STARZ ENTERTAINMENT CORP /CN/ 10-Q

Item 1. Financial Statements. LIONS GATE ENTERTAINMENT CORP. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2024 March 31, 2024 (Amounts in millions) ASSETS Cash and cash equivalents $ 229.6 $ 314.0 Accounts receivable, net 573.1 753.0 Other current assets 350.5 396.5 Total current assets 1,153.2 1,463.5 Investment in films and television programs and program rights, net 3,284.8 2,762.2 Property and equipment, net 86.7 88.5 Investments 77.7 74.8 Intangible assets, net 916.5 991.8 Goodwill 806.5 811.2 Other assets 821.4 900.7 Total assets $ 7,146.8 $ 7,092.7 LIABILITIES Accounts payable $ 345.2 $ 327.6 Content related payables 155.2 190.0 Other accrued liabilities 228.3 355.1 Participations and residuals 619.6 678.4 Film related obligations 1,702.6 1,393.1 Debt - short term portion 362.6 860.3 Deferred revenue 377.0 187.6 Total current liabilities 3,790.5 3,992.1 Debt 2,097.7 1,619.7 Participations and residuals 442.6 435.1 Film related obligations 228.4 544.9 Other liabilities 515.1 556.4 Deferred revenue 172.6 118.4 Deferred tax liabilities 24.8 13.3 Total liabilities 7,271.7 7,279.9 Commitments and contingencies (Note 16) Redeemable noncontrolling interests 99.7 123.3 EQUITY (DEFICIT) Class A voting common shares, no par value, 500.0 shares authorized, 83.6 shares issued (March 31, 2024 - 83.6 shares issued) 674.0 673.6 Class B non-voting common shares, no par value, 500.0 shares authorized, 156.4 shares issued (March 31, 2024 - 151.7 shares issued) 2,483.7 2,474.4 Accumulated deficit ( 3,396.4 ) ( 3,576.7 ) Accumulated other comprehensive income 96.6 116.0 Total Lions Gate Entertainment Corp. shareholders' equity (deficit) ( 142.1 ) ( 312.7 ) Noncontrolling interests ( 82.5 ) 2.2 Total equity (deficit) ( 224.6 ) ( 310.5 ) Total liabilities, redeemable noncontrolling interests and equity (deficit) $ 7,146.8 $ 7,092.7 See accompanying notes. 4 Table of Contents LIONS GATE ENTERTAINMENT CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions, except per share amounts) Revenues $ 948.6 $ 1,015.5 $ 1,783.3 $ 1,924.1 Expenses Direct operating 643.2 557.1 1,072.4 1,038.3 Distribution and marketing 232.9 221.7 431.5 466.1 General and administration 109.5 123.6 229.0 247.1 Depreciation and amortization 45.5 44.6 91.6 89.0 Restructuring and other 6.1 222.1 28.6 254.0 Goodwill and intangible asset impairment — 663.9 — 663.9 Total expenses 1,037.2 1,833.0 1,853.1 2,758.4 Operating loss ( 88.6 ) ( 817.5 ) ( 69.8 ) ( 834.3 ) Interest expense ( 74.3 ) ( 63.8 ) ( 143.1 ) ( 125.8 ) Interest and other income 3.3 2.7 8.5 4.7 Other expense ( 15.7 ) ( 11.5 ) ( 18.9 ) ( 17.2 ) Gain (loss) on extinguishment of debt ( 0.5 ) — ( 6.4 ) 21.2 Loss on investments, net — ( 1.6 ) — ( 1.7 ) Equity interests income (loss) ( 0.1 ) 1.8 0.8 1.5 Loss before income taxes ( 175.9 ) ( 889.9 ) ( 228.9 ) ( 951.6 ) Income tax benefit (provision) ( 1.9 ) 2.0 ( 12.0 ) ( 7.8 ) Net loss ( 177.8 ) ( 887.9 ) ( 240.9 ) ( 959.4 ) Less: Net loss attributable to noncontrolling interests 14.5 1.7 18.2 2.5 Net loss attributable to Lions Gate Entertainment Corp. shareholders $ ( 163.3 ) $ ( 886.2 ) $ ( 222.7 ) $ ( 956.9 ) Per share information attributable to Lions Gate Entertainment Corp. shareholders: Basic net loss per common share $ ( 0.68 ) $ ( 3.79 ) $ ( 0.94 ) $ ( 4.12 ) Diluted net loss per common share $ ( 0.68 ) $ ( 3.79 ) $ ( 0.94 ) $ ( 4.12 ) Weighted average number of common shares outstanding: Basic 239.3 234.0 237.5 232.1 Diluted 239.3 234.0 237.5 232.1 See accompanying notes. 5 Table of Contents LIONS GATE ENTERTAINMENT CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Net loss $ ( 177.8 ) $ ( 887.9 ) $ ( 240.9 ) $ ( 959.4 ) Foreign currency translation adjustments, net of tax 14.6 ( 2.2 ) 11.7 ( 1.4 ) Net unrealized gain (loss) on cash flow hedges, net of tax ( 15.2 ) — ( 19.8 ) 16.9 Comprehensive loss ( 178.4 ) ( 890.1 ) ( 249.0 ) ( 943.9 ) Less: Comprehensive loss attributable to noncontrolling interests 14.5 1.7 18.2 2.5 Comprehensive loss attributable to Lions Gate Entertainment Corp. shareholders $ ( 163.9 ) $ ( 888.4 ) $ ( 230.8 ) $ ( 941.4 ) See accompanying notes. 6 Table of Contents LIONS GATE ENTERTAINMENT CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) Three Months Ended Class A Voting Class B Non-Voting Accumulated Deficit Accumulated Other Comprehensive Income Lions Gate Entertainment Corp. Shareholders' Equity (Deficit) Noncontrolling Interests (a) Total Equity (Deficit) Common Shares Common Shares Number Amount Number Amount (Amounts in millions) Balance at June 30, 2024 83.6 $ 673.8 152.3 $ 2,490.4 $ ( 3,242.7 ) $ 93.1 $ 14.6 $ ( 63.6 ) $ ( 49.0 ) Exercise of stock options — — 0.1 0.3 — — 0.3 — 0.3 Share-based compensation, net of share cancellations for taxes — 0.2 4.0 ( 7.0 ) — — ( 6.8 ) — ( 6.8 ) Noncontrolling interest reclassification — — — — — 4.1 4.1 ( 5.2 ) ( 1.1 ) Net loss — — — — ( 163.3 ) — ( 163.3 ) ( 13.7 ) ( 177.0 ) Other comprehensive loss — — — — — ( 0.6 ) ( 0.6 ) — ( 0.6 ) Redeemable noncontrolling interests adjustments to redemption value — — — — 9.6 — 9.6 — 9.6 Balance at September 30, 2024 83.6 $ 674.0 156.4 $ 2,483.7 $ ( 3,396.4 ) $ 96.6 $ ( 142.1 ) $ ( 82.5 ) $ ( 224.6 ) Balance at June 30, 2023 83.5 $ 672.9 148.0 $ 2,431.2 $ ( 2,516.3 ) $ 138.6 $ 726.4 $ 1.8 $ 728.2 Exercise of stock options — — — 0.3 — — 0.3 — 0.3 Share-based compensation, net of share cancellations for taxes — 0.1 3.4 5.5 — — 5.6 — 5.6 Net loss — — — — ( 886.2 ) — ( 886.2 ) 0.5 ( 885.7 ) Other comprehensive loss — — — — — ( 2.2 ) ( 2.2 ) — ( 2.2 ) Redeemable noncontrolling interests adjustments to redemption value — — — — ( 65.0 ) — ( 65.0 ) — ( 65.0 ) Balance at September 30, 2023 83.5 $ 673.0 151.4 $ 2,437.0 $ ( 3,467.5 ) $ 136.4 $ ( 221.1 ) $ 2.3 $ ( 218.8 ) _____________________ (a) Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 9). 7 Table of Contents LIONS GATE ENTERTAINMENT CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) Six Months Ended Class A Voting Class B Non-Voting Accumulated Deficit Accumulated Other Comprehensive Income Lions Gate Entertainment Corp. Shareholders' Equity (Deficit) Noncontrolling Interests (a) Total Equity (Deficit) Common Shares Common Shares Number Amount Number Amount (Amounts in millions) Balance at March 31, 2024 83.6 $ 673.6 151.7 $ 2,474.4 $ ( 3,576.7 ) $ 116.0 $ ( 312.7 ) $ 2.2 $ ( 310.5 ) Exercise of stock options — — 0.1 0.3 — — 0.3 — 0.3 Share-based compensation, net of share cancellations for taxes — 0.4 4.6 9.0 — — 9.4 — 9.4 Sale of noncontrolling interest in Lionsgate Studios Corp. (see Note 2) — — — — 393.7 ( 11.3 ) 382.4 ( 100.8 ) 281.6 Noncontrolling interests (see Note 9) — — — — — — — 33.0 33.0 Net loss — — — — ( 222.7 ) — ( 222.7 ) ( 16.9 ) ( 239.6 ) Other comprehensive loss — — — — — ( 8.1 ) ( 8.1 ) — ( 8.1 ) Redeemable noncontrolling interests adjustments to redemption value — — — — 9.3 — 9.3 — 9.3 Balance at September 30, 2024 83.6 $ 674.0 156.4 $ 2,483.7 $ ( 3,396.4 ) $ 96.6 $ ( 142.1 ) $ ( 82.5 ) $ ( 224.6 ) Balance at March 31, 2023 83.5 $ 672.3 145.9 $ 2,430.9 $ ( 2,439.6 ) $ 120.9 $ 784.5 $ 1.5 $ 786.0 Exercise of stock options — — — 0.3 — — 0.3 — 0.3 Share-based compensation, net of share cancellations for taxes — 0.4 5.5 5.5 — — 5.9 — 5.9 Issuance of common shares — 0.3 — 0.3 — — 0.6 — 0.6 Net loss — — — — ( 956.9 ) — ( 956.9 ) 0.8 ( 956.1 ) Other comprehensive income — — — — — 15.5 15.5 — 15.5 Redeemable noncontrolling interests adjustments to redemption value — — — — ( 71.0 ) — ( 71.0 ) — ( 71.0 ) Balance at September 30, 2023 83.5 $ 673.0 151.4 $ 2,437.0 $ ( 3,467.5 ) $ 136.4 $ ( 221.1 ) $ 2.3 $ ( 218.8 ) _____________________ (a) Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 9). See accompanying notes. 8 Table of Contents LIONS GATE ENTERTAINMENT CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended September 30, 2024 2023 (Amounts in millions) Operating Activities: Net loss $ ( 240.9 ) $ ( 959.4 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 91.6 89.0 Amortization of films and television programs and program rights 774.2 767.5 Amortization of debt financing costs and other non-cash interest 18.4 14.6 Non-cash share-based compensation 40.6 43.5 Other amortization 32.1 23.8 Goodwill and intangible asset impairment — 663.9 Content and other impairments 16.3 239.5 (Gain) loss on extinguishment of debt 6.4 ( 21.2 ) Equity interests income ( 0.8 ) ( 1.5 ) Loss on investments, net — 1.7 Deferred income taxes 11.3 ( 8.8 ) Changes in operating assets and liabilities: Accounts receivable, net 276.1 132.2 Investment in films and television programs and program rights, net ( 1,245.3 ) ( 666.5 ) Other assets ( 6.5 ) ( 18.6 ) Accounts payable and accrued liabilities ( 146.5 ) ( 92.1 ) Participations and residuals ( 58.5 ) 36.9 Content related payables ( 47.9 ) ( 3.5 ) Deferred revenue 238.5 89.3 Net Cash Flows Provided By (Used In) Operating Activities ( 240.9 ) 330.3 Investing Activities: Net proceeds from purchase price adjustments for eOne acquisition (see Note 2) 12.0 — Proceeds from the sale of other investments — 0.2 Investment in equity method investees and other ( 2.0 ) ( 11.3 ) Acquisition of assets (film library and related assets) ( 35.0 ) — Increase in loans receivable — ( 2.1 ) Capital expenditures ( 18.2 ) ( 18.3 ) Net Cash Flows Used In Investing Activities ( 43.2 ) ( 31.5 ) Financing Activities: Debt - borrowings, net of debt issuance and redemption costs 2,537.5 1,084.5 Debt - repurchases and repayments ( 2,569.0 ) ( 1,165.5 ) Film related obligations - borrowings 1,274.2 943.6 Film related obligations - repayments ( 1,289.8 ) ( 1,172.9 ) Sale of noncontrolling interest in Lionsgate Studios Corp. (see Note 2) 283.1 — Purchase of noncontrolling interest ( 7.4 ) ( 0.6 ) Distributions to noncontrolling interest ( 0.6 ) ( 0.6 ) Exercise of stock options 0.3 0.3 Tax withholding required on equity awards ( 28.6 ) ( 30.7 ) Net Cash Flows Provided By (Used In) Financing Activities 199.7 ( 341.9 ) Net Change In Cash, Cash Equivalents and Restricted Cash ( 84.4 ) ( 43.1 ) Foreign Exchange Effects on Cash, Cash Equivalents and Restricted Cash 2.3 ( 0.7 ) Cash, Cash Equivalents and Restricted Cash - Beginning Of Period 371.4 313.0 Cash, Cash Equivalents and Restricted Cash - End Of Period $ 289.3 $ 269.2 See accompanying notes. 9 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. General Nature of Operations Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) encompasses world-class motion picture and television studio operations aligned with the STARZ premium global subscription platform to bring a unique and varied portfolio of entertainment to consumers around the world. The Company’s film, television, subscription and location-based entertainment businesses are backed by a more than 20,000 -title library and a valuable collection of iconic film and television franchises. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Lionsgate and all of its majority-owned and controlled subsidiaries. The unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to quarterly report on Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the three and six months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2025. The balance sheet at March 31, 2024 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024. Certain amounts presented in prior periods have been reclassified to conform to the current period presentation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The most significant estimates made by management in the preparation of the financial statements relate to ultimate revenue and costs used for the amortization of investment in films and television programs; estimates of future viewership used for the amortization of licensed program rights; estimates related to the revenue recognition of sales or usage-based royalties; fair value of equity-based compensation; fair value of assets and liabilities for allocation of the purchase price of companies and assets acquired; income taxes including the assessment of valuation allowances for deferred tax assets; accruals for contingent liabilities; and impairment assessments for investment in films and television programs and licensed program rights, property and equipment, equity investments, goodwill and intangible assets. Actual results could differ from such estimates. Recent Accounting Pronouncements Segment Reporting: In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance which expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and therefore will be effective beginning with the Company’s financial statements issued for the fiscal year ending March 31, 2025 and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and disclosures. 