What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-02-03 · 393 added, 732 removed, 509 unchanged (69% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Combining the STARZ premium global subscription platform with world-class motion picture and television studio operations, Lions Gate Entertainment Corp.

(the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) brings a unique and varied portfolio of entertainment to consumers around the world.

Our film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and one of the largest collections of film and television franchises in the independent media space.

Lions Gate Entertainment Corp.

(the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) encompasses world-class motion picture and television studio operations aligned with the STARZ premium global subscription platform to bring a unique and varied portfolio of entertainment to consumers around the world.

The Company’s film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and a valuable collection of iconic film and television franchises.

We classify our operations through three reporting segments:

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COVID-19 Global Pandemic

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

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

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

Since fiscal 2020, the economic, social and regulatory impacts associated with the ongoing COVID-19 global pandemic (including its variants), continued measures to prevent its spread, and the resulting economic uncertainty, have affected our business in a number of ways.

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

Although film and television production have generally resumed, we continue to see disruption of production activities depending on local circumstances.

We also cannot predict whether productions that have resumed will be paused again, or the impact of incremental costs required to adhere to health and safety protocols.

Additionally, although the lifting of the quarantines have enabled many theaters to reopen, we are unable to predict how shifting government mandates or guidance regarding COVID-19 restrictions will impact patronage and theater capacity.

In turn, production delays (and fewer theatrical releases) have limited the availability of film content to be sold in distribution windows subsequent to the theatrical release, and have resulted in delays of release of new television content, including on our STARZ platform.

The impact of these disruptions and the extent of their adverse impact on our financial and operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unknowable duration and severity of the impacts of COVID-19 and its variants, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals’ and companies’ responses regarding health matters going forward.

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

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Three Months Ended Nine Months Ended

December 31, December 31,

2021 2020 2021 2020

Three Months Ended

(Amounts in millions)

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$ (1.0) $ 1.6

Distribution and marketing expense (2)

— 5.4 0.3 16.1

Restructuring and other (2)

0.2 0.8 0.9 1.6

Total COVID-19 related charges (benefit) $ (0.9) $ 1.9

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

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

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

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

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

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

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

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

We are in the

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

In the three months ended June 30, 2022, insurance recoveries exceeded the incremental costs expensed in the quarter, resulting in a net benefit included in direct operating expense.

(2) Amounts reflected in restructuring and other represent certain incremental general and administrative costs associated with the COVID-19 global pandemic, such as costs related to transitioning the Company to a remote-work

environment, costs associated with return-to-office safety protocols and other incremental general and administrative costs associated with the COVID-19 global pandemic.

We expect to incur additional incremental costs related to the COVID-19 global pandemic in future periods, especially if there is a continued spread of recent and new variants.

We are in the process of seeking additional insurance recovery for some of the costs already incurred and expect to seek insurance recovery for any additional incremental costs.

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

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

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

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

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

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

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

and while STARZ initially experienced an increase in viewership during the fiscal year ended March 31, 2021 of its content, future growth could be impacted by whether productions that have resumed will be paused again, and future consumer viewing patterns as the pandemic eases.

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

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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, 2021 and 2020.

countries individually comprised greater than 10% of total revenues for the three months ended June 30, 2022 and 2021.

Studio Business

Motion Picture:

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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.

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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.

Television revenues also include revenue from licenses to subscription-video-on-demand ("SVOD") platforms in which the initial license of a television series is to an SVOD platform.

Television revenues also include revenue from licenses to SVOD platforms in which the initial license of a television series is to an SVOD platform.

• International.

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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 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 earned and executive producer fees related to talent management.

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

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STARZPLAY International revenues are primarily derived from OTT distribution of the Company's STARZ branded premium subscription video services outside of the U.S.

Through March 31, 2021, our Media Networks segment also included revenues derived from Other Streaming Services, which represented revenues derived primarily from our formerly majority owned premium Spanish language streaming services business, Pantaya, which included subscriber based streaming revenue and other distribution revenue.

We sold our interest in Pantaya on March 31, 2021, for approximately $123.6 million in cash, subject to certain customary adjustments pursuant to the terms of the agreement.

Under the terms of the purchase agreement, control of Pantaya transferred to Hemisphere Media Group on March 31, 2021, with the cash consideration transferred on April 1, 2021.

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

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

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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 of DVD/Blu-ray duplication and marketing.

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.

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

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.

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.

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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 pay television rights.

The cost of the Media Networks’ third-party licensed content and produced content is allocated between the pay television market distributed by the Media Networks’ segment and the ancillary revenue markets (e.g., home video, digital platforms, international television, etc.) based on the estimated relative fair values of these markets.

Our estimates of fair value for the pay television and ancillary markets and windows of exploitation involve uncertainty and management judgment.

Programming costs vary due to the number of airings and cost of our original series, the number of films licensed and the cost per film paid under our output and library programming agreements.

