STARZ ENTERTAINMENT CORP /CN/ 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) encompasses world-class motion picture and television studio operations (collectively referred to as the “Studio Business”) 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. We classify our operations through three reporting segments: Motion Picture, Television Production, and Media Networks (see further discussion below). Proposed Separation In October 2024, as amended in January 2025, we filed a joint proxy statement/prospectus on Form S-4 with the SEC relating to the implementation of a plan of arrangement that will result in the separation of the businesses of Lionsgate Studios Corp., of which we own approximately 87.8% and which encompasses our motion picture and television studio operations, from our other businesses, including the STARZ-branded premium subscription platform (the “Proposed Separation”). The Proposed S eparation will be subject to the satisfaction of a number of conditions and our Board of Directors, together with the Board of Directors of Lionsgate Studios Corp., may decide not to proceed with the Proposed S eparation. Additionally, the Proposed S eparation is complex in nature, and unanticipated developments or changes, including disruptions in general market conditions, changes in law or execution challenges may affect our ability to complete the Proposed S eparation on the terms and on the timeline we announced, or at all. These or other developments could cause us not to realize some or all of the expected benefits of the Proposed Separation, or to realize them on a different timeline than expected. Business Combination On May 13, 2024, the Company consummated the business combination agreement (the “Business Combination Agreement”), with Screaming Eagle Acquisition Corp., a Cayman Islands exempted company (“SEAC”), SEAC II Corp., a Cayman Islands exempted company and wholly-owned subsidiary of SEAC (“New SEAC”), LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of the Company (“Studio HoldCo”), LG Orion Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of the Company (“StudioCo) and other affiliates of SEAC. Pursuant to the terms and conditions of the Business Combination Agreement, the Studio Business was combined with SEAC through a series of transactions, including an amalgamation of StudioCo and New SEAC under a Canadian plan of arrangement (the “Business Combination”). In connection with the closing of the business combination, New SEAC changed its name to “Lionsgate Studios Corp.” (referred to as “Lionsgate Studios”) and continues the existing business operations of StudioCo, which consists of the Studio Business of Lionsgate. The "Studio Business" consists of the businesses of Lionsgate's Motion Picture and Television Production segments, together with substantially all of Lionsgate's corporate general and administrative functions and costs. Lionsgate Studios became a separate publicly traded company and its common shares commenced trading on Nasdaq under the symbol “LION” on May 14, 2024. In connection with and prior to the Business Combination, the Company and StudioCo entered into a separation agreement pursuant to which the assets and liabilities of the Company’s Studio Business were transferred to StudioCo such that StudioCo holds, directly or indirectly, all of the assets and liabilities of the Studio Business (the “Separation”). Following the transaction, approximately 87.8% of the total shares of Lionsgate Studios continue to be held by the Company, while former SEAC public shareholders and founders and common equity financing investors own approximately 12.2% of Lionsgate Studios. In addition to establishing Lionsgate Studios as a standalone publicly-traded entity, the transaction resulted in approximately $330.0 million of gross proceeds to the Company, including $254.3 million in PIPE financing. The net proceeds were used to partially pay down amounts outstanding under the Term Loan A and Term Loan B pursuant to the Credit Agreement (see Note 6 to our unaudited consolidated financial statements). The Business Combination has been accounted for as a reverse recapitalization in accordance with U.S. 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 47 Table of Contents Studio Business issuing stock for the historical net assets of SEAC, substantially consisting of cash held in the trust account, accompanied by a recapitalization. The historical net assets of SEAC were stated at fair value, which approximates historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of the Studio Business. The Studio Business continues to be a consolidated subsidiary of the Company. Media Networks Restructuring During fiscal 2024, the Company continued executing its Media Networks restructuring plan, which included exiting all international territories except for Canada and India, and included an evaluation of the programming on Starz's domestic and international platforms. The Company has incurred impairment charges from the inception of the plan through December 31, 2024 amounting to $735.1 million. During the three and nine months ended December 31, 2024, the Company recorded net recoveries of content impairment charges related to the Media Networks segment of $6.4 million and $8.8 million, respectively (three and nine months ended December 31, 2023 - content impairment charges of $77.8 million and $317.4 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 Proposed Separation 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. Subsequent to December 31, 2024, the Company removed programming on Starz's domestic platform which had a carrying value of approximately $77.4 million, which charge, measured as the excess of the carrying value over the fair value of the titles removed, will be recorded during the fourth quarter ending March 31, 2025. Accordingly, the Company may incur additional content impairment and other restructuring charges. Revenues Our revenues are derived from the Motion Picture, Television Production and Media Networks segments, as described below. We refer to our Motion Picture and Television Production segments collectively as our Studio Business. Our revenues are derived from the U.S., Canada, the United Kingdom and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2024 and 2023. Studio Business Motion Picture: Our Motion Picture segment includes revenues derived from the following: • Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (distributed by us directly in the U.S. and through a sub-distributor in Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we receive a percentage of the box office results. • Home Entertainment. Home entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) on packaged media and through digital media platforms (including pay-per-view and video-on-demand platforms, electronic sell through, and digital rental). In addition, we have revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, we share in the rental or sales revenues generated by the platform on a title-by-title basis. • Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the linear pay, basic cable and free television markets. In addition, when a license in our traditional pay television window is made to a subscription video-on-demand ("SVOD") or other digital platform, the revenues are included here. • International. International revenues are derived from (1) licensing of our productions, acquired films, our catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; and (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom. • Other. Other revenues are derived from, among others, the licensing of our film and television and related content (games, music, location-based entertainment royalties, etc.) to other ancillary markets. 48 Table of Contents Television Production: Our Television Production segment includes revenues derived from the following. • Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television and syndication) of scripted and unscripted series, television movies, mini-series and non-fiction programming. Television revenues also include revenue from licenses to SVOD platforms in which the initial license of a television series is to an SVOD platform. Television revenues include fixed fee arrangements as well as arrangements in which we earn advertising revenue from the exploitation of certain content on television networks. • International. International revenues are derived from the licensing and syndication to international markets of scripted and unscripted series, television movies, mini-series and non-fiction programming. • Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series on packaged media and through digital media platforms. • Other. Other revenues are derived from, among others, the licensing of our television programs to other ancillary markets, the sales and licensing of music from the television broadcasts of our productions, and from commissions and executive producer fees earned related to talent management. Media Networks Our Media Networks segment includes revenues derived from the following: • Starz Networks. Starz Networks’ revenues are derived from the domestic distribution of our STARZ branded premium subscription video services through over-the-top ("OTT") streaming platforms and distributors, on a direct-to-consumer basis through the Starz App, and through U.S. and Canada multichannel video programming distributors (“MVPDs”) including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”). • Other. Other revenues are primarily derived from OTT distribution of the Starz subscription video services outside of the U.S. and Canada. The Starz Networks platforms together with the Other platforms are referred to as the "Starz Platforms". Expenses Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and administration expenses. Direct operating expenses include amortization of film and television production or acquisition costs, amortization of programming production or acquisition costs and programming related salaries, participation and residual expenses, provision for doubtful accounts, and foreign exchange gains and losses. Participation costs represent contingent consideration payable based on the performance of the film or television program to parties associated with the film or television program, including producers, writers, directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild - American Federation of Television and Radio Artists, Directors Guild of America, and Writers Guild of America, based on the performance of the film or television program in certain ancillary markets or based on the individual’s (i.e., actor, director, writer) salary level in the television market. Distribution and marketing expenses primarily include the costs of theatrical prints and advertising (“P&A”) and premium video-on-demand ("Premium VOD") expense and of DVD/Blu-ray duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical exhibitors and the advertising and marketing cost associated with the theatrical release of the picture. Premium VOD expense represents the advertising and marketing cost associated with the Premium VOD release of the picture. DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products. DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising. Marketing costs for Media Networks includes advertising, consumer marketing, distributor marketing support and other marketing costs. In addition, distribution and marketing costs includes our Media Networks segment operating costs for the direct-to-consumer service, transponder expenses and maintenance and repairs. General and administration expenses include salaries and other overhead. Corporate general and administrative expenses include certain corporate executive expense (such as salaries and wages for the office of the Chief Executive Officer, Chief Financial Officer, General Counsel and other corporate officers), investor relations costs, costs of maintaining corporate 49 Table of Contents 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. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. As described more fully below, these estimates bear the risk of change due to the inherent uncertainty of the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on May 30, 2024 (the "Form 10-K"). Accounting for Films and Television Programs and Licensed Program Rights Capitalized costs for films or television programs are amortized and tested for impairment based on whether the content is predominantly monetized individually or as a group. Film and Television Programs Monetized Individually. For films and television programs monetized individually, film cost amortization, participations and residuals expense are based on management's estimates. Costs of acquiring and producing films and television programs and of acquired libraries that are monetized individually are amortized and estimated liabilities for participations and residuals costs are accrued using the individual-film-forecast method, based on the ratio of the current period's revenues to management’s estimated remaining total gross revenues to be earned ("ultimate revenue"). Management's judgment is required in estimating ultimate revenue and the costs to be incurred throughout the life of each film or television program. Management estimates ultimate revenues based on historical experience with similar titles or the title genre, the general public appeal of the cast, audience test results when available, actual performance (when available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general economic conditions and other tangible and intangible factors, many of which we do not control and which may change. For motion pictures, ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. The most sensitive factor affecting our estimate of ultimate revenues for a film intended for theatrical release is the film's theatrical performance, as subsequent revenues from the licensing and sale in other markets have historically been highly correlated to its theatrical performance. After a film's release, our estimates of revenue from succeeding markets are revised based on historical relationships and an analysis of current market trends. For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. The most sensitive factors affecting our estimate of ultimate revenues for a television series is whether the series will be ordered for a subsequent season and estimates of revenue in secondary markets other than the initial license fee, which may depend on a number of factors, including, among others, the ratings or viewership the program achieves on the customers' platforms. The initial estimate of ultimate revenue may include estimates of revenues outside of the initial license window (i.e., international, home entertainment and other distribution platforms) and are based on historical experience for similar programs (genre, duration, etc.) and the estimated number of seasons of the series. Ultimates of revenue beyond the initial license fee are generally higher for programs that have been or are expected to be ordered for multiple seasons. We regularly monitor the performance of each season, and evaluate whether impairment indicators are present (i.e., low ratings, cancellations or the season is not reordered), and based upon our review, we revise our estimates as needed and perform an impairment assessment if impairment indicators are present (see below). For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition. 50 Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful or less successful than anticipated. Management regularly reviews and revises when necessary, its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value (see below). An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results in an impairment requiring a write-down of the film cost to the title’s fair value. These write-downs are included in amortization expense within direct operating expenses in our consolidated statements of operations. See further discussion below under Impairment Assessment . Film and Television Programs Monetized as a Group. Licensed programming rights may include rights to more than one exploitation window under the Company's output and library agreements. For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated fair value of each window which generally results in the majority of the cost allocated to the first window on newer releases. Certain license agreements and productions may include additional ancillary rights in addition to the rights for exploitation on the Starz Platforms. A portion of the cost of these licenses and the cost of produced content, is allocated between the programming rights for exploitation on the Starz Platforms and investment in film and television programs for exploitation outside of the Starz Platforms in ancillary markets (e.g., home video, digital platforms, television, etc.) based on the relative fair value of those markets. The estimates of fair value for the allocation between windows of exploitation on the Starz Platform and ancillary markets is based on historical experience of the values of similar titles licensed in subsequent windows and estimates of future revenues in ancillary markets. The cost of licensed program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on a title-by-title or episode-by-episode basis using an accelerated or straight-line method based on the expected and historical viewership patterns, or the current and anticipated number of exhibitions over the license period or estimated life for owned or produced programs. The number of exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the expected usage of the content. Participations and residuals are expensed in line with the amortization of production costs. Changes in management’s estimate of the anticipated exhibitions and viewership patterns of films and original series on our platforms could result in the earlier recognition of our programming costs than anticipated. Impairment Assessment. A film group or individual film or television program is evaluated for impairment when events or changes in circumstances indicate that the fair value of an individual film or film group is less than its unamortized cost. If the result of the impairment test indicates that the carrying value exceeds the estimated fair value, an impairment charge will then be recorded for the amount of the difference. Estimate of Fair Value. For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), the fair value is determined based on a discounted cash flow analysis of the cash flows directly attributable to the title. For motion pictures intended for theatrical release, the discounted cash flow analysis used in the impairment evaluation prior to theatrical release is subjective and the key inputs include estimates of future anticipated revenues, estimates of box office performance, which may differ from future actual results. These estimates are based