023, direct operating expense included a benefit of $0.1 million, representing insurance recoveries on costs incurred (three months ended December 31, 2022 - benefit of $1.8 million, net of insurance recoveries of $2.8 million).

Direct operating expenses related to the COVID-19 global pandemic have been declining and are expected to continue to decline as the severity of the COVID-19 global pandemic continues to lessen.

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

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

Other direct operating expense includes share-based compensation.

Other direct operating expense in the three months ended June 30, 2024 includes rent cost for production facilities that were unutilized as a result of the industry strikes amounting to $5.2 million, which was not allocated to the segments, and is included in direct operating expense.

In addition, other direct operating expense in the three months ended June 30, 2024 and 2023 includes share-based compensation, and COVID related charges, if any, net of insurance recoveries.

Distribution and Marketing Expenses.

Distribution and marketing expenses by segment were as follows for the three months ended December 31, 2023 and 2022:

Distribution and marketing expenses by segment were as follows for the three months ended June 30, 2024 and 2023:

Three Months Ended

December 31, Change

June 30, Change

2024 2023 Amount Percent

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Other 0.2 0.2 — — %

Intersegment eliminations (0.1) — (0.1) n/a

Intersegment eliminations (0.1) (2.2) 2.1 nm

$ 198.6 $ 244.2 $ (45.6) (18.7) %

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nm - Percentage not meaningful

Distribution and marketing expenses increased in the three months ended December 31, 2023, due to higher Studio Business and Media Networks distribution and marketing expense.

The increase at the Studio Business primarily reflects greater Motion Picture theatrical P&A and Premium VOD expense associated with the theatrical release of The Hunger Games:

The Ballad of Songbirds & Snakes in the current quarter.

The increase in Media Networks distribution and marketing expense was due to an increase at Starz Networks of $18.8 million due to increased advertising and marketing costs, partially offset by a decrease at LIONSGATE+ of $11.3 million due to a decrease in distribution and advertising expenses from the territories exited, or to be exited.

Distribution and marketing expenses decreased in the three months ended June 30, 2024, due to lower Studio Business and Media Networks distribution and marketing expense.

The decrease at the Studio Business primarily reflects lower Motion Picture theatrical P&A and Premium VOD expense associated with the theatrical slate releases in the current quarter.

The decrease in Media Networks distribution and marketing expense was due to a decrease of $11.4 million primarily from the international territories exited, partially offset by an increase at Starz Networks of $0.3 million.

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

General and Administrative Expenses.

General and administrative expenses by segment were as follows for the three months ended December 31, 2023 and 2022:

General and administrative expenses by segment were as follows for the three months ended June 30, 2024 and 2023:

Three Months Ended

December 31, Change

June 30, Change

2024 % of Revenues 2023 % of Revenues Amount Percent

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Total general and administrative expenses $ 119.5 14.3% $ 123.6 13.6% $ (4.1) (3.3) %

General and administrative expenses increased in the three months ended December 31, 2023, resulting from increased corporate, Motion Picture, and Television Production general and administrative expenses and share-based compensation expense, partially offset by lower purchase accounting and related adjustments, and a slight decrease in Media Networks general and administrative expenses.

General and administrative expenses decreased in the three months ended June 30, 2024, resulting from decreased purchase accounting and related adjustments and Media Networks general and administrative expenses, partially offset by increased Studio Business and corporate general and administrative expenses and share-based compensation expense.

Studio Business general and administrative expenses for the three months ended June 30, 2024 included approximately $7.0 million from eOne.

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

Corporate general and administrative expenses increased $9.8 million, or 46.0%, primarily due to an increase in incentive based compensation.

Corporate general and administrative expenses increased $2.9 million, or 9.5%, primarily due to approximately $3.0 million of corporate general and administrative expenses from eOne.

The increase in share-based compensation expense included in general and administrative expense in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 is primarily due to lower fair values in

the prior year's period 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.

The following table presents share-based compensation expense by financial statement line item:

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

Purchase accounting and related adjustments include the non-cash charge for the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the non-cash charge for the amortization of the recoupable portion of the purchase price and the expense associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense.

The noncontrolling equity interest in the distributable earnings of 3 Arts Entertainment are reflected as an expense rather than noncontrolling interest in the consolidated statement of operations due to the relationship to continued employment.

Purchase accounting and related adjustments decreased $14.1 million, or 83.4%, primarily due to lower expense of $8.9 million associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment and lower noncontrolling interest discount amortization of $3.3 million.

Purchase accounting and related adjustments include the expense associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment, and the non-cash charges for the accretion of the noncontrolling interest discount and the amortization of the recoupable portion of the purchase price related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense.

The noncontrolling equity interests in the distributable earnings of 3 Arts Entertainment are reflected as an expense rather than noncontrolling interest in the unaudited condensed consolidated statement of operations due to the relationship to continued employment.

Purchase accounting and related adjustments decreased $7.9 million, or 79.0%, primarily due to lower noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment of $6.6 million associated with a lower noncontrolling interest ownership percentage as a result of our acquisition of an additional interest in 3 Arts Entertainment (see Note 9 to our unaudited condensed consolidated financial statements).

In addition, purchase accounting and related adjustments decreased due to lower amortization of the recoupable portion of the purchase price of 3 Arts Entertainment of $1.3 million, due to the amortization period ending in May 2023.

Depreciation and Amortization Expense.

Depreciation and amortization of $49.9 million in the three months ended December 31, 2023 increased $3.6 million from $46.3 million in the three months ended December 31, 2022 due to increased depreciation expense related to software in the current quarter.

Depreciation and amortization of $46.1 million for the three months ended June 30, 2024 increased $1.7 million from $44.4 million in the three months ended June 30, 2023 due to increased amortization of intangible assets.

Restructuring and Other.

Restructuring and other increased $41.6 million in the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, and includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the three months ended December 31, 2023 and 2022 (see Note 14 to our unaudited condensed consolidated financial statements):

Restructuring and other decreased $9.5 million in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, and includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the three months ended June 30, 2024 and 2023 (see Note 14 to our unaudited condensed consolidated financial statements):

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2024 2023 Amount Percent

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Severance (2)

Cash 23.9 2.4 21.5 nm

Cash 3.1 4.3 (1.2) (27.9) %

Accelerated vesting on equity awards (see Note 12 to our unaudited condensed consolidated financial statements)

6.8 1.5 5.3 nm

Total severance costs 30.7 3.9 26.8 nm

— 0.5 (0.5) (100.0) %

Total severance costs 3.1 4.8 (1.7) (35.4) %

Transaction and other costs (3)

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nm - Percentage not meaningful.

(1) Media Networks Restructuring:

As a result of the Media Networks restructuring initiatives discussed in "Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" , the Company recorded content impairment charges related to the Media Networks segment in the three months ended December 31, 2023 of $77.8 million (three months ended December 31, 2022 - $80.8 million).

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" , the Company recorded content impairment charges related to the Media Networks segment in the three months ended June 30, 2024 of $1.9 million (three months ended June 30, 2023 - $28.0 million).

See Note 14 to our unaudited condensed consolidated financial statements.

(2) Severance costs were primarily related to restructuring activities and other cost-saving initiatives.

In the three months ended December 31, 2023, amounts were due to restructuring activities including integration of the acquisition of eOne, LIONSGATE+ international restructuring and our Motion Picture and Television Production segments.

(3) Transaction and other costs in the three months ended December 31, 2023 and 2022 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs and benefits associated with certain legal matters.

In the three months ended December 31, 2022, these amounts include a benefit of $11.0 million for a settlement of a legal matter related to the Media Networks segment.

Other Impairments:

Amounts in the three months ended June 30, 2024 also include impairments of certain operating lease right-of-use and leasehold improvement assets related to the Television Production segment amounting to $18.0 million associated with facility leases that will no longer be utilized by the Company primarily related to the integration of eOne.

(2) Severance costs were primarily related to restructuring, acquisition integration activities and other cost-saving initiatives.

(3) Transaction and other costs in the three months ended June 30, 2024 and 2023 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs and benefits associated with legal and other matters.

In the three months ended June 30, 2024 and 2023, transaction and other costs also includes a benefit of $7.1 million and $3.8 million, respectively, associated with an arrangement to migrate subscribers in some of the exited territories to a third-party in connection with the Starz international restructuring.

Interest Expense.

Interest expense of $67.1 million for the three months ended December 31, 2023 increased $7.5 million, from $59.6 million in the three months ended December 31, 2022 due to higher average interest rates and balances on variable rate corporate debt and film related obligations, partially offset by a larger benefit from the interest rate swaps.

The following table sets forth the components of interest expense for the three months ended December 31, 2023 and 2022:

Interest expense of $68.8 million in the three months ended June 30, 2024 increased $6.8 million from the three months ended June 30, 2023 due to higher average interest rates and balances on variable rate corporate debt and film related obligations, partially offset by a slightly larger benefit from the interest rate swaps.

The following table sets forth the components of interest expense for the three months ended June 30, 2024 and 2023:

Three Months Ended

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Interest and Other Income.

Interest and other income of $1.8 million for the three months ended December 31, 2023 was comparable to interest and other income of $1.7 million for the three months ended December 31, 2022.

Interest and other income of $5.1 million for the three months ended June 30, 2024 increased as compared to interest and other income of $1.9 million for the three months ended June 30, 2023 due to higher interest income.

Other Expense.

Other expense of $2.5 million for the three months ended December 31, 2023 compared to other expense of $10.7 million for the three months ended December 31, 2022, and represented a decrease in the loss recorded related to our monetization of accounts receivable programs (see Note 18 to our unaudited condensed consolidated financial statements).

Gain on Extinguishment of Debt.

Gain on extinguishment of debt of $38.2 million in the three months ended December 31, 2022 represented a gain associated with the repurchase of $123.7 million principal amount of 5.500% Senior Notes at a discount.

There was no comparable gain on extinguishment of debt in the three months ended December 31, 2023.

Other expense of $3.1 million for the three months ended June 30, 2024 decreased as compared to other expense of $5.7 million for the three months ended June 30, 2023, and primarily represented the loss recorded related to our monetization of accounts receivable programs (see Note 18 to our unaudited condensed consolidated financial statements).

Gain (Loss) on Extinguishment of Debt.

Loss on extinguishment of debt of $5.9 million for the three months ended June 30, 2024 related to the write-off of debt issuance costs associated with the voluntary prepayment of $84.9 million principal amount of the Term Loan A and $214.1 million of the Term Loan B, and the 5.5% Senior Notes exchange.

In the three months ended June 30, 2023, the gain on extinguishment of debt of $21.2 million represented a gain associated with the repurchase of $85.0 million principal amount of 5.5% Senior Notes at a discount.

See Note 6 to our unaudited condensed consolidated financial statements.

Gain on Investments, net.

Gain on investments, net was $4.4 million for the three months ended December 31, 2023 due to a gain on other investments, as compared to $43.4 million for the three months ended December 31, 2022 which represented a gain associated with the sale of a portion of our ownership interest in STARZPLAY Arabia.

Equity Interests Income (Loss).

Equity interests income of $4.2 million in the three months ended December 31, 2023 compared to equity interests income of nil in the three months ended December 31, 2022 due to a gain in the current quarter related to the sale of an equity method investee.

Equity interests income of $0.9 million in the three months ended June 30, 2024 compared to equity interests loss of $0.3 million in the three months ended June 30, 2023 due to higher income generated by our equity method investees.

Income Tax Provision.

We had an income tax provision of $4.7 million in the three months ended December 31, 2023, compared to an income tax provision of $5.6 million in the three months ended December 31, 2022.

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, 2023 and 2022 was also impacted by charges for interest on uncertain tax benefits, and benefited from the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

We acquired all of the issued and outstanding equity interests of eOne on December 27, 2023 and are evaluating the tax impact on the preliminary purchase price allocation (see Note 2 to our unaudited condensed consolidated financial statements).

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

We had an income tax provision of $10.1 million in the three months ended June 30, 2024, compared to an income tax provision of $9.8 million in the three months ended June 30, 2023.