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

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

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 networks could result in the earlier recognition of our programming costs than anticipated.

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.

Conversely, scheduled exhibitions and expected viewership patterns may not capture the appropriate usage of the program rights in current periods which would lead to the write-off of additional program rights in future periods and may have a significant impact on our future results of operations and our financial position.

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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 along the Company's networks and digital content offerings domestically (i.e., Starz Networks and, through March 31, 2021, Other Streaming Services) and by territory or groups of territories internationally, wherein content assets are shared across the various territories and therefore, the territory or group of territories is the film group.

The Company's film groups are generally aligned along the Company's networks and digital content offerings domestically (i.e., Starz Networks) and by territory or groups of territories internationally, wherein content assets are shared across the various territories and therefore, the territory or group of territories is the film group.

Content removed from the service and abandoned is written down to its fair value, if any, determined using a discounted cash flow approach.

Valuation Assumptions.

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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 or film group.

The fair value of any film costs associated with a film or television program that management plans to abandon is zero.

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 and packaged media), television, and international market places.

Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services and, through March 31, 2021, from our formerly majority owned premium Spanish language streaming services business, Pantaya, which includes subscriber based streaming revenue and other distribution revenue.

We sold our interest in Pantaya on March 31, 2021, see Note 2 to our unaudited condensed consolidated financial statements for further information.

and international market places.

Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services.

Our content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales or usage based royalties.

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

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

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

An incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related product) for home entertainment products would have had an impact of approximately $0.3 million on our total revenue in the three months ended June 30, 2022 (2021 - $0.5 million).

Revenue from commissions are recognized as such services are provided.

Media Networks revenues may be based on a fixed fee, subject to nominal annual escalations, or a variable fee (i.e., a fee based on number of subscribers who receive our networks or other factors).

Media Networks programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor.

The variable distribution fee arrangements represent sales or usage based royalties and are recognized over the period of such sales or usage by the Company's distributor, which is the same period that the content is provided to the distributor.

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.

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 and revenues are recognized ratably over each applicable membership period.

Payments to distributors for marketing support

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

Goodwill and Indefinite-Lived Intangibles.

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

At June 30, 2022, the carrying value of goodwill and indefinite-lived intangible assets was $2.8 billion and $250.0 million, respectively.

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

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

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

Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at June 30, 2022, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $1.97 billion), and our Television (goodwill of $309 million) and Talent Management (goodwill of $93 million) businesses, both of which are part of our Television Production segment.

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

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Goodwill Impairment Assessment:

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

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

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

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

For our annual goodwill impairment test for fiscal 2022, due to overall macroeconomic conditions, including the uncertainty of the longer-term economic impacts of the COVID-19 global pandemic, the competitive environment for subscribers and its impact on subscriber growth rates and our businesses, we performed a quantitative impairment assessment for all of our reporting units as of January 1, 2022.

The DCF analysis components of the fair value estimates were determined primarily by discounting estimated future cash flows, which included weighted average perpetual nominal growth rates ranging from 1.5% to 3.5%, at a weighted average cost of capital (discount rate) ranging from 10.5% to 11.8%, which considered the risk of achieving the projected cash flows, including the risk applicable to the reporting unit, industry and market as a whole.

Based on our annual quantitative impairment assessment for fiscal 2022, the Company determined that one of our reporting units (Media Networks) was at risk for impairment due to relatively small changes in certain key assumptions that could cause an impairment of goodwill.

The fair value analysis of our Media Networks reporting unit indicated that the fair value exceeded the related carrying value by approximately 10%.

We evaluated the sensitivity of our most critical assumptions used in the fair value analysis of our Media Networks reporting unit, including the discount rate, perpetual nominal growth rate and annual revenue growth rates.

For our Media Networks reporting unit, we determined that an increase in the discount rate of up to 0.7% or a reduction of the perpetual nominal growth rate of up to 1.4% would not have impacted the test results, assuming no changes to other factors.

During the three months ended June 30, 2022, we evaluated the current macroeconomic and microeconomic environments in relation to the current and expected performance of our reporting units.

Based on this evaluation, we determined there were no events or circumstances that would have resulted in changes to the underlying key assumptions and judgments used in our goodwill impairment test at a significance level that would indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value.

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

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 reporting units may include the duration of the COVID-19 global pandemic, its impact on the global economy and the creation and consumption of our content, and the timing of when remaining production can resume and remaining theaters can re-open;

adverse macroeconomic conditions;

continued and increasingly adverse macroeconomic conditions related to higher inflation and interest rates and currency rate fluctuations, and the impact on the global economy from Russia's invasion of Ukraine;

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

the commercial success of our television programming and our motion pictures;

capital market transactions;

the commercial success of our television programming and motion pictures;

our continual contractual relationships with our customers;

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

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

During the three months ended June 30, 2022, there were no events or circumstances that would indicate that it is more-likely-than-not that the fair value of our indefinite-lived trade names is less than its carrying value.