in part on the historical performance of similar films, test audience results when available, information regarding competing film releases, and critic reviews. For television programs, the discounted cash flow analysis used in the impairment evaluation includes key inputs such as estimates of future anticipated revenue, as discussed above. See further discussion of Valuation Assumptions below. For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), the fair value is determined based on the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows are independent of other produced and licensed content. The Company's film groups are generally aligned with the Company's networks and digital content offerings domestically (i.e., Starz Networks) and internationally by territory or groups of territories where content assets are shared across the various territories. Content removed from the service and abandoned is written down to its fair value, if any, determined using a discounted cash flow approach. As a result of the Media Networks restructuring initiatives discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", we have incurred impairment charges from the inception of the restructuring plan through December 31, 2024 amounting to $735.1 million. During the three and nine months ended December 51 31, 2024, we recorded net recoveries of content impairment charges related to the Media Networks segment of $6.4 million and $8.8 million, respectively, which are included in restructuring and other in the unaudited condensed consolidated statement of operations (three and nine months ended December 31, 2023 - content impairment charges of $77.8 million and $317.4 million, respectively). Subsequent to December 31, 2024, the Company removed programming on Starz's domestic platform which had a carrying value of approximately $77.4 million, which charge, measured as the excess of the carrying value over the fair value of the titles removed, will be recorded during the fourth quarter ending March 31, 2025. See Note 3 and Note 14 to our unaudited condensed consolidated financial statements. Valuation Assumptions. The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement, see Note 8 to our unaudited condensed consolidated financial statements). The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in management’s future revenue estimates. Revenue Recognition. Our Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media), television, and international market places. Our Media Networks segment generates revenue primarily from the distribution of our STARZ premium subscription video services. Our content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales or usage based royalties. Our fixed fee or minimum guarantee licensing arrangements in the television, digital media and international markets may, in some cases, include multiple titles, multiple license periods (windows) with a substantive period in between the windows, rights to exploitation in different media, or rights to exploitation in multiple territories, which may be considered distinct performance obligations. When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or territory) are recognized when the content has been delivered, and the window for the exploitation right in that territory has begun, which is the point in time at which the customer is able to begin to use and benefit from the content. Sales or usage based royalties represent amounts due to us based on the “sale” or “usage” of our content by the customer, and revenues are recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which some or all the sales or usage-based royalty has been allocated has been satisfied (or partially satisfied). Generally, when we license completed content (with standalone functionality, such as a movie, or television show), our performance obligation will be satisfied prior to the sale or usage. When we license intellectual property that does not have stand-alone functionality (e.g., brands, themes, logos, etc.), our performance obligation is generally satisfied in the same period as the sale or usage. The actual amounts due to us under these arrangements are generally not reported to us until after the close of the reporting period. We record revenue under these arrangements for the amounts due and not yet reported to us based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. Such estimates are based on information from our customers, historical experience with similar titles in that market or territory, the performance of the title in other markets and/or available data in the industry. While we believe these estimates are reasonable estimates of the amounts due under these arrangements, such estimated amounts could differ from the actual amounts to be subsequently reported by the customer, which could be higher or lower than our estimates, and could result in an adjustment to revenues in future periods. Revenue from the theatrical release of feature films are treated as sales or usage-based royalties and recognized starting at the exhibition date and based on our participation in box office receipts of the theatrical exhibitor . Digital media revenue sharing arrangements are recognized as sales or usage based royalties. Revenue from commissions are recognized as such services are provided. Media Networks revenues may be based on a variable fee (i.e., a fee based on number of subscribers who receive our networks or other subscriber based factors) or to a lesser extent, may be based on a monthly fixed fee or minimum guarantee, subject to nominal annual escalations. Media Networks revenue is also generated through the distribution of our SVOD service directly to consumer through the Starz App. The variable distribution fee arrangements represent sales or usage based royalties, which are recognized over the period of such sales or usage by our distributor, which is the same period that the content is provided to the distributor. Estimates of revenue generated but not yet reported to us by our distribution partners are made based on the estimated number of subscribers using historical trends and recent reporting. Media Networks fixed fee or minimum guarantee programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor. Subscribers through the Starz App are billed in advance of the start of their monthly or annual membership 52 and revenues are recognized ratably over each applicable membership period. Payments to distributors for marketing support costs for which Starz receives a discrete benefit are recorded as distribution and marketing costs, and payments to distributors for which Starz receives no discrete benefit are recorded as a reduction of revenue. Goodwill. At December 31, 2024, the carrying value of goodwill was $808.5 million. Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (component level). Reporting units are determined by the discrete financial information available for the component and whether that information is regularly reviewed by segment management. Components are aggregated into a single reporting unit if they share similar economic characteristics. Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at December 31, 2024, were Motion Picture (goodwill of $397 million), Media Networks (no remaining goodwill balance), and our Television (goodwill of $319 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment. Goodwill is not amortized but is reviewed for impairment each fiscal year or between the annual tests if an event occurs or circumstances change that indicates it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. We perform our annual impairment test as of January 1 in each fiscal year. A goodwill impairment loss would be recognized for the amount that the carrying amount of a reporting unit exceeds its fair value. An entity may perform a qualitative assessment of the likelihood of the existence of a goodwill impairment. The qualitative assessment is an evaluation, based on all identified events and circumstances which impact the fair value of the reporting unit of whether or not it is more-likely-than-not that the fair value is less than the carrying value of the reporting unit. If we believe that as a result of our qualitative assessment it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a quantitative impairment test is not required but may be performed at the option of the Company. A quantitative assessment requires determining the fair value of our reporting units. The determination of fair value requires considerable judgment and requires assumptions and estimates of many factors, including revenue and market growth, operating margins and cash flows, market multiples and discount rates. In performing a quantitative assessment of goodwill, we determine the fair value of our reporting units by using a combination of discounted cash flow ("DCF") analyses and market-based valuation methodologies. The models rely on significant judgments and assumptions surrounding general market and economic conditions, short-term and long-term growth rates, discount rates, income tax rates, and detailed management forecasts of future cash flow and operating margin projections, and other assumptions, all of which are based on our internal forecasts of future performance as well as historical trends. The market-based valuation method utilizes EBITDA multiples from guideline public companies operating in similar industries and a control premium. The results of these valuation methodologies are weighted as to their relative importance and a single fair value is determined. The fair value of our reporting units is reconciled to the market value of our equity, determined based on the average prices of our common shares just prior to the period end. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual or interim goodwill impairment tests will prove to be an accurate prediction of the future. Goodwill Impairment Assessments: Fiscal 2025. During the three months ended December 31, 2024, we performed qualitative goodwill impairment assessments for our reporting units with a remaining goodwill balance (Motion Picture, and our Television and Talent Management businesses, both of which are part of our Television Production segment). Fiscal 2024. For our annual goodwill impairment test for fiscal 2024, we performed qualitative goodwill impairment assessments for our reporting units with a remaining goodwill balance (Motion Picture, and our Television and Talent Management businesses, both of which are part of our Television Production segment). Our qualitative assessments considered the market price of the Company’s common shares, the recent performance of these reporting units, and updated forecasts of performance and cash flows, as well as the current micro and macroeconomic environments in relation to the current and expected performance of these reporting units, and industry considerations, and determined that since the date of the most recent quantitative assessment performed over these reporting units (and for the December 31, 2024 assessment, since our qualitative assessment performed for fiscal 2024), there were no events or circumstances that rise to a level that would more-likely-than-not reduce the fair value of those reporting units below their carrying values; therefore, a quantitative goodwill impairment analysis was not required for these reporting units. Management will continue to monitor all of its reporting units for further changes in the business environment that could impact the recoverability in future periods. The recoverability of goodwill is dependent upon the continued growth of revenue and cash flows from our business activities. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our 53 reporting units may include the global economy; consumer consumption levels of our content; adverse macroeconomic conditions related to higher inflation and interest rates and currency rate fluctuations, and the impact on the global economy from wars, terrorism and multiple international conflicts, and future bank failures; volatility in the equity and debt markets which could result in higher weighted-average cost of capital; capital market transactions; the duration and potential impact of strikes of unions on our ability to produce, acquire and distribute our content; the commercial success of our television programming and motion pictures; our continual contractual relationships with our customers; and changes in consumer behavior. If our assumptions are not realized, it is possible that additional impairment charges may need to be recorded in the future. Finite-Lived Intangible Assets. At December 31, 2024, the carrying value of our finite-lived intangible assets was $880.9 million. Our finite-lived intangible assets primarily relate to customer relationships associated with U.S. MVPDs, including cable operators, satellite television providers and telecommunications companies ("Traditional Affiliate"), which amounted to $806.3 million. The amount of our customer relationship asset related to these Traditional Affiliate relationships reflects the estimated fair value of these customer relationships determined in connection with the acquisition of Starz on December 8, 2016, net of amortization recorded since the date of the Starz acquisition. Beginning October 1, 2023, our finite-lived intangible assets also include the trade names previously accounted for as indefinite-lived intangible assets. Identifiable intangible assets with finite lives are amortized to depreciation and amortization expense over their estimated useful lives, ranging from 5 to 16 years. The Starz Traditional Affiliate customer relationship intangible asset is amortized in the proportion that current period revenues bear to management’s estimate of future revenue over the remaining estimated useful life of the asset, which results in greater amortization in the earlier years of the estimated useful life of the asset than the latter years. Amortizable intangible assets are tested for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount of the asset may not be recoverable. If a triggering event has occurred, an impairment analysis is required. The impairment test first requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. The impairment test is performed at the lowest level of cash flows associated with the asset. If the carrying value of the asset exceeds the undiscounted future cash flows, the asset would not be deemed to be recoverable. Impairment would then be measured as the excess of the asset’s carrying value over its fair value. The Company monitors its finite-lived intangible assets and changes in the underlying circumstances each reporting period for indicators of possible impairments or a change in the useful life or method of amortization of our finite-lived intangible assets. For fiscal 2024, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption, and continuing difficult macro and microeconomic conditions, we performed an impairment analysis of our amortizable intangible assets. The impairment analysis requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset or asset group to the carrying value of the asset or asset group. Based on our impairment analysis, the estimated undiscounted cash flows exceeded the carrying amount of the asset group that includes the Starz customer relationship and tradename intangible assets by over 50% and therefore no impairment charge was required. The estimated undiscounted cash flow assumed a weighted average growth in revenue over the useful life of approximately 2.5%. During the three and nine months ended December 31, 2024, there were no events or circumstances that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable. Determining whether an intangible asset is recoverable or impaired requires various estimates and assumptions, including whether events or circumstances indicate that the carrying amount of the asset or asset group may not be recoverable, determining estimates of future cash flows for the assets involved and, when applicable, the assumptions applied in determining fair value, including discount rates, growth rates, market risk premiums and other assumptions about the economic environment. If actual revenues significantly underperform as compared to the forecasted amounts and cost cannot be sufficiently reduced, the undiscounted cash flows may not exceed the carrying value of the asset group and an impairment charge could result for the difference between the fair value and the carrying value of the asset group. We continue to monitor the Starz business for changes that could significantly decrease the future undiscounted cash flows expected to be generated which could result in an impairment of our amortizable intangible assets, or could require us to further shorten the useful life or adopt a more accelerated method of amortization, both of which would increase the amount of amortization expense we record. Examples of events or circumstances that could result in changes to projected cash flows include the creation and consumer consumption of our content; adverse macroeconomic conditions related to higher inflation and interest rates, and the impact on the global economy from the geopolitical environments including wars, terrorism and multiple international conflicts; volatility in the equity and debt markets which could result in higher weighted-average cost of capital and difficulty in funding our content requirements; our continual contractual relationships with our customers, including 54 our affiliate agreements; and our domestic subscriber growth rates across our traditional and OTT platforms and changes in consumer behavior. Income Taxes. We are subject to federal and state income taxes in the U.S., and in several foreign jurisdictions. We record deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves in these jurisdictions. We recognize a future tax benefit to the extent that realization of such benefit is more likely than not on a jurisdiction-by-jurisdiction basis; otherwise, a valuation allowance is applied. In order to realize the benefit of our deferred tax assets, we will need to generate sufficient taxable income in the future in each of the jurisdictions which have these deferred tax assets. However, the assessment as to whether there will be sufficient taxable income in a jurisdiction to realize our net deferred tax assets in that jurisdiction is an estimate which could change in the future depending primarily upon the actual performance of our Company. We will be required to continually evaluate the more likely than not assessment that our net deferred tax assets will be realized, and if operating results deteriorate in a particular jurisdiction, we may need to record a valuation allowance for all or a portion of our deferred tax assets through a charge to our income tax benefit (provision). As of March 31, 2024, we had a valuation allowance of $808.3 million against certain U.S. and foreign deferred tax assets that may not be realized on a more likely than not basis. Our quarterly income tax provision and our corresponding annual effective tax rate are based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. For interim financial reporting, we estimate the annual effective tax rate based on projected taxable income for the full year and record a quarterly tax provision in accordance with the expected annual effective tax rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process often results in a change to our expected annual effective tax rate for the year. When this occurs, we adjust our income tax provision during the quarter in which the change in estimate occurs so that the year-to-date income tax provision reflects the expected annual effective tax rate. Significant judgment is required in determining our expected annual effective tax rate and in evaluating our tax positions. Our effective tax rates differ from the U.S. federal statutory income tax rate and is affected by many factors, including the overall level of income (loss) before taxes and its mix across the jurisdictions in which we conduct operations, changes in tax laws and regulations, changes in valuation allowances against our deferred tax assets, changes in unrecognized tax benefits, tax planning strategies available to us, and other discrete items. RESULTS OF OPERATIONS Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023 Consolidated Results of Operations The following table sets forth our consolidated results of operations for the three months ended December 31, 2024 and 2023. Due to the acquisition of eOne, the three months ended December 31, 2024 includes the results of operations of eOne (acquired December 27, 2023), see Note 2 to our unaudited condensed consolidated financial statements for further details. 