Our income tax provision differs from the U.S.

federal statutory income tax rate of 21% multiplied by income (loss) before taxes due to the mix of our earnings across the various jurisdictions in which our operations are conducted, changes in valuation allowances against our deferred tax assets, and certain minimum income and foreign withholding taxes.

Our income tax provision for the three months ended June 30, 2024 and 2023 also benefited from the 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 June 30, 2024 was also impacted by additional deferred tax expense as result of the Separation that occurred during the quarter.

Net Loss Attributable to Lions Gate Entertainment Corp.

Shareholders.

Net loss attributable to our shareholders for the three months ended December 31, 2023 was $106.6 million, or basic and diluted net loss per common share of $0.45 on 235.1 million weighted average common shares outstanding.

This compares to net income attributable to our shareholders for the three months ended December 31, 2022 of $16.6 million, or basic net income per common share of $0.07 on 228.8 million weighted average common shares outstanding and diluted net income per common share of $0.07 on 230.1 million weighted average common shares outstanding.

Net loss attributable to our shareholders for the three months ended June 30, 2024 was $59.4 million, or basic and diluted net loss per common share of $0.25 on 235.6 million weighted average common shares outstanding.

This compares to net loss attributable to our shareholders for the three months ended June 30, 2023 of $70.7 million, or basic and diluted net loss per common share of $0.31 on 230.2 million weighted average common shares outstanding.

Segment Results of Operations and Non-GAAP Measures

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Total segment profit represents the sum of segment profit for our individual segments, net of eliminations for intersegment transactions.

Segment profit and total segment profit excludes, when applicable, corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and/or programming and content strategy, certain charges related to the COVID-19 global pandemic, charges resulting from Russia's invasion of Ukraine, and purchase accounting and related adjustments.

Segment profit when presented in accordance with ASC 280 within the notes to the consolidated financial statements is a GAAP financial measure and is disclosed in Note 15 to our unaudited condensed consolidated financial statements.

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Not all companies calculate segment profit or total segment profit in the same manner, and segment profit and total segment profit as defined by the Company may not be comparable to similarly titled measures presented by other companies due to differences in the methods of calculation and excluded items.

The following table reconciles the GAAP measure, operating income (loss), to the non-GAAP measure, total segment profit, for the three months ended December 31, 2023 and 2022.

The following table reconciles the GAAP measure, operating loss, to the non-GAAP measure, total segment profit, for the three months ended June 30, 2024 and 2023.

In addition, each of segment direct operating expense, distribution and marketing expense and general and administrative expense is reconciled to the respective line items presented in the GAAP-based statement of operations in the preceding section of the Management's Discussion and Analysis of Financial Condition and Results of Operations which discusses consolidated results of operations.

Three Months Ended

December 31, Change

June 30, Change

2024 2023 Amount Percent

(Amounts in millions)

Operating income (loss) $ (43.5) $ 7.8 $ (51.3) nm

Operating loss $ 18.8 $ (16.8) $ 35.6 (211.9) %

Corporate general and administrative expenses 33.3 30.4 2.9 9.5 %

1 unchanged sentence

Restructuring and other 22.5 32.0 (9.5) (29.7) %

COVID-19 related charges (benefit) (0.1) (1.8) 1.7 (94.4) %

COVID-19 related charges (benefit) (3.1) 0.2 (3.3) nm

Unallocated rent cost included in direct operating expense 5.2 — 5.2 n/a

Adjusted share-based compensation expense 18.1 15.9 2.2 13.8 %

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We refer to our Motion Picture and Television Production segments collectively as our Studio Business.

The table below

sets forth the revenues and segment profit of our collective Studio Business and Media Networks segment.

The table below sets forth the revenues and segment profit of our collective Studio Business and Media Networks segment.

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2024 2023 Amount Percent

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Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended December 31, 2023 and 2022:

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended June 30, 2024 and 2023:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2024 2023 Amount Percent

10 unchanged sentences

Gross contribution as a percentage of revenue 33.0 % 24.3 %

The table below sets forth Motion Picture revenue by media and product category for the three months ended December 31, 2023 and 2022:

Three Months Ended December 31,

The table below sets forth Motion Picture revenue by media and product category for the three months ended June 30, 2024 and 2023.

Motion Picture revenues for the three months ended June 30, 2024 included approximately 25.1 million of revenues from eOne.

Three Months Ended June 30,

2024 2023 Total Increase (Decrease)

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Includes acquired and licensed brands and libraries originally released by other parties such as third-party library product, including our titles released by acquired companies prior to our acquisition of the company (i.e., Summit Entertainment library), and titles released with our equity method investees, Roadside Attractions and Pantelion Films, and other titles.

Theatrical revenue increased $88.4 million in the three months ended December 31, 2023 as compared to the three months ended December 31, 2022 due to an increase of $89.2 million from Lionsgate Original Releases driven by the successful box-office performance of The Hunger Games:

The Ballad of Songbirds & Snakes, and to a lesser extent, theatrical revenue from Saw X , released September 29, 2023.

Home entertainment revenue increased $9.8 million, or 5.9%, in the three months ended December 31, 2023, as compared to the three months ended December 31, 2022, due to higher digital media revenue of $8.1 million.

The increase in digital media revenue was due to an increase from Lionsgate Original Releases of $5.0 million due to revenues generated from a greater number of fiscal 2024 theatrical slate titles released on home entertainment digital media in the current quarter and revenues from titles in The Hunger Games franchise, which were offset by revenue from the license of Shotgun Wedding to a direct-to-streaming platform in the prior year's quarter.

The increase in digital media revenue was also due to an increase from Other Film of $3.1 million from our acquired library titles.

Television revenue increased $18.3 million, or 38.9%, in the three months ended December 31, 2023, as compared to the three months ended December 31, 2022, due to an increase from Lionsgate Original Releases of $22.1 million due to a greater number of television windows opening from our fiscal 2024 theatrical slate ( Are You There God?

It's Me, Margaret., The Blackening, Joy Ride and About My Father), than from our fiscal 2023 theatrical slate in the prior year's quarter ( The Unbearable Weight of Massive Talent) .

International revenue increased $39.4 million, or 71.2%, in the three months ended December 31, 2023, as compared to the three months ended December 31, 2022 due to an increase from Lionsgate Original Releases of $39.4 million driven by higher revenue generated from our fiscal 2024 theatrical state titles in the current quarter, and in particular, The Hunger Games:

The Ballad of Songbirds & Snakes , as compared to the fiscal 2023 theatrical slate titles in the prior year's quarter.

Theatrical revenue decreased $29.9 million in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 due to a decrease of $29.8 million from Lionsgate Original Releases due to revenue in the prior year's quarter from the fiscal 2023 theatrical slate release, John Wick:

Chapter 4, partially offset by revenue from the release of The Strangers:

Chapter 1 in the current quarter.

Home entertainment revenue decreased $50.7 million, or 25.4%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, due to lower digital media revenue of $34.0 million and lower packaged media revenue of $16.7 million primarily due to decreases from Lionsgate Original Releases.

Digital media revenue and packaged media revenue from Lionsgate Original Releases declined $30.9 million and $14.2 million, respectively, due to revenue in the prior year's quarter from John Wick:

Chapter 4, partially offset by revenue in the current quarter from The Ministry of Ungentlemanly Warfare.

Television revenue increased $39.5 million, or 81.4%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 due to an increase from Lionsgate Original Releases of $40.1 million due to a greater number of television windows opening in the current quarter for our theatrical slate titles, and higher revenue recognized for those titles, and in particular, The Hunger Games:

The Ballad of Songbirds & Snakes, partially offset by a decrease from Other Film of $0.6 million.

International revenue decreased $12.7 million, or 15.7%, in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 due to a decrease from Lionsgate Original Releases of $25.9 million driven by revenue in the prior year's quarter for John Wick:

Chapter 4 , partially offset by an increase from Other Film of $13.2 million from our acquired library titles.

Direct Operating Expense.

The increase in direct operating expenses is due to higher motion picture revenue in the current quarter.

The increase in direct operating expenses as a percentage of motion picture revenue is 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 addition, the current quarter included a lower benefit from foreign currency gains of $2.6 million as compared to the prior year's quarter.

Investment in film write-downs included in Motion Picture segment direct operating expense were $0.5 million in the three months ended December 31, 2023, compared to approximately $0.6 million in the three months ended December 31, 2022.

The decrease in direct operating expenses is due to lower motion picture revenue in the current quarter.

Direct operating expenses as a percentage of motion picture revenue decreased slightly from the prior year's quarter and is 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.

Investment in film write-downs included in Motion Picture segment direct operating expense increased to $0.3 million in the three months ended June 30, 2024, as compared to $0.2 million in the three months ended June 30, 2023.

Distribution and Marketing Expense.

The increase in distribution and marketing expense in the three months ended December 31, 2023 is due to higher theatrical P&A and Premium VOD expense due to higher expense associated with the theatrical release of The Hunger Games:

The Ballad of Songbirds & Snakes in the current quarter, partially offset by lower expense for films to be released in subsequent quarters.

In the three months ended December 31, 2023, approximately $10.5 million of theatrical P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $15.5 million in the prior year's quarter in the Motion Picture segment.

The decrease in distribution and marketing expense in the three months ended June 30, 2024 is due to lower theatrical P&A and Premium VOD expense due to lower expense associated with the theatrical slate releases in the current quarter.

In the three months ended June 30, 2024 approximately $15.1 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $20.9 million in the three months ended June 30, 2023 in the Motion Picture segment.

Gross Contribution.

Gross contribution of the Motion Picture segment for the three months ended December 31, 2023 increased as compared to the three months ended December 31, 2022, due to higher Motion Picture revenue, partially offset by higher direct operating expense as a percentage of revenue and distribution and marketing expense.

Gross contribution of the Motion Picture segment for the three months ended June 30, 2024 increased as compared to the three months ended June 30, 2023 due to lower Motion Picture distribution and marketing expense and direct operating expense, partially offset by lower Motion Picture revenue.

General and Administrative Expense.

General and administrative expenses of the Motion Picture segment increased $6.6 million, or 32.2% primarily due to an increase in incentive based compensation.

General and administrative expenses of the Motion Picture segment in the three months ended June 30, 2024 decreased $0.9 million, or 3.1%, primarily due to a decrease in professional fees.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the three months ended December 31, 2023 and 2022:

The table below sets forth Television Production gross contribution and segment profit for the three months ended June 30, 2024 and 2023:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2024 2023 Amount Percent

9 unchanged sentences

Gross contribution as a percentage of revenue 11.9 % 16.3 %

The table below sets forth Television Production revenue and changes in revenue by media for the three months ended December 31, 2023 and 2022:

The table below sets forth Television Production revenue and changes in revenue by media for the three months ended June 30, 2024 and 2023.

Television Production revenues for the three months ended June 30, 2024 included approximately $76.5 million of revenues from eOne.

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2024 2023 Amount Percent

(Amounts in millions)

Television Production Revenue

Television Production (Amounts in millions)

Television $ 160.2 $ 150.0 $ 10.2 6.8 %

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

Domestic television revenue decreased in the three months ended December 31, 2023 due to a decrease of $114.2 million from intersegment revenues from the licensing of fewer Starz original series to Starz Networks (revenue in the current quarter from Power Book II:

Ghost Season 4, and BMF - Black Mafia Family Season 3, among others, compared to revenue in the prior year's quarter from Heels Season 2, Power Book IV:

Force Season 2, Hightown Season 3, and Power Book II:

Ghost Season 3, among others), and lower third-party revenue from fewer television episodes delivered which were impacted by the WGA and SAG-AFTRA strikes.

In particular, the prior year's period included significant third-party revenue from Minx - Season 2 and Home Economics - Season 3.

International revenue in the three months ended December 31, 2023 decreased $33.6 million, or 51.1%, and reflected a decrease of $41.0 million from intersegment revenues from the licensing of fewer Starz original series to LIONSGATE+ (revenue in the current quarter from Power Book II:

Ghost Season 4, among others, compared to revenue in the prior year's quarter from Heels Season 2, Power Book IV:

Force Season 2, Nacho Season 1, among others).