10 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Income Taxes: In December 2023, the FASB issued guidance which expands income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, this guidance requires all entities disaggregate disclosures by jurisdiction on the amount of income taxes paid (net of refunds received), income or loss from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations. This guidance is effective for fiscal years beginning after December 15, 2024, and therefore will be effective beginning with the Company’s financial statements issued for the fiscal year ending March 31, 2026 with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and disclosures. Income Statement: In November 2024, the FASB issued guidance requiring public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This guidance is effective for fiscal years beginning after December 15, 2026, and therefore will be effective beginning with the Company’s financial statements issued for the fiscal year ending March 31, 2028 and interim reporting periods beginning in fiscal 2029, with early adoption permitted. The disclosures required under the guidance can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and disclosures. 2. Acquisitions Acquired Library On June 5, 2024, the Company invested approximately $ 35.0 million for a 51 % members' interest in a newly formed limited liability company, CP LG Library Holdings, LLC (“CP LG”), with the Company designated as the managing member of CP LG. CP LG used the funds received from the Company, along with funds invested by the 49 % member, to acquire a library of 46 films for approximately $ 68.6 million. Also on June 5, 2024, the Company entered into a distribution agreement with CP LG to distribute the titles in the acquired library. The purchase included the film library (of which $ 48.3 million of the purchase price was allocated to investment in film and television programs for the film library), accounts receivable and certain liabilities associated with the film library, most notably participations and residuals liabilities. The Company determined that CP LG is a variable interest entity (“VIE”) for which it is the primary beneficiary and is consolidated under the applicable accounting guidance as the Company has the power to direct the significant activities and the right to receive benefits and obligation to absorb losses of CP LG. The Company concluded that the acquired library and related assets and liabilities was not a business and therefore, accounted for the acquisition as an initial consolidation of a VIE that is not a business under the applicable accounting guidance. There was no gain or loss recognized upon initial consolidation of the VIE as the sum of the fair value of the consideration paid and noncontrolling interest equaled the fair value of the net assets on the acquisition date. See Note 9 for the noncontrolling interest recorded related to CP LG. As of September 30, 2024, the unaudited condensed consolidated balance sheet included assets and liabilities of CP LG totaling $ 85.1 million (which is primarily comprised of investment in film and television programs) and $ 16.6 million, respectively. The assets and liabilities of CP LG primarily consist of accounts receivable, investment in film and television programs, and participations and residuals. Business Combination Agreement 11 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 a 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 (the "Closing"). 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 Studio Business were transferred to StudioCo such that StudioCo held, 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 private investments in public equities ("PIPE") financing, which amount excludes an aggregate of approximately $ 20.0 million that remains due from a PIPE Investor that subscribed for common shares and which shares, as of September 30, 2024, are pending issuance subject to receipt of such amount. 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). The Business Combination has been accounted for as a reverse recapitalization in accordance with U.S. GAAP. 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 of the Studio Business equity. 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. In connection with the Business Combination, as described above, approximately 12.2 % of the Lionsgate Studios common shares were issued to the SEAC public shareholders and founders and other common equity financing investors in exchange for net proceeds of $ 281.6 million. The following table reconciles the gross proceeds to the net proceeds reflected in the consolidated statement of cash flows and the consolidated statement of equity (deficit): (Amounts in millions) Total gross cash proceeds $ 330.0 Less: SEAC warrant exchange payment (1) ( 12.5 ) Less: Transaction costs ( 35.9 ) Net proceeds from the sale of noncontrolling interest in Lionsgate Studios Corp. per the condensed consolidated statement of equity (deficit) 281.6 Add: Transaction costs accrued and not paid, net of transaction costs previously paid 1.5 Net cash proceeds from the sale of noncontrolling interest in Lionsgate Studios per the condensed consolidated statement of cash flows $ 283.1 ______________ (1) Prior to the Closing, each of the then issued and outstanding whole warrants of SEAC, sold as part of SEAC’s initial public offering (the “SEAC Public Warrants”) was automatically exchanged for $ 0.50 in cash pursuant to the terms of an amendment to the agreement governing the SEAC Public Warrants. As of the Closing, no SEAC Public Warrants were outstanding. 12 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company recorded a reduction of noncontrolling interest in shareholders' equity (deficit) of $ 100.8 million and a reduction of accumulated other comprehensive income of $ 11.3 million for the issuance of the Lionsgate Studios common shares, which was based upon the 12.2 % ownership interest in the carrying value of Lionsgate Studios. The reduction in noncontrolling interest was due to the negative carrying value of Lionsgate Studios as of May 13, 2024, partially offset by an amount allocated to certain options described below. The difference between the net cash proceeds and the amounts recorded as noncontrolling interest and accumulated other comprehensive income was reflected as a reduction of accumulated deficit in the consolidated statement of shareholders' equity (deficit). See Note 9. In connection with the Business Combination, 2,200,000 options (the "Sponsor Options") to receive Lionsgate Studios common shares, were issued to certain noncontrolling interest holders, with an exercise price of $ 0.0001 per share. The Sponsor Options will become exercisable (i) on or after the date on which the trading price of Lionsgate Studios common shares (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) equals or exceeds $ 16.05 per share or (ii) if a Change of Control (as defined in the sponsor option agreement) occurs, subject to certain conditions. The Company has recorded the Sponsor Options as part of the noncontrolling interest recorded. eOne Acquisition 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 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 initially approximately $ 385.1 million and subsequently adjusted to $ 373.1 million upon the settlement of certain working capital items pursuant to the Purchase Agreement. The final purchase price is subject to further adjustment based on the settlement of certain amounts held back pursuant to the Purchase Agreement. 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. Allocation of Purchase Consideration. The Company has made a preliminary estimate of the allocation of the preliminary purchase price of eOne to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair value. The Company is still evaluating the fair value of film and television programs and libraries, accounts receivable, participations and residuals liabilities and income taxes, in addition to ensuring all other assets and liabilities have been identified and recorded. The Company has estimated the preliminary fair value of assets acquired and liabilities assumed based on information currently available and will continue to adjust those estimates as additional information pertaining to events or circumstances present at December 27, 2023 becomes available and final appraisals and analysis are completed. The Company will reflect measurement period adjustments, in the period in which the adjustments occur, and the Company will finalize its accounting for the acquisition within one year from December 27, 2023 (see Note 5 for measurement period adjustments recorded through September 30, 2024). A change in the fair value of the net assets may change the amount recognized to goodwill. If the final fair value estimates and tax adjustments related to the net assets acquired decrease from their preliminary estimates, the amount of goodwill will increase and if the final fair value estimates and tax adjustments related to the net assets acquired increase from their preliminary estimates, the amount of goodwill will decrease and may result in a gain on purchase. In addition, the final fair value estimates related to the net assets acquired could impact the amount of amortization expense recorded associated with amounts allocated to film and television programs and other intangible assets. The preliminary goodwill amount is reflected in the table below, and arises from the opportunity for strengthening our global distribution infrastructure and enhanced positioning for motion picture and television projects and selling opportunities. The goodwill will not be amortized for financial reporting purposes, and will not be deductible for federal tax purposes. The fair value measurements were primarily based on significant inputs that are not observable in the market, such as discounted cash flow (DCF) analyses, and thus represent Level 3 fair value measurements. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed (including measurement period adjustments recorded through September 30, 2024, see Note 5), and a reconciliation to total consideration transferred is presented in the table below: 13 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Amounts in millions) Cash and cash equivalents $ 54.1 Accounts receivable 294.2 Investment in films and television programs 370.2 Property and equipment 14.0 Intangible assets 4.0 Other assets (1) 171.1 Accounts payable and accrued liabilities ( 67.7 ) Content related payable ( 38.8 ) Participations and residuals (1) ( 202.4 ) Film related obligations (1) ( 105.8 ) Other liabilities and deferred revenue (1) ( 130.7 ) Preliminary fair value of net assets acquired 362.2 Goodwill 10.9 Preliminary purchase price consideration at September 30, 2024 $ 373.1 ______________ (1) Includes current and non-current amounts. Investment in films and television programs includes the preliminary fair value of completed films and television programs which have been produced by eOne or for which eOne has acquired distribution rights, as well as the preliminary fair value of films and television programs in production, pre-production and development. For investment in films and television programs, the fair value was preliminarily estimated based on forecasted cash flows discounted to present value at a rate commensurate with the risk of the assets. Titles that were released less than three years prior to the acquisition date (December 27, 2023) were valued individually and will be amortized using the individual film forecast method, based on the ratio of current period revenues to management’s estimated remaining total gross revenues to be earned ("ultimate revenue"). Titles released more than three years prior to the acquisition date were valued as part of a library and will be amortized on a straight-line basis over the estimated useful life of 5 years to 10 years. The intangible assets acquired include trade names with a weighted average estimated useful life of 5 years. The fair value of the trade names was preliminarily estimated based on the present value of the hypothetical cost savings that could be realized by the owner of the trade names 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 trade names, reduced by the tax effect realized by the licensee on the royalty payments. Other preliminary fair value adjustments were made to property and equipment and right-of-use lease assets to reflect the fair value of certain assets upon acquisition. Deferred taxes, net of any required valuation allowance, were preliminarily adjusted to record the deferred tax impact of acquisition accounting adjustments primarily related to amounts allocated to film and television programs, other intangible assets, and certain property and equipment, right-of-use lease assets, and other liabilities. The fair value of eOne's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, participations and residuals, film related obligations and other liabilities were estimated to approximate their book values. Pro Forma Statement of Operations Information. The following unaudited pro forma condensed consolidated statement of operations information presented below illustrates the results of operations of the Company as if the acquisition of eOne as described above occurred on April 1, 2023. The unaudited pro forma condensed consolidated financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had occurred on April 1, 2023, nor is it indicative of future results. The statement of operations information below includes the 14 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) statement of operations of eOne for the three and six months ended September 30, 2023 combined with the Company's statement of operations for the three and six months ended September 30, 2023, respectively. Three Months Ended Six Months Ended September 30, September 30, 2023 2023 (Amounts in millions) Revenues $ 1,125.8 $ 2,176.8 Net loss attributable to Lions Gate Entertainment Corp. shareholders $ ( 869.7 ) $ ( 1,231.0 ) The unaudited pro forma condensed consolidated financial information includes, where applicable, adjustments for (i) reductions in amortization expense from the fair value adjustments to investment in films and television programs, (ii) reduction in amortization expense related to acquired intangible assets, (iii) reduction in depreciation expense from the fair value of property and equipment, (iv) transaction costs and other one-time non-recurring costs, (v) increase in interest expense resulting from financing the acquisition with borrowings under the Company's revolving credit facility, (vi) elimination of intercompany activity between eOne and the Company, and (vii) associated tax-related impacts of adjustments. These pro forma adjustments are based on available information as of the date hereof and upon assumptions that the Company believes are reasonable to reflect the impact of the acquisition of eOne on the Company's historical financial information on a supplemental pro forma basis. The unaudited pro forma condensed consolidated statement of operations information does not include adjustments related to integration activities, operating efficiencies or cost savings. In addition, the unaudited pro forma condensed consolidated financial information for the six months ended September 30, 2023 includes an impairment of goodwill and trade name of $ 296.2 million which was reflected in the statement of operations of eOne for the six months ended September 30, 2023. The results of operations of eOne were reflected beginning December 27, 2023, in the Motion Picture and Television Production reportable segments of the Company. 3. Investment in Films and Television Programs and Licensed Program Rights Total investment in films and television programs and licensed program rights by predominant monetization strategy is as follows: September 30, 2024 March 31, 2024 (Amounts in millions) Investment in Films and Television Programs: Individual Monetization Released, net of accumulated amortization $ 967.5 $ 878.3 Completed and not released 115.8 225.4 In progress 781.2 469.2 In development 77.0 65.7 1,941.5 1,638.6 Film Group Monetization Released, net of accumulated amortization 513.2 497.1 Completed and not released 201.0 170.1 In progress 317.2 179.0 In development 5.9 4.3 1,037.3 850.5 Licensed program rights, net of accumulated amortization 306.0 273.1 Investment in films and television programs and licensed program rights, net $ 3,284.8 $ 2,762.2 15 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At September 30, 2024, acquired film and television libraries have remaining unamortized costs of $ 258.3 million, which are monetized individually and are being amortized on a straight-line basis or the individual-film-forecast method over a weighted-average remaining period of approximately 13.6 years (March 31, 2024 - unamortized costs of $ 223.1 million). Amortization of investment in film and television programs and licensed program rights by predominant monetization strategy is as follows, and was included in direct operating expense in the unaudited condensed consolidated statements of operations: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Amortization expense: Individual monetization $ 348.8 $ 223.3 $ 511.6 $ 404.4 Film group monetization 79.1 98.7 156.0 209.9 Licensed program rights 58.6 85.6 106.6 153.2 $ 486.5 $ 407.6 $ 774.2 $ 767.5 Impairments. Investment in films and television programs and licensed program rights includes write-downs to fair value. The following table sets forth impairments by segment and the line item in our unaudited condensed consolidated statement of operations they are recorded in for the three and six months ended September 30, 2024 and 2023: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Impairments by segment: Included in direct operating expense (1) : Motion Picture $ 18.3 $ 26.8 $ 18.5 $ 27.0 Television Production — 5.4 — 5.4 Impairments not included in segment operating results (2) : Included in restructuring and other ( 4.8 ) 211.6 ( 2.8 ) 239.5 $ 13.5 $ 243.8 $ 15.7 $ 271.9 ________________ (1) Impairments included in direct operating expense are included in the amortization expense amounts reflected in the table above which presents amortization of investment in film and television programs and licensed program rights by predominant monetization strategy. (2) Represents charges (net recoveries) primarily related to the Media Networks restructuring plan initiatives. See Note 14 for further information. 4. Investments The Company's investments consisted of the following: September 30, 2024 March 31, 2024 (Amounts in millions) Investments in equity method investees $ 71.3 $ 68.4 Other investments 6.4 6.4 $ 77.7 $ 74.8 16 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Equity Method Investments: The Company has investments in various equity method investees with ownership percentages ranging from approximately 6 % to 49 %. These investments include: Spyglass. Spyglass is a global premium content company, focused on developing, producing, financing and acquiring motion pictures and television programming across all platforms for worldwide audiences. STARZPLAY Arabia. STARZPLAY Arabia (Playco Holdings Limited) offers a STARZ-branded online subscription video-on-demand service in the Middle East and North Africa. Roadside Attractions . Roadside Attractions is an independent theatrical distribution company. Pantelion Films. Pantelion Films is a joint venture with Videocine, an affiliate of Televisa, which produces, acquires and distributes a slate of English and Spanish language feature films that target Hispanic moviegoers in the U.S. 42. 42 is a fully integrated management and production company, producing film, television and content, representing actors, writers, directors, comedians, presenters, producers, casting directors and media book rights; with offices in London and Los Angeles. Other. In addition to the equity method investments discussed above, the Company holds ownership interests in other immaterial equity method investees. 5. Goodwill and Intangible Assets Goodwill Changes in the carrying value of goodwill by reporting segment were as follows: Motion Picture Television Production Media Networks Total (Amounts in millions) Balance as of March 31, 2024 (1) $ 398.6 $ 412.6 $ — $ 811.2 Measurement period adjustments (2) ( 2.2 ) ( 2.5 ) — ( 4.7 ) Balance as of September 30, 2024 (1) $ 396.4 $ 410.1 $ — $ 806.5 ________________ (1) As of September 30, 2024 and March 31, 2024, accumulated goodwill impairment losses totaled $ 1.969 billion related to the Media Networks reporting unit. (2) Measurement period adjustments for the acquisition of eOne reflect a decrease to goodwill of $ 4.7 million resulting from an adjustment to the purchase price related to a settlement of certain working capital items of $ 12.0 million partially offset by a net decrease in the estimated fair value of the net assets acquired. The decrease in the estimated fair value of the net assets acquired consisted of a net decrease to accounts receivable of $ 4.6 million, a net decrease in investment in films and television programs of $ 1.6 million, net increases to content related payables of $ 3.4 million, participations and residuals of $ 0.4 million, and accrued and other liabilities of $ 0.2 million, partially offset by a net increase to other assets of $ 2.9 million. Fiscal 2024 Goodwill and Intangible Asset Impairments: Goodwill Impairment. 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, along with recent market valuation multiples, the Company updated its quantitative impairment assessment for its Media Networks reporting unit goodwill based on the most recent data and expected growth trends. In performing its quantitative impairment assessment, the fair value of the Company's reporting units was estimated by using a combination of discounted cash flow ("DCF") analyses and market-based valuation methodologies. Based on its quantitative impairment assessment, the Company determined that the fair value of its Media Networks reporting unit was less than its 17 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 three months ended September 30, 2023, representing all of the then 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. Intangible Asset Impairment. During the three months ended September 30, 2023, due to the events and their impact discussed above related to the Media Networks reporting unit, the Company performed a quantitative impairment assessment of its indefinite-lived Starz 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 trade names 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 trade names, reduced by the tax effect realized by the licensee on the royalty payments. Based on the quantitative impairment assessment of the trade names, the Company recorded an impairment charge of $ 170.0 million in the three months ended September 30, 2023, related to the Company's Starz business, which is recorded in the "goodwill and intangible asset impairment" line item in the unaudited condensed consolidated statement of operations. After performing its quantitative impairment assessment, the Company then reassessed the estimated useful life of its trade names with a remaining carrying value of $ 80.0 million at September 30, 2023 (net of the impairment charge discussed above), and beginning October 1, 2023, the trade names are being accounted for as finite-lived intangible assets and amortized over their estimated useful life. 6. Debt Total debt of the Company, excluding film related obligations, was as follows: September 30, 2024 March 31, 2024 (Amounts in millions) Corporate debt: Revolving Credit Facility $ 421.5 $ 575.0 Term Loan A 314.4 399.3 Term Loan B 250.0 819.2 5.5 % Senior Notes and Exchange Notes 715.0 715.0 eOne IP Credit Facility 340.0 — LG IP Credit Facility 455.0 — Total corporate debt 2,495.9 2,508.5 Unamortized debt issuance costs ( 35.6 ) ( 28.5 ) Total debt, net 2,460.3 2,480.0 Less current portion ( 362.6 ) ( 860.3 ) Non-current portion of debt $ 2,097.7 $ 1,619.7 Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B) Revolving Credit Facility Availability of Funds & Commitment Fee. The Revolving Credit Facility provides for borrowings and letters of credit up to an aggregate of $ 1.25 billion, and at September 30, 2024 there was $ 828.5 million available. However, borrowing levels are subject to certain financial covenants as discussed below. There were no letters of credit outstanding at September 30, 2024. The Company is required to pay a quarterly commitment fee on the Revolving Credit Facility of 0.250 % to 0.375 % per annum, depending on the achievement of certain leverage ratios, as defined in the credit and guarantee agreement dated December 8, 2016, as amended (the "Credit Agreement"), on the total Revolving Credit Facility of $ 1.25 billion less the amount drawn. Maturity Date: • Revolving Credit Facility & Term Loan A: April 6, 2026. • Term Loan B: March 24, 2025. 18 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Interest: • Revolving Credit Facility & Term Loan A: The Revolving Credit Facility and term loan A facility due April 2026 (the "Term Loan A") bear interest at a rate per annum equal to SOFR plus 0.10 % plus 1.75 % margin (or an alternative base rate plus 0.75 %), with a SOFR floor of zero . The margin is subject to potential increases of up to 50 basis points ( two increases of 25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the Credit Agreement (effective interest rate of 6.70 % as of September 30, 2024, before the impact of interest rate swaps, see Note 17 for interest rate swaps). • Term Loan B: The term loan B facility due March 2025 (the "Term Loan B") bears interest at a rate per annum equal to SOFR plus 0.10 % plus 2.25 % margin, with a SOFR floor of zero (or an alternative base rate plus 1.25 % margin) (effective interest rate of 7.20 % as of September 30, 2024, before the impact of interest rate swaps). Required Principal Payments: • Term Loan A: Quarterly principal payments, at quarterly rates of 1.75 % and increasing to 2.50 % beginning September 30, 2024 through March 31, 2026, with the balance payable at maturity. • Term Loan B: Quarterly principal payments at a quarterly rate of 0.25 %, with the balance payable at maturity. The Term Loan A and Term Loan B also require mandatory prepayments in connection with certain asset sales, subject to certain significant exceptions, and the Term Loan B is subject to additional mandatory repayment from specified percentages of excess cash flow, as defined in the Credit Agreement. Optional Prepayment: • Revolving Credit Facility, Term Loan A & Term Loan B: The Company may voluntarily prepay the Revolving Credit Facility, Term Loan A and Term Loan B at any time without premium or penalty Security. The Senior Credit Facilities are guaranteed by the guarantors named in the Credit Agreement and are secured by a security interest in substantially all of the assets of Lionsgate and the Guarantors (as defined in the Credit Agreement), subject to certain exceptions. Covenants. The Senior Credit Facilities contain representations and warranties, events of default and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant exceptions, restrictions on the ability to declare or pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. In addition, a net first lien leverage maintenance covenant and an interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested quarterly. As of September 30, 2024, the Company was in compliance with all applicable covenants. Change in Control. The Company may also be subject to an event of default upon a change in control (as defined in the Credit Agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50 % of the Company’s common shares. 