55 Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Revenues Studio Business Motion Picture $ 309.2 $ 443.2 $ (134.0) (30.2) % Television Production 404.6 248.4 156.2 62.9 % Total Studio Business 713.8 691.6 22.2 3.2 % Media Networks 344.5 417.2 (72.7) (17.4) % Intersegment eliminations (87.8) (133.7) 45.9 (34.3) % Total revenues 970.5 975.1 (4.6) (0.5) % Expenses: Direct operating 567.3 510.8 56.5 11.1 % Distribution and marketing 174.4 220.0 (45.6) (20.7) % General and administration 105.9 121.0 (15.1) (12.5) % Depreciation and amortization 43.8 49.9 (6.1) (12.2) % Restructuring and other 43.3 116.9 (73.6) (63.0) % Total expenses 934.7 1,018.6 (83.9) (8.2) % Operating income (loss) 35.8 (43.5) 79.3 nm Interest expense (69.1) (67.1) (2.0) 3.0 % Interest and other income 3.1 1.8 1.3 72.2 % Other gains (losses), net 8.4 (2.5) 10.9 (436.0) % Loss on extinguishment of debt (0.3) — (0.3) n/a Gain on investments, net — 4.4 (4.4) (100.0) % Equity interests income 7.6 4.2 3.4 81.0 % Loss before income taxes (14.5) (102.7) 88.2 nm Income tax provision (4.0) (4.7) 0.7 (14.9) % Net loss (18.5) (107.4) 88.9 nm Less: Net loss attributable to noncontrolling interest (3.4) 0.8 (4.2) nm Net loss attributable to Lions Gate Entertainment Corp. shareholders $ (21.9) $ (106.6) $ 84.7 nm _______________________ nm - Percentage not meaningful. 56 Revenues. Consolidated revenues decreased $4.6 million in the three months ended December 31, 2024 reflecting an increase of $22.2 million from our Studio Business and decreased intersegment eliminations of $45.9 million, partially offset by a decrease of $72.7 million from our Media Networks business. Studio Business revenues for the three months ended December 31, 2024 included approximately $126.9 million of revenues from eOne (acquired December 27, 2023, therefore the three months ended December 31, 2023 included no material comparable revenues). Intersegment eliminations relate to the licensing of product from our Studio Business to the Media Networks segment. Motion Picture revenue decreased $134.0 million due to lower theatrical and international revenue as compared to the prior year's quarter, which included the release of The Hunger Games: The Ballad of Songbirds & Snakes , and lower television, home entertainment revenue and other revenue. Motion Picture revenues for the three months ended December 31, 2024 included approximately $12.6 million of revenues from eOne. Motion Picture revenue included $9.9 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing a decrease of $26.7 million from the three months ended December 31, 2023. Television Production revenue increased $156.2 million due to the inclusion of revenue from eOne of approximately $114.3 million, and increases in home entertainment, international and other revenue. Television Production revenue included $77.9 million of revenue from licensing Television Production segment product to our Media Networks segment, representing a decrease of $19.2 million from the three months ended December 31, 2023. The decrease in intersegment eliminations of $45.9 million is due to lower Motion Picture revenues and Television Production revenues from licenses of motion pictures and original series to the Media Networks segment as discussed above. Media Networks revenue decreased $72.7 million and reflected decreases in international revenue of $67.7 million due to the exiting of the majority of international territories, and a decrease at Starz Networks of $5.0 million. See further discussion in the Segment Results of Operations section below. Direct Operating Expenses. Direct operating expenses by segment were as follows for the three months ended December 31, 2024 and 2023: Three Months Ended December 31, 2024 2023 Change Amount % of Segment Revenues Amount % of Segment Revenues Amount Percent (Amounts in millions) Direct operating expenses Studio Business: Motion Picture $ 132.6 42.9 % $ 214.3 48.4 % $ (81.7) (38.1) % Television Production 320.4 79.2 219.0 88.2 101.4 46.3 % Total Studio Business 453.0 63.5 433.3 62.7 19.7 4.5 % Media Networks 204.5 59.4 198.3 47.5 6.2 3.1 % Other 4.8 nm 0.8 nm 4.0 nm Intersegment eliminations (95.0) nm (121.6) nm 26.6 (21.9) % $ 567.3 58.5 % $ 510.8 52.4 % $ 56.5 11.1 % _______________________ nm - Percentage not meaningful. Direct operating expenses increased in the three months ended December 31, 2024 due to higher direct operating expenses for our Studio Business and Media Networks segment, and lower intersegment eliminations. The increase at the Studio Business reflects higher direct operating expenses of the Television Production segment associated with increased Television Production revenues, partially offset by lower direct operating expenses of the Motion Picture segment associated with decreased Motion Picture revenue. The increase in Media Networks direct operating expense was driven by an increase at Starz Networks of $42.8 million due to higher programming cost amortization, partially offset by a decrease of $36.6 million due to the territories exited. The decrease in intersegment eliminations is due to lower Motion Picture and Television Production revenue from licenses of motion pictures and original series to the Media Networks segment, as discussed above. See further discussion in the Segment Results of Operations section below. 57 Other. Other direct operating expense in the three months ended December 31, 2024 includes rent cost for production facilities that were unutilized as a result of the industry strikes amounting to $4.1 million, which was not allocated to the segments, and is included in direct operating expense. In addition, other direct operating expense in the three months ended December 31, 2024 and 2023 includes share-based compensation. Distribution and Marketing Expenses. Distribution and marketing expenses by segment were as follows for the three months ended December 31, 2024 and 2023: Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Distribution and marketing expenses Studio Business: Motion Picture $ 70.6 $ 101.4 $ (30.8) (30.4) % Television Production 8.8 7.8 1.0 12.8 % Total Studio Business 79.4 109.2 (29.8) (27.3) % Media Networks 94.9 110.7 (15.8) (14.3) % Other 0.2 0.2 — — % Intersegment eliminations (0.1) (0.1) — — % $ 174.4 $ 220.0 $ (45.6) (20.7) % U.S. theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 39.1 $ 54.1 $ (15.0) (27.7) % _______________________ nm - Percentage not meaningful. Distribution and marketing expenses decreased in the three months ended December 31, 2024, due to lower Studio Business and Media Networks distribution and marketing expense. The decrease at the Studio Business primarily reflects lower Motion Picture theatrical P&A and Premium VOD expense associated with the theatrical slate releases in the current quarter, and lower Motion Picture home entertainment expense. The decrease in Media Networks distribution and marketing expense was due to a decrease at Starz Networks of $10.2 million, and a decrease of $5.6 million primarily from the international territories exited. See further discussion in the Segment Results of Operations section below. General and Administrative Expenses. General and administrative expenses by segment were as follows for the three months ended December 31, 2024 and 2023: 58 Three Months Ended December 31, Change 2024 % of Revenues 2023 % of Revenues Amount Percent (Amounts in millions) General and administrative expenses Studio Business: Motion Picture $ 22.4 $ 27.1 $ (4.7) (17.3) % Television Production 14.5 13.5 1.0 7.4 % Total Studio Business 36.9 40.6 (3.7) (9.1) % Media Networks 20.2 22.7 (2.5) (11.0) % Corporate 28.4 31.1 (2.7) (8.7) % Share-based compensation expense 17.5 23.8 (6.3) (26.5) % Purchase accounting and related adjustments 2.9 2.8 0.1 3.6 % Total general and administrative expenses $ 105.9 10.9% $ 121.0 12.4% $ (15.1) (12.5) % General and administrative expenses decreased in the three months ended December 31, 2024, resulting from decreased share-based compensation expense, Studio Business, corporate, and Media Networks general and administrative expense. Studio Business general and administrative expenses for the three months ended December 31, 2024 included approximately $5.1 million from eOne. See further discussion in the Segment Results of Operations section below. Corporate general and administrative expenses decreased $2.7 million, or 8.7%, primarily due to a decrease in incentive based compensation, partially offset by approximately $3.0 million of corporate general and administrative expenses from eOne. The decrease in share-based compensation expense included in general and administrative expense in the three months ended December 31, 2024, as compared to the three months ended December 31, 2023 is primarily due to lower fair values in the current quarter associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved. The following table presents share-based compensation expense by financial statement line item: Three Months Ended December 31, 2024 2023 (Amounts in millions) Share-based compensation expense by expense category General and administrative expense $ 17.5 $ 23.8 Restructuring and other (1) — 6.8 Direct operating expense 0.7 0.9 Distribution and marketing expense 0.2 0.2 Total share-based compensation expense $ 18.4 $ 31.7 _______________________ (1) Represents share-based compensation expense included in restructuring and other expenses reflecting the impact of the acceleration of vesting schedules for equity awards pursuant to certain severance arrangements. Purchase accounting and related adjustments include the expense associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment, and the non-cash charge for the amortization of the recoupable portion of the purchase price related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense. The noncontrolling equity interests in the distributable earnings of 3 Arts Entertainment are reflected as an expense rather than noncontrolling interest in the unaudited condensed consolidated statement of operations due to the relationship to continued employment. Purchase accounting and related adjustments were comparable to the prior year's quarter (see Note 9 to our unaudited condensed consolidated financial statements). 59 Depreciation and Amortization Expense. Depreciation and amortization of $43.8 million in the three months ended December 31, 2024 decreased $6.1 million from $49.9 million in the three months ended December 31, 2023 due to lower depreciation expense. Restructuring and Other. Restructuring and other decreased $73.6 million in the three months ended December 31, 2024 as compared to the three months ended December 31, 2023, and includes restructuring and severance costs and certain transaction and other costs, when applicable. Restructuring and other costs were as follows for the three months ended December 31, 2024 and 2023 (see Note 14 to our unaudited condensed consolidated financial statements): Three Months Ended December 31, Increase (Decrease) 2024 2023 Amount Percent (Amounts in millions) Restructuring and other: Content and other impairments (1) $ 0.9 $ 77.8 $ (76.9) (98.8) % Severance (2) 21.3 30.7 (9.4) (30.6) % Transaction and other costs (3) 21.1 8.4 12.7 151.2 % $ 43.3 $ 116.9 $ (73.6) (63.0) % _______________________ nm - Percentage not meaningful. (1) Media Networks Restructuring: As discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" , the Company recorded net recoveries of content impairment charges related to the Media Networks segment in the three months ended December 31, 2024 of $6.4 million (three months ended December 31, 2023 - the Company recorded content impairment charges related to the Media Networks segment of $77.8 million). Subsequent to December 31, 2024, the Company removed programming on Starz's domestic platform which had a carrying value of approximately $77.4 million, which charge, measured as the excess of the carrying value over the fair value of the titles removed, will be recorded during the fourth quarter ending March 31, 2025. See Note 14 to our unaudited condensed consolidated financial statements. Content and Other Impairments: Amounts in the three months ended December 31, 2024 also include content impairments of $7.3 million related to the Motion Picture and Television Production segments associated with exiting local production in certain international territories. (2) Severance costs were primarily related to restructuring, acquisition integration activities and other cost-saving initiatives. During the quarter ended December 31, 2024, in connection with the Company's current restructuring plan, approximately 8% of its eligible U.S. employees elected to take advantage of voluntary severance and early retirement packages. A total of approximately $26.1 million in severance expense is expected to be incurred under the voluntary severance program, of which $14.6 million of severance expense was recognized in restructuring and other in the three months ended December 31, 2024, and the remaining amount is expected to be recognized in the fourth quarter ended March 31, 2025. In the three months ended December 31, 2023, amounts were due to restructuring activities including integration of the acquisition of eOne, Media Networks international restructuring and our Motion Picture and Television Production segments. (3) Transaction and other costs in the three months ended December 31, 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. Interest Expense. Interest expense of $69.1 million for the three months ended December 31, 2024 increased $2.0 million from the three months ended December 31, 2023 due to higher average balances on variable rate corporate debt and film related obligations and a smaller benefit from the interest rate swaps, partially offset by lower average interest rates. The following table sets forth the components of interest expense for the three months ended December 31, 2024 and 2023: 60 Three Months Ended December 31, 2024 2023 (Amounts in millions) Interest Expense Cash Based: Revolving credit facility $ 13.4 $ 6.5 Term loans 6.8 23.6 Senior Notes 9.8 9.9 IP credit facilities (1) 18.9 — Other (2) 13.9 19.6 62.8 59.6 Amortization of debt issuance costs and other non-cash interest (3) 6.3 7.5 Total interest expense $ 69.1 $ 67.1 _______________________ (1) IP credit facilities interest expense includes interest expense associated with the eOne IP Credit Facility and LG IP Credit Facility. (2) Other interest expense includes payments associated with certain film related obligations (Production Tax Credit Facility, Film Library Facility, Backlog Facility and other, see Note 7 to our unaudited condensed consolidated financial statements), and payments and receipts associated with the Company's interest rate swaps (see Note 17 to our unaudited condensed consolidated financial statements). (3) Amounts include the amortization of unrealized losses in accumulated other comprehensive income (loss) related to de-designated interest rate swaps which are being amortized to interest expense (see Note 17 to our unaudited condensed consolidated financial statements). Interest and Other Income. Interest and other income of $3.1 million for the three months ended December 31, 2024 increased as compared to interest and other income of $1.8 million for the three months ended December 31, 2023 due to higher interest income. Other Gains (Losses), net. Other gains (losses), net represented a gain of $8.4 million for the three months ended December 31, 2024 as compared to a loss of $2.5 million for the three months ended December 31, 2023. The change is primarily due to foreign currency gains in the three months ended December 31, 2024, partially offset by an increase in losses recorded related to our monetization of accounts receivable programs in the three months ended December 31, 2024 as compared to the three months ended December 31, 2023 (see Note 18 to our unaudited condensed consolidated financial statements). Loss on Extinguishment of Debt. Loss on extinguishment of debt of $0.3 million in the three months ended December 31, 2024 related to the write-off of debt issuance costs associated with the voluntary prepayment of $250.0 million principal amount of the Term Loan B. There was no comparable loss on extinguishment of debt in the three months ended December 31, 2023. See Note 6 to our unaudited condensed consolidated financial statements. Gain on Investments, net. Gain on investments, net was nil for the three months ended December 31, 2024, as compared to $4.4 million for the three months ended December 31, 2023 related to other investments. Equity Interests Income. Equity interests income of $7.6 million in the three months ended December 31, 2024 compared to equity interests income of $4.2 million in the three months ended December 31, 2023 due to higher equity interest income in the current quarter. Income Tax Provision. We had an income tax provision of $4.0 million in the three months ended December 31, 2024, compared to an income tax provision of $4.7 million in the three months ended December 31, 2023. Our income tax provision differs from the U.S. federal