This decrease was partially offset by increased third-party revenue in the current quarter ( The Continental Season 1 and Acapulco Season 3 in the current quarter, compared to Love and Death Season 1 and Minx Season 2 in the prior year's quarter).

Home entertainment revenue in the three months ended December 31, 2023 decreased $114.8 million due primarily to digital media revenue in the prior year's quarter for Schitt's Creek Seasons 1 to 6 from the license to a streaming platform, and to a lesser extent, Nashville Seasons 1 to 6, and a decrease in digital media intersegment revenues from the licensing of Starz original series to Starz Networks of $5.9 million.

Other revenue decreased $13.4 million in the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, and primarily reflects lower revenue of 3 Arts Entertainment, which is generated from commissions and executive producer fees earned related to talent management and was unfavorably impacted by the WGA and SAG-AFTRA strikes.

Domestic television revenue increased in the three months ended June 30, 2024 due to an increase of approximately $66.3 million for revenues from eOne in the current quarter, partially offset by a decrease of $30.0 million from intersegment revenues from the licensing of fewer Starz original series to Starz Networks and a decrease from reality television programs.

International revenue in the three months ended June 30, 2024 increased $3.6 million, or 11.3% as compared to the three months ended June 30, 2023 due to an increase of approximately $5.4 million for revenues from eOne in the current quarter.

Home entertainment revenue in the three months ended June 30, 2024 increased $7.6 million, or 62.3% as compared to the three months ended June 30, 2023 due to increased third-party digital media revenues.

Other revenue in the three months ended June 30, 2024 decreased $1.2 million, or 4.9% from the three months ended June 30, 2023, and primarily reflects revenue of 3 Arts Entertainment, which is generated from commissions and executive producer fees earned related to talent management.

Direct Operating Expense.

Direct operating expense of the Television Production segment in the three months ended December 31, 2023 decreased $296.5 million, or 57.5% due to the decrease 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 prior year's quarter amortization rate reflected the timing of the licensing of higher margin library and acquired titles.

Direct operating expense of the Television Production segment in the three months ended June 30, 2024 increased $27.1 million, or 15.5% due to the increase in Television Production revenues.

Direct operating expenses as a percentage of television production revenue increased as compared to the prior year's quarter, primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter.

There were no investment in film and television programs write-downs included in Television Production segment direct operating expense in the three months ended June 30, 2024 and 2023.

Gross Contribution.

Gross contribution of the Television Production segment for the three months ended December 31, 2023 decreased as compared to the three months ended December 31, 2022, due to lower television production revenue and higher direct operating expenses as a percentage of television production revenue.

Gross contribution of the Television Production segment for the three months ended June 30, 2024 decreased as compared to the three months ended June 30, 2023, due to higher direct operating expenses as a percentage of television production revenue, partially offset by increased television production revenue.

General and Administrative Expense.

General and administrative expenses of the Television Production segment increased $2.7 million, or 25.0%, primarily due to an increase in incentive based compensation.

General and administrative expenses of the Television Production segment increased $5.2 million, or 40.9%.

Television Production general and administrative expenses for the three months ended June 30, 2024 included $6.0 million from eOne.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the three months ended December 31, 2023 and 2022.

The table below sets forth Media Networks gross contribution and segment profit for the three months ended June 30, 2024 and 2023:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2024 2023 Amount Percent

9 unchanged sentences

Gross contribution as a percentage of revenue 22.3 % 15.1 %

_______________________

nm - Percentage not meaningful.

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

Three Months Ended Three Months Ended

December 31, 2023 December 31, 2022

Starz Networks LIONSGATE+ Total Media Networks Starz Networks LIONSGATE+ Total Media Networks

June 30, 2024 June 30, 2023

Starz Networks (North America) (1)

Total Media Networks Starz Networks (North America) (1)

Total Media Networks

(Amounts in millions)

6 unchanged sentences

Segment profit $ 58.5 $ (1.0) $ 57.5 $ 38.1 $ (6.2) $ 31.9

_______________________

(1) Starz Networks represents the results of operations of the U.S.

and Canada, see footnote (2) below.

(2) During the quarter ended June 30, 2024, the Company began reflecting the results of operations of Canada within Starz Networks.

Accordingly, the following amounts were reclassified from "Other" (formerly "LIONSGATE+") to Starz Networks in the three months ended June 30, 2023 to conform to the current period presentation:

(i) revenue of $4.2 million;

(ii) direct operating expense of $2.7 million;

and (iii) distribution and marketing expense of $1.1 million, which resulted in gross contribution and segment profit of $0.4 million reclassified.

The amounts reflected in "Other" consist of the results of operations outside of the U.S.

Subscriber Data.

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Service subscribers may impact revenue differently depending on specific distribution agreements we have with our distributors which may include fixed fees, rates per basic video household or a rate per STARZ subscriber.

The table below sets forth, as of the dates presented, subscriptions to our Media Networks and STARZPLAY Arabia services.

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

Actual Pro Forma (1)

December 31, December 31, December 31, December 31,

June 30, June 30, June 30, June 30,

2024 2023 2024 2023

(Amounts in millions)

Starz Domestic

Starz North America (1)

OTT Subscribers 13.20 12.51 13.20 12.51

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2.62 4.62 2.62 3.03

Linear Subscribers 1.75 1.83 1.75 1.83

Total 6.10 15.18 5.00 5.00

OTT Subscribers (2)

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27.17 29.41 27.17 27.82

Supplemental Subscriber Information:

Starz North America (4)

OTT Subscribers 13.43 12.24 13.43 12.24

Linear Subscribers 8.85 10.15 8.85 10.15

Total 22.28 22.39 22.28 22.39

Subscribers by Platform:

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___________________

(1) Pro forma amounts exclude OTT subscribers for the international territories exited or to be exited in Australia, Continental Europe, Japan, Latin America and the U.K.

amounting to 1.10 million and 10.18 million at December 31, 2023 and 2022, respectively.

(1) Starz North America represents subscribers for the U.S.

(2) Pro forma amounts exclude OTT subscribers for the international territories exited in Australia, Latin America and the U.K.

amounting to 1.59 million at June 30, 2023.

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

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

(4) Starz North America subscribers include subscribers in the U.S.

(as presented in the "Starz Domestic" line item) and Canada (included in the LIONSGATE+ subscriber amounts in the table above).

Media Networks revenue increased $36.9 million and reflected increased revenue at LIONSGATE+ of $35.9 million, and Starz Networks of $1.0 million.

Starz Networks' revenue increased $1.0 million primarily due to higher OTT revenue of $19.0 million resulting from an increase in OTT subscribers as well as from a price increase initiated at the end of June 2023 and fully implemented during the quarter ended September 30, 2023, which was mostly offset by declines in revenue of $17.4 million from traditional linear services.

The LIONSGATE+ revenue of $74.5 million for the three months ended December 31, 2023 includes $67.5 million from the LIONSGATE+ territories exited, or to be exited of Australia, Continental Europe, Japan, Latin America and the U.K.

(the "Exiting Territories").

The increase in revenue at LIONSGATE+ was primarily due to an increase in revenue from the Exiting Territories of approximately $35.6 million, which was primarily the result of a modification to shorten a long-term distribution contract in Latin America.

During the three months ended December 31, 2023 and 2022, the following original series premiered on STARZ:

Three Months Ended December 31, 2023 Three Months Ended December 31, 2022

Title Premiere Date Title Premiere Date

Shining Vale Season 2

October 13, 2023 Step Up Season 3

October 16, 2022

Power Book III:

Raising Kanan Season 3

December 1, 2023 Dangerous Liaisons Season 1

November 6, 2022

Direct Operating and Distribution and Marketing Expenses .

Direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively.

The level of programming cost amortization and advertising and marketing costs and thus the gross contribution margin for the Media Networks' segment can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the network during the period.

Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere.

In addition, the shutdown, and planned shutdown, of the LIONSGATE+ international service in the Exiting Territories, will result in a decrease in expenses going forward.

The decrease in Media Networks direct operating expenses is due to a decrease at Starz Networks of $24.9 million, partially offset by an increase at LIONSGATE+ of $18.5 million in the three months ended December 31, 2023.

The decrease in Starz Networks direct operating expense was primarily due to lower programming cost amortization of $9.0 million related to library content, $8.5 million related to our Starz Originals, and $7.0 million related to theatrical releases under our programming output agreements.

Direct operating expenses at LIONSGATE+ increased in the Exiting Territories as a result of higher programming cost amortization and operating expenses of approximately $12.1 million and increased expense of approximately $5.5 million related to lower foreign exchange gains in the current quarter.

The LIONSGATE+ direct operating expense of $41.1 million for the three months ended December 31, 2023 includes $35.4 million from the Exiting Territories.

The increase in Media Networks distribution and marketing expense is due to an increase of $18.8 million at Starz Networks due to an increase in advertising and marketing costs to drive subscriber growth and increased spend on our Starz Original premieres, partially offset by a decrease of $11.3 million at LIONSGATE+ primarily due to a decrease in distribution and advertising expenses from the Exiting Territories.

The LIONSGATE+ distribution and marketing expense of $7.0 million for the three months ended December 31, 2023 includes $5.2 million from the Exiting Territories.

Gross Contribution.

The increase in gross contribution compared to the three months ended December 31, 2022 was due to increased gross contribution at LIONSGATE+ of $28.7 million and at Starz Networks of $7.1 million, driven by higher revenue and lower distribution and marketing expense at LIONSGATE+, and lower direct operating expense partially offset by higher distribution and marketing expense at Starz Networks, as described above.

The positive gross contribution related to the Exiting Territories was approximately $27.0 million for the three months ended December 31, 2023.

General and Administrative Expense.

General and administrative expenses of the Media Networks segment in the three months ended December 31, 2023 decreased slightly from the prior year's quarter, due to a decrease of $2.9 million at LIONSGATE+, partially offset by increases of $2.7 million at Starz Networks.

Nine Months Ended December 31, 2023 Compared to Nine Months Ended December 31, 2022

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Studio Business

Motion Picture $ 1,245.6 $ 791.6 $ 454.0 57.4 %

Television Production 860.7 1,468.6 (607.9) (41.4) %

Total Studio Business 2,106.3 2,260.2 (153.9) (6.8) %

Media Networks 1,214.9 1,157.5 57.4 5.0 %

Intersegment eliminations (422.1) (648.6) 226.5 (34.9) %

Total revenues 2,899.1 2,769.1 130.0 4.7 %

Direct operating 1,549.1 1,744.7 (195.6) (11.2) %

Distribution and marketing 686.0 567.1 118.9 21.0 %

General and administration 368.1 340.0 28.1 8.3 %

Depreciation and amortization 138.9 133.9 5.0 3.7 %

Restructuring and other 371.0 316.5 54.5 17.2 %

Goodwill and intangible asset impairment 663.9 1,475.0 (811.1) (55.0) %

Total expenses 3,777.0 4,577.2 (800.2) (17.5) %

Operating loss (877.9) (1,808.1) 930.2 (51.4) %

Interest expense (192.9) (163.0) (29.9) 18.3 %

Interest and other income 6.5 4.8 1.7 35.4 %

Other expense (19.6) (21.1) 1.5 (7.1) %

Gain on extinguishment of debt 21.2 40.3 (19.1) (47.4) %

Gain on investments, net 2.7 42.1 (39.4) (93.6) %

Equity interests income 5.7 0.8 4.9 612.5 %

Loss before income taxes (1,054.3) (1,904.2) 849.9 (44.6) %

Income tax provision (12.5) (16.6) 4.1 (24.7) %

Net loss (1,066.8) (1,920.8) 854.0 (44.5) %

Net loss attributable to noncontrolling interest 3.3 7.3 (4.0) (54.8) %

Net loss attributable to Lions Gate Entertainment Corp.

shareholders $ (1,063.5) $ (1,913.5) $ 850.0 (44.4) %

_______________________

nm - Percentage not meaningful.

Consolidated revenues increased $130.0 million in the nine months ended December 31, 2023 reflecting an increase of $57.4 million from our Media Networks business, and a decrease of $153.9 million from our Studio Business which was more than offset by lower intersegment eliminations of $226.5 million.