19 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 5.5 % Senior Notes and Exchange Notes Interest: Bears interest at 5.5 % annually (payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2021). See Changes Upon Separation of the Starz Business from the Studio Business below for further information. Maturity Date: April 15, 2029. See Changes Upon Separation of the Starz Business from the Studio Business below for further information. Optional Redemption: (i) On or after April 15, 2024, the Company may redeem the 5.5 % Senior Notes and 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. Such redemption prices are as follows (as a percentage of the principal amount redeemed): (i) on or after April 15, 2024 - 102.750 %; (ii) on or after April 15, 2025 - 101.375 %; and (iii) on or after April 15, 2026 - 100 %. See Changes Upon Separation of the Starz Business from the Studio Business below for further information. Security. The 5.5 % Senior Notes and Exchange Notes are unsubordinated, unsecured obligations of the Company. Covenants. The Exchange Notes contain certain restrictions and covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations. As of September 30, 2024, the Company was in compliance with all applicable covenants. Change in Control. The occurrence of a change of control will be a triggering event requiring the Company to offer to purchase from holders all of the Exchange Notes, at a price equal to 101 % of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase. In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the Exchange Notes at 100 % of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. Changes Upon Separation of the Starz Business from the Studio Business. On May 8, 2024, an indirect, wholly-owned subsidiary of the Company issued $ 389.9 million aggregate principal amount of 5.5 % senior notes due 2029 (the "Exchange Notes") in exchange for an equivalent amount of the existing 5.5 % Senior Notes due 2029 (the "Existing Notes"). The Exchange Notes initially bear interest at 5.5 % annually and mature April 15, 2029, with the interest rate increasing to 6.0 % and the maturity date extending to April 15, 2030 effective upon completion of the separation of the Starz Business from the Studio Business, both of which are currently held in subsidiaries consolidated by the Company. The "Starz Business" consists of the business of Lionsgate's Media Networks segment. On or after the Separation Closing Date, as defined in the indenture to 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. Such redemption prices are as follows (as a percentage of the principal amount redeemed): (i) on or after the Separation Closing Date until, but excluding, the one-year anniversary thereof - 103.0 %; (ii) on or after the one-year anniversary of the Separation Closing Date until, but excluding the two-year anniversary thereof - 102.0 %; (iii) on or after the two-year anniversary of the Separation Closing Date until, but excluding the three-year anniversary thereof - 101.0 %; (iv) on or after the three-year anniversary of the Separation Closing Date and thereafter - 100 %. 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. eOne IP Credit 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 eOne IP Credit Facility is subject to quarterly required principal payments of $ 8.5 million, beginning November 14, 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 (effective interest rate of 7.10 % as of September 30, 2024, before the impact of interest rate swaps, see Note 17 for interest rate swaps). The eOne IP Credit Facility matures on July 3, 2029. 20 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) LG IP Credit Facility. In September 2024, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "LG IP Credit Facility") based on and secured by the Company’s intellectual property rights primarily associated with certain titles. The maximum principal amount of the LG IP Credit Facility is $ 455.0 million, subject to the amount of collateral available, which is based on the valuation of unsold rights from the libraries. The LG IP Credit Facility is subject to quarterly required principal payments of $ 11.375 million, beginning February 14, 2025, with the balance payable at maturity. Advances under the LG IP Credit Facility bear interest at a rate equal to Term SOFR plus 2.25 % per annum (effective interest rate of 7.10 % as of September 30, 2024, before the impact of interest rate swaps, see Note 17 for interest rate swaps). The LG IP Credit Facility matures on September 30, 2029. See Note 19 - Subsequent Events for the November 2024 increase in maximum principal amount of the LG IP Credit Facility and subsequent borrowings. Capacity to Pay Dividends At September 30, 2024, the capacity to pay dividends under the Senior Credit Facilities and the 5.5 % Senior Notes and Exchange Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $ 240.9 million and accumulated deficit of $ 3,396.4 million were deemed free of restrictions from paying dividends at September 30, 2024. Other Debt Transactions: Term Loan A and Term Loan B Prepayment. In May 2024, the Company used the proceeds from the Business Combination to prepay $ 84.9 million principal amount of the Term Loan A and $ 214.1 million of the Term Loan B, together with accrued and unpaid interest thereon. In September 2024, the Company used the proceeds from the LG IP Credit Facility to prepay $ 355.1 million principal amount of the Term Loan B, together with accrued and unpaid interest thereon. See Note 19 - Subsequent Events for the November 2024 repayment in full of the remaining principal amount of the Term Loan B. Senior Notes Repurchases. In the six months ended September 30, 2023, the Company repurchased $ 85.0 million principal amount of the 5.5 % Senior Notes for $ 61.4 million, together with accrued and unpaid interest ( none in the three months ended September 30, 2023). Gain (Loss) on Extinguishment of Debt: During the three and six months ended September 30, 2024 and 2023, the Company recorded a gain (loss) on extinguishment of debt related to the transactions described above as summarized in the table below: Three Months Ended September 30, Six Months Ended September 30, 2024 2023 2024 2023 (Amounts in millions) Gain (Loss) on Extinguishment of Debt: Senior Notes exchange and repurchases (1) $ — $ — $ ( 4.9 ) $ 21.2 Term Loan A and B prepayments ( 0.5 ) — ( 1.5 ) — $ ( 0.5 ) $ — $ ( 6.4 ) $ 21.2 ________________ (1) The 5.5 % Senior Notes Exchange was considered a modification of terms since the present value of the cash flows after the amendment differed by less than a 10% change from the present value of the cash flows on a creditor-by-creditor basis prior to the amendment. Accordingly, the unamortized debt issuance costs are being amortized over the applicable term of the debt and the third-party costs of $ 4.9 million were expensed as a loss on extinguishment of debt in the six months ended September 30, 2024. 21 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 7. Film Related Obligations September 30, 2024 March 31, 2024 (Amounts in millions) Film related obligations: Production Loans $ 1,244.8 $ 1,292.2 Production Tax Credit Facility 260.0 260.0 Programming Notes 67.9 — Backlog Facility and Other 273.2 287.3 Film Library Facility 94.2 109.9 Total film related obligations 1,940.1 1,949.4 Unamortized issuance costs ( 9.1 ) ( 11.4 ) Total film related obligations, net 1,931.0 1,938.0 Less current portion ( 1,702.6 ) ( 1,393.1 ) Total non-current film related obligations $ 228.4 $ 544.9 Production Loans . Production loans represent individual and multi-title loans for the production of film and television programs that the Company produces. 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, and incur primarily SOFR-based interest at a weighted average rate of 5.94 % (before the impact of interest rate swaps, see Note 17 for interest rate swaps). Production loans amounting to $ 1,039.1 million are secured by collateral which consists of the underlying rights related to the intellectual property (i.e. film or television show), and $ 205.7 million are unsecured. Production Tax Credit Facility. In January 2021, as amended in March 2024, the Company entered into a non-recourse senior secured revolving credit facility (the "Production Tax Credit Facility") based on and secured by collateral consisting solely of certain of the Company’s tax credit receivables. The maximum principal amount of the Production Tax Credit Facility is $ 260.0 million, subject to the amount of collateral available, which is based on specified percentages of amounts payable to the Company by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction. Cash collections from the underlying collateral (tax credit receivables) are used to repay the Production Tax Credit Facility. As of September 30, 2024, tax credit receivables amounting to $ 344.2 million represented collateral related to the Production Tax Credit Facility. Advances under the Production Tax Credit Facility bear interest at a rate equal to SOFR plus 0.10 % to 0.25 % depending on the SOFR term (i.e., one, three or six months), plus 1.50 % per annum or the base rate plus 0.50 % per annum (effective interest rate of 6.45 % at September 30, 2024). The Production Tax Credit Facility matures on January 27, 2025. As of September 30, 2024, there were no amounts available under the Production Tax Credit Facility. Programming Notes . Programming notes represent individual unsecured loans for the licensing of film and television programs that the Company licenses, related to the Company's Media Networks business. The Company's programming notes have contractual repayment dates in November 2024, and incur SOFR-based interest at a weighted average rate of 7.89 %. Film Library Facility. In July 2021, as amended in September 2022, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "Film Library Facility") based on and secured by the collateral consisting solely of certain of the Company’s rights in certain acquired library titles. The maximum principal amount of the Film Library Facility is $ 161.9 million, subject to the amount of collateral available, which is based on the valuation of cash flows from the libraries. The cash flows generated from the exploitation of the rights will be applied to repay the Film Library Facility subject to cumulative minimum guaranteed payment amounts as set forth below: 22 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Cumulative Period From September 29, 2022 Through: Cumulative Minimum Guaranteed Payment Amounts Payment Due Date (in millions) September 30, 2024 $ 60.7 November 14, 2024 September 30, 2025 $ 91.1 November 14, 2025 September 30, 2026 $ 121.4 November 14, 2026 July 30, 2027 $ 161.9 July 30, 2027 Advances under the Film Library Facility bear interest at a rate equal to, at the Company’s option, SOFR plus 0.11 % to 0.26 % depending on the SOFR term (i.e., one or three months) plus 2.25 % per annum (with a SOFR floor of 0.25 %) or the base rate plus 1.25 % per annum (effective interest rate of 7.17 % at September 30, 2024). The Film Library Facility matures on July 30, 2027. Backlog Facility and Other: Backlog Facility. In March 2022, as amended in August 2022, certain subsidiaries of the Company entered into a committed secured revolving credit facility (the "Backlog Facility") based on and secured by collateral consisting solely of certain of the Company's fixed fee or minimum guarantee contracts where cash will be received in the future. The maximum principal amount of the Backlog Facility is $ 175.0 million, subject to the amount of eligible collateral contributed to the facility. Advances under the Backlog Facility bear interest at a rate equal to Term SOFR plus 0.10 % to 0.25 % depending on the SOFR term (i.e., one, three or six months), plus an applicable margin amounting to 1.15 % per annum. The applicable margin is subject to a potential increase to either 1.25 % or 1.50 % based on the weighted average credit quality rating of the collateral contributed to the facility (effective interest rate of 6.10 % at September 30, 2024). The Backlog Facility revolving period ends on May 16, 2025, at which point cash collections from the underlying collateral is used to repay the facility. The facility maturity date is up to 2 years, 90 days after the revolving period ends, currently August 14, 2027. As of September 30, 2024, there was $ 160.2 million outstanding under the Backlog Facility, and there were no amounts available under the Backlog Facility (March 31, 2024 - $ 175.0 million outstanding). Other. 