statutory income tax rate of 21% multiplied by income (loss) before taxes due to the mix of our earnings across the various jurisdictions in which our operations are conducted, changes in valuation allowances against our deferred tax assets, and certain minimum income and foreign withholding taxes. Our income tax provision for the three months ended December 31, 2023 was also impacted by charges for interest on uncertain tax benefits. Net Loss Attributable to Lions Gate Entertainment Corp. Shareholders. Net loss attributable to our shareholders for the three months ended December 31, 2024 was $21.9 million, or basic and diluted net loss per common share of $0.09 on 240.2 61 million weighted average common shares outstanding. This compares to net loss attributable to our shareholders for the three months ended December 31, 2023 of $106.6 million, or basic and diluted net loss per common share of $0.45 on 235.1 million weighted average common shares outstanding. Segment Results of Operations and Non-GAAP Measures The Company's primary measure of segment performance is segment profit. Segment profit is defined as segment revenues, less segment direct operating and segment distribution and marketing expense, less segment general and administration expenses. Total segment profit represents the sum of segment profit for our individual segments, net of eliminations for intersegment transactions. Segment profit and total segment profit excludes, when applicable, corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and/or programming and content strategy, certain charges related to the COVID-19 global pandemic, and purchase accounting and related adjustments. Segment profit when presented in accordance with ASC 280 within the notes to the consolidated financial statements is a GAAP financial measure and is disclosed in Note 15 to our unaudited condensed consolidated financial statements. We also present below our total segment profit for all of our segments and the sum of our Motion Picture and Television Production segment profit as our "Studio Business" segment profit. Total segment profit and Studio Business segment profit, when presented outside of the segment information and reconciliations included in Note 15 to our unaudited condensed consolidated financial statements, is considered a non-GAAP financial measure, and should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with United States GAAP. We use this non-GAAP measure, among other measures, to evaluate the aggregate operating performance of our business. The Company believes the presentation of total segment profit and Studio Business segment profit is relevant and useful for investors because it allows investors to view total 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 before non-operating items. Total segment profit and Studio Business segment profit is considered an important measure of the Company’s performance because it reflects the aggregate profit contribution from the Company's segments, both in total and for the Studio Business and represents a measure, consistent with our segment profit, that eliminates amounts that, in management’s opinion, do not necessarily reflect the fundamental performance of the Company’s businesses, are infrequent in occurrence, and in some cases are non-cash expenses. Not all companies calculate segment profit or total segment profit in the same manner, and segment profit and total segment profit as defined by the Company may not be comparable to similarly titled measures presented by other companies due to differences in the methods of calculation and excluded items. The following table reconciles the GAAP measure, operating loss, to the non-GAAP measure, total segment profit, for the three months ended December 31, 2024 and 2023. In addition, each of segment direct operating expense, distribution and marketing expense and general and administrative expense is reconciled to the respective line items presented in the GAAP-based statement of operations in the preceding section of the Management's Discussion and Analysis of Financial Condition and Results of Operations which discusses consolidated results of operations. Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Operating income (loss) $ 35.8 $ (43.5) $ 79.3 nm Corporate general and administrative expenses 28.4 31.1 (2.7) (8.7) % Adjusted depreciation and amortization 8.4 13.5 (5.1) (37.8) % Restructuring and other 43.3 116.9 (73.6) (63.0) % COVID-19 related charges (benefit) — (0.1) 0.1 (100.0) % Unallocated rent cost included in direct operating expense 4.1 — 4.1 n/a Adjusted share-based compensation expense 18.4 24.9 (6.5) (26.1) % Purchase accounting and related adjustments 38.3 39.2 (0.9) (2.3) % Total segment profit $ 176.7 $ 182.0 $ (5.3) (2.9) % _______________________ nm - Percentage not meaningful. 62 See Note 15 to our unaudited condensed consolidated financial statements for further information on the reconciling line items above, and for reconciliations of depreciation and amortization and share-based compensation expense as presented on our unaudited condensed consolidated statements of operations to adjusted depreciation and amortization and adjusted share-based compensation expense, respectively, as presented in the line items above. We refer to our Motion Picture and Television Production segments collectively as our Studio Business. The table below sets forth the revenues and segment profit of our collective Studio Business and Media Networks segment. Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Revenue Studio Business Motion Picture $ 309.2 $ 443.2 $ (134.0) (30.2) % Television Production 404.6 248.4 156.2 62.9 % Total Studio Business $ 713.8 $ 691.6 $ 22.2 3.2 % Media Networks 344.5 417.2 (72.7) (17.4) % Intersegment eliminations (87.8) (133.7) 45.9 (34.3) % $ 970.5 $ 975.1 $ (4.6) (0.5) % Segment Profit Studio Business Motion Picture $ 83.6 $ 100.4 $ (16.8) (16.7) % Television Production 60.9 8.1 52.8 651.9 % Total Studio Business $ 144.5 $ 108.5 $ 36.0 33.2 % Media Networks 24.9 85.5 (60.6) (70.9) % Intersegment eliminations 7.3 (12.0) 19.3 (160.8) % $ 176.7 $ 182.0 $ (5.3) (2.9) % See the following discussion for further detail of our individual segments. The segment results of operations presented below do not include the elimination of intersegment transactions which are eliminated when presenting consolidated results. Motion Picture The table below sets forth Motion Picture gross contribution and segment profit for the three months ended December 31, 2024 and 2023: 63 Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Motion Picture Segment: Revenue $ 309.2 $ 443.2 $ (134.0) (30.2) % Expenses: Direct operating expense 132.6 214.3 (81.7) (38.1) % Distribution & marketing expense 70.6 101.4 (30.8) (30.4) % Gross contribution 106.0 127.5 (21.5) (16.9) % General and administrative expenses 22.4 27.1 (4.7) (17.3) % Segment profit $ 83.6 $ 100.4 $ (16.8) (16.7) % U.S. theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 39.1 $ 54.1 $ (15.0) (27.7) % Direct operating expense as a percentage of revenue 42.9 % 48.4 % Gross contribution as a percentage of revenue 34.3 % 28.8 % Revenue. The table below sets forth Motion Picture revenue by media and product category for the three months ended December 31, 2024 and 2023. Motion Picture revenues for the three months ended December 31, 2024 included approximately $12.6 million of revenues from eOne. Three Months Ended December 31, 2024 2023 Total Increase (Decrease) Lionsgate Original Releases (1) Other Film (2) Total Lionsgate Original Releases (1) Other Film (2) Total (Amounts in millions) Motion Picture Revenue Theatrical $ 33.9 $ 1.1 $ 35.0 $ 98.7 $ 1.4 $ 100.1 $ (65.1) Home Entertainment Digital Media 93.4 52.3 145.7 112.7 42.8 155.5 (9.8) Packaged Media 9.8 6.2 16.0 11.4 9.6 21.0 (5.0) Total Home Entertainment 103.2 58.5 161.7 124.1 52.4 176.5 (14.8) Television 30.5 7.8 38.3 59.7 5.6 65.3 (27.0) International 48.2 20.1 68.3 80.6 14.1 94.7 (26.4) Other 3.1 2.8 5.9 4.8 1.8 6.6 (0.7) $ 218.9 $ 90.3 $ 309.2 $ 367.9 $ 75.3 $ 443.2 $ (134.0) ____________________ (1) Lionsgate Original Releases: Includes titles originally planned for a wide theatrical release by Lionsgate, including titles that have changed from a planned wide theatrical release to an initial direct-to-streaming release. These releases include films developed and produced in-house, films co-developed and co-produced and films acquired or licensed from third parties. In addition, Lionsgate Original Releases also includes multi-platform and direct-to-platform motion pictures originally released or licensed by Lionsgate, and the licensing of our original release motion picture content to other ancillary markets (location-based entertainment, games, etc.). (2) Other Film: Includes acquired and licensed brands and libraries originally released by other parties such as third-party library product, including our titles released by acquired companies prior to our acquisition of the company (i.e., Summit Entertainment library), and titles released with our equity method investees, Roadside Attractions and Pantelion Films, and other titles. Theatrical revenue decreased $65.1 million in the three months ended December 31, 2024 as compared to the three months ended December 31, 2023 due to a decrease of $64.8 million from Lionsgate Original Releases due to significant revenue in the prior year's quarter from the release of The Hunger Games: The Ballad of Songbirds & Snakes . 64 Home entertainment revenue decreased $14.8 million, or 8.4%, in the three months ended December 31, 2024, as compared to the three months ended December 31, 2023, due to lower digital media revenue and packaged media revenue of $9.8 million and $5.0 million, respectively, primarily due to decreases from Lionsgate Original Releases. Digital media revenue from Lionsgate Original Releases declined $19.3 million due to significant revenue in the prior year's period from titles in the The Hunger Games franchise, partially offset by an increase in Other Film of $9.5 million from our acquired library titles. Television revenue decreased $27.0 million, or 41.3%, in the three months ended December 31, 2024, as compared to the three months ended December 31, 2023, due to a decrease from Lionsgate Original Releases of $29.2 million due to a greater number of television windows opening in the prior year's quarter for our theatrical slate titles. International revenue decreased $26.4 million, or 27.9%, in the three months ended December 31, 2024, as compared to the three months ended December 31, 2023 due to a decrease from Lionsgate Original Releases of $32.4 million due to lower revenue in the current quarter from our fiscal 2025 theatrical slate, as compared to our fiscal 2024 theatrical slate in the prior year's quarter, and in particular, The Hunger Games: The Ballad of Songbirds & Snakes. This decrease was partially offset by an increase from Other Film of $6.0 million from our acquired library titles. Direct Operating Expense. The decrease in direct operating expenses is due to lower Motion Picture revenue. The decrease in direct operating expenses as a percentage of motion picture revenue as compared to the prior year's quarter was driven by the change in the mix of titles and product categories generating revenue, and in particular, the current quarter reflected a lower amortization rate and greater portion of revenue from library titles relative to the prior year's quarter. Investment in film write-downs included in Motion Picture segment direct operating expense were approximately $0.2 million in the three months ended December 31, 2024, compared to approximately $0.5 million in the three months ended December 31, 2023. Distribution and Marketing Expense. The decrease in distribution and marketing expense in the three months ended December 31, 2024 is due to lower theatrical P&A and Premium VOD expense associated with the theatrical slate releases in the current quarter, and lower Motion Picture home entertainment expense. In the three months ended December 31, 2024, approximately $22.1 million of theatrical P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $10.5 million in the prior year's quarter in the Motion Picture segment. Gross Contribution. Gross contribution of the Motion Picture segment for the three months ended December 31, 2024 decreased as compared to the three months ended December 31, 2023 due to lower Motion Picture revenue, partially offset by lower direct operating expense as a percentage of Motion Picture revenue and lower distribution and marketing expense, as described above. General and Administrative Expense. General and administrative expenses of the Motion Picture segment decreased $4.7 million, or 17.3% primarily due to a decrease in incentive based compensation. Television Production The table below sets forth Television Production gross contribution and segment profit for the three months ended December 31, 2024 and 2023: Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Television Production Segment: Revenue $ 404.6 $ 248.4 $ 156.2 62.9 % Expenses: Direct operating expense 320.4 219.0 101.4 46.3 % Distribution & marketing expense 8.8 7.8 1.0 12.8 % Gross contribution 75.4 21.6 53.8 249.1 % General and administrative expenses 14.5 13.5 1.0 7.4 % Segment profit $ 60.9 $ 8.1 $ 52.8 651.9 % Direct operating expense as a percentage of revenue 79.2 % 88.2 % Gross contribution as a percentage of revenue 18.6 % 8.7 % 65 Revenue. The table below sets forth Television Production revenue and changes in revenue by media for the three months ended December 31, 2024 and 2023. Television Production revenues for the three months ended December 31, 2024 included approximately $114.3 million of revenues from eOne. Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Television Production Revenue Television $ 259.9 $ 182.3 $ 77.6 42.6 % International 59.3 32.1 27.2 84.7 % Home Entertainment Digital 55.5 17.4 38.1 219.0 % Packaged Media 1.7 0.3 1.4 466.7 % Total Home Entertainment 57.2 17.7 39.5 223.2 % Other 28.2 16.3 11.9 73.0 % $ 404.6 $ 248.4 $ 156.2 62.9 % The primary component of Television Production revenue is domestic television revenue. Domestic television revenue increased in the three months ended December 31, 2024 due to an increase of approximately $89.3 million for revenues from eOne in the current quarter, partially offset by a decrease of approximately $13.9 million from intersegment revenues from the licensing of Starz original series to Starz Networks. International revenue in the three months ended December 31, 2024 increased $27.2 million, or 84.7%, as compared to the three months ended December 31, 2023 due to an increase of approximately $17.7 million for revenues from eOne in the current quarter, and an increase from other third-party international revenue of approximately $13.8 million, partially offset by a decrease of $4.0 million from intersegment revenues from the licensing of Starz original series to Starz Networks. Home entertainment revenue in the three months ended December 31, 2024 increased $39.5 million due to increased third-party digital media revenues, and in particular, digital media revenue in the current quarter for Mad Men Seasons 1 to 7 and Ghosts Season 3 . Other revenue increased $11.9 million in the three months ended December 31, 2024 as compared to the three months ended December 31, 2023, due to increased revenue from 3 Arts Entertainment, which is generated from commissions and executive producer fees earned related to talent management. Direct Operating Expense. Direct operating expense of the Television Production segment in the three months ended December 31, 2024 increased $101.4 million, or 46.3% due to the increase in Television Production revenues. Direct operating expenses as a percentage of television production revenue decreased primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter. In particular, the current quarter's amortization rate reflected higher revenues on product that has lower direct operating expense as a percentage of revenue, including from older library product, such as Mad Men , from our talent management business, and from library and new content acquired with the eOne acquisition. The amortization rate of older, more successful titles is typically lower than newer titles due to a television series incurring higher amortization expenses in relation to revenues initially, until there are a sufficient number of subsequent seasons ordered and episodes produced, such that revenue can be generated from syndication in domestic and international markets. Gross Contribution. Gross contribution of the Television Production segment for the three months ended December 31, 2024 increased as compared to the three months ended December 31, 2023, due to higher television production revenue and lower direct operating expenses as a percentage of television production revenue. General and Administrative Expense. General and administrative expenses of the Television Production segment increased $1.0 million, or 7.4%. Television Production general and administrative expenses for the three months ended December 31, 2024 included $4.1 million from eOne, partially offset by a decrease in incentive based compensation. 66 Media Networks The table below sets forth Media Networks gross contribution and segment profit for the three months ended December 31, 2024 and 2023. As previously discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", beginning in fiscal 2023, the Company began a plan to restructure its Media Networks international business. During fiscal 2024, the Company continued executing its restructuring plan which included exiting all international territories except Canada and India, which was completed in May 2024. As a result, certain territories were exited beginning May 2023, with additional territories exited during fiscal 2024 and the first quarter of fiscal 2025 (the “Exited Territories”), therefore the results of operations for “Other” for the three months ended December 31, 2023 reflect amounts including the results of operations of the Exited Territories. Three Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Media Networks Segment: Revenue $ 344.5 $ 417.2 $ (72.7) (17.4) % Expenses: Direct operating expense 204.5 198.3 6.2 3.1 % Distribution & marketing expense 94.9 110.7 (15.8) (14.3) % Gross contribution 45.1 108.2 (63.1) (58.3) % General and administrative expenses 20.2 22.7 (2.5) (11.0) % Segment profit $ 24.9 $ 85.5 $ (60.6) (70.9) % Direct operating expense as a percentage of revenue 59.4 % 47.5 % Gross contribution as a percentage of revenue 13.1 % 25.9 % The following table sets forth the Media Networks segment profit by product line: Three Months Ended Three Months Ended December 31, 2024 December 31, 2023 Starz Networks (North America) (1) Other (2) Total Media Networks Starz Networks (North America) (1) Other (2) Total Media Networks (Amounts in millions) Media Networks Segment: Revenue $ 341.9 $ 2.6 $ 344.5 $ 346.9 $ 70.3 $ 417.2 Expenses: Direct operating expense 202.7 1.8 204.5 159.9 38.4 198.3 Distribution & marketing expense 94.2 0.7 94.9 104.4 6.3 110.7 Gross contribution 45.0 0.1 45.1 82.6 25.6 108.2 General and administrative expenses 19.3 0.9 20.2 19.3 3.4 22.7 Segment profit $ 25.7 $ (0.8) $ 24.9 $ 63.3 $ 22.2 $ 85.5 _______________________ (1) Starz Networks represents the results of operations of the U.S. and Canada, see footnote (2) below. (2) During the quarter ended June 30, 2024, the Company began reflecting the results of operations of Canada within Starz Networks. Accordingly, the following amounts were reclassified from "Other" (formerly "LIONSGATE+") to Starz Networks in the three months ended December 31, 2023 to conform to the current period presentation: (i) revenue of $4.2 million; (ii) direct operating expense of $2.7 million; and (iii) distribution and marketing expense of $0.7 million, which resulted in gross contribution and segment profit of $0.8 million reclassified. The amounts reflected in "Other" consist of the results of operations outside of the U.S. and Canada. 