Intersegment eliminations relate to the licensing of product from our Studio Business (primarily our Television Production segment) to the Media Networks segment.

Motion Picture revenue increased $454.0 million in the current period due primarily to higher theatrical and international revenue associated with the release of The Hunger Games:

The Ballad of Songbirds & Snakes , and higher digital media home entertainment revenue, television and other revenue.

Motion Picture revenue included $113.7 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing an increase of $83.7 million from the nine months ended December 31, 2022.

Television Production revenue decreased $607.9 million due to decreased domestic and international television revenue from lower intersegment revenues from the licensing of Starz original series, and lower third-party domestic television revenue, digital media home entertainment and other revenue.

Television Production revenue included $308.4 million of revenue from licensing Television Production segment product to our Media Networks segment, representing a decrease of $310.2 million from the nine months ended December 31, 2022.

The decrease in intersegment eliminations of $226.5 million is primarily associated with lower Television Production revenues of $310.2 million for licenses of original series to Starz Networks and LIONSGATE+, both in the Media Networks segment as discussed above, partially offset by higher Motion Picture revenues of $83.7 million reflecting the licensing of certain recent theatrical releases to Starz.

Media Networks revenue increased $57.4 million, and reflected increased revenue at LIONSGATE+ of $86.2 million, offset by a decrease of $28.8 million at Starz Networks.

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

Direct Operating Expenses.

Direct operating expenses by segment were as follows for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

2023 2022 Change

Amount % of Segment Revenues Amount % of Segment Revenues Amount Percent

(Amounts in millions)

Direct operating expenses

Studio Business

Motion Picture $ 603.6 48.5 % $ 379.6 48.0 % $ 224.0 59.0 %

Television Production 701.8 81.5 1,306.1 88.9 (604.3) (46.3) %

Total Studio Business 1,305.4 62.0 1,685.7 74.6 (380.3) (22.6) %

Media Networks 617.5 50.8 677.0 58.5 (59.5) (8.8) %

COVID-19 related charges (benefit) (0.5) nm (8.8) nm 8.3 (94.3) %

Other 2.3 nm 9.1 nm (6.8) (74.7) %

Intersegment eliminations (375.6) nm (618.3) nm 242.7 (39.3) %

$ 1,549.1 53.4 % $ 1,744.7 63.0 % $ (195.6) (11.2) %

Direct operating expenses decreased in the nine months ended December 31, 2023 due to lower direct operating expenses for our Studio Business and the Media Networks segment, partially offset by lower intersegment eliminations.

The decrease at the Studio Business reflects lower direct operating expenses of the Television Production segment due to lower revenues from Television Production, partially offset by higher direct operating expenses of the Motion Picture segment due to higher Motion Picture revenues.

The decrease in Media Networks direct operating expense was driven by decreases at Starz Networks of $55.5 million and LIONSGATE+ of $4.0 million due to lower programming cost amortization, and a benefit from foreign exchange gains as compared to foreign exchange losses in the prior year's period at LIONSGATE+.

The decrease in intersegment eliminations is due to lower Television Production revenue from licenses of original series to Starz Networks and LIONSGATE+, as discussed above.

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

COVID-19 Related Charges (Benefit).

We incurred certain incremental costs associated with the COVID-19 global pandemic.

In the nine months ended December 31, 2023, direct operating expense included a benefit of $0.5 million, net of insurance recoveries of $0.7 million (nine months ended December 31, 2022 - benefit of $8.8 million, net of insurance recoveries of $10.7 million).

In the nine months ended December 31, 2023 and 2022, other direct operating expense includes share-based compensation.

In addition, in the nine months ended December 31, 2022, other direct operating expenses includes approximately $7.2 million in development costs written off in connection with certain management changes and changes in the theatrical marketplace in the Motion Picture segment, as a result of changes in strategy across its theatrical slate.

These charges are excluded from segment operating results but included in direct operating expense in the consolidated statement of operations and reflected in the "other" line item above.

Other direct operating expense in the nine months ended December 31, 2022 also includes the amortization of the non-cash fair value adjustments on film and television assets associated with the application of purchase accounting related to recent acquisitions.

Distribution and Marketing Expenses.

Distribution and marketing expenses by segment were as follows for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Distribution and marketing expenses

Studio Business:

Motion Picture $ 321.7 $ 163.1 $ 158.6 97.2 %

Television Production 24.3 25.9 (1.6) (6.2) %

Total Studio Business 346.0 189.0 157.0 83.1 %

Media Networks 342.0 376.5 (34.5) (9.2) %

Other 0.7 0.6 0.1 16.7 %

Intersegment eliminations (2.7) 1.0 (3.7) nm

$ 686.0 $ 567.1 $ 118.9 21.0 %

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 204.0 $ 77.0 $ 127.0 164.9 %

_______________________

nm - Percentage not meaningful

Distribution and marketing expenses increased in the nine months ended December 31, 2023, due to higher Studio Business distribution and marketing expense, partially offset by lower Media Networks distribution and marketing expense.

The increase at the Studio Business primarily reflects greater Motion Picture theatrical P&A and Premium VOD expense associated with the theatrical slate releases in the current period.

The decrease in Media Networks distribution and marketing expense was due to a decrease at LIONSGATE+ of $39.6 million primarily due to a decrease in distribution and advertising expenses from the Exiting Territories, partially offset by an increase at Starz Networks of $5.1 million.

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

General and Administrative Expenses.

General and administrative expenses by segment were as follows for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

December 31, Change

2023 % of Revenues 2022 % of Revenues Amount Percent

(Amounts in millions)

General and administrative expenses

Studio Business

Motion Picture $ 83.2 $ 66.2 $ 17.0 25.7 %

Television Production 40.5 32.0 8.5 26.6 %

Total Studio Business 123.7 98.2 25.5 26.0 %

Media Networks 71.3 70.5 0.8 1.1 %

Corporate 94.2 69.4 24.8 35.7 %

Share-based compensation expense 63.9 55.9 8.0 14.3 %

Purchase accounting and related adjustments 15.0 46.0 (31.0) (67.4) %

Total general and administrative expenses $ 368.1 12.7% $ 340.0 12.3% $ 28.1 8.3 %

General and administrative expenses increased in the nine months ended December 31, 2023, resulting from increased corporate, Motion Picture, Television Production, share-based compensation expense, and Media Networks general and administrative expenses, partially offset by lower purchase accounting and related adjustments.

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

Corporate general and administrative expenses increased $24.8 million, or 35.7%, primarily due to an increase in incentive based compensation.

The increase in share-based compensation expense included in general and administrative expense in the nine months ended December 31, 2023, as compared to the nine months ended December 31, 2022 is primarily due to lower fair values in the prior year's period 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.

The following table presents share-based compensation expense by financial statement line item:

Nine Months Ended

(Amounts in millions)

Share-based compensation expense by expense category

General and administrative expense $ 63.9 $ 55.9

Restructuring and other (1)

Direct operating expense 2.3 1.2

Distribution and marketing expense 0.7 0.6

Total share-based compensation expense $ 75.3 $ 59.8

_______________________

Purchase accounting and related adjustments decreased $31.0 million, or 67.4% primarily due to lower noncontrolling interest

discount amortization of $13.3 million and lower expense of $13.3 million associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment.

Depreciation and Amortization Expense.

Depreciation and amortization of $138.9 million for the nine months ended December 31, 2023 increased $5.0 million from $133.9 million in the nine months ended December 31, 2022 due to increased depreciation expense related to software in the current period.

Restructuring and Other.

Restructuring and other increased $54.5 million in the nine months ended December 31, 2023 as compared to the nine months ended December 31, 2022, and includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the nine months ended December 31, 2023 and 2022 (see Note 14 to our unaudited condensed consolidated financial statements):

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Restructuring and other:

Content and other impairments (1)

$ 317.4 $ 299.7 $ 17.7 5.9 %

Severance (2)

Cash 32.9 14.8 18.1 122.3 %

Accelerated vesting on equity awards (see Note 12 to our unaudited condensed consolidated financial statements)

8.4 2.1 6.3 300.0 %

Total severance costs 41.3 16.9 24.4 144.4 %

COVID-19 related charges — 0.1 (0.1) (100.0) %

Transaction and other costs (3)

12.3 (0.2) 12.5 nm

$ 371.0 $ 316.5 $ 54.5 17.2 %

_______________________

nm - Percentage not meaningful

(1) Media Networks Restructuring:

As a result of the Media Networks restructuring initiatives discussed in "Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" , the Company recorded content impairment charges related to the Media Networks segment in the nine months ended December 31, 2023 of $317.4 million (nine months ended December 31, 2022 - $293.8 million).

See Note 14 to our unaudited condensed consolidated financial statements.

Other Impairments:

Amounts in the nine months ended December 31, 2022 also include an impairment of an operating lease right-of-use asset related to the Studio business and corporate facilities amounting to $5.8 million associated with a portion of a facility lease that will no longer be utilized by the Company.

(2) Severance costs were primarily related to restructuring activities and other cost-saving initiatives.

In the nine months ended December 31, 2023, amounts were due to restructuring activities including integration of the acquisition of eOne, LIONSGATE+ international restructuring and our Motion Picture and Television Production segments.

(3) Transaction and other costs in the nine months ended December 31, 2023 and 2022 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs and benefits associated with certain legal matters.

In the nine months ended December 31, 2023, transaction and other costs also includes a benefit of $3.8 million associated with an arrangement to migrate subscribers in some of the exited territories to a third-party in connection with the LIONSGATE+ international restructuring.

In the nine months ended December 31, 2022, transaction and other costs includes a benefit of $11.0 million for a settlement of a legal matter related to the Media Networks segment.

Goodwill and Intangible Asset Impairment.

Goodwill and intangible asset impairment of $663.9 million in the nine months ended December 31, 2023 included goodwill impairment of $493.9 million and impairment of our indefinite-lived trade names of $170.0 million related to the Media Networks reporting unit, as compared to goodwill impairment of $1.475 billion for the nine months ended December 31, 2022 related to the Media Networks reporting unit.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates",

Goodwill and Indefinite-Lived Intangible Assets and Note 5 to our unaudited condensed consolidated financial statements for further information.

Interest Expense.

Interest expense of $192.9 million in the nine months ended December 31, 2023 increased $29.9 million from the nine months ended December 31, 2022 due to higher average interest rates and balances on variable rate corporate debt and film related obligations, partially offset by a larger benefit from the interest rate swaps.

The following table sets forth the components of interest expense for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

(Amounts in millions)

Interest Expense

Revolving credit facility $ 24.3 $ 10.2

Term loans 67.4 41.9

Senior Notes 30.0 40.3

Amortization of debt issuance costs and other non-cash interest (2)

Total interest expense $ 192.9 $ 163.0

______________________

(1) Other interest expense includes payments associated with certain film related obligations (Production Tax Credit Facility, IP Credit Facility, Backlog Facility and other, see Note 7 to our unaudited condensed consolidated financial statements), and payments and receipts associated with the Company's interest rate swaps (see Note 17 to our unaudited condensed consolidated financial statements).

(2) Amounts include the amortization of unrealized losses in accumulated other comprehensive income (loss) related to de-designated interest rate swaps which are being amortized to interest expense (see Note 17 to our unaudited condensed consolidated financial statements).

Interest and Other Income.

Interest and other income of $6.5 million for the nine months ended December 31, 2023 was comparable to interest and other income of $4.8 million for the nine months ended December 31, 2022.

Other Expense.

Other expense of $19.6 million for the nine months ended December 31, 2023 was comparable to other expense of $21.1 million for the nine months ended December 31, 2022, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 18 to our unaudited condensed consolidated financial statements).

Gain on Extinguishment of Debt.

Gain on extinguishment of debt of $21.2 million for the nine months ended December 31, 2023 represented a gain associated with the repurchase of $85.0 million principal amount of 5.500% Senior Notes at a discount.

In the nine months ended December 31, 2022, the gain on extinguishment of debt of $40.3 million represented a gain associated with the repurchase of $123.7 million principal amount of 5.500% Senior Notes at a discount, partially offset by the write-off of debt issuance costs associated with the voluntary prepayment of the entire outstanding amount of Term Loan A due March 22, 2023 and the repurchase of the 5.500% Senior Notes.