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. As of September 30, 2024, there was $ 113.0 million outstanding (March 31, 2024 - $ 112.3 million outstanding) under the "other" loans, incurring SOFR-based interest at a weighted average rate of 6.18 %, of which $ 55.1 million has a contractual repayment date in July 2025 and $ 57.9 million has a contractual repayment date in April 2027. As of September 30, 2024, accounts receivable amounting to $ 72.7 million and contracted receivables not yet reflected as accounts receivable on the balance sheet at September 30, 2024 amounting to $ 65.6 million represented collateral related to the "other" loans. 8. Fair Value Measurements Fair Value Accounting guidance and standards about fair value define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair Value Hierarchy Fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The accounting guidance and standards establish three levels of inputs that may be used to measure fair value: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations 23 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. The following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of September 30, 2024 and March 31, 2024: September 30, 2024 March 31, 2024 Level 1 Level 2 Total Level 1 Level 2 Total Assets: (Amounts in millions) Interest rate swaps (see Note 17) $ — $ 12.2 $ 12.2 $ — $ 35.6 $ 35.6 Liabilities: Forward exchange contracts (see Note 17) — ( 0.6 ) ( 0.6 ) — ( 2.8 ) ( 2.8 ) Interest rate swaps (see Note 17) — ( 1.7 ) ( 1.7 ) — — — The following table sets forth the carrying values and fair values of the Company’s outstanding debt and film related obligations at September 30, 2024 and March 31, 2024: September 30, 2024 March 31, 2024 (Amounts in millions) Carrying Value Fair Value (1) Carrying Value Fair Value (1) (Level 2) (Level 2) Revolving Credit Facility $ 417.6 $ 421.5 $ 569.9 $ 575.0 Term Loan A 312.9 312.9 396.6 397.3 Term Loan B 249.7 249.7 816.9 818.1 5.5 % Senior Notes 698.2 581.4 696.6 536.2 eOne IP Credit Facility 334.0 340.0 — — LG IP Credit Facility 447.9 455.0 — — Production Loans 1,239.4 1,244.8 1,286.2 1,292.2 Production Tax Credit Facility 259.6 260.0 258.7 260.0 Programming Notes 67.9 67.9 — — Backlog Facility and Other 271.9 273.2 285.4 287.3 Film Library Facility 92.3 94.2 107.6 109.9 ________________ (1) The Company measures the fair value of its outstanding debt and interest rate swaps using discounted cash flow techniques that use observable market inputs, such as SOFR-based yield curves, swap rates, and credit ratings (Level 2 measurements). The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable, content related payables, other accrued liabilities, and other liabilities. The carrying values of these financial instruments approximated the fair values at September 30, 2024 and March 31, 2024. 24 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 9. Noncontrolling Interests Redeemable Noncontrolling Interests Redeemable noncontrolling interests (included in temporary equity on the consolidated balance sheets) primarily relate to 3 Arts Entertainment and Pilgrim Media Group, as further described below. Redeemable noncontrolling interests are measured at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date less the amount attributed to unamortized noncontrolling interest discount if applicable, or (ii) the historical value resulting from the original acquisition date value plus or minus any earnings or loss attribution, plus the amount of amortized noncontrolling interest discount, less the amount of cash distributions that are not accounted for as compensation, if any. The amount of the redemption value in excess of the historical values of the noncontrolling interest, if any, is recognized as an increase to redeemable noncontrolling interest and a charge to retained earnings or accumulated deficit. The table below presents the reconciliation of changes in redeemable noncontrolling interests: Six Months Ended September 30, 2024 2023 (Amounts in millions) Beginning balance $ 123.3 $ 343.6 Net loss attributable to redeemable noncontrolling interests ( 1.3 ) ( 3.3 ) Adjustments to redemption value 0.6 71.0 Cash distributions 0.5 ( 0.6 ) Purchase of noncontrolling interest ( 23.4 ) ( 0.6 ) Ending balance $ 99.7 $ 410.1 3 Arts Entertainment. During the fourth quarter of the year ended March 31, 2024 (in January 2024), the Company closed on the acquisition of an additional 25 % of 3 Arts Entertainment representing approximately half of the noncontrolling interest for $ 194.1 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 under the previous arrangement 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. At the completion of the purchase, a portion of the noncontrolling interest continued to be considered compensatory, as it was subject to forfeiture provisions upon termination of employment under certain circumstances, and the remaining portion represented the noncontrolling interest holders' fully vested equity interest. Under the new arrangement, the holders' right to sell their interest to the Company, and the Company's right to purchase the noncontrolling interest, are based on a formula-based amount (i.e., a fixed EBITDA multiple), subject to a minimum purchase price, rather than being based on fair value. Since the redemption features described above were based on a formula using a fixed multiple, the compensatory portion of the noncontrolling interest is now considered a liability award, and as a result, during the fourth quarter of fiscal 2024, approximately $ 93.2 million was reclassified from mezzanine equity to a liability, and is reflected in "other liabilities - non-current" in the consolidated balance sheet at March 31, 2024 and September 30, 2024. The redeemable noncontrolling interest balance related to 3 Arts Entertainment reflects the fully vested equity portion of the noncontrolling interest, which remains classified as redeemable noncontrolling interest outside of shareholders' equity on the Company's consolidated balance sheets due to the purchase and sale rights beginning in 2027 which were determined to be embedded in the noncontrolling interest, and are outside the control of the Company. The redeemable noncontrolling interest is being adjusted to its redemption value through accumulated deficit through the sale or purchase right date in January 2027. Subsequent to the January 2024 transactions noted above, changes in the carrying value of the redeemable noncontrolling interest are reflected in the calculation of basic and diluted net income or loss per common share attributable to Lions Gate Entertainment Corp. shareholders, if dilutive, or to the extent the adjustments represent recoveries of amounts previously reflected in the computation of basic and diluted net income or loss per common share attributable to Lions Gate Entertainment Corp. shareholders (see Note 11). 25 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The liability component of the noncontrolling interest is reflected at its estimated redemption value, with any changes in estimated redemption value recognized as a charge or benefit in general and administrative expense in the consolidated statements of operations over the vesting period (i.e., the period from January 2, 2024 to the sale or purchase right date in January 2027). Earned distributions continue to be accounted for as compensation since such amounts are allocated to the holders based on performance, and are being expensed within general and administrative expense as incurred. Pilgrim Media Group. In July 2024, the Company acquired the noncontrolling interest holder's remaining 12.5 % of Pilgrim Media Group for approximately $ 13.5 million, and recorded a reduction to redeemable noncontrolling interest of $ 23.4 million, representing the carrying value of the noncontrolling interest purchased, with the difference between the carrying value of the noncontrolling interest purchased and the cash paid for the remaining interest recorded as a reduction to accumulated deficit of $ 9.9 million. Prior to the Company's acquisition of the remaining interest, the noncontrolling interest was presented as a redeemable noncontrolling interest outside of shareholders' equity on the Company's consolidated balance sheets, due to put and call options which were determined to be embedded in the noncontrolling interest, and because the put rights were outside the control of the Company. Other. The Company has other immaterial redeemable noncontrolling interests. Other Noncontrolling Interests The Company has other noncontrolling interests that are not redeemable, which are classified in shareholder's equity on the Company's consolidated balance sheets. These noncontrolling interests include: Lionsgate Studios. In connection with the Business Combination discussed in Note 2, on May 13, 2024, the Company recorded a noncontrolling interest representing approximately 12.2 % of Lionsgate Studios amounting to a reduction of noncontrolling interest in shareholders' equity (deficit) of $ 100.8 million, due to the negative carrying value of Lionsgate Studios at May 13, 2024, partially offset by an amount allocated to certain options. See Note 2 for further information. Other. In connection with the Company's investment in CP LG and acquisition of the acquired library and related assets and liabilities discussed in Note 2, on June 5, 2024, the Company recorded a noncontrolling interest representing approximately 49 % of CP LG amounting to $ 33.6 million. See Note 2 for further information. In addition, the Company has other immaterial noncontrolling interests that are not redeemable. 10. Revenue The Company's Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international marketplaces. The Company's Media Networks segment generates revenue primarily from the distribution of the Company's STARZ premium subscription video services. Revenue by Segment, Market or Product Line The table below presents revenues by segment, market or product line for the three and six months ended September 30, 2024 and 2023. The Motion Picture and Television Production segments include the revenues of eOne from the acquisition date of December 27, 2023 (see Note 2). 26 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Revenue by Type: Motion Picture Theatrical $ 20.1 $ 28.2 $ 56.1 $ 94.1 Home Entertainment Digital Media 114.5 165.7 254.6 339.8 Packaged Media 12.5 16.1 21.8 42.0 Total Home Entertainment 127.0 181.8 276.4 381.8 Television 108.7 100.8 196.7 149.3 International 148.0 79.7 216.0 160.7 Other 3.3 5.4 8.8 16.6 Total Motion Picture revenues 407.1 395.9 754.0 802.5 Television Production Television 313.1 221.8 473.2 371.9 International 49.7 73.6 85.5 105.6 Home Entertainment Digital Media 34.3 84.2 53.2 96.0 Packaged Media 0.5 0.3 1.3 0.7 Total Home Entertainment 34.8 84.5 54.5 96.7 Other 19.0 14.0 44.8 38.2 Total Television Production revenues 416.6 393.9 658.0 612.4 Media Networks - Programming Revenues Domestic (1) 343.0 344.0 688.2 685.6 International 3.9 72.5 8.8 112.0 346.9 416.5 697.0 797.6 Intersegment eliminations ( 222.0 ) ( 190.8 ) ( 325.7 ) ( 288.4 ) Total revenues $ 948.6 $ 1,015.5 $ 1,783.3 $ 1,924.1 _________ (1) During the quarter ended June 30, 2024, the Company changed the presentation of Media Networks programming revenues to reflect revenues from Canada in the "Domestic" line item above in order to be consistent with how management is now reviewing the Media Networks segment. Revenues from Canada of $ 4.2 million and $ 8.4 million, respectively, for the three and six months ended September 30, 2023 were reclassified to "Domestic" from "International" in the table above to conform to the current period presentation. 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). Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at September 30, 2024 are as follows: Rest of Year Ending March 31, 2025 Year Ending March 31, 2026 2027 Thereafter Total (Amounts in millions) Remaining Performance Obligations $ 853.2 $ 781.8 $ 114.4 $ 58.6 $ 1,808.0 27 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The above table does not include estimates of variable consideration for transactions involving sales or usage-based royalties in exchange for licenses of intellectual property. The revenues included in the above table include all fixed fee contracts regardless of duration. Revenues of $ 68.6 million and $ 157.9 million, respectively, including variable and fixed fee arrangements, were recognized during the three and six months ended September 30, 2024 from performance obligations satisfied prior to March 31, 2024. These revenues were primarily associated with the distribution of television and theatrical product in electronic sell-through and video-on-demand formats, and to a lesser extent, the distribution of theatrical product in the domestic and international markets related to films initially released in prior periods. Accounts Receivable, Contract Assets and Deferred Revenue The timing of revenue recognition, billings and cash collections affects the recognition of accounts receivable, contract assets and deferred revenue. See the unaudited condensed consolidated balance sheets or Note 18 for accounts receivable, contract assets and deferred revenue balances at September 30, 2024 and March 31, 2024. Accounts Receivable. Accounts receivable are presented net of a provision for doubtful accounts. The Company estimates provisions for accounts receivable based on historical experience for the respective risk categories and current and future expected economic conditions. To assess collectability, the Company analyzes market trends, economic conditions, the aging of receivables and customer specific risks, and records a provision for estimated credit losses expected over the lifetime of the receivables in direct operating expense. The Company performs ongoing credit evaluations and monitors its credit exposure through active review of customers' financial condition, aging of receivable balances, historical collection trends, and expectations about relevant future events that may significantly affect collectability. The Company generally does not require collateral for its trade accounts receivable. Changes in the provision for doubtful accounts consisted of the following: March 31, 2024 (Benefit) provision for doubtful accounts Other (1) Uncollectible accounts written-off September 30, 2024 (Amounts in millions) Provision for doubtful accounts $ 7.2 $ ( 1.0 ) $ 2.5 $ ( 1.0 ) $ 7.7 ______________________ (1) Represents a measurement period adjustment to the provision for doubtful accounts acquired in the acquisition of eOne (see Note 2). Contract Assets. Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables). Amounts relate primarily to contractual payment holdbacks in cases in which the Company is required to deliver additional episodes or seasons of television content in order to receive payment, complete certain administrative activities, such as guild filings, or allow the Company's customers' audit rights to expire. See Note 18 for contract assets at September 30, 2024 and March 31, 2024. Deferred Revenue. Deferred revenue relates primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation. Revenues of $ 38.7 million and $ 135.8 million, respectively, were recognized during the three and six months ended September 30, 2024 related to the balance of deferred revenue at March 31, 2024. 28 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 11. Net Loss Per Share Basic net loss per share is calculated based on the weighted average common shares outstanding for the period. Basic and diluted net loss per share for the three and six months ended September 30, 2024 and 2023 is presented below: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions, except per share amounts) Basic and Diluted Net Loss Per Common Share: Numerator: Net loss attributable to Lions Gate Entertainment Corp. shareholders $ ( 163.3 ) $ ( 886.2 ) $ ( 222.7 ) $ ( 956.9 ) Accretion of redeemable noncontrolling interest ( 0.3 ) — ( 0.6 ) — Net loss attributable to Lions Gate Entertainment Corp. shareholders after accretion of redeemable noncontrolling interest $ ( 163.6 ) $ ( 886.2 ) $ ( 223.3 ) $ ( 956.9 ) Denominator: Weighted average common shares outstanding 239.3 234.0 237.5 232.1 Basic and diluted net loss per common share $ ( 0.68 ) $ ( 3.79 ) $ ( 0.94 ) $ ( 4.12 ) As a result of the net loss in the three and six months ended September 30, 2024 and 2023, the dilutive effect of the share purchase options, RSUs and restricted stock, and contingently issuable shares were considered anti-dilutive and, therefore, excluded from diluted net loss per share. The weighted average anti-dilutive shares excluded from the calculation due to the net loss for the three and six months ended September 30, 2024 totaled 1.7 million and 3.2 million, respectively, (three and six months ended September 30, 2023 - 1.0 million and 3.3 million, respectively). Additionally, for the three and six months ended September 30, 2024 and 2023, the outstanding common shares issuable presented below were excluded from diluted net loss per common share because their inclusion would have had an anti-dilutive effect regardless of net income or loss in the period. Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Anti-dilutive shares issuable Share purchase options 17.6 20.4 15.7 18.7 Restricted share units 6.6 6.6 3.3 3.4 Other issuable shares 3.8 4.1 3.8 4.0 Total weighted average anti-dilutive shares issuable excluded from diluted net income (loss) per common share 28.0 31.1 22.8 26.1 29 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 12. Capital Stock (a) Common Shares The Company had 500 million authorized Class A voting shares and 500 million authorized Class B non-voting shares at September 30, 2024 and March 31, 2024. The table below outlines common shares reserved for future issuance: September 30, 2024 March 31, 2024 (Amounts in millions) Stock options and share appreciation rights (SARs) outstanding 18.4 20.7 Restricted share units and restricted stock — unvested 15.2 13.4 Common shares available for future issuance 9.9 15.4 Shares reserved for future issuance 43.5 49.5 (b) Share-based Compensation The Company recognized the following share-based compensation expense during the three and six months ended September 30, 2024 and 2023: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Compensation Expense: Stock options $ 0.2 $ 0.5 $ 0.5 $ 1.4 Restricted share units and other share-based compensation 17.2 25.0 34.9 39.3 Share appreciation rights 0.2 0.5 0.3 1.2 17.6 26.0 35.7 41.9 Impact of accelerated vesting on equity awards (1) 4.9 1.1 4.9 1.6 Total share-based compensation expense $ 22.5 $ 27.1 $ 40.6 $ 43.5 ___________________ (1) Represents the impact of the acceleration of vesting schedules for equity awards pursuant to certain severance arrangements. Share-based compensation expense, by expense category, consisted of the following: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Share-Based Compensation Expense: Direct operating $ 0.8 $ 0.9 $ 1.4 $ 1.4 Distribution and marketing 0.2 0.3 0.5 0.4 General and administration 16.6 24.8 33.8 40.1 Restructuring and other 4.9 1.1 4.9 1.6 $ 22.5 $ 27.1 $ 40.6 $ 43.5 30 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table sets forth the stock option, SARs, restricted stock and restricted share unit activity during the six months ended September 30, 2024: Stock Options and SARs Restricted Stock and Restricted Share Units Class A Voting Shares Class B Non-Voting Shares Class A Voting Shares Class B Non-Voting Shares Number of Shares Weighted-Average Exercise Price Number of Shares Weighted-Average Exercise Price Number of Shares Weighted-Average Grant-Date Fair Value Number of Shares Weighted-Average Grant-Date Fair Value (Number of shares in millions) Outstanding at March 31, 2024 2.4 $ 22.96 18.3 $ 13.73 0.1 $ 9.27 13.3 $ 8.71 Granted — — — — — — 10.0 $ 7.99 Options exercised or restricted stock or RSUs vested — — ( 0.1 ) $ 6.61 — (1) 11.45 ( 7.9 ) $ 8.77 Forfeited or expired ( 0.1 ) $ 20.26 ( 2.1 ) $ 14.82 — — ( 0.3 ) $ 9.02 Outstanding at September 30, 2024 2.3 $ 23.09 16.1 $ 13.61 0.1 $ 8.98 15.1 $ 8.20 __________________ (1) Represents less than 0.1 million shares. (c) Share Repurchases During the three and six months ended September 30, 2024 and 2023, the Company did not repurchase any common shares. To date, approximately $ 288.1 million common shares have been repurchased, leaving approximately $ 179.9 million of authorized potential repurchases. 13. Income Taxes The income tax provision for the three and six months ended September 30, 2024 and 2023 is calculated by estimating the Company's annual effective tax rate (estimated annual tax provision divided by estimated annual income before income taxes), and then applying the effective tax rate to income (loss) before income taxes for the period, plus or minus the tax effects of items that relate discretely to the period, if any. The Company's income tax provision differs from the federal statutory income tax rate applied to income (loss) before taxes due to the mix of earnings generated across the various jurisdictions in which operations are conducted, in addition to the tax deductions generated through the Company's capital structure. The Company's income tax provision for the three and six months ended September 30, 2024 and 2023 was impacted by changes in the valuation allowances against certain U.S. and foreign deferred tax assets, certain minimum taxes and foreign withholding taxes. The Company's income tax provision for the three and six months ended September 30, 2024 and 2023 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. The Company's income tax provision for the three and six months ended September 30, 2024 was also impacted by additional deferred tax expense as a result of the Separation that occurred during the quarter ended June 30, 2024. The Company's income tax provision can be affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items. 31 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 14. Restructuring and Other Restructuring and other includes restructuring and severance costs and certain transaction and other costs, when applicable. During the three and six months ended September 30, 2024 and 2023, the Company also incurred certain other unusual charges or benefits, which are included in direct operating expense in the consolidated statements of operations and are described below. The following table sets forth restructuring and other and these other unusual charges or benefits and the statement of operations line items they are included in for the three and six months ended September 30, 2024 and 2023: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Restructuring and other: Content and other impairments (1) $ ( 3.8 ) $ 211.6 $ 16.1 $ 239.5 Severance (2) 1.8 5.8 5.0 10.6 Transaction and other costs (benefits) (3) 8.1 4.7 7.5 3.9 Total Restructuring and Other 6.1 222.1 28.6 254.0 Other unusual charges not included in restructuring and other or the Company's operating segments: COVID-19 related charges (benefit) included in direct operating expense (4) — ( 0.6 ) ( 3.1 ) ( 0.4 ) Unallocated rent cost included in direct operating expense (5) 5.2 — 10.5 — Total restructuring and other and other unusual charges not included in restructuring and other $ 11.3 $ 221.5 $ 36.0 $ 253.6 _______________________ (1) Media Networks Restructuring: During fiscal 2024, the Company continued executing its 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. The Company has incurred impairment charges from the inception of the plan through September 30, 2024 amounting to $ 741.4 million. During the three and six months ended September 30, 2024, the Company recorded net recoveries of content impairment charges related to the Media Networks segment of $ 4.3 million and $ 2.4 million, respectively (three and six months ended September 30, 2023 - content impairment charges of $ 211.6 million and $ 239.5 million, respectively). As the Company continues 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, the Company may decide to expand its restructuring plan and exit additional territories or remove certain content off its platform in the future. Accordingly, the Company may incur additional content impairment and other restructuring charges. Other Impairments: Amounts in the three and six months ended September 30, 2024 also include impairments of certain operating lease right-of-use and leasehold improvement assets related to the Television Production segment associated with facility leases that will no longer be utilized by the Company, primarily related to the integration of eOne. 32 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (2) Severance costs were primarily related to restructuring, acquisition integration activities and other cost-saving initiatives. (3) Transaction and other costs in the three and six months ended September 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 six months ended September 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. (4) Amounts include incremental costs incurred, if any, due to circumstances associated with the COVID-19 global pandemic, net of insurance recoveries of nil and $ 3.1 million in the three and six months ended September 30, 2024, respectively (three and six months ended September 30, 2023 - insurance recoveries of $ 0.6 million). In the six months ended September 30, 2024 and the three and six months ended September 30, 2023, insurance recoveries exceeded the incremental costs expensed in the period, resulting in a net benefit included in direct operating expense. (5) Amounts represent rent cost for production facilities that were unutilized as a result of the industry strikes, and therefore such amounts are not allocated to the segments. Changes in the restructuring and other severance liability were as follows for the six months ended September 30, 2024 and 2023: Six Months Ended September 30, 2024 2023 (Amounts in millions) Severance liability Beginning balance $ 23.6 $ 8.7 Accruals (2) 0.1 9.0 Severance payments ( 15.5 ) ( 9.7 ) Ending balance (1) $ 8.2 $ 8.0 _______________________ (1) As of September 30, 2024, the remaining severance liability of approximately $ 8.2 million is expected to be paid in the next 12 months. (2) Excludes $ 4.9 million and $ 1.6 million in the six months ended September 30, 2024 and 2023, respectively, of accelerated vesting on equity awards. 