67 Subscriber Data. The number of period-end service subscribers is a key metric which management uses to evaluate a non-ad supported subscription video service. We believe this key metric provides useful information to investors as a growing or decreasing subscriber base is a key indicator of the health of the overall business. Service subscribers may impact revenue differently depending on specific distribution agreements we have with our distributors which may include fixed fees, rates per basic video household or a rate per STARZ subscriber. The table below sets forth, for the periods presented, subscriptions to our Media Networks and STARZPLAY Arabia services. Actual Pro Forma (2) December 31, December 31, December 31, December 31, 2024 2023 2024 2023 (Amounts in millions) Starz North America (1) OTT Subscribers 12.57 13.43 12.57 13.43 Linear Subscribers 7.36 8.85 7.36 8.85 Total 19.93 22.28 19.93 22.28 Other OTT Subscribers (2) 2.31 3.55 2.31 2.45 Total Starz OTT Subscribers (2) 14.88 16.98 14.88 15.88 Linear Subscribers 7.36 8.85 7.36 8.85 Total Starz 22.24 25.83 22.24 24.73 STARZPLAY Arabia (4) 2.33 3.19 2.33 3.19 Total Domestic and International Subscribers (2) 24.57 29.02 24.57 27.92 Subscribers by Platform: OTT Subscribers (2)(4) 17.21 20.17 17.21 19.07 Linear Subscribers 7.36 8.85 7.36 8.85 Total Global Subscribers (2) 24.57 29.02 24.57 27.92 ___________________ (1) Starz North America represents subscribers for the U.S. and Canada. (2) Pro forma amounts exclude OTT subscribers for the Exited Territories amounting to 1.10 million at December 31, 2023. (3) Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee. (4) OTT subscribers include subscribers of STARZPLAY Arabia, as presented above. 68 Revenue. Media Networks revenue decreased $72.7 million and reflected lower Other revenue of $67.7 million and a decrease at Starz Networks of $5.0 million. Starz Networks' revenue decreased $5.0 million primarily because of the continued decline in revenue from traditional linear services of $14.1 million, which was partially offset by higher OTT revenue of $8.7 million resulting primarily from price increases. Starz Networks initiated a price increase beginning in August 2024, which was implemented by its various partners throughout the quarter ended December 31, 2024. The decrease in Other revenue was primarily the result of the exit from the Exited Territories of approximately $67.8 million. During the three months ended December 31, 2024 and 2023, the following original series premiered on STARZ: Three Months Ended December 31, 2024 Three Months Ended December 31, 2023 Title Premiere Date Title Premiere Date Fat Joe Talks Season 1 October 4, 2024 Shining Value Season 2 October 13, 2023 Sweetpea Season 1 October 10, 2024 Power Book III: Raising Kanan Season 3 December 1, 2023 Outlander Season 7B November 22, 2024 Direct Operating and Distribution and Marketing Expenses . Direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively. The level of programming cost amortization and advertising and marketing costs and thus the gross contribution margin for the Media Networks' segment can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the network during the period. Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere. In addition, the shutdown of the international service in the Exited Territories will result in a decrease in expenses going forward. The increase in Media Networks direct operating expenses in the three months ended December 31, 2024 is due to increases at Starz Networks of $42.8 million, partially offset by decreases in Other of $36.6 million primarily due to the exit from the Exited Territories. The increase in Starz Networks direct operating expense was due primarily to an increase of $43.4 million related to theatrical releases under our programming output agreements, and an increase of $10.2 million in development expense, partially offset by lower programming cost amortization of $7.2 million related to our Starz Originals. The decrease in Media Networks distribution and marketing expense is due to a decrease of $10.2 million at Starz Networks primarily due to a decrease in advertising and marketing costs related to our Starz Originals, and a decrease in Other of $5.6 million primarily from the exit from the Exited Territories. Gross Contribution. The decrease in gross contribution compared to the three months ended December 31, 2023 was due to lower gross contribution at Starz Networks of $37.6 million and lower gross contribution from Other of $25.5 million. Gross contribution at Starz Networks declined due to higher direct operating expense and slightly lower revenue, partially offset by lower distribution and marketing expense, as described above. Gross contribution from Other declined primarily due to the exit from the Exited Territories, and reflected lower revenue which was partially offset by lower direct operating expense and distribution and marketing expense, as described above. General and Administrative Expense. General and administrative expenses of the Media Networks segment in the three months ended December 31, 2024 decreased slightly from the prior year's quarter, due to decreases of $2.5 million from Other resulting from the exit from the Exited Territories. Nine Months Ended December 31, 2024 Compared to Nine Months Ended December 31, 2023 Consolidated Results of Operations The following table sets forth our consolidated results of operations for the nine months ended December 31, 2024 and 2023. Due to the acquisition of eOne, the nine months ended December 31, 2024 includes the results of operations of eOne (acquired December 27, 2023), see Note 2 to our unaudited condensed consolidated financial statements for further details. 69 Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Revenues Studio Business Motion Picture $ 1,063.3 $ 1,245.6 $ (182.3) (14.6) % Television Production 1,062.5 860.7 201.8 23.4 % Total Studio Business 2,125.8 2,106.3 19.5 0.9 % Media Networks 1,041.5 1,214.9 (173.4) (14.3) % Intersegment eliminations (413.5) (422.1) 8.6 (2.0) % Total revenues 2,753.8 2,899.1 (145.3) (5.0) % Expenses: Direct operating 1,639.7 1,549.1 90.6 5.8 % Distribution and marketing 606.0 686.0 (80.0) (11.7) % General and administration 334.9 368.1 (33.2) (9.0) % Depreciation and amortization 135.4 138.9 (3.5) (2.5) % Restructuring and other 71.9 371.0 (299.1) (80.6) % Goodwill and intangible asset impairment — 663.9 (663.9) (100.0) % Total expenses 2,787.9 3,777.0 (989.1) (26.2) % Operating loss (34.1) (877.9) 843.8 (96.1) % Interest expense (212.2) (192.9) (19.3) 10.0 % Interest and other income 11.6 6.5 5.1 78.5 % Other losses, net (10.6) (19.6) 9.0 (45.9) % Gain (loss) on extinguishment of debt (6.7) 21.2 (27.9) (131.6) % Gain on investments, net — 2.7 (2.7) (100.0) % Equity interests income 8.5 5.7 2.8 49.1 % Loss before income taxes (243.5) (1,054.3) 810.8 (76.9) % Income tax provision (16.0) (12.5) (3.5) 28.0 % Net loss (259.5) (1,066.8) 807.3 (75.7) % Less: Net loss attributable to noncontrolling interest 14.8 3.3 11.5 nm Net loss attributable to Lions Gate Entertainment Corp. shareholders $ (244.7) $ (1,063.5) $ 818.8 (77.0) % _______________________ nm - Percentage not meaningful. 70 Revenues. Consolidated revenues decreased $145.3 million in the nine months ended December 31, 2024 reflecting a decrease of $173.4 million from our Media Networks business, partially offset by an increase of $19.5 million from our Studio Business and lower intersegment eliminations of $8.6 million. Studio Business revenues for the nine months ended December 31, 2024 included approximately $355.1 million of revenues from eOne (acquired December 27, 2023, therefore the nine months ended December 31, 2023 included no material comparable revenues). Intersegment eliminations relate to the licensing of product from our Studio Business to the Media Networks segment. Motion Picture revenue decreased $182.3 million due to lower home entertainment and theatrical revenue, primarily due to revenue in the prior year's period from John Wick: Chapter 4 and The Hunger Games: The Ballad of Songbirds & Snakes , and lower other revenue which was partially offset by increased international and television revenue. Motion Picture revenues for the nine months ended December 31, 2024 included approximately $53.0 million of revenues from eOne. Motion Picture revenue included $146.2 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing an increase of $32.5 million from the nine months ended December 31, 2023. Television Production revenue increased $201.8 million due to the inclusion of revenue from eOne of $302.1 million and increased other revenue, which was offset by decreases from other domestic television, home entertainment digital and international revenue. Television Production revenue included $267.3 million of revenue from licensing Television Production segment product to our Media Networks segment, representing a decrease of $41.1 million from the nine months ended December 31, 2023. The decrease in intersegment eliminations of $8.6 million is due to lower Television Production intersegment revenues, partially offset by higher Motion Picture intersegment revenues from licenses of original series motion pictures, respectively, to the Media Networks segment as discussed above. Media Networks revenue decreased $173.4 million, and reflected decreases in international revenue of $170.9 million due to the exiting of the majority of international territories, and decreases of $2.5 million at Starz Networks. See further discussion in the Segment Results of Operations section below. Direct Operating Expenses. Direct operating expenses by segment were as follows for the nine months ended December 31, 2024 and 2023: Nine Months Ended December 31, 2024 2023 Change Amount % of Segment Revenues Amount % of Segment Revenues Amount Percent (Amounts in millions) Direct operating expenses Studio Business Motion Picture $ 538.5 50.6 % $ 603.6 48.5 % $ (65.1) (10.8) % Television Production 889.9 83.8 701.8 81.5 188.1 26.8 % Total Studio Business 1,428.4 67.2 1,305.4 62.0 123.0 9.4 % Media Networks 568.0 54.5 617.5 50.8 (49.5) (8.0) % Other 13.6 nm 1.8 nm 11.8 nm Intersegment eliminations (370.3) nm (375.6) nm 5.3 (1.4) % $ 1,639.7 59.5 % $ 1,549.1 53.4 % $ 90.6 5.8 % _______________________ nm - Percentage not meaningful Direct operating expenses increased in the nine months ended December 31, 2024, due to higher direct operating expenses of our Studio Business, increased other direct operating expense and lower intersegment eliminations, partially offset by lower direct operating expenses of our Media Networks segment. The increase at the Studio Business reflects higher direct operating expenses of the Television Production segment due to increased revenues from Television Production, partially offset by lower direct operating expenses of the Motion Picture segment due to decreased revenues from Motion Picture. The decrease in Media Networks direct operating expense was driven by decreases of $98.5 million due to the territories exited, partially offset by increases at Starz Networks of $49.0 million due to higher programming cost amortization. The decrease in intersegment 71 eliminations is due to lower Television Production intersegment revenue, partially offset by higher Motion Picture intersegment revenue from licenses of original series and motion pictures, respectively, to the Media Networks segment, as discussed above. See further discussion in the Segment Results of Operations section below. Other. Other direct operating expense in the nine months ended December 31, 2024 includes rent cost for production facilities that were unutilized as a result of the industry strikes amounting to $14.6 million, which was not allocated to the segments, and is included in direct operating expense. In addition, other direct operating expense in the nine months ended December 31, 2024 and 2023 includes share-based compensation. These charges were offset by a benefit in the nine months ended December 31, 2024 and 2023 of $3.1 million and $0.5 million, respectively, from COVID related insurance recoveries, net of charges, if any. Distribution and Marketing Expenses. Distribution and marketing expenses by segment were as follows for the nine months ended December 31, 2024 and 2023: Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Distribution and marketing expenses Studio Business: Motion Picture $ 278.7 $ 321.7 $ (43.0) (13.4) % Television Production 27.3 24.3 3.0 12.3 % Total Studio Business 306.0 346.0 (40.0) (11.6) % Media Networks 300.0 342.0 (42.0) (12.3) % Other 0.7 0.7 — — % Intersegment eliminations (0.7) (2.7) 2.0 (74.1) % $ 606.0 $ 686.0 $ (80.0) (11.7) % U.S. theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 181.1 $ 204.0 $ (22.9) (11.2) % Distribution and marketing expenses decreased in the nine months ended December 31, 2024, due to lower Studio Business and Media Networks distribution and marketing expense. The decrease at the Studio Business primarily reflects lower Motion Picture theatrical P&A and Premium VOD expense associated with the theatrical slate releases in the current period, and lower Motion Picture home entertainment distribution and marketing expense. The decrease in Media Networks distribution and marketing expense was due to a decrease of $27.8 million primarily from the international territories exited, and a decrease at Starz Networks of $14.2 million. See further discussion in the Segment Results of Operations section below. 72 General and Administrative Expenses. General and administrative expenses by segment were as follows for the nine months ended December 31, 2024 and 2023: Nine Months Ended December 31, Change 2024 % of Revenues 2023 % of Revenues Amount Percent (Amounts in millions) General and administrative expenses Studio Business Motion Picture $ 73.6 $ 83.2 $ (9.6) (11.5) % Television Production 49.3 40.5 8.8 21.7 % Total Studio Business 122.9 123.7 (0.8) (0.6) % Media Networks 64.0 71.3 (7.3) (10.2) % Corporate 89.9 94.2 (4.3) (4.6) % Share-based compensation expense 51.3 63.9 (12.6) (19.7) % Purchase accounting and related adjustments 6.8 15.0 (8.2) (54.7) % Total general and administrative expenses $ 334.9 12.2% $ 368.1 12.7% $ (33.2) (9.0) % General and administrative expenses decreased in the nine months ended December 31, 2024, resulting from decreased share-based compensation expense, purchase accounting and related adjustments, and Media Networks, corporate and Studio Business general and administrative expenses. Studio Business general and administrative expenses for the nine months ended December 31, 2024 included approximately $18.0 million from eOne. See further discussion in the Segment Results of Operations section below. Corporate general and administrative expenses decreased $4.3 million, or 4.6%, primarily due to a decrease in incentive based compensation, partially offset by increases in professional fees and salaries and related expenses and approximately $9.0 million of corporate general and administrative expenses from eOne. The decrease in share-based compensation expense included in general and administrative expense in the nine months ended December 31, 2024, as compared to the nine months ended December 31, 2023 is primarily due to lower fair values in the current period associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved. The following table presents share-based compensation expense by financial statement line item: Nine Months Ended December 31, 2024 2023 (Amounts in millions) Share-based compensation expense by expense category General and administrative expense $ 51.3 $ 63.9 Restructuring and other (1) 4.9 8.4 Direct operating expense 2.1 2.3 Distribution and marketing expense 0.7 0.7 Total share-based compensation expense $ 59.0 $ 75.3 _______________________ (1) Represents share-based compensation expense included in restructuring and other expenses reflecting the impact of the acceleration of vesting schedules for equity awards pursuant to certain severance arrangements. Purchase accounting and related adjustments include the expense associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment, and the non-cash charge for the amortization of the recoupable portion of the purchase price related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense. The noncontrolling equity interests in the distributable earnings of 3 Arts Entertainment are reflected as an expense rather than noncontrolling interest in the unaudited condensed consolidated statement of operations due to the relationship to continued employment. Purchase accounting and related adjustments decreased $8.2 million, or 54.7%, 73 primarily due to lower noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment of $6.9 million associated with a lower noncontrolling interest ownership percentage as a result of our acquisition of an additional interest in 3 Arts Entertainment (see Note 9 to our unaudited condensed consolidated financial statements). In addition, purchase accounting and related adjustments decreased due to lower amortization of the recoupable portion of the purchase price of 3 Arts Entertainment of $1.3 million, due to the amortization period ending in May 2023. Depreciation and Amortization Expense. Depreciation and amortization of $135.4 million for the nine months ended December 31, 2024 decreased $3.5 million from $138.9 million in the nine months ended December 31, 2023 due to lower depreciation expense of $8.8 million, partially offset by increased amortization of intangible assets. Restructuring and Other. Restructuring and other decreased $299.1 million in the nine months ended December 31, 2024 as compared to the nine months ended December 31, 2023, and includes restructuring and severance costs and certain transaction and other costs, when