See Note 6 to our unaudited condensed consolidated financial statements.

Gain on Investments, net.

Gain on investments, net was $2.7 million for the nine months ended December 31, 2023, as compared to gain on investments, net of $42.1 million for the nine months ended December 31, 2022 which primarily represented a gain associated with the sale of a portion of our ownership interest in STARZPLAY Arabia.

Equity Interests Income.

Equity interests income of $5.7 million in the nine months ended December 31, 2023 compared to equity interests income of $0.8 million in the nine months ended December 31, 2022 due to a gain in the current period related to the sale of an equity method investee.

Income Tax Provision.

We had an income tax provision of $12.5 million in the nine months ended December 31, 2023, compared to an income tax provision of $16.6 million in the nine months ended December 31, 2022.

Our income tax provision for the nine months ended December 31, 2023 and 2022 was also impacted by charges for interest on uncertain tax benefits, and benefited from the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Net Loss Attributable to Lions Gate Entertainment Corp.

Shareholders.

Net loss attributable to our shareholders for the nine months ended December 31, 2023 was $1,063.5 million, or basic and diluted net loss per common share of $4.56 on 233.1 million weighted average common shares outstanding.

This compares to net loss attributable to our shareholders for the nine months ended December 31, 2022 of $1,913.5 million, or basic and diluted net loss per common share of $8.41 on 227.4 million weighted average common shares outstanding.

Segment Results of Operations and Non-GAAP Measures

Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022", Segment Results of Operations and Non-GAAP measures for a definition of the non-GAAP measure, total segment profit and Studio Business segment profit, which when presented outside of the segment information and reconciliations included in Note 15 to our unaudited condensed consolidated financial statements, is considered a non-GAAP financial measure, and should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with United States GAAP.

We use this non-GAAP measure, among other measures, to evaluate the aggregate operating performance of our business.

The following table reconciles the GAAP measure, operating loss, to the non-GAAP measure, total segment profit, for the nine months ended December 31, 2023 and 2022.

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Operating loss $ (877.9) $ (1,808.1) $ 930.2 (51.4) %

Corporate general and administrative expenses 94.2 69.4 24.8 35.7 %

Goodwill and intangible asset impairment 663.9 1,475.0 (811.1) (55.0) %

Adjusted depreciation and amortization 33.4 29.5 3.9 13.2 %

Restructuring and other 371.0 316.5 54.5 17.2 %

COVID-19 related charges (benefit) (0.5) (8.8) 8.3 (94.3) %

Content charges — 7.2 (7.2) (100.0) %

Adjusted share-based compensation expense 66.9 57.7 9.2 15.9 %

Purchase accounting and related adjustments 120.5 151.1 (30.6) (20.3) %

Total segment profit $ 471.5 $ 289.5 $ 182.0 62.9 %

_______________________

nm - Percentage not meaningful.

See Note 15 to our unaudited condensed consolidated financial statements for further information on the reconciling line items above, and for reconciliations of depreciation and amortization and share-based compensation expense as presented on our unaudited condensed consolidated statements of operations to adjusted depreciation and amortization and adjusted share-based compensation expense, respectively, as presented in the line items above.

We refer to our Motion Picture and Television Production segments collectively as our Studio Business.

The table below sets forth the revenues and segment profit of our collective Studio Business and Media Networks segment.

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Studio Business

Motion Picture $ 1,245.6 $ 791.6 $ 454.0 57.4 %

Television Production 860.7 1,468.6 (607.9) (41.4) %

Total Studio Business $ 2,106.3 $ 2,260.2 $ (153.9) (6.8) %

Media Networks 1,214.9 1,157.5 57.4 5.0 %

Intersegment eliminations (422.1) (648.6) 226.5 (34.9) %

$ 2,899.1 $ 2,769.1 $ 130.0 4.7 %

Segment Profit

Studio Business

Motion Picture $ 237.1 $ 182.7 $ 54.4 29.8 %

Television Production 94.1 104.6 (10.5) (10.0) %

Total Studio Business $ 331.2 $ 287.3 $ 43.9 15.3 %

Media Networks 184.1 33.5 150.6 nm

Intersegment eliminations (43.8) (31.3) (12.5) 39.9 %

$ 471.5 $ 289.5 $ 182.0 62.9 %

_______________________

nm - Percentage not meaningful.

See the following discussion for further detail of our individual segments.

The segment results of operations presented below do not include the elimination of intersegment transactions which are eliminated when presenting consolidated results.

Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Motion Picture Segment:

Revenue $ 1,245.6 $ 791.6 $ 454.0 57.4 %

Direct operating expense 603.6 379.6 224.0 59.0 %

Distribution & marketing expense 321.7 163.1 158.6 97.2 %

Gross contribution 320.3 248.9 71.4 28.7 %

General and administrative expenses 83.2 66.2 17.0 25.7 %

Segment profit $ 237.1 $ 182.7 $ 54.4 29.8 %

theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 204.0 $ 77.0 $ 127.0 164.9 %

Direct operating expense as a percentage of revenue 48.5 % 48.0 %

Gross contribution as a percentage of revenue 25.7 % 31.4 %

The table below sets forth Motion Picture revenue by media and product category for the nine months ended December 31, 2023 and 2022:

Nine Months Ended December 31,

2023 2022 Total Increase (Decrease)

Lionsgate Original Releases (1)

Other Film (2)

Total Lionsgate Original Releases (1)

Other Film (2)

(Amounts in millions)

Motion Picture Revenue

Theatrical $ 191.0 $ 3.2 $ 194.2 $ 24.0 $ 4.6 $ 28.6 $ 165.6

Home Entertainment

Digital Media 359.1 136.2 495.3 255.7 122.8 378.5 116.8

Packaged Media 43.9 19.1 63.0 27.2 28.1 55.3 7.7

Total Home Entertainment 403.0 155.3 558.3 282.9 150.9 433.8 124.5

Television 193.9 20.6 214.5 116.7 30.3 147.0 67.5

International 220.0 35.3 255.3 124.4 42.1 166.5 88.8

Other 17.5 5.8 23.3 10.0 5.7 15.7 7.6

$ 1,025.4 $ 220.2 $ 1,245.6 $ 558.0 $ 233.6 $ 791.6 $ 454.0

____________________

(1) Lionsgate Original Releases:

Includes titles originally planned for a wide theatrical release by Lionsgate, including titles that have changed from a planned wide theatrical release to an initial direct-to-streaming release.

These releases include films developed and produced in-house, films co-developed and co-produced and films acquired or licensed from third parties.

In addition, Lionsgate Original Releases also includes multi-platform and direct-to-platform motion pictures originally released or licensed by Lionsgate, and the licensing of our original release motion picture content to other ancillary markets (location-based entertainment, games, etc.).

(2) Other Film:

Theatrical revenue increased $165.6 million in the nine months ended December 31, 2023 as compared to the nine months ended December 31, 2022 due to an increase of $167.0 million from Lionsgate Original Releases driven by the performance of our fiscal 2024 theatrical slate, and in particular, The Hunger Games:

The Ballad of Songbirds & Snakes and Saw X, and revenue from our fiscal 2023 theatrical slate release, John Wick:

Chapter 4 in the current period.

The increase was also, to a lesser extent, due to a greater number of theatrical slate releases in the current period as compared to the prior year's period.

Home entertainment revenue increased $124.5 million, or 28.7%, in the nine months ended December 31, 2023, as compared to the nine months ended December 31, 2022, due to higher digital media revenue of $116.8 million.

The increase in digital media revenue was due to an increase from Lionsgate Original Releases of $103.4 million due to revenues generated from John Wick:

Chapter 4 , Jesus Revolution (fiscal 2023 theatrical slate titles), and from titles in The Hunger Games franchise, and a greater number of fiscal 2024 theatrical slate titles released on home entertainment digital media in the current period as compared to the prior year's period, partially offset by revenue in the prior year's period from the license of Shotgun Wedding to a direct-to-streaming platform.

The increase in digital media revenue was also due to an increase from Other Film of $13.4 million from our acquired library titles.

Television revenue increased $67.5 million, or 45.9%, in the nine months ended December 31, 2023, as compared to the nine months ended December 31, 2022 due to an increase from Lionsgate Original Releases of $77.2 million due to a greater number of television windows opening from our fiscal 2024 and fiscal 2023 theatrical slates than from our fiscal 2023 and fiscal 2022 theatrical slates in the prior year's period, and higher revenue recognized for those titles, and in particular, John Wick:

Chapter 4, partially offset by a decrease from Other Film of $9.7 million from our acquired library titles.

International revenue increased $88.8 million, or 53.3%, in the nine months ended December 31, 2023, as compared to the nine months ended December 31, 2022 due to an increase from Lionsgate Original Releases of $95.6 million driven by higher revenue generated from our fiscal 2024 and fiscal 2023 theatrical slate titles in the current period, and in particular, The Hunger Games:

The Ballad of Songbirds & Snakes , and John Wick:

Chapter 4 , as compared to the fiscal 2023 and fiscal 2022 theatrical slate titles in the prior year's period, partially offset by a decrease from Other Film of $9.0 million from our acquired library titles.

Direct Operating Expense.

The increase in direct operating expenses is due to higher motion picture revenue in the current period.

Direct operating expenses as a percentage of motion picture revenue was comparable to the prior year's period and is 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.

Investment in film write-downs included in Motion Picture segment direct operating expense increased to $27.5 million in the nine months ended December 31, 2023, as compared to $1.1 million in the nine months ended December 31, 2022.

Distribution and Marketing Expense.

The increase in distribution and marketing expense in the nine months ended December 31, 2023 is due to higher theatrical P&A and Premium VOD expense due to higher expense associated with the theatrical slate releases in the current period, partially offset by slightly lower expense for films to be released in subsequent quarters.

In the nine months ended December 31, 2023 approximately $24.8 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $27.3 million in the nine months ended December 31, 2022 in the Motion Picture segment.

Gross Contribution.

Gross contribution of the Motion Picture segment for the nine months ended December 31, 2023 increased as compared to the nine months ended December 31, 2022 due to higher Motion Picture revenue, partially offset by higher distribution and marketing expense and direct operating expense.

General and Administrative Expense.

General and administrative expenses of the Motion Picture segment in the nine months ended December 31, 2023 increased $17.0 million, or 25.7%, primarily due to an increase in incentive based compensation.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Television Production Segment:

Revenue $ 860.7 $ 1,468.6 $ (607.9) (41.4) %

Direct operating expense 701.8 1,306.1 (604.3) (46.3) %

Distribution & marketing expense 24.3 25.9 (1.6) (6.2) %

Gross contribution 134.6 136.6 (2.0) (1.5) %

General and administrative expenses 40.5 32.0 8.5 26.6 %

Segment profit $ 94.1 $ 104.6 $ (10.5) (10.0) %

Direct operating expense as a percentage of revenue 81.5 % 88.9 %

Gross contribution as a percentage of revenue 15.6 % 9.3 %

The table below sets forth Television Production revenue and changes in revenue by media for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

December 31, Increase (Decrease)

2023 2022 Amount Percent

Television Production (Amounts in millions)

Television $ 554.2 $ 973.1 $ (418.9) (43.0) %

International 137.7 219.4 (81.7) (37.2) %

Home Entertainment

Digital 113.4 205.1 (91.7) (44.7) %

Packaged Media 1.0 2.7 (1.7) (63.0) %

Total Home Entertainment 114.4 207.8 (93.4) (44.9) %

Other 54.4 68.3 (13.9) (20.4) %

$ 860.7 $ 1,468.6 $ (607.9) (41.4) %

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

Domestic television revenue decreased in the nine months ended December 31, 2023 due to a decrease of $214.1 million from intersegment revenues from the licensing of fewer Starz original series to Starz Networks (revenue in the current period from Power Book II:

Ghos t Season 4, BMF Season 3 and Power Book III:

Raising Kanan Season 3 compared to revenue in the prior year's period from Power Book II:

Ghost Season 3 , P-Valley Season 2 , BMF Season 2 , Heels Season 2 , Power Book III:

Raising Kanan Season 2 , and Power Book IV:

Force Season 2, among others) .