15. Segment Information The Company’s reportable segments have been determined based on the distinct nature of their operations, the Company's internal management structure, and the financial information that is evaluated regularly by the Company's chief operating decision maker. The Company has three reportable business segments: (1) Motion Picture, (2) Television Production and (3) Media Networks. The Company refers to its Motion Picture and Television Production segments collectively as the Studio Business. Studio Business: Motion Picture. Motion Picture consists of the development and production of feature films, acquisition of North American and worldwide distribution rights, North American theatrical, home entertainment and television distribution of feature films produced and acquired, and worldwide licensing of distribution rights to feature films produced and acquired. Television Production. Television Production consists of the development, production and worldwide distribution of television productions including television series, television movies and mini-series, and non-fiction programming. Television Production includes the licensing of Starz original series productions to Starz Networks and to Starz platforms outside of the U.S. and Canada, and the ancillary market distribution of Starz original productions and licensed product. Additionally, the Television Production segment includes the results of operations of 3 Arts Entertainment. 33 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Media Networks Business: Media Networks. Media Networks consists of the following product lines (i) Starz Networks, which includes the domestic distribution of STARZ branded premium subscription video services through over-the-top ("OTT") platforms, on a direct-to-consumer basis through the Starz App, and through U.S. and Canada multichannel video programming distributors ("MVPDs") including cable operators, satellite television providers and telecommunication companies (collectively, "Distributors"); and (ii) Other, which represents revenues primarily from the OTT distribution of the Company's Starz subscription video services outside of the U.S. and Canada. In the ordinary course of business, the Company's reportable segments enter into transactions with one another. The most common types of intersegment transactions include licensing motion pictures or television programming (including Starz original productions) from the Motion Picture and Television Production segments to the Media Networks segment. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses, assets, or liabilities recognized by the segment that is the counterparty to the transaction) are eliminated in consolidation and, therefore, do not affect consolidated results. 34 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Segment information is presented in the table below. The Motion Picture and Television Production segments include the results of operations of eOne from the acquisition date of December 27, 2023 (see Note 2). Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Segment revenues Studio Business: Motion Picture $ 407.1 $ 395.9 $ 754.0 $ 802.5 Television Production 416.6 393.9 658.0 612.4 Total Studio Business 823.7 789.8 1,412.0 1,414.9 Media Networks 346.9 416.5 697.0 797.6 Intersegment eliminations ( 222.0 ) ( 190.8 ) ( 325.7 ) ( 288.4 ) $ 948.6 $ 1,015.5 $ 1,783.3 $ 1,924.1 Intersegment revenues Studio Business: Motion Picture $ 72.1 $ 60.5 $ 136.3 $ 77.1 Television Production 149.9 130.3 189.4 211.3 Total Studio Business 222.0 190.8 325.7 288.4 Media Networks — — — — $ 222.0 $ 190.8 $ 325.7 $ 288.4 Gross contribution Studio Business: Motion Picture $ 25.4 $ 94.2 $ 140.0 $ 192.9 Television Production 41.4 77.5 70.0 113.0 Total Studio Business 66.8 171.7 210.0 305.9 Media Networks 50.5 89.4 128.5 147.1 Intersegment eliminations ( 38.6 ) ( 23.8 ) ( 49.8 ) ( 31.9 ) $ 78.7 $ 237.3 $ 288.7 $ 421.1 Segment general and administration Studio Business: Motion Picture $ 22.8 $ 26.7 $ 51.3 $ 56.1 Television Production 17.0 14.3 34.8 27.0 Total Studio Business 39.8 41.0 86.1 83.1 Media Networks 23.3 22.8 43.8 48.6 $ 63.1 $ 63.8 $ 129.9 $ 131.7 Segment profit Studio Business: Motion Picture $ 2.6 $ 67.5 $ 88.7 $ 136.8 Television Production 24.4 63.2 35.2 86.0 Total Studio Business 27.0 130.7 123.9 222.8 Media Networks 27.2 66.6 84.7 98.5 Intersegment eliminations ( 38.6 ) ( 23.8 ) ( 49.8 ) ( 31.9 ) $ 15.6 $ 173.5 $ 158.8 $ 289.4 The Company's primary measure of segment performance is segment profit. Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration 35 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) expenses. 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, and purchase accounting and related adjustments. The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enables them to understand the fundamental performance of the Company's businesses. The reconciliation of total segment profit to the Company’s loss before income taxes is as follows: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Company’s total segment profit $ 15.6 $ 173.5 $ 158.8 $ 289.4 Corporate general and administrative expenses (1) ( 28.1 ) ( 32.8 ) ( 61.5 ) ( 63.1 ) Adjusted depreciation and amortization (2) ( 8.2 ) ( 9.9 ) ( 16.7 ) ( 19.9 ) Restructuring and other ( 6.1 ) ( 222.1 ) ( 28.6 ) ( 254.0 ) Goodwill and intangible asset impairment — ( 663.9 ) — ( 663.9 ) COVID-19 related benefit (charges) included in direct operating expense (3) — 0.6 3.1 0.4 Unallocated rent cost included in direct operating expense (4) ( 5.2 ) — ( 10.5 ) — Adjusted share-based compensation expense (5) ( 17.6 ) ( 26.0 ) ( 35.7 ) ( 41.9 ) Purchase accounting and related adjustments (6) ( 39.0 ) ( 36.9 ) ( 78.7 ) ( 81.3 ) Operating loss ( 88.6 ) ( 817.5 ) ( 69.8 ) ( 834.3 ) Interest expense ( 74.3 ) ( 63.8 ) ( 143.1 ) ( 125.8 ) Interest and other income 3.3 2.7 8.5 4.7 Other expense ( 15.7 ) ( 11.5 ) ( 18.9 ) ( 17.2 ) Gain (loss) on extinguishment of debt ( 0.5 ) — ( 6.4 ) 21.2 Loss on investments, net — ( 1.6 ) — ( 1.7 ) Equity interests income (loss) ( 0.1 ) 1.8 0.8 1.5 Loss before income taxes $ ( 175.9 ) $ ( 889.9 ) $ ( 228.9 ) $ ( 951.6 ) ___________________ (1) 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. (2) Adjusted depreciation and amortization represents depreciation and amortization as presented on our unaudited condensed consolidated statements of operations less the depreciation and amortization related to the non-cash fair value adjustments to property and equipment and intangible assets acquired in acquisitions which are included in the purchase accounting and related adjustments line item above, as shown in the table below: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Depreciation and amortization $ 45.5 $ 44.6 $ 91.6 $ 89.0 Less: Amount included in purchase accounting and related adjustments ( 37.3 ) ( 34.7 ) ( 74.9 ) ( 69.1 ) Adjusted depreciation and amortization $ 8.2 $ 9.9 $ 16.7 $ 19.9 36 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (3) Amounts represent the incremental costs, if any, included in direct operating expense resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries (see Note 14). These benefits (charges) are excluded from segment operating results. (4) Amounts represent rent cost for production facilities that were unutilized as a result of the industry strikes, and therefore such amounts are not allocated to the segments. (5) The following table reconciles total share-based compensation expense to adjusted share-based compensation expense: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Total share-based compensation expense $ 22.5 $ 27.1 $ 40.6 $ 43.5 Less: Amount included in restructuring and other (i) ( 4.9 ) ( 1.1 ) ( 4.9 ) ( 1.6 ) Adjusted share-based compensation $ 17.6 $ 26.0 $ 35.7 $ 41.9 (i) 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. (6) Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in acquisitions. The following sets forth the amounts included in each line item in the financial statements: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Purchase accounting and related adjustments: General and administrative expense (i) $ 1.7 2.2 $ 3.8 $ 12.2 Depreciation and amortization 37.3 34.7 74.9 69.1 $ 39.0 $ 36.9 $ 78.7 $ 81.3 (i) These adjustments include the expense associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment, and the amortization of the recoupable portion of the purchase price ($ 1.3 million through May 2023) 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 unaudited condensed consolidated statements of operations due to the relationship to continued employment. See Note 10 for revenues by media or product line as broken down by segment for the three and six months ended September 30, 2024 and 2023. The following table reconciles segment general and administration expense to the Company's total consolidated general and administration expense: 37 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) General and administration Segment general and administrative expenses $ 63.1 $ 63.8 $ 129.9 $ 131.7 Corporate general and administrative expenses 28.1 32.8 61.5 63.1 Share-based compensation expense included in general and administrative expense 16.6 24.8 33.8 40.1 Purchase accounting and related adjustments 1.7 2.2 3.8 12.2 $ 109.5 $ 123.6 $ 229.0 $ 247.1 The reconciliation of total segment assets to the Company’s total consolidated assets is as follows: September 30, 2024 March 31, 2024 (Amounts in millions) Assets Motion Picture $ 1,924.9 $ 1,851.4 Television Production 2,401.0 2,347.8 Media Networks 2,159.2 2,036.7 Other unallocated assets (1) 661.7 856.8 $ 7,146.8 $ 7,092.7 _____________________ (1) Other unallocated assets primarily consist of cash, other assets and investments. 16. Contingencies From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business. The Company establishes an accrued liability for claims and legal proceedings when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. As of September 30, 2024, the Company is not a party to any material pending claims or legal proceeding and is not aware of any other claims that it believes could, individually or in the aggregate, have a material adverse effect on the Company's financial position, results of operations or cash flows. 38 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 17. Derivative Instruments and Hedging Activities Forward Foreign Exchange Contracts The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. Changes in the fair value of the foreign exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income (loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged. As of September 30, 2024, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 19 months from September 30, 2024): September 30, 2024 Foreign Currency Foreign Currency Amount US Dollar Amount Weighted Average Exchange Rate Per $1 USD (Amounts in millions) (Amounts in millions) Czech Koruna 180.0 CZK in exchange for $ 7.7 23.29 CZK Euro 14.8 EUR in exchange for $ 16.6 0.90 EUR Canadian Dollar 15.0 CAD in exchange for $ 11.1 1.35 CAD Mexican Peso 199.1 MXN in exchange for $ 10.4 19.73 MXN Hungarian Forint 1,498.7 HUF in exchange for $ 3.9 371.46 HUF New Zealand Dollar 3.6 NZD in exchange for $ 2.3 1.64 NZD Interest Rate Swaps The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows. The Company primarily uses pay-fixed interest rate swaps to facilitate its interest rate risk management activities, which the Company generally designates as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these designated cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur. Changes in the fair value of interest rate swaps that are not designated as hedges are recorded in interest expense (see further explanation below). Cash settlements related to interest rate contracts are generally classified as operating activities on the consolidated statements of cash flows. 