applicable. Restructuring and other costs were as follows for the nine months ended December 31, 2024 and 2023 (see Note 14 to our unaudited condensed consolidated financial statements): 74 Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Restructuring and other: Content and other impairments (1) $ 17.1 $ 317.4 $ (300.3) (94.6) % Severance (2) 26.2 41.3 (15.1) (36.6) % Transaction and other costs (3) 28.6 12.3 16.3 132.5 % $ 71.9 $ 371.0 $ (299.1) (80.6) % _______________________ (1) Media Networks Restructuring: As discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" , the Company recorded net recoveries of content impairment charges related to the Media Networks segment in the nine months ended December 31, 2024 of $8.8 million (nine months ended December 31, 2023 - the Company recorded content impairment charges related to the Media Networks segment of $317.4 million). Subsequent to December 31, 2024, the Company removed programming on Starz's domestic platform which had a carrying value of approximately $77.4 million, which charge, measured as the excess of the carrying value over the fair value of the titles removed, will be recorded during the fourth quarter ending March 31, 2025. See Note 14 to our unaudited condensed consolidated financial statements. Content and Other Impairments: Amounts in the nine months ended December 31, 2024 also include content impairments of $7.3 million related to the Motion Picture and Television Production segments associated with exiting local production in certain international territories. Amounts in the nine months ended December 31, 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. (2) Severance costs were primarily related to restructuring, acquisition integration activities and other cost-saving initiatives. During the quarter ended December 31, 2024, in connection with the Company's current restructuring plan, approximately 8% of its eligible U.S. employees elected to take advantage of voluntary severance and early retirement packages. A total of approximately $26.1 million in severance expense is expected to be incurred under the voluntary severance program, of which $14.6 million of severance expense was recognized in restructuring and other in the nine months ended December 31, 2024, and the remaining amount is expected to be recognized in the fourth quarter ended March 31, 2025. In the nine months ended December 31, 2023, amounts were due to restructuring activities including integration of the acquisition of eOne, Media Networks international restructuring and our Motion Picture and Television Production segments. (3) Transaction and other costs in the nine months ended December 31, 2024 and 2023 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs associated with legal and other matters. In the nine months ended December 31, 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. Goodwill and Intangible Asset Impairment. Goodwill and intangible asset impairment of $663.9 million in the nine months ended December 31, 2023 included goodwill impairment of $493.9 million and impairment of our indefinite-lived trade names of $170.0 million related to the Media Networks reporting unit. There was no comparable charge in the nine months ended December 31, 2024. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates", Goodwill and Note 5 to our unaudited condensed consolidated financial statements for further information. Interest Expense. Interest expense of $212.2 million in the nine months ended December 31, 2024 increased $19.3 million from the nine months ended December 31, 2023 due to higher average balances on variable rate corporate debt and film related obligations and a smaller benefit from the interest rate swaps, partially offset by slightly lower average interest rates. The following table sets forth the components of interest expense for the nine months ended December 31, 2024 and 2023: 75 Nine Months Ended December 31, 2024 2023 (Amounts in millions) Interest Expense Cash Based: Revolving credit facility $ 44.9 $ 24.3 Term loans 45.6 67.4 Senior Notes 29.5 30.0 IP credit facilities (1) 24.9 — Other (2) 42.5 49.2 187.4 170.9 Amortization of debt issuance costs and other non-cash interest (3) 24.8 22.0 Total interest expense $ 212.2 $ 192.9 ______________________ (1) IP credit facility interest expense includes interest expense associated with the eOne IP Credit Facility and the LG IP Credit Facility. (2) Other interest expense includes payments associated with certain film related obligations (Production Tax Credit Facility, Film Library Facility, Backlog Facility and other, see Note 7 to our unaudited condensed consolidated financial statements), and payments and receipts associated with the Company's interest rate swaps (see Note 17 to our unaudited condensed consolidated financial statements). (3) Amounts include the amortization of unrealized losses in accumulated other comprehensive income (loss) related to de-designated interest rate swaps which are being amortized to interest expense (see Note 17 to our unaudited condensed consolidated financial statements). Interest and Other Income. Interest and other income of $11.6 million for the nine months ended December 31, 2024 increased as compared to interest and other income of $6.5 million for the nine months ended December 31, 2023 due to higher interest income. Other Losses, net. Other losses, net of $10.6 million for the nine months ended December 31, 2024 decreased as compared to other losses, net of $19.6 million for the nine months ended December 31, 2023. The decrease is due to lower losses recorded related to our monetization of accounts receivable programs in the nine months ended December 31, 2024 as compared to the nine months ended December 31, 2023 (see Note 18 to our unaudited condensed consolidated financial statements) and foreign currency gains in the nine months ended December 31, 2024. Gain (Loss) on Extinguishment of Debt. Loss on extinguishment of debt of $6.7 million for the nine months ended December 31, 2024 related to the write-off of debt issuance costs associated with the September 2024 and November 2024 voluntary prepayment of $605.1 million principal amount of the Term Loan B, the May 2024 voluntary prepayment of $84.9 million principal amount of the Term Loan A and $214.1 million of the Term Loan B, and the 5.5% Senior Notes exchange. In the nine months ended December 31, 2023, the gain on extinguishment of debt of $21.2 million represented a gain associated with the repurchase of $85.0 million principal amount of 5.5% Senior Notes at a discount. See Note 6 to our unaudited condensed consolidated financial statements. Gain on Investments, net. Gain on investments, net was nil for the nine months ended December 31, 2024, as compared to $2.7 million for the nine months ended December 31, 2023 related to other investments. Equity Interests Income. Equity interests income of $8.5 million in the nine months ended December 31, 2024 compared to equity interests income of $5.7 million in the nine months ended December 31, 2023 due to higher equity interest income in the current period. 76 Income Tax Provision. We had an income tax provision of $16.0 million in the nine months ended December 31, 2024, compared to an income tax provision of $12.5 million in the nine months ended December 31, 2023. Our income tax provision differs from the U.S. federal statutory income tax rate of 21% multiplied by income (loss) before taxes due to the mix of our earnings across the various jurisdictions in which our operations are conducted, changes in valuation allowances against our deferred tax assets, and certain minimum income and foreign withholding taxes. Our income tax provision for the nine months ended December 31, 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. Our income tax provision for the nine months ended December 31, 2024 was also impacted by additional deferred tax expense as result of the Separation that occurred during the quarter ended June 30, 2024. Net Loss Attributable to Lions Gate Entertainment Corp. Shareholders. Net loss attributable to our shareholders for the nine months ended December 31, 2024 was $244.7 million, or basic and diluted net loss per common share of $1.03 on 238.4 million weighted average common shares outstanding. This compares to net loss attributable to our shareholders for the nine months ended December 31, 2023 of $1,063.5 million, or basic and diluted net loss per common share of $4.56 on 233.1 million weighted average common shares outstanding. Segment Results of Operations and Non-GAAP Measures See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023", Segment Results of Operations and Non-GAAP measures for a definition of the non-GAAP measure, total segment profit and Studio Business segment profit, which when presented outside of the segment information and reconciliations included in Note 15 to our unaudited condensed consolidated financial statements, is considered a non-GAAP financial measure, and should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with United States GAAP. We use this non-GAAP measure, among other measures, to evaluate the aggregate operating performance of our business. The following table reconciles the GAAP measure, operating loss, to the non-GAAP measure, total segment profit, for the nine months ended December 31, 2024 and 2023. In addition, each of segment direct operating expense, distribution and marketing expense and general and administrative expense is reconciled to the respective line items presented in the GAAP-based statement of operations in the preceding section of the Management's Discussion and Analysis of Financial Condition and Results of Operations which discusses consolidated results of operations. Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Operating loss $ (34.1) $ (877.9) $ 843.8 (96.1) % Corporate general and administrative expenses 89.9 94.2 (4.3) (4.6) % Goodwill and intangible asset impairment — 663.9 (663.9) (100.0) % Adjusted depreciation and amortization 25.1 33.4 (8.3) (24.9) % Restructuring and other 71.9 371.0 (299.1) (80.6) % COVID-19 related charges (benefit) (3.1) (0.5) (2.6) nm Unallocated rent cost included in direct operating expense 14.6 — 14.6 n/a Adjusted share-based compensation expense 54.1 66.9 (12.8) (19.1) % Purchase accounting and related adjustments 117.1 120.5 (3.4) (2.8) % Total segment profit $ 335.5 $ 471.5 $ (136.0) (28.8) % _______________________ nm - Percentage not meaningful. 77 See Note 15 to our unaudited condensed consolidated financial statements for further information on the reconciling line items above, and for reconciliations of depreciation and amortization and share-based compensation expense as presented on our unaudited condensed consolidated statements of operations to adjusted depreciation and amortization and adjusted share-based compensation expense, respectively, as presented in the line items above. We refer to our Motion Picture and Television Production segments collectively as our Studio Business. The table below sets forth the revenues and segment profit of our collective Studio Business and Media Networks segment. Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Revenue Studio Business Motion Picture $ 1,063.3 $ 1,245.6 $ (182.3) (14.6) % Television Production 1,062.5 860.7 201.8 23.4 % Total Studio Business $ 2,125.8 $ 2,106.3 $ 19.5 0.9 % Media Networks 1,041.5 1,214.9 (173.4) (14.3) % Intersegment eliminations (413.5) (422.1) 8.6 (2.0) % $ 2,753.8 $ 2,899.1 $ (145.3) (5.0) % Segment Profit Studio Business Motion Picture $ 172.5 $ 237.1 $ (64.6) (27.2) % Television Production 96.0 94.1 1.9 2.0 % Total Studio Business $ 268.5 $ 331.2 $ (62.7) (18.9) % Media Networks 109.5 184.1 (74.6) (40.5) % Intersegment eliminations (42.5) (43.8) 1.3 (3.0) % $ 335.5 $ 471.5 $ (136.0) (28.8) % See the following discussion for further detail of our individual segments. The segment results of operations presented below do not include the elimination of intersegment transactions which are eliminated when presenting consolidated results. Motion Picture The table below sets forth Motion Picture gross contribution and segment profit for the nine months ended December 31, 2024 and 2023: 78 Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Motion Picture Segment: Revenue $ 1,063.3 $ 1,245.6 $ (182.3) (14.6) % Expenses: Direct operating expense 538.5 603.6 (65.1) (10.8) % Distribution & marketing expense 278.7 321.7 (43.0) (13.4) % Gross contribution 246.1 320.3 (74.2) (23.2) % General and administrative expenses 73.6 83.2 (9.6) (11.5) % Segment profit $ 172.5 $ 237.1 $ (64.6) (27.2) % U.S. theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 181.1 $ 204.0 $ (22.9) (11.2) % Direct operating expense as a percentage of revenue 50.6 % 48.5 % Gross contribution as a percentage of revenue 23.1 % 25.7 % Revenue. The table below sets forth Motion Picture revenue by media and product category for the nine months ended December 31, 2024 and 2023. Motion Picture revenues for the nine months ended December 31, 2024 included approximately $53.0 million of revenues from eOne. Nine Months Ended December 31, 2024 2023 Total Increase (Decrease) Lionsgate Original Releases (1) Other Film (2) Total Lionsgate Original Releases (1) Other Film (2) Total (Amounts in millions) Motion Picture Revenue Theatrical $ 87.3 $ 3.8 $ 91.1 $ 191.0 $ 3.2 $ 194.2 $ (103.1) Home Entertainment Digital Media 265.8 134.5 400.3 359.1 136.2 495.3 (95.0) Packaged Media 22.8 15.0 37.8 43.9 19.1 63.0 (25.2) Total Home Entertainment 288.6 149.5 438.1 403.0 155.3 558.3 (120.2) Television 211.2 23.8 235.0 193.9 20.6 214.5 20.5 International 225.1 59.2 284.3 220.0 35.3 255.3 29.0 Other 8.2 6.6 14.8 17.5 5.8 23.3 (8.5) $ 820.4 $ 242.9 $ 1,063.3 $ 1,025.4 $ 220.2 $ 1,245.6 $ (182.3) ____________________ (1) Lionsgate Original Releases: Includes titles originally planned for a wide theatrical release by Lionsgate, including titles that have changed from a planned wide theatrical release to an initial direct-to-streaming release. These releases include films developed and produced in-house, films co-developed and co-produced and films acquired or licensed from third parties. In addition, Lionsgate Original Releases also includes multi-platform and direct-to-platform motion pictures originally released or licensed by Lionsgate, and the licensing of our original release motion picture content to other ancillary markets (location-based entertainment, games, etc.). (2) Other Film: Includes acquired and licensed brands and libraries originally released by other parties such as third-party library product, including our titles released by acquired companies prior to our acquisition of the company (i.e., Summit Entertainment library), and titles released with our equity method investees, Roadside Attractions and Pantelion Films, and other titles. Theatrical revenue decreased $103.1 million in the nine months ended December 31, 2024 as compared to the nine months ended December 31, 2023 due to a decrease of $103.7 million from Lionsgate Original Releases due to significant revenue in the prior year's period from The Hunger Games: The Ballad of Songbirds & Snakes and John Wick: Chapter 4. 79 Home entertainment revenue decreased $120.2 million, or 21.5%, in the nine months ended December 31, 2024, as compared to the nine months ended December 31, 2023, due to lower digital media revenue and packaged media revenue of $95.0 million and $25.2 million, respectively, primarily due to decreases from Lionsgate Original Releases. Digital media revenue from Lionsgate Original Releases declined $93.3 million due to significant revenue in the prior year's period from John Wick: Chapter 4, titles in the The Hunger Games franchise, and Jesus Revolution . Packaged media revenue from Lionsgate Original Releases declined $21.1 million primarily due to revenue in the prior year's period for John Wick: Chapter 4 . Television revenue increased $20.5 million, or 9.6%, in the nine months ended December 31, 2024, as compared to the nine months ended December 31, 2023 due to an increase from Lionsgate Original Releases of $17.3 million due to higher revenue generated from our fiscal 2025 and 2024 theatrical slate titles with television windows opening in the current period as compared to the revenue from our fiscal 2024 and fiscal 2023 theatrical slate titles with television windows opening in the prior year's period . International revenue increased $29.0 million, or 11.4%, in the nine months ended December 31, 2024, as compared to the nine months ended December 31, 2023 due to an increase from Other Film of $23.9 million from our acquired library titles, and an increase from Lionsgate Original Releases of $5.1 million due to higher revenue from multi-platform releases which was mostly offset by lower revenue from our theatrical slate titles due to revenue in the prior year's period for The Hunger Games: The Ballad of Songbirds & Snakes and John Wick: Chapter 4 . Direct Operating Expense. The decrease in direct operating expenses is due to lower Motion Picture revenue. The increase in direct operating expenses as a percentage of motion picture revenue as compared to the prior year's period was driven by the change in the mix of titles and product categories generating revenue, and in particular, the performance and cost of the titles released in the period, including Borderlands , which had a higher amortization rate as compared to the titles released in the prior year's period. Investment in film write-downs included in Motion Picture segment direct operating expense were $18.8 million in the nine months ended December 31, 2024, as compared to $27.5 million in the nine months ended December 31, 2023. Distribution and Marketing Expense. The decrease in distribution and marketing expense in the nine months ended December 31, 2024 is due to lower theatrical P&A and Premium VOD expense associated with the theatrical slate releases in the current period, and lower home entertainment distribution and marketing expense. In the nine months ended December 31, 2024 approximately $32.3 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $24.8 million in the nine months ended December 31, 2023 in the Motion Picture segment. Gross Contribution. Gross contribution of the Motion Picture segment for the nine months ended December 31, 2024 decreased as compared to the nine months ended December 31, 2023 due to the negative contribution of the theatrical slate titles released in the period, including Borderlands , as a result of higher direct operating expense as a percentage of revenue, and lower Motion Picture revenue. These decreases in gross contribution were partially offset by lower Motion Picture distribution and marketing expense. General and Administrative Expense. General and administrative expenses of the Motion Picture segment in the nine months ended December 31, 2024 decreased $9.6 million, or 11.5%, primarily due to a decrease in incentive based compensation, partially offset by an increase in salaries and related expenses. 