The decrease in domestic television revenue was also due to lower third-party revenue from fewer television episodes delivered which were impacted by the WGA and SAG-AFTRA strikes (including significant revenue in the prior year's period from The First Lady Season 1, and lower revenue in the current period from unscripted television programs).

International revenue in the nine months ended December 31, 2023 decreased $81.7 million, or 37.2% as compared to the nine months ended December 31, 2022 due to a decrease of $79.9 million from intersegment revenues from the licensing of fewer Starz original series to LIONSGATE+.

Home entertainment revenue in the nine months ended December 31, 2023 decreased $93.4 million, or 44.9% as compared to the nine months ended December 31, 2022 due to lower third-party digital media revenue ( The Continental Season 1 in the current period, compared to Schitt's Creek Seasons 1 to 6 from the license to a streaming platform, Nashville Seasons 1 to 6, and Ghosts Season 1 in the prior year's period), and a decrease of $16.2 million from digital media intersegment revenues from the licensing of Starz original series to Starz Networks.

Other revenue in the nine months ended December 31, 2023 decreased $13.9 million, or 20.4% from the nine months ended December 31, 2022, and primarily reflects lower revenue of 3 Arts Entertainment, which is generated from commissions and executive producer fees earned related to talent management and was unfavorably impacted by the WGA and SAG-AFTRA strikes.

Direct Operating Expense.

Direct operating expense of the Television Production segment in the nine months ended December 31, 2023 decreased $604.3 million, or 46.3% due to the decrease in Television Production revenues.

Direct operating expenses as a percentage of television production revenue decreased as compared to the prior year's period, 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 significant revenue from The Continental which has a lower amortization rate as compared to the prior year's period, which included a greater number of deliveries of newer shows in which direct operating expense is typically higher as a percentage of revenue.

Investment in film and television programs write-downs included in Television Production segment direct operating expense in the nine months ended December 31, 2023 were $6.6 million as compared to $4.7 million in the nine months ended December 31, 2022.

Gross Contribution.

Gross contribution of the Television Production segment for the nine months ended December 31, 2023 decreased slightly as compared to the nine months ended December 31, 2022, due to lower television production revenue which was mostly offset by lower direct operating expenses as a percentage of television production revenue.

General and Administrative Expense.

General and administrative expenses of the Television Production segment increased $8.5 million, or 26.6% primarily due to an increase in incentive based compensation.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

December 31, Change

2023 2022 Amount Percent

(Amounts in millions)

Media Networks Segment:

Revenue $ 1,214.9 $ 1,157.5 $ 57.4 5.0 %

Direct operating expense 617.5 677.0 (59.5) (8.8) %

Distribution & marketing expense 342.0 376.5 (34.5) (9.2) %

Gross contribution 255.4 104.0 151.4 145.6 %

General and administrative expenses 71.3 70.5 0.8 1.1 %

Segment profit $ 184.1 $ 33.5 $ 150.6 449.6 %

Direct operating expense as a percentage of revenue 50.8 % 58.5 %

Gross contribution as a percentage of revenue 21.0 % 9.0 %

_______________________

nm - Percentage not meaningful.

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

Nine Months Ended Nine Months Ended

December 31, 2023 December 31, 2022

Starz Networks LIONSGATE+ Total Media Networks Starz Networks LIONSGATE+ Total Media Networks

(Amounts in millions)

Media Networks Segment:

Revenue $ 1,019.9 $ 195.0 $ 1,214.9 $ 1,048.7 $ 108.8 $ 1,157.5

Direct operating expense 502.3 115.2 617.5 557.8 119.2 677.0

Distribution & marketing expense 309.9 32.1 342.0 304.8 71.7 376.5

Gross contribution 207.7 47.7 255.4 186.1 (82.1) 104.0

General and administrative expenses 59.3 12.0 71.3 50.7 19.8 70.5

Segment profit $ 148.4 $ 35.7 $ 184.1 $ 135.4 $ (101.9) $ 33.5

Media Networks revenue increased $57.4 million and reflected increased revenue at LIONSGATE+ of $86.2 million, partially offset by a decrease of $28.8 million at Starz Networks.

Starz Networks' revenue decreased $28.8 million primarily because of declines in revenue of $63.1 million from traditional linear services, which were offset by higher OTT revenue of $33.1 million resulting primarily from an increase in OTT subscribers as well as from a price increase initiated at the end of June 2023 and fully implemented during the quarter ended September 30, 2023.

The LIONSGATE+ revenue of $195.0 million for the nine months ended December 31, 2023 includes $158.8 million from the Exiting Territories.

The increase in revenue at LIONSGATE+, was primarily due to an increase in revenue from the Exiting Territories of approximately $69.9 million, which was primarily the result of a modification to shorten a long-term distribution contract in Latin America.

In addition, the increase was due to revenue from the distribution of certain Starz Originals and licensed content to third-party distributors outside of the Starz Platforms in ancillary markets of approximately $16.1 million.

During the nine months ended December 31, 2023 and 2022, the following original series premiered on STARZ:

Nine Months Ended December 31, 2023 Nine Months Ended December 31, 2022

(4) OTT subscribers include subscribers of STARZPLAY Arabia, as presented above.

Media Networks revenue decreased $31.0 million and reflected lower Other revenue of $34.7 million, partially offset by an increase of $3.7 million at Starz Networks.

Starz Networks' revenue increased $3.7 million primarily because of higher OTT revenue of $20.9 million resulting from a price increase initiated at the end of June 2023 and fully implemented during the quarter ended September 30, 2023, and growth in OTT subscribers of 0.69 million since June 30, 2023, which were offset by declines in revenue of $15.7 million from traditional linear services.

The Other revenue of $4.8 million for the three months ended June 30, 2024 includes $2.6 million from the U.K.

which was exited in May 2024.

The decrease in Other revenue was primarily due to revenue in the prior year's quarter from the international territories exited in Australia, Continental Europe, Japan, Latin America and the U.K.

(the "Exiting Territories") of approximately $36.9 million.

During the three months ended June 30, 2024 and 2023, the following original series premiered on STARZ:

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

Title Premiere Date Title Premiere Date

First Quarter:

Blindspotting Season 2 April 14, 2023 Gaslit April 24, 2022

Run the World Season 2

May 26, 2023 P-Valley Season 2

Mary & George Season 1

April 5, 2024 Blindspotting Season 2

April 14, 2023

Power Book II:

Ghost Season 4 Part 1

June 7, 2024 Run the World Season 2

Outlander Season 7A

June 16, 2023 Becoming Elizabeth Season 1

June 16, 2023

Who is Ghislaine Maxwell June 26, 2022

Second Quarter:

Minx Season 2

July 21, 2023 Power Book III:

Raising Kanan Season 2

August 14, 2022

Heels Season 2

July 28, 2023 Serpent Queen Season 1

September 11, 2022

Men in Kilts Season 2

August 11, 2023

Power Book IV:

Force Season 2

July 28, 2023

Third Quarter:

Shining Value Season 2

October 13, 2023 Step Up Season 3

October 16, 2022

Power Book III:

Raising Kanan Season 3

December 1, 2023 Dangerous Liaisons Season 1

November 6, 2022

Direct Operating and Distribution and Marketing Expenses .

2 unchanged sentences

Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere.

In addition, the shutdown, and planned shutdown, of the LIONSGATE+ international service in the Exiting Territories will result in a decrease in expenses going forward.

The decrease in Media Networks direct operating expenses is due to decreases at Starz Networks of $55.5 million and LIONSGATE+ of $4.0 million in the nine months ended December 31, 2023.

The decrease in Starz Networks direct operating expense was due primarily to lower programming cost amortization of $27.0 million related to theatrical releases under our programming output agreements, $24.5 million related to library content, and $10.0 million related to our Starz Originals, partially offset by a benefit in the prior year's period of $10.0 million associated with the modification of a content licensing arrangement.

Direct operating expenses at LIONSGATE+ decreased in the Exiting Territories as a result of lower programming cost amortization and operating costs of approximately $10.2 million and lower expense of approximately $7.3 million related to foreign exchange gains in the current period compared to foreign exchange losses in the prior year's period, partially offset by higher amortization of investment in films and television programs of $11.9 million associated with the distribution of Starz Originals and licensed content to third-party distributors outside of the Starz Platforms in ancillary markets.

The LIONSGATE+ direct operating expense of $115.2 million for the nine months ended December 31, 2023 includes $87.8 million from the Exiting Territories.

The decrease in Media Networks distribution and marketing expense is due to a decrease of $39.6 million at LIONSGATE+ primarily due to a decrease in distribution and advertising expenses from the Exiting Territories, partially offset by an increase of $5.1 million at Starz Networks.

The LIONSGATE+ distribution and marketing expense of $32.1 million for the nine months ended December 31, 2023 includes $25.4 million from the Exiting Territories.

In addition, the shutdown of the international service in the Exiting Territories will result in a decrease in expenses going forward.

The decrease in Media Networks direct operating expenses is due to decreases at Starz Networks of $15.0 million and Other of $25.2 million in the three months ended June 30, 2024.

The decrease in Starz Networks direct operating expense was due primarily to lower programming cost amortization of $45.4 million related to our Starz Originals, partially offset by an increase of $28.4 million related to theatrical releases under our programming output agreements.

Other direct operating expenses decreased $24.9 million in the Exiting Territories.

Other direct operating expense of $3.7 million for the three months ended June 30, 2024 includes $2.0 million from the Exiting Territories.

The decrease in Media Networks distribution and marketing expense is due to a decrease in Other of $11.4 million primarily due to a decrease in distribution and advertising expenses from the Exiting Territories, partially offset by an increase of $0.3 million at Starz Networks.

Gross Contribution.

The increase in gross contribution compared to the nine months ended December 31, 2022 was due to increased gross contribution at LIONSGATE+ of $129.8 million, and at Starz Networks of $21.6 million, driven by higher LIONSGATE+ revenue, and lower direct operating expense and LIONSGATE+ distribution and marketing expense, partially offset by lower Starz Networks revenue, as described above.

The positive gross contribution related to the Exiting Territories was approximately $45.7 million for the nine months ended December 31, 2023.

The increase in gross contribution compared to the three months ended June 30, 2023 was due to increased gross contribution at Starz Networks of $18.4 million and from Other of $1.9 million, driven by lower direct operating expense and Other distribution and marketing expense, partially offset by lower Other revenue, as described above.

General and Administrative Expense.

General and administrative expenses in the nine months ended December 31, 2023 increased from the prior year's period, due to increases of $8.6 million at Starz Networks, partially offset by a decrease of $7.8 million at LIONSGATE+.

General and administrative expenses in the three months ended June 30, 2024 decreased from the prior year's quarter, due to decreases of $2.0 million at Starz Networks and $3.3 million from Other.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

Our liquidity and capital requirements in the nine months ended December 31, 2023 were provided principally through cash generated from operations, corporate debt, our film related obligations (as further discussed below), and the monetization of trade accounts receivable.

As of December 31, 2023, we had cash and cash equivalents of $283.0 million.

Our liquidity and capital requirements in the three months ended June 30, 2024 were provided principally through cash generated from operations, corporate debt, our film related obligations (as further discussed below), and the monetization of trade accounts receivable.

As of June 30, 2024, we had cash and cash equivalents of $192.5 million.

Business Combination.

As discussed under "Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", in connection with the business combination with Screaming Eagle and establishing the Studio Business as a standalone publicly-traded entity, the transaction is expected to deliver approximately $350.0 million of gross proceeds to the Company, including $175.0 million in private investments in public equities (“PIPE”) financing.

The closing of the transaction is also subject to the gross proceeds to the Company being equal to a minimum of $350.0 million.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", on May 13, 2024, the Company closed the Business Combination Agreement, and Lionsgate Studios became a separate publicly traded company and its common shares commenced trading on Nasdaq under the symbol "LION" on May 14, 2024.

The net proceeds were used to partially pay down amounts outstanding under the Term Loan A and Term Loan B pursuant to the Credit Agreement (see Note 6 to our unaudited condensed consolidated financial statements).

eOne IP Facility.