39 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Designated Cash Flow Hedges. As of September 30, 2024 and March 31, 2024, the Company had the following pay-fixed interest rate swaps, which have been designated as cash flow hedges outstanding (all related to the Company's SOFR-based debt, see Note 6 and Note 7). Effective Date Notional Amount Fixed Rate Paid Maturity Date (in millions) May 23, 2018 $ 300.0 2.915 % March 24, 2025 May 23, 2018 $ 700.0 2.915 % March 24, 2025 June 25, 2018 $ 200.0 2.723 % March 23, 2025 July 31, 2018 $ 300.0 2.885 % March 23, 2025 December 24, 2018 $ 50.0 2.744 % March 23, 2025 December 24, 2018 $ 100.0 2.808 % March 23, 2025 December 24, 2018 $ 50.0 2.728 % March 23, 2025 August 15, 2024 (1) $ 65.0 4.045 % September 15, 2026 August 15, 2024 (1) $ 77.5 3.803 % August 15, 2026 August 15, 2024 (1) $ 77.5 3.810 % September 15, 2026 Total $ 1,920.0 ___________________ (1) Entered into during the three months ended September 30, 2024. Financial Statement Effect of Derivatives Unaudited condensed consolidated statements of operations and comprehensive loss: The following table presents the pre-tax effect of the Company's derivatives on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended September 30, 2024 and 2023: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Derivatives designated as cash flow hedges: Forward exchange contracts Gain (loss) recognized in accumulated other comprehensive income (loss) $ 0.8 $ ( 0.6 ) $ 1.0 $ ( 3.1 ) Gain (loss) reclassified from accumulated other comprehensive income (loss) into direct operating expense $ ( 0.2 ) $ ( 0.4 ) $ ( 1.2 ) $ 0.1 Interest rate swaps Gain (loss) recognized in accumulated other comprehensive income (loss) $ ( 6.3 ) $ 9.3 $ ( 2.8 ) $ 36.4 Gain reclassified from accumulated other comprehensive income (loss) into interest expense $ 11.4 $ 10.9 $ 22.3 $ 20.1 Derivatives not designated as cash flow hedges: Interest rate swaps Loss reclassified from accumulated other comprehensive income (loss) into interest expense $ ( 1.5 ) $ ( 1.8 ) $ ( 3.1 ) $ ( 3.8 ) Total direct operating expense on consolidated statements of operations $ 643.2 $ 557.1 $ 1,072.4 $ 1,038.3 Total interest expense on consolidated statements of operations $ 74.3 $ 63.8 $ 143.1 $ 125.8 40 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Unaudited condensed consolidated balance sheets: The Company classifies its forward foreign exchange contracts and interest rate swap agreements within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (see Note 8). Pursuant to the Company's accounting policy to offset the fair value amounts recognized for derivative instruments, the Company presents the asset or liability position of the swaps that are with the same counterparty under a master netting arrangement net as either an asset or liability in its unaudited condensed consolidated balance sheets. As of September 30, 2024 and March 31, 2024, there were no swaps outstanding that were subject to a master netting arrangement. As of September 30, 2024 and March 31, 2024, the Company had the following amounts recorded in the accompanying unaudited condensed consolidated balance sheets related to the Company's use of derivatives: September 30, 2024 Other Current Assets Other Accrued Liabilities (current) Other Liabilities (non-current) (Amounts in millions) Derivatives designated as cash flow hedges: Forward exchange contracts $ — $ 0.6 $ — Interest rate swaps 12.2 — ( 1.7 ) Fair value of derivatives $ 12.2 $ 0.6 $ ( 1.7 ) March 31, 2024 Other Current Assets Other Accrued Liabilities (current) (Amounts in millions) Derivatives designated as cash flow hedges: Forward exchange contracts $ — $ 2.8 Interest rate swaps 35.6 — Fair value of derivatives $ 35.6 $ 2.8 As of September 30, 2024, based on the current release schedule, the Company estimates approximately $ 1.2 million of gains associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive income (loss) will be reclassified into earnings during the one-year period ending September 30, 2025. As of September 30, 2024, the Company estimates approximately $ 23.4 million of gains recorded in accumulated other comprehensive income (loss) associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending September 30, 2025. 18. Additional Financial Information The following tables present supplemental information related to the unaudited condensed consolidated financial statements. Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the unaudited condensed consolidated balance sheets to the total amounts reported in the unaudited condensed consolidated statements of cash flows at September 30, 2024 and March 31, 2024. At September 30, 2024 and March 31, 2024, restricted cash represents primarily amounts related to required cash reserves for interest payments associated with certain corporate debt and film related obligations. 41 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) September 30, 2024 March 31, 2024 (Amounts in millions) Cash and cash equivalents $ 229.6 $ 314.0 Restricted cash included in other current assets 48.1 43.7 Restricted cash included in other non-current assets 11.6 13.7 Total cash, cash equivalents and restricted cash $ 289.3 $ 371.4 Other Assets The composition of the Company’s other assets is as follows as of September 30, 2024 and March 31, 2024: September 30, 2024 March 31, 2024 (Amounts in millions) Other current assets Prepaid expenses and other $ 67.0 $ 58.2 Restricted cash 48.1 43.7 Contract assets 56.6 59.9 Interest rate swap assets 12.2 35.6 Tax credits receivable 166.6 199.1 $ 350.5 $ 396.5 Other non-current assets Prepaid expenses and other $ 15.2 $ 21.6 Restricted cash 11.6 13.7 Accounts receivable 47.0 111.7 Contract assets 5.2 3.2 Tax credits receivable 394.7 361.7 Operating lease right-of-use assets 347.7 388.8 $ 821.4 $ 900.7 Accounts Receivable Monetization Under the Company's accounts receivable monetization programs, the Company has entered into (1) individual agreements to monetize certain of its trade accounts receivable directly with third-party purchasers and (2) a revolving agreement to monetize designated pools of trade accounts receivable with various financial institutions, as further described below. Under these programs, the Company transfers receivables to purchasers in exchange for cash proceeds, and the Company continues to service the receivables for the purchasers. The Company accounts for the transfers of these receivables as a sale, removes (derecognizes) the carrying amount of the receivables from its balance sheets and classifies the proceeds received as cash flows from operating activities in the statements of cash flows. The Company records a loss on the sale of these receivables reflecting the net proceeds received (net of any obligations incurred), less the carrying amount of the receivables transferred. The loss is reflected in the "other expense" line item on the unaudited condensed consolidated statements of operations. The Company receives fees for servicing the accounts receivable for the purchasers, which represent the fair value of the services and were immaterial for the three and six months ended September 30, 2024 and 2023. 42 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Individual Monetization Agreements. The Company enters into individual agreements to monetize trade accounts receivable. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers. The following table sets forth a summary of the receivables transferred under individual agreements or purchases during the three and six months ended September 30, 2024 and 2023: Three Months Ended Six Months Ended September 30, September 30, 2024 2023 2024 2023 (Amounts in millions) Carrying value of receivables transferred and derecognized $ 391.7 $ 418.7 $ 705.3 $ 760.0 Net cash proceeds received 384.9 408.3 693.6 744.9 Loss recorded related to transfers of receivables 6.8 10.4 11.7 15.1 At September 30, 2024, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheets, but which the Company continues to service, related to the Company's individual agreements to monetize trade accounts receivable was $ 626.8 million (March 31, 2024 - $ 613.4 million). Pooled Monetization Agreement. In December 2019, the Company entered into a revolving agreement, as amended in July 2023, to transfer up to $ 100.0 million of certain receivables to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred, which matured on October 1, 2023. As customers paid their balances, the Company would transfer additional receivables into the program. The transferred receivables were fully guaranteed by a bankruptcy-remote wholly-owned subsidiary of the Company. The third-party purchasers had no recourse to other assets of the Company in the event of non-payment by the customers. The following table sets forth a summary of the receivables transferred under the pooled monetization agreement during the three and six months ended September 30, 2023: Three Months Ended Six Months Ended September 30, September 30, 2023 2023 (Amounts in millions) Gross cash proceeds received for receivables transferred and derecognized $ 16.3 $ 22.2 Less amounts from collections reinvested under revolving agreement ( 6.2 ) ( 9.1 ) Proceeds from new transfers 10.1 13.1 Collections not reinvested and remitted or to be remitted ( 9.0 ) ( 13.4 ) Net cash proceeds received (paid or to be paid) $ 1.1 $ ( 0.3 ) Carrying value of receivables transferred and derecognized (1) $ 16.3 $ 22.1 Obligations recorded $ 1.0 $ 2.1 Loss recorded related to transfers of receivables $ 1.0 $ 2.0 ___________________ (1) Receivables net of unamortized discounts on long-term, non-interest bearing receivables. At September 30, 2024 and March 31, 2024, there were no outstanding receivables derecognized from the Company's unaudited condensed consolidated balance sheet, for which the Company continues to service, related to the pooled monetization agreement. Content related payables Content related payables include minimum guarantees and accrued licensed program rights obligations, which represent amounts payable for film or television rights that the Company has acquired or licensed. 43 Table of Contents LIONS GATE ENTERTAINMENT CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Other Accrued Liabilities Other accrued liabilities include employee related liabilities (such as accrued bonuses and salaries and wages) of $ 37.8 million and $ 147.4 million at September 30, 2024 and March 31, 2024, respectively. Accumulated Other Comprehensive Income The following table summarizes the changes in the components of accumulated other comprehensive income, net of tax. During the six months ended September 30, 2024 and 2023, there was no income tax expense or benefit reflected in other comprehensive income due to the income tax impact being offset by changes in the Company’s deferred tax valuation allowance. Foreign currency translation adjustments Net unrealized gain (loss) on cash flow hedges Total (Amounts in millions) March 31, 2024 $ ( 22.7 ) $ 138.7 $ 116.0 Other comprehensive income (loss) 11.7 ( 1.8 ) 9.9 Reclassifications to net loss (1) — ( 18.0 ) ( 18.0 ) Reclassifications to noncontrolling interest (2) 5.2 ( 16.5 ) ( 11.3 ) September 30, 2024 $ ( 5.8 ) $ 102.4 $ 96.6 March 31, 2023 $ ( 21.6 ) $ 142.5 $ 120.9 Other comprehensive income (loss) ( 1.4 ) 33.3 31.9 Reclassifications to net loss (1) — ( 16.4 ) ( 16.4 ) September 30, 2023 $ ( 23.0 ) $ 159.4 $ 136.4 ___________________ (1) Represents a loss of $ 1.2 million included in direct operating expense and a gain of $ 19.2 million included in interest expense on the unaudited condensed consolidated statement of operations in the six months ended September 30, 2024 (six months ended September 30, 2023 - gain of $ 0.1 million included in direct operating expense and a gain of $ 16.3 million included in interest expense) (see Note 17). (2) Represents amounts reclassified in connection with the noncontrolling interest recorded for the proportionate ownership interest in the carrying value of Lionsgate Studios (see Note 2). Supplemental Cash Flow Information Significant non-cash transactions during the six months ended September 30, 2024 and 2023 include certain interest rate swap agreements, which are discussed in Note 17, "Derivative Instruments and Hedging Activities". There were no significant non-cash financing or investing activities for the six months ended September 30, 2024 and 2023. 19. Subsequent Events On November 6, 2024, the Company closed an amendment to its LG IP Credit Facility which increased the maximum principal amount of the LG IP Credit Facility to $ 720.0 million. The Company borrowed $ 265.0 million under the LG IP Credit Facility, and used the net proceeds to pay in full the remaining $ 250.0 million principal amount of the Term Loan B, together with accrued and unpaid interest thereon. 44 Table of Contents