80 Television Production The table below sets forth Television Production gross contribution and segment profit for the nine months ended December 31, 2024 and 2023: Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Television Production Segment: Revenue $ 1,062.5 $ 860.7 $ 201.8 23.4 % Expenses: Direct operating expense 889.9 701.8 188.1 26.8 % Distribution & marketing expense 27.3 24.3 3.0 12.3 % Gross contribution 145.3 134.6 10.7 7.9 % General and administrative expenses 49.3 40.5 8.8 21.7 % Segment profit $ 96.0 $ 94.1 $ 1.9 2.0 % Direct operating expense as a percentage of revenue 83.8 % 81.5 % Gross contribution as a percentage of revenue 13.7 % 15.6 % 81 Revenue. The table below sets forth Television Production revenue and changes in revenue by media for the nine months ended December 31, 2024 and 2023. Television Production revenues for the nine months ended December 31, 2024 included approximately $302.1 million of revenues from eOne. Nine Months Ended December 31, Increase (Decrease) 2024 2023 Amount Percent Television Production (Amounts in millions) Television $ 733.1 $ 554.2 $ 178.9 32.3 % International 144.8 137.7 7.1 5.2 % Home Entertainment Digital 108.7 113.4 (4.7) (4.1) % Packaged Media 3.0 1.0 2.0 200.0 % Total Home Entertainment 111.7 114.4 (2.7) (2.4) % Other 72.9 54.4 18.5 34.0 % $ 1,062.5 $ 860.7 $ 201.8 23.4 % The primary component of Television Production revenue is domestic television revenue. Domestic television revenue increased in the nine months ended December 31, 2024 due to an increase of approximately $246.9 million for revenues from eOne in the current period, partially offset by decreases of $50.9 million from other third-party domestic television revenue and $16.8 million from intersegment revenues from the licensing of Starz original series to Starz Networks. The decrease from other third-party domestic television revenue was due to significant revenue in the prior year's period from The Continental and lower revenue from reality television programs. International revenue in the nine months ended December 31, 2024 increased $7.1 million, or 5.2% as compared to the nine months ended December 31, 2023 due to an increase of approximately $36.7 million for revenues from eOne in the current period, which was mostly offset by a decrease of $30.9 million from intersegment revenues from the licensing of Starz original series to Starz Networks. Home entertainment revenue in the nine months ended December 31, 2024 decreased $2.7 million, or 2.4% as compared to the nine months ended December 31, 2023 due to lower third-party digital media revenues, which reflected significant revenue in the prior year's period for The Continental, and lower intersegment revenues of $6.2 million from the licensing of Starz original series to Starz Networks. These decreases were offset by the inclusion of approximately $12.7 million of revenues from eOne in the current period. Other revenue in the nine months ended December 31, 2024 increased $18.5 million, or 34.0% from the nine months ended December 31, 2023, due to increased revenue from 3 Arts Entertainment, which is generated from commissions and executive producer fees earned related to talent management. Direct Operating Expense. Direct operating expense of the Television Production segment in the nine months ended December 31, 2024 increased $188.1 million, or 26.8% due to the increase in Television Production revenues. Direct operating expenses as a percentage of television production revenue increased primarily due to the mix of titles generating revenue in the current period as compared to the prior year's period, and in particular, the prior year's period included significant revenue from The Continental which has a lower amortization rate as compared to the current period. There were investment in film and television programs write-downs of $0.4 million included in Television Production segment direct operating expense in the nine months ended December 31, 2024, as compared to $6.6 million in the nine months ended December 31, 2023. 82 Gross Contribution. Gross contribution of the Television Production segment for the nine months ended December 31, 2024 increased as compared to the nine months ended December 31, 2023, due to increased television production revenue, partially offset by higher direct operating expenses as a percentage of television production revenue. General and Administrative Expense. General and administrative expenses of the Television Production segment increased $8.8 million, or 21.7%. Television Production general and administrative expenses for the nine months ended December 31, 2024 included $15.0 million from eOne and an increase in professional fees, partially offset by a decrease in incentive based compensation. Media Networks The table below sets forth Media Networks gross contribution and segment profit for the nine months ended December 31, 2024 and 2023. As previously discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023", the results of operations for “Other” for the nine months ended December 31, 2023 reflect amounts including the results of operations of the Exited Territories related to the Media Networks international restructuring. Nine Months Ended December 31, Change 2024 2023 Amount Percent (Amounts in millions) Media Networks Segment: Revenue $ 1,041.5 $ 1,214.9 $ (173.4) (14.3) % Expenses: Direct operating expense 568.0 617.5 (49.5) (8.0) % Distribution & marketing expense 300.0 342.0 (42.0) (12.3) % Gross contribution 173.5 255.4 (81.9) (32.1) % General and administrative expenses 64.0 71.3 (7.3) (10.2) % Segment profit $ 109.5 $ 184.1 $ (74.6) (40.5) % Direct operating expense as a percentage of revenue 54.5 % 50.8 % Gross contribution as a percentage of revenue 16.7 % 21.0 % 83 The following table sets forth the Media Networks segment profit by product line: Nine Months Ended Nine Months Ended December 31, 2024 December 31, 2023 Starz Networks (North America) (1) Other (2) Total Media Networks Starz Networks (North America) (1) Other (2) Total Media Networks (Amounts in millions) Media Networks Segment: Revenue $ 1,030.1 $ 11.4 $ 1,041.5 $ 1,032.6 $ 182.3 $ 1,214.9 Expenses: Direct operating expense 560.1 7.9 568.0 511.1 106.4 617.5 Distribution & marketing expense 297.7 2.3 300.0 311.9 30.1 342.0 Gross contribution 172.3 1.2 173.5 209.6 45.8 255.4 General and administrative expenses 61.4 2.6 64.0 59.3 12.0 71.3 Segment profit $ 110.9 $ (1.4) $ 109.5 $ 150.3 $ 33.8 $ 184.1 _______________________ (1) Starz Networks represents the results of operations of the U.S. and Canada, see footnote (2) below. (2) During the quarter ended June 30, 2024, the Company began reflecting the results of operations of Canada within Starz Networks. Accordingly, the following amounts were reclassified from "Other" (formerly "LIONSGATE+") to Starz Networks in the nine months ended December 31, 2023 to conform to the current period presentation: (i) revenue of $12.7 million; (ii) direct operating expense of $8.8 million; and (iii) distribution and marketing expense of $2.0 million, which resulted in gross contribution and segment profit of $1.9 million reclassified. The amounts reflected in "Other" consist of the results of operations outside of the U.S. and Canada. Revenue . Media Networks revenue decreased $173.4 million and reflected lower Other revenue of $170.9 million, and a decrease of $2.5 million at Starz Networks. Starz Networks' revenue decreased $2.5 million primarily because of the continued declines in revenue from traditional linear services of $44.0 million, which were mostly offset by higher OTT revenue of $40.9 million resulting from price increases. Starz Networks initiated a price increase at the end of June 2023, which was implemented by its various partners throughout the period ended September 30, 2023. Starz Networks initiated an additional price increase beginning in August 2024, which was implemented by its various partners throughout the quarter ended December 31, 2024. The Other revenue of $11.4 million for the nine months ended December 31, 2024 includes $4.5 million from the Exited Territories. The decrease in Other revenue was primarily the result of the exit from the Exited Territories which was approximately $156.9 million. In addition, the decrease in Other was due to ancillary revenue earned during the nine months ended December 31, 2023 from the distribution of certain Starz Originals and licensed content to third-party distributors outside of the Starz Platforms decreasing by approximately $13.5 million as compared to the corresponding period in fiscal 2024. During the nine months ended December 31, 2024 and 2023, the following original series premiered on STARZ: 84 Nine Months Ended December 31, 2024 Nine Months Ended December 31, 2023 Title Premiere Date Title Premiere Date First Quarter: First Quarter: Mary & George Season 1 April 5, 2024 Blindspotting Season 2 April 14, 2023 Power Book II: Ghost Season 4 Part 1 June 7, 2024 Run the World Season 2 May 26, 2023 Outlander Season 7A June 16, 2023 Second Quarter: Second Quarter: Serpent Queen Season 2 July 12, 2024 Minx Season 2 July 21, 2023 Power Book II: Ghost Season 4 Part 2 September 6, 2024 Heels Season 2 July 28, 2023 Three Women Season 1 September 13, 2024 Men in Kilts Season 2 August 11, 2023 Power Book IV: Force Season 2 July 28, 2023 Third Quarter: Third Quarter: Fat Joe Talks Season 1 October 4, 2024 Shining Value Season 2 October 13, 2023 Sweetpea Season 1 October 10, 2024 Power Book III: Raising Kanan Season 3 December 1, 2023 Outlander Season 7B November 22, 2024 Direct Operating and Distribution and Marketing Expenses . Direct operating and distribution and marketing expenses primarily represent programming cost amortization and advertising and marketing costs, respectively. The level of programming cost amortization and advertising and marketing costs and thus the gross contribution margin for the Media Networks' segment can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the network during the period. Programming cost amortization and advertising and marketing costs generally increase in periods where new original series premiere. In addition, the shutdown of the international service in the Exited Territories will result in a decrease in expenses going forward. The decrease in Media Networks direct operating expenses is due to decreases at Other of $98.5 million, partially offset by an increase at Starz Networks of $49.0 million in the nine months ended December 31, 2024. The increase in Starz Networks direct operating expense was due primarily to an increase of $112.7 million related to theatrical releases under our programming output agreements, partially offset by lower programming cost amortization of $67.9 million related to our Starz Originals. Other direct operating expenses decreased $97.2 million due to the exit from the Exited Territories. Other direct operating expense of $7.9 million for the nine months ended December 31, 2024 includes $2.8 million from the Exited Territories. The decrease in Media Networks distribution and marketing expense is due to a decrease in Other of $27.8 million primarily due to a decrease in distribution and advertising expenses resulting from the exit from the Exited Territories, and a decrease of $14.2 million at Starz Networks primarily due to a decrease in direct response advertising and marketing costs. Gross Contribution. The decrease in gross contribution compared to the nine months ended December 31, 2023 was due to lower gross contribution at Starz Networks of $37.3 million and lower gross contribution from Other of $44.6 million. Gross contribution at Starz Networks declined due to higher direct operating expense and slightly lower revenue, partially offset by lower distribution and marketing expense, as described above. Gross contribution from Other declined primarily due to the exit from the Exited Territories, and reflected lower revenue which was partially offset by lower direct operating expense and distribution and marketing expense, as described above. General and Administrative Expense. General and administrative expenses in the nine months ended December 31, 2024 decreased from the prior year's period, due to a decrease of $9.4 million from Other resulting from the exit from the Exited Territories, partially offset by an increase of $2.1 million at Starz Networks. 85 LIQUIDITY AND CAPITAL RESOURCES Sources of Cash Our liquidity and capital requirements in the nine months ended December 31, 2024 were provided principally through cash generated from operations, corporate debt, our film related obligations (as further discussed below), and the monetization of trade accounts receivable. As of December 31, 2024, we had cash and cash equivalents of $200.5 million. Business Combination. As discussed under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview", on May 13, 2024, the Company closed the Business Combination Agreement, and Lionsgate Studios became a separate publicly traded company and its common shares commenced trading on Nasdaq under the symbol "LION" on May 14, 2024. Following the transaction, approximately 87.8% of the total shares of Lionsgate Studios continue to be held by the Company, while former SEAC public shareholders and founders and common equity financing investors own approximately 12.2% of Lionsgate Studios. In addition to establishing Lionsgate Studios as a standalone publicly-traded entity, the transaction resulted in approximately $330.0 million of gross proceeds to the Company, including $254.3 million in PIPE financing. The net proceeds were used to partially pay down amounts outstanding under the Term Loan A and Term Loan B pursuant to the Credit Agreement (see Note 6 to our unaudited condensed consolidated financial statements). Corporate Debt Our corporate debt at December 31, 2024, excluding film related obligations discussed further below, consisted of the following: • Senior Credit Facilities: ◦ Revolving Credit Facility. We have a $1.25 billion revolving credit facility (with $390.0 million outstanding at December 31, 2024) due April 2026 (the "Revolving Credit Facility"). We maintain significant availability under our Revolving Credit Facility, which is currently used to meet our short-term liquidity requirements, and could also be used for longer term liquidity requirements. ◦ Term Loan A. We have a term loan A facility due April 2026 (the "Term Loan A"), with $314.4 million outstanding at December 31, 2024. In November 2024, the Company paid in full the term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"). • Senior Notes: We have $715.0 million outstanding of 5.5% senior notes due 2029 (the "5.5% Senior Notes") and 5.5% exchange notes due 2029 (the "Exchange Notes") in the aggregate at December 31, 2024. Effective upon completion of the separation of the Starz Business from the Studio Business, the interest rate will increase to 6.0% and the maturity date will extend to April 15, 2030 for a portion of the 5.5% Senior Notes which amounted to $389.9 million at December 31, 2024. On or after the Separation Closing Date, as defined in the indenture to the Exchange Notes, the Company may redeem the Exchange Notes, in whole at any time, or in part from time to time, at certain specified redemption prices, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Exchange Notes will initially be guaranteed by all existing obligors under the Existing Notes, and upon completion of the separation of the Studio Business and the Starz Business, the Exchange Notes will be guaranteed exclusively by entities which are part of the Studio Business. • 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, with $331.5 million outstanding as of December 31, 2024. The eOne IP Credit Facility matures on July 3, 2029. • 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. In November 2024 and December 2024, the Company closed amendments which increased the maximum principal amount of the LG IP Credit Facility to $850.0 million as of December 31, 2024 subject to the amount of collateral available, which is based on the valuation of unsold rights from the libraries. As of December 31, 2024, $850.0 million was outstanding under the LG IP Credit Facility. The LG IP Credit Facility matures on September 30, 2029. 86 See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our corporate debt. Film Related Obligations We utilize our film related obligations to fund our film and television productions or licenses. Our film related obligations at December 31, 2024 include the following: • Production Loans: Production loans represent individual and multi-title loans for the production of film and television programs that we produce or license. The majority of the Company's production loans have contractual repayment dates either at or near the expected completion or release dates, with the exception of certain loans containing repayment dates on a longer term basis. At December 31, 2024, there was $1,346.0 million outstanding of production loans. • Programming Notes: Programming notes represent individual loans for the licensing of film and television programs that we license, related to our Media Networks business. The Company's programming notes have contractual repayment dates in January 2025. At December 31, 2024, there was $75.8 million outstanding of programming notes. • Production Tax Credit Facility: At December 31, 2024, we had a $260.0 million non-recourse senior secured revolving credit facility due January 2025 based on collateral consisting solely of certain of the Company’s tax credit receivables (the "Production Tax Credit Facility"). As of December 31, 2024, tax credit receivables amounting to $353.1 million represented collateral related to the Production Tax Credit Facility. Cash collections from the underlying collateral (tax credit receivables) are used to repay the Production Tax Credit Facility. At December 31, 2024, there was $257.8 million outstanding under the Production Tax Credit Facility. In January and February 2025, the Company entered into amendments to the Production Tax Credit Facility which extended the maturity to January 27, 2028 and increased the maximum principal amount to $280.0 million. • Film Library Facility: In July 2021, as amended in September 2022, certain of our subsidiaries entered into a senior secured amortizing term credit facility due July 2027 (the "Film Library Facility") based on the collateral consisting solely of certain of our rights in certain acquired library titles, including the Spyglass and other recently acquired libraries. The maximum principal amount of the 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. At December 31, 2024, there was $87.5 million outstanding under the Film Library Facility. • 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 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. The Backlog Facility revolving period finishes 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 two years and 90 days after the revolving period ends, currently August 14, 2027. As of December 31, 2024, there was $151.9 million outstanding under the Backlog Facility. ◦ 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 December 31, 2024, there was $27.1 million outstanding under the "other" loans, with a contractual repayment date in July 2025. As of December 31, 2024, accounts receivable amounting to $20.8 million and contracted receivables not yet reflected as accounts receivable on the balance sheet at December 31, 2024 amounting to $11.0 million represented collateral related to the "other" loans. See Note 7 to our unaudited condensed consolidated financial statements for a discussion of our film related obligations. Accounts Receivable Monetization and Governmental Incentives Our accounts receivable monetization programs include individual agreements to monetize certain of our trade accounts receivable directly with third-party purchasers and previously have included a revolving agreement to monetize designated pools of trade accounts receivable with various financial institutions. 