In July 2024, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "eOne IP Credit Facility") based on and secured by the Company’s intellectual property rights primarily associated with certain titles acquired as part of the eOne acquisition.

The maximum principal amount of the eOne IP Credit Facility is $340.0 million, subject to the amount of collateral available, which is based on the valuation of unsold rights from the libraries.

The Company borrowed $340.0 million under the eOne IP Credit Facility.

The cash flows generated from the rights will be applied to repay the eOne IP Credit Facility subject to quarterly required principal payments of $8.5 million, beginning September 30, 2024, with the balance payable at maturity.

Advances under the eOne IP Credit Facility bear interest at a rate equal to Term SOFR plus 2.25% per annum.

The eOne IP Credit Facility matures on July 3, 2029.

See Note 19 - Subsequent Events.

Corporate Debt

Our corporate debt at December 31, 2023, excluding film related obligations discussed further below, consisted of the following:

Our corporate debt at June 30, 2024, excluding film related obligations discussed further below, consisted of the following:

• Senior Credit Facilities:

◦ Revolving Credit Facility.

We have a $1.25 billion revolving credit facility (with $375.0 million outstanding at December 31, 2023 used for the purchase of eOne) due April 2026 (the "Revolving Credit Facility").

We have a $1.25 billion revolving credit facility (with $585.0 million outstanding at June 30, 2024) due April 2026 (the "Revolving Credit Facility").

We maintain significant availability under our Revolving Credit Facility, which is currently used to meet our short-term liquidity requirements, and could also be used for longer term liquidity requirements.

◦ Term Loan A.

We have a term loan A facility due April 2026 (the "Term Loan A"), with $407.1 million outstanding at December 31, 2023.

We have a term loan A facility due April 2026 (the "Term Loan A"), with $314.4 million outstanding at June 30, 2024.

The outstanding amounts under the Revolving Credit Facility and Term Loan A may become due on December 23, 2024 (i.e.

91 days prior to March 24, 2025) prior to its maturity on April 6, 2026 in the event that the aggregate principal amount of outstanding Term Loan B in excess of $250 million has not been repaid, refinanced or extended to have a maturity date on or after July 6, 2026.

The Company expects to refinance and extend the maturity date of the Term Loan B prior to December 23, 2024 such that the maturity of the revolving credit facility and Term Loan A are not accelerated.

The Company expects to repay and/or refinance and extend the maturity date of the Term Loan B prior to December 23, 2024 such that the maturity of the revolving credit facility and Term Loan A are not accelerated.

◦ 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 $822.3 million outstanding at December 31, 2023.

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 $605.1 million outstanding at June 30, 2024.

• Senior Notes:

We have $715.0 million outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at December 31, 2023.

We have $715.0 million outstanding of 5.5% senior notes due 2029 (the "5.5% Senior Notes") at June 30, 2024.

Effective upon completion of the separation of the Starz Business from the Studio Business, the interest rate will increase to 6.0% and the maturity date will extend to April 15, 2030 for a portion of the 5.5% Senior Notes (the "Exchange Notes") which amounted to $389.9 million at June 30, 2024.

On or after the Separation Closing Date, as defined in the indenture to the Exchange Notes, the Company may redeem the Exchange Notes, in whole at any time, or in part from time to time, at certain specified redemption prices, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

The Exchange Notes will initially be guaranteed by all existing obligors under the Existing Notes, and upon completion of the separation of the Studio Business and the Starz Business, the Exchange Notes will be guaranteed exclusively by entities which are part of the Studio Business.

See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our corporate debt.

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We utilize our film related obligations to fund our film and television productions or licenses.

Our film related obligations at December 31, 2023 include the following:

Our film related obligations at June 30, 2024 include the following:

• Production Loans:

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The majority of the Company's production loans have contractual repayment dates either at or near the expected completion or release dates, with the exception of certain loans containing repayment dates on a longer term basis.

At December 31, 2023, there was $1,279.2 million outstanding of production loans.

At June 30, 2024, there was $1,306.4 million outstanding of production loans.

• Programming Notes:

Programming notes represent individual loans for the licensing of film and television programs that we license, related to our Media Networks business.

The Company's programming notes have contractual repayment dates in February 2024.

At December 31, 2023, there was $60.4 million outstanding of programming notes.

The Company's programming notes have contractual repayment dates in August 2024.

At June 30, 2024, there was $53.8 million outstanding of programming notes.

• Production Tax Credit Facility:

We have a $260.0 million non-recourse senior secured revolving credit facility due January 2025 based on collateral consisting solely of certain of the Company’s tax credit receivables (the "Production Tax Credit Facility").

As of June 30, 2024, tax credit receivables amounting to $336.8 million represented collateral related to the Production Tax Credit Facility.

Cash collections from the underlying collateral (tax credit receivables) are used to repay the Production Tax Credit Facility.

At December 31, 2023, there was $250.0 million outstanding under the Production Tax Credit Facility.

At June 30, 2024, there was $260.0 million outstanding under the Production Tax Credit Facility.

• IP Credit Facility:

In July 2021, as amended in September 2022, certain of our subsidiaries entered into a senior secured amortizing term credit facility due July 2027 (the "IP Credit Facility") based on the collateral consisting solely of certain of our rights in certain library titles, including the Spyglass and other recently acquired libraries.

In July 2021, as amended in September 2022, certain of our subsidiaries entered into a senior secured amortizing term credit facility due July 2027 (the "IP Credit Facility") based on the collateral consisting solely of certain of our rights in certain acquired library titles, including the Spyglass and other recently acquired libraries.

The maximum principal amount of the IP Credit Facility is $161.9 million, subject to the amount of collateral available, which is based on the valuation of cash flows from the libraries.

At December 31, 2023, there was $117.3 million outstanding under the IP Credit Facility.

At June 30, 2024, there was $100.6 million outstanding under the IP Credit Facility.

• Backlog Facility and Other:

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The facility maturity date is up to two years and 90 days after the revolving period ends, currently August 14, 2027.

As of December 31, 2023, there was $175.0 million outstanding under the Backlog Facility.

The Company has previously had other loans which are secured by contracted receivables which are not yet recognized as revenue under certain licensing agreements.

As of June 30, 2024, there was $175.0 million outstanding under the Backlog Facility.

The Company has other loans which are secured by accounts receivable and contracted receivables which are not yet recognized as revenue under certain licensing agreements.

Outstanding loan balances under these "other" loans must be repaid with any cash collections from the underlying collateral if and when received by the Company, and may be voluntarily repaid at any time without prepayment penalty fees.

The Company's "other" loans had no amounts outstanding as of December 31, 2023.

As of June 30, 2024, there was $138.0 million outstanding under the "other" loans, of which $67.9 million has a contractual repayment date in July 2025 and $70.1 million has a contractual repayment date in April 2027.

As of June 30, 2024, accounts receivable amounting to $84.8 million and contracted receivables not yet reflected as accounts receivable on the balance sheet at June 30, 2024 amounting to $81.1 million represented collateral related to the "other" loans.

See Note 7 to our unaudited condensed consolidated financial statements for a discussion of our film related obligations.

Accounts Receivable Monetization and Governmental Incentives

Our accounts receivable monetization programs include individual agreements to monetize certain of our trade accounts receivable directly with third-party purchasers and a revolving agreement to monetize designated pools of trade accounts receivable with various financial institutions.

Our accounts receivable monetization programs include individual agreements to monetize certain of our trade accounts receivable directly with third-party purchasers and previously have included a revolving agreement to monetize designated pools of trade accounts receivable with various financial institutions.

In addition, we utilize governmental incentives, programs and other structures from states and foreign countries (e.g., sales tax refunds, transferable tax credits, refundable tax credits, low interest loans, direct subsidies or cash rebates, calculated based on the amount of money spent in the particular jurisdiction in connection with the production) to fund our film and television productions and reduce financial risk.

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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.

Redeemable Noncontrolling Interests.

In addition, the Company has a redeemable noncontrolling interest balance of $409.1 million as of December 31, 2023 related to its acquisition of a controlling interest, consisting of a limited liability company interest, in each of 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 9 to our unaudited condensed consolidated financial statements).

• 3 Arts Entertainment.

As of December 31, 2023, the Company had a redeemable noncontrolling interest representing 49% of 3 Arts Entertainment.

The noncontrolling interest was subject to put and call options at fair value that were exercisable during the quarter.

On January 2, 2024, the Company closed on the acquisition of an additional 25% of 3 Arts Entertainment representing approximately half of the noncontrolling interest for approximately $194 million.

In addition, the Company purchased certain profit interests held by certain managers and entered into certain option rights agreements, which replaced the put and call rights discussed above by providing noncontrolling interest holders the right to sell to the Company and the Company the right to purchase their remaining (24%) interest beginning in January 2027.

• Pilgrim Media Group.

The Company has a remaining redeemable noncontrolling interest representing 12.5% of Pilgrim Media Group.

The noncontrolling interest holder has a right to put and the Company has a right to call the noncontrolling interest at fair value, subject to a cap, exercisable for thirty (30) days beginning November 12, 2024, as amended.

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

Such repurchases or exchanges or refinancings, if any, will depend on prevailing market conditions, our liquidity requirements, our assessment of opportunities to lower interest expense, contractual restrictions and other factors, and such repurchases or exchanges could result in a charge from the early extinguishment of debt.

In addition, the Company has a redeemable noncontrolling interest balance of $123.0 million as of June 30, 2024 related to its acquisition of a controlling interest, consisting of a limited liability company interest, in each of 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 9 to our unaudited condensed consolidated financial statements).

Such repurchases or exchanges or refinancing's, if any, will depend on prevailing market conditions, our liquidity requirements, our assessment of opportunities to lower interest expense, contractual restrictions and other factors, and such repurchases or exchanges could result in a charge from the early extinguishment of debt.

The amounts involved may be material.

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Under the current Media Networks business restructuring plan and ongoing strategic review previously discussed under "Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", we estimate we will incur additional charges ranging from approximately $30 million to $55 million related to certain contractual content commitments or programming content impairment charges, among other items related to territories exited or to be exited and content to be removed from its services.

The amounts above will depend on the results of its strategic content review and amounts recoverable from alternative distribution strategies, if any, on content in domestic and foreign markets.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", the net future cash outlay is estimated to range from approximately $50 million to $55 million, which includes contractual commitments on content in territories being exited, and payments on the remaining amounts payable for content removed or that may be removed from its services.

As we continue to evaluate the Media Networks business and its current restructuring plan in relation to the current micro and macroeconomic environment and the announced plan to separate the Company's Starz business (i.e., Media Networks segment) and Studio Business (i.e., Motion Picture and Television Production segments), including further strategic review of content performance and its strategy on a territory-by-territory basis, we may decide to expand our restructuring plan and exit additional territories or remove certain content off its platform in the future.

We may incur additional content impairment and other restructuring charges beyond the estimates above.

In the short-term, we currently expect that our cash requirements for productions will decrease and that our cash requirements for marketing spend will increase in fiscal 2024 as compared to fiscal 2023.

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, IP Credit Facility and Backlog Facility and other financing obligations, 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 next 12 months and beyond, 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 in our remaining international territories.

In the short-term, we currently expect that our cash requirements for productions will increase and our marketing spend will decrease in fiscal 2025 as compared to fiscal 2024.

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 from other financing obligations, available production, license or intellectual property financing, and proceeds from equity financing (see Note 2 to our unaudited condensed consolidated financial statements), will be adequate to meet known operational cash and debt service (i.e.

We monitor our cash flow liquidity, availability, fixed charge coverage, capital base, film spending and leverage ratios with the long-term goal of maintaining our credit worthiness.

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Any such transaction could be financed through our cash flow from operations, credit facilities, equity or debt financing.

If additional financing beyond our existing cash flows

from operations and credit facilities cannot fund such transactions, there is no assurance that such financing will be available on terms acceptable to us.

If additional financing beyond our existing cash flows from operations and credit facilities cannot fund such transactions, there is no assurance that such financing will be available on terms acceptable to us.