87 In addition, we utilize governmental incentives, programs and other structures from states and foreign countries (e.g., sales tax refunds, transferable tax credits, refundable tax credits, low interest loans, direct subsidies or cash rebates, calculated based on the amount of money spent in the particular jurisdiction in connection with the production) to fund our film and television productions and reduce financial risk. See Note 18 to our unaudited condensed consolidated financial statements for our accounts receivable monetization programs and our tax credit receivables. Uses of Cash Our principal uses of cash in operations include the funding of film and television productions, film and programming rights acquisitions, the distribution and marketing of films and television programs, and general and administrative expenses. We also use cash for debt service (i.e. principal and interest payments) requirements, equity method or other equity investments, quarterly cash dividends when declared, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of or investment in businesses. In addition, the Company has a redeemable noncontrolling interest balance of $99.7 million as of December 31, 2024 related to its acquisition of a controlling interest, consisting of a limited liability company interest, in 3 Arts Entertainment, and $93.2 million included in other liabilities-non current representing the compensatory portion of the 3 Arts Entertainment noncontrolling interest, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests (see Note 9 to our unaudited condensed consolidated financial statements). We may from time to time seek to retire or purchase or refinance our outstanding debt through cash purchases, and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, refinancing's, or otherwise. Such repurchases or exchanges or refinancing's, if any, will depend on prevailing market conditions, our liquidity requirements, our assessment of opportunities to lower interest expense, contractual restrictions and other factors, and such repurchases or exchanges could result in a charge from the early extinguishment of debt. The amounts involved may be material. Anticipated Cash Requirements. The nature of our business is such that significant initial expenditures are required to produce, acquire, distribute and market films and television programs, while revenues from these films and television programs are earned over an extended period of time after their completion or acquisition. In addition to the cash requirements of any potential future redemption of our noncontrolling interests as discussed above, which we may fund with a combination of cash on hand, borrowings under our line of credit and/or new financing arrangements, we have other anticipated cash requirements outside of our normal operations. As we continue to evaluate the Media Networks business and its current restructuring plan in relation to the current micro and macroeconomic environment and the Proposed Separation of the Company's Starz business (i.e., Media Networks segment) and Studio Business (i.e., Motion Picture and Television Production segments), including further strategic review of content performance and its strategy on a territory-by-territory basis, we may decide to expand our restructuring plan and exit additional territories or remove certain content off its platform in the future. Subsequent to December 31, 2024, the Company removed programming on Starz's domestic platform which had a carrying value of approximately $77.4 million, which charge, measured as the excess of the carrying value over the fair value of the titles removed, will be recorded during the fourth quarter ending March 31, 2025 (see Note 14 to our unaudited condensed consolidated financial statements). We may incur additional content impairment and other restructuring charges. In the short-term, we currently expect that our cash requirements for productions will increase and our marketing spend will decrease in fiscal 2025 as compared to fiscal 2024. However, we currently believe that cash flow from operations, cash on hand, revolving credit facility availability, the monetization of trade accounts receivable, tax-efficient financing, the availability from other financing obligations, available production, license or intellectual property financing, and proceeds from equity financing (see Note 2 to our unaudited condensed consolidated financial statements), will be adequate to meet known operational cash and debt service (i.e. principal and interest payments) requirements for the next 12 months and beyond, including the funding of future film and television production, film and programming rights acquisitions and theatrical and home entertainment release schedules, and future equity method or other investment funding requirements. We monitor our cash flow liquidity, availability, fixed charge coverage, capital base, film spending and leverage ratios with the long-term goal of maintaining our credit worthiness. Our current financing strategy is to fund operations and to leverage investment in films and television programs in the short-term and long-term through our cash flow from operations, our revolving credit facility, eOne IP Credit Facility, LG IP Credit Facility, production loans and programming notes, government incentive programs, the monetization of trade accounts receivable, our Production Tax Credit Facility, our Film Library Facility, our Backlog Facility, and other obligations. In 88 addition, we may acquire businesses or assets, including individual films or libraries that are complementary to our business. Any such transaction could be financed through our cash flow from operations, credit facilities, equity or debt financing. If additional financing beyond our existing cash flows from operations and credit facilities cannot fund such transactions, there is no assurance that such financing will be available on terms acceptable to us. Our ability to obtain any additional financing will depend on, among other things, our business plans, operating performance, the condition of the capital markets at the time we seek financing, and short and long-term debt ratings assigned by independent rating agencies. Additionally, circumstances related to inflation and rising interest rates and bank failures has caused disruption in the capital markets, which could make financing more difficult and/or expensive, and we may not be able to obtain such financing. We may also dispose of businesses or assets, including individual films or libraries, and use the net proceeds from such dispositions to fund operations or such acquisitions, or to repay debt. Material Cash Requirements from Known Contractual and Other Obligations. Our material cash requirements from known contractual and other obligations primarily relate to our corporate debt and film related obligations. The following table sets forth our significant contractual and other obligations as of December 31, 2024 and the estimated timing of payment: Total Next 12 Months Beyond 12 Months (Amounts in millions) Future annual repayment of debt and other obligations recorded as of December 31, 2024 (on-balance sheet arrangements) Corporate debt (1) : Revolving credit facility $ 390.0 $ — $ 390.0 Term Loan A 314.4 — 314.4 5.5% Senior Notes and Exchange Notes 715.0 — 715.0 eOne IP Credit Facility 331.5 34.0 297.5 LG IP Credit Facility 850.0 85.0 765.0 Film related obligations (2) 1,946.1 1,497.0 449.1 Content related payables (3) 182.4 147.2 35.2 Operating lease obligations 399.2 57.1 342.1 5,128.6 1,820.3 3,308.3 Contractual commitments by expected repayment date (off-balance sheet arrangements) Film related obligations commitments (4) 547.6 313.2 234.4 Interest payments (5) 527.0 171.0 356.0 Other contractual obligations 477.8 131.6 346.2 1,552.4 615.8 936.6 Total future repayment of debt and other commitments under contractual obligations (6) $ 6,681.0 $ 2,436.1 $ 4,244.9 ___________________ (1) See Note 6 to our unaudited condensed consolidated financial statements for further information on our corporate debt. (2) See Note 7 to our unaudited condensed consolidated financial statements for further information on our film related obligations. (3) Content related payables include minimum guarantees and accrued licensed program rights obligations included on our consolidated balance sheet, which represent amounts payable for film or television rights that we have acquired or licensed. (4) Film related obligations commitments include distribution and marketing commitments, minimum guarantee commitments, program rights commitments, and production loan commitments not reflected on the consolidated balance sheets as they did not then meet the criteria for recognition. (5) Includes cash interest payments on our corporate debt and film related obligations, based on the applicable SOFR interest rates at December 31, 2024, net of payments and receipts from the Company's interest rate swaps, and excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates. (6) Not included in the amounts above are $93.2 million included in other liabilities-non current representing the compensatory portion of the 3 Arts Entertainment noncontrolling interest and $99.7 million of redeemable noncontrolling interest, as future amounts and timing are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future payments (see Note 9 to our unaudited condensed consolidated financial statements). 89 We have an exclusive multiyear post pay-one output licensing agreement with Universal for live-action films theatrically released in the U.S. starting January 1, 2022. The Universal agreement provides us with rights to exhibit these films immediately following their pay-one windows. We are unable to estimate the amounts to be paid under the Universal agreement for films that have not yet been released in theaters, however, such amounts are expected to be significant. For additional details of contingencies, see Note 16 to our unaudited condensed consolidated financial statements. 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 December 31, 2024, the Company was in compliance with all applicable 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 December 31, 2024, the Company was in compliance with all applicable covenants. Share Repurchase Plan. On February 2, 2016, our Board of Directors authorized to increase our previously announced share repurchase plan from $300 million to $468 million. To date, approximately $288.1 million of our common shares have been purchased under the plan, leaving approximately $179.9 million of authorized potential repurchases. The remaining $179.9 million of our common shares authorized under the plan may be purchased from time to time at our discretion, including quantity, timing and price thereof, and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal requirements. During the nine months ended December 31, 2024, the Company did not repurchase any common shares. Dividends. The amount of dividends, if any, that we pay to our shareholders is determined by our Board of Directors, at its discretion, and is dependent on a number of factors, including our financial position, results of operations, cash flows, capital requirements and restrictions under our credit agreements, and shall be in compliance with applicable law. Capacity to Pay Dividends. At December 31, 2024, the capacity to pay dividends under the Senior Credit Facilities and the Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $259.5 million and accumulated deficit of $3,422.7 million were deemed free of restrictions from paying dividends at December 31, 2024. Discussion of Operating, Investing, Financing Cash Flows Cash, cash equivalents and restricted cash decreased by $113.6 million for the nine months ended December 31, 2024 and increased by $18.5 million for the nine months ended December 31, 2023, before foreign exchange effects on cash. Components of these changes are discussed below in more detail. Operating Activities. Cash flows provided by (used in) operating activities for the nine months ended December 31, 2024 and 2023 were as follows: Nine Months Ended December 31, 2024 2023 Net Change (Amounts in millions) Net Cash Flows Provided By (Used In) Operating Activities $ (359.7) $ 401.4 $ (761.1) Cash flows used in operating activities for the nine months ended December 31, 2024 were $359.7 million compared to cash flows provided by operating activities of $401.4 million for the nine months ended December 31, 2023. The decrease in cash provided by operating activities is due to greater cash used in changes in operating assets and liabilities of $703.5 million. The greater cash used in changes in operating assets and liabilities was driven by increased cash used for investment in film and television programs and program rights, greater decreases in content related payables, participations and residuals, and accounts payable and accrued liabilities, partially offset by greater proceeds from decreases in accounts receivable, net and greater increases in deferred revenue. 90 Investing Activities. Cash flows used in investing activities for the nine months ended December 31, 2024 and 2023 were as follows: Nine Months Ended December 31, 2024 2023 (Amounts in millions) Net proceeds from purchase price adjustments for eOne acquisition (see Note 2) $ 12.0 $ — Purchase of eOne, net of cash acquired (see Note 2) — (331.1) Proceeds from the sale of other investments 1.5 5.2 Investment in equity method investees and other (2.0) (11.3) Acquisition of assets (film library and related assets) (35.0) — Increase in (repayment of) loans receivable 0.8 (3.6) Capital expenditures (23.6) (24.7) Net Cash Flows Used In Investing Activities $ (46.3) $ (365.5) Cash flows used in investing activities of $46.3 million for the nine months ended December 31, 2024 compared to cash flows used in investing activities of $365.5 million for the nine months ended December 31, 2023, primarily due to cash used for the acquisition of a film library and related assets, partially offset by proceeds from the settlement of certain working capital items pursuant to the Purchase Agreement for eOne in the current period as compared to cash used for the purchase of eOne, net of cash acquired, in the prior year's period. Financing Activities. Cash flows provided by (used in) financing activities for the nine months ended December 31, 2024 and 2023 were as follows: Nine Months Ended December 31, 2024 2023 (Amounts in millions) Debt - borrowings, net of debt issuance and redemption costs $ 3,557.7 $ 2,270.5 Debt - repurchases and repayments (3,493.0) (1,987.4) Net proceeds from debt 64.7 283.1 Film related obligations - borrowings 1,692.0 1,262.6 Film related obligations - repayments (1,703.9) (1,530.3) Net repayments of film related obligations (11.9) (267.7) Sale of noncontrolling interest in Lionsgate Studios Corp. (see Note 2) 281.7 — Other financing activities (42.1) (32.8) Net Cash Flows Provided By (Used In) Financing Activities $ 292.4 $ (17.4) Cash flows provided by financing activities of $292.4 million for the nine months ended December 31, 2024 compared to cash flows used in financing activities of $17.4 million for the nine months ended December 31, 2023. Cash flows provided by financing activities for the nine months ended December 31, 2024 primarily reflects proceeds from the sale of a noncontrolling interest in Lionsgate Studios of $281.7 million, and net debt borrowings of $64.7 million, which were partially offset by net film related obligations repayments of $11.9 million, and cash used for other financing activities of $42.1 million representing primarily tax withholding required on equity awards of $28.7 million. Net debt borrowings of $64.7 million in the nine months ended December 31, 2024 included the below transactions, along with required repayments on our term loans and borrowings and repayments under our revolving credit facility for working capital purposes: • In May 2024, we 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. • In July 2024 and September 2024, we borrowed $340.0 million under the eOne IP Credit Facility and $455.0 million under the LG IP Credit Facility, respectively. In September 2024, we used the proceeds from the LG IP Credit Facility to prepay $355.1 million principal amount of the Term Loan B. 91 • In November 2024, we 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. • In December 2024, we borrowed $130.0 million under the LG IP Credit Facility. Cash flows used in financing activities of $17.4 million for the nine months ended December 31, 2023 primarily reflects net film related obligations repayments of $267.7 million due to net repayments under production loans and the Production Tax Credit Facility of $188.1 million and net repayments under the Backlog Facility, Film Library Facility and other of $79.6 million, and cash used for other financing activities of $32.8 million representing primarily tax withholding required on equity awards of $31.0 million. These uses of cash were partially offset by net proceeds from debt of $283.1 million in the nine months ended December 31, 2023, which included net borrowings under our revolving credit facility of $375.0 million to fund the purchase of eOne, which were offset by cash paid of $61.4 million for the repurchase of $85.0 million principal amount of the 5.5% Senior Notes, and required repayments on our term loans. Remaining Performance Obligations and Backlog Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog). As disclosed in Note 10 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.8 billion at December 31, 2024 (March 31, 2024 - $1.8 billion). The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.2 billion at December 31, 2024 (March 31, 2024 - $1.5 billion).