Our ability to obtain any additional financing will depend on, among other things, our business plans, operating performance, the condition of the capital markets at the time we seek financing, and short and long-term debt ratings assigned by independent rating agencies.

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Our material cash requirements from known contractual and other obligations primarily relate to our corporate debt and film related obligations.

The following table sets forth our significant contractual and other obligations as of December 31, 2023 and the estimated timing of payment:

The following table sets forth our significant contractual and other obligations as of June 30, 2024 and the estimated timing of payment:

Total Next 12 Months Beyond 12 Months

(Amounts in millions)

Future annual repayment of debt and other obligations recorded as of December 31, 2023 (on-balance sheet arrangements)

Future annual repayment of debt and other obligations recorded as of June 30, 2024 (on-balance sheet arrangements)

Corporate debt (1) :

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(3) See Note 7 to our unaudited condensed consolidated financial statements for further information on our film related obligations.

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(5) Film related obligations commitments include distribution and marketing commitments, minimum guarantee commitments, program rights commitments, and production loan commitments not reflected on the consolidated balance sheets as they did not then meet the criteria for recognition.

(6) Includes cash interest payments on our corporate debt and film related obligations, based on the applicable SOFR interest rates at December 31, 2023, net of payments and receipts from the Company's interest rate swaps, and excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

(7) Not included in the amounts above are $409.1 million of redeemable noncontrolling interest, as future amounts and timing are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future payments.

As discussed above, on January 2, 2024, the Company closed on the acquisition of an additional 25% of 3 Arts

Entertainment representing approximately half of the noncontrolling interest for approximately $194 million.

See Note 9 to our unaudited condensed consolidated financial statements.

(6) Includes cash interest payments on our corporate debt and film related obligations, based on the applicable SOFR interest rates at June 30, 2024, net of payments and receipts from the Company's interest rate swaps, and excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

(7) Not included in the amounts above are $123.0 million of redeemable noncontrolling interest, as future amounts and timing are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future payments (see Note 9 to our unaudited condensed consolidated financial statements).

See Note 19 to our unaudited condensed consolidated financial statements for amounts borrowed in July 2024 under the eOne IP Facility.

We have an exclusive multiyear post pay-one output licensing agreement with Universal for live-action films theatrically released in the U.S.

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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 December 31, 2023, the Company was in compliance with all applicable covenants.

As of June 30, 2024, the Company was in compliance with all applicable covenants.

The 5.5% 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 December 31, 2023, the Company was in compliance with all applicable covenants.

As of June 30, 2024, the Company was in compliance with all applicable covenants.

Share Repurchase Plan.

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

During the nine months ended December 31, 2023, the Company did not repurchase any common shares.

During the three months ended June 30, 2024, 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.

Capacity to Pay Dividends.

At December 31, 2023, 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 $1,066.8 million and accumulated deficit of $3,574.6 million were deemed free of restrictions from paying dividends at December 31, 2023.

At June 30, 2024, 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 $63.1 million and accumulated deficit of $3,242.7 million were deemed free of restrictions from paying dividends at June 30, 2024.

Discussion of Operating, Investing, Financing Cash Flows

Cash, cash equivalents and restricted cash increased by $18.5 million for the nine months ended December 31, 2023 and increased by $89.9 million for the nine months ended December 31, 2022, before foreign exchange effects on cash.

Cash, cash equivalents and restricted cash decreased by $129.0 million for the three months ended June 30, 2024 and increased by $79.9 million for the three months ended June 30, 2023, 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 nine months ended December 31, 2023 and 2022 were as follows:

Nine Months Ended

Cash flows provided by (used in) operating activities for the three months ended June 30, 2024 and 2023 were as follows:

Three Months Ended

2024 2023 Net Change

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Net Cash Flows Provided By (Used In) Operating Activities $ (158.9) $ 29.2 $ (188.1)

Cash flows provided by operating activities for the nine months ended December 31, 2023 were $401.4 million compared to cash flows used in operating activities of $128.0 million for the nine months ended December 31, 2022.

The increase in cash provided by operating activities is due to greater cash provided by changes in operating assets and liabilities of $572.2 million.

The greater cash provided by changes in operating assets and liabilities was driven by lower cash used for investment in film and television programs and program rights, greater proceeds from decreases in accounts receivable, net, and increases in film

related obligations and deferred revenue, partially offset by lower increases in participations and residuals and greater decreases in accounts payable and accrued liabilities.

The nine months ended December 31, 2022 included proceeds in the prior year's period from the termination of interest rate swaps (see further discussion below for interest rate swap transactions in the prior year's period).

In addition, cash flows provided by operating activities for the nine months ended December 31, 2023 included a net benefit of approximately $40.1 million from the monetization of accounts receivables programs, as compared to a net benefit of approximately $77.0 million for the nine months ended December 31, 2022 (see Note 18 to our unaudited condensed consolidated financial statements).

During the nine months ended December 31, 2022, we terminated certain interest rate swaps (a portion of which were considered hybrid instruments with a financing component and an embedded at-market derivative that was a designated cash flow hedge), and received approximately $56.4 million.

The $56.4 million received was classified in the unaudited condensed consolidated statement of cash flows as cash provided by operating activities of $188.7 million reflecting the amount received for the derivative portion of the termination of swaps (and presented in the "proceeds from the termination of interest rate swaps" line item on the unaudited condensed consolidated statement of cash flows), and a use of cash in financing activities of $134.5 million reflecting the pay down of the financing component of the Terminated Swaps (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million) (see Financing Activities below).

See Note 17 to our unaudited condensed consolidated financial statements.

Cash flows used in operating activities for the three months ended June 30, 2024 were $158.9 million compared to cash flows provided by operating activities of $29.2 million for the three months ended June 30, 2023.

The decrease in cash provided by operating activities is due to greater cash used in changes in operating assets and liabilities of $157.3 million.

The greater cash used in changes in operating assets and liabilities was driven by increased cash used for investment in film and television programs and program rights, greater decreases in participations and residuals and accounts payable and accrued liabilities, partially offset by greater increases in deferred revenue, and greater proceeds from decreases in accounts receivable, net.

Investing Activities.

Cash flows used in investing activities for the nine months ended December 31, 2023 and 2022 were as follows:

Nine Months Ended

Cash flows used in investing activities for the three months ended June 30, 2024 and 2023 were as follows:

Three Months Ended

(Amounts in millions)

Purchase of eOne, net of cash acquired $ (331.1) $ —

Proceeds from the sale of equity method and other investments 5.2 46.3

Investment in equity method investees and other $ (2.0) $ —

Acquisition of assets (film library and related assets) (35.0) —

Increase in loans receivable — (0.9)

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Net Cash Flows Used In Investing Activities $ (46.0) $ (9.8)

Cash flows used in investing activities of $365.5 million for the nine months ended December 31, 2023 compared to cash flows used in investing activities of $7.8 million for the nine months ended December 31, 2022, primarily due to cash used for the purchase of eOne, net of cash acquired, in the current period and lower proceeds from the sale of equity method and other investments due to the sale of a portion of our ownership interest in STARZPLAY Arabia in the prior year's period, partially offset by lower cash used for capital expenditures and investment in equity method investees and other.

Cash flows used in investing activities of $46.0 million for the three months ended June 30, 2024 compared to cash flows used in investing activities of $9.8 million for the three months ended June 30, 2023, primarily due to cash used for the acquisition of a film library and related assets in the current quarter.

Financing Activities.

Cash flows provided by (used in) financing activities for the nine months ended December 31, 2023 and 2022 were as follows:

Nine Months Ended

Cash flows provided by financing activities for the three months ended June 30, 2024 and 2023 were as follows:

Three Months Ended

(Amounts in millions)

Debt - borrowings $ 2,270.5 $ 1,238.0

Debt - borrowings, net of debt issuance and redemption costs $ 771.8 $ 490.0

Debt - repurchases and repayments (1,065.4) (560.1)

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Net proceeds from (repayments of) film related obligations 79.1 146.2

Sale of noncontrolling interest in Lionsgate Studios Corp.

(see Note 2) 294.0 —

Other financing activities (3.6) (15.6)

Net Cash Flows Provided By (Used In) Financing Activities $ 75.9 $ 60.5

Cash flows used in financing activities of $17.4 million for the nine months ended December 31, 2023 compared to cash flows provided by financing activities of $225.7 million for the nine months ended December 31, 2022.

Cash flows used in financing activities for the nine months ended December 31, 2023 primarily reflects net film related obligations repayments of $267.7 million due to net repayments under production loans and the Production Tax Credit Facility of $188.1 million and net repayments under the Backlog Facility, IP Credit Facility and other of $79.6 million, and cash used for other financing activities of $32.8 million representing primarily tax withholding required on equity awards of $31.0 million.

These uses of cash were partially offset by net proceeds from debt of $283.1 million in the nine months ended December 31, 2023, which included net borrowings under our revolving credit facility of $375.0 million to fund the purchase of eOne, which were offset by cash paid of $61.4 million for the repurchase of $85.0 million principal amount of the 5.500% Senior Notes, and required repayments on our term loans.

Cash flows provided by financing activities of $225.7 million for the nine months ended December 31, 2022 primarily reflects net film related obligations borrowings of $689.2 million due to net borrowings under production loans and the Production Tax Credit Facility of $430.2 million and increased net borrowings under the Backlog Facility, IP Credit Facility and other of $259.0 million, offset by net debt repayments of $310.3 million.

Net debt repayments and repurchases of $310.3 million in the nine months ended December 31, 2022 included the below transactions, along with required repayments on our term loans:

• In April 2022, we voluntarily prepaid the entire outstanding principal amount of the Term Loan A due March 22, 2023 of $193.6 million.

• During the nine months ended December 31, 2022, we repurchased $142.4 million principal amount of the 5.500% Senior Notes for $96.2 million.

In addition, other financing activities in the nine months ended December 31, 2022 includes $134.5 million for interest rate swap settlement payments due to a financing component on a portion of our interest rate swaps (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million) (see discussion above in Operating Activities , and Note 17 to our unaudited condensed consolidated financial statements).

Cash flows provided by financing activities of $75.9 million for the three months ended June 30, 2024 compared to cash flows provided by financing activities of $60.5 million for the three months ended June 30, 2023.

Cash flows provided by financing activities for the three months ended June 30, 2024 primarily reflects net proceeds from the sale of a noncontrolling interest in Lionsgate Studios of $294.0 million, and net film related obligations borrowings of $79.1 million due to net borrowings under production loans and the Production Tax Credit Facility of $64.8 million and net borrowings under the Backlog Facility, IP Credit Facility and other of $14.3 million.

These sources of cash were partially offset by net repayments of debt of $293.6 million, which included the prepayment of $84.9 million principal amount of the Term Loan A and $214.1 million principal amount of the Term Loan B and required repayments on our term loans, along with borrowings and repayments under our revolving credit facility for working capital purposes.

Cash used for other financing activities of $3.6 million represented primarily tax withholding required on equity awards of $3.0 million.

Cash flows provided by financing activities of $60.5 million for the three months ended June 30, 2023 primarily reflects net film related obligations borrowings of $146.2 million due to net borrowings under production loans and the Production Tax Credit Facility of $3.6 million and net borrowings under the Backlog Facility, IP Credit Facility and other of $142.6 million, offset by net debt repayments and repurchases of $70.1 million.

Net debt repayments and repurchases of $70.1 million in the three months ended June 30, 2023 included the below transaction, along with required repayments on our term loans:

• During the three months ended June 30, 2023, we repurchased $85.0 million principal amount of the 5.5% Senior Notes for $61.4 million.

Other financing activities also includes tax withholding required on equity awards of $15.1 million.

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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 10 to our unaudited condensed consolidated financial statements, remaining performance obligations were $2.0 billion at December 31, 2023 (March 31, 2023 - $1.9 billion).

The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.6 billion at December 31, 2023 (March 31, 2023 - $1.5 billion).

As disclosed in Note 10 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.8 billion at June 30, 2024 (March 31, 2024 - $1.8 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 June 30, 2024 (March 31, 2024 - $1.5 billion).

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.

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Item 2. Management’s Discussion and Analysis