Finite-Lived Intangible Assets.

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

At June 30, 2022, the carrying value of our finite-lived intangible assets was approximately $1.16 billion.

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

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

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

For fiscal 2022, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption, and the economic uncertainty from the COVID-19 global pandemic, we performed an impairment analysis of our amortizable intangible assets.

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

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

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

During the three months ended June 30, 2022, there were no events or circumstances that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.

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

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RESULTS OF OPERATIONS

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

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Consolidated Results of Operations

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

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

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

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

The following table sets forth our consolidated results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Studio Business

Motion Picture $ 278.8 $ 291.2 $ (12.4) (4.3) %

Television Production 432.3 386.1 46.2 12.0 %

Total Studio Business 711.1 677.3 33.8 5.0 %

Media Networks 381.2 382.3 (1.1) (0.3) %

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

Intersegment eliminations (198.4) (158.4) (40.0) 25.3 %

Total revenues 893.9 901.2 (7.3) (0.8) %

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Total expenses 962.1 880.9 81.2 9.2 %

Operating income 9.3 37.1 (27.8) (74.9) %

Operating income (loss) (68.2) 20.3 (88.5) nm

Interest expense (46.1) (41.7) (4.4) 10.6 %

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Loss on extinguishment of debt (1.3) (26.6) 25.3 n/a

Loss on investments (0.2) — (0.2) n/a

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

Gain (loss) on investments 1.8 (0.1) 1.9 nm

Equity interests income 0.9 0.7 0.2 28.6 %

Loss before income taxes (116.6) (45.2) (71.4) 158.0 %

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nm - Percentage not meaningful.

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

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

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

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

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

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

Consolidated revenues decreased $7.3 million in the three months ended June 30, 2022 reflecting a slight decrease of $1.1 million from our Media Networks business, and an increase in intersegment eliminations, which primarily relate to the licensing of product from our Studio Business (primarily our Television Production segment) to the Media Networks segment, offset by an increase of $33.8 million from our Studio Business.

Motion Picture revenue decreased $12.4 million in the current quarter due primarily to fewer theatrical slate releases generating revenue in the quarter, lower packaged media home entertainment revenue, and decreased television revenue.

These decreases were offset by increased digital media home entertainment revenue and international revenue.

Motion Picture revenue included $3.5 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing a decrease of $0.9 million from the three months ended June 30, 2021.

Television Production revenue increased $46.2 million due to increased intersegment revenues from the licensing of Starz original series, and increased third-party revenue from reality television programs.

Television Production revenue included $194.9 million of revenue from licensing Television Production segment product to our Media Networks segment, representing an increase of $40.9 million from the three months ended June 30, 2021.

The increase in Television Production revenue was partially offset by increased intersegment eliminations associated with higher Television Production revenues for licenses of original series to Starz Networks and STARZPLAY International, both in the Media Networks segment.

Media Networks revenue decreased $1.1 million reflecting a decrease of $8.6 million at Starz Networks, partially offset by increased revenue at STARZPLAY International of $7.5 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, 2021 and 2020:

Direct operating expenses by segment were as follows for the three months ended June 30, 2022 and 2021:

Three Months Ended

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Direct operating expenses

Studio Business

Motion Picture $ 150.2 53.9 % $ 127.1 43.6 % $ 23.1 18.2 %

Television Production 393.2 91.0 365.2 94.6 28.0 7.7 %

Total Studio Business 543.4 76.4 492.3 72.7 51.1 10.4 %

Media Networks 247.2 64.8 158.8 41.5 88.4 55.7 %

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Other 0.2 nm 0.5 nm (0.3) (60.0) %

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

Intersegment eliminations (193.3) nm (167.0) nm (26.3) 15.7 %

$ 596.5 66.7 % $ 486.2 54.0 % $ 110.3 22.7 %

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

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

Media Networks direct operating expense increased due to increases at Starz Networks of $29.4 million and STARZPLAY International of $13.5 million.

Direct operating expenses increased in the three months ended June 30, 2022 due to higher direct operating expenses of the Media Networks segment and our Studio Business, partially offset by higher intersegment eliminations.

The increase in Media Networks direct operating expense was driven by increases at Starz Networks of $72.8 million and STARZPLAY International of $15.6 million.

The increase at the Studio Business reflects higher direct operating expenses of the Television Production segment due to higher revenues, and higher direct operating expenses of the Motion Picture segment due to higher direct operating expense as a percentage of Motion Picture revenue due to the mix of product in the current quarter.

The increase in intersegment eliminations is due to increased revenue from licenses of original series to Starz Networks and STARZPLAY International, as discussed above.

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

COVID-19 Related Charges.

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

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

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

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

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

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

As discussed previously, we incurred certain incremental costs associated with the COVID-19 global pandemic.

In the three months ended June 30, 2022, direct operating expense included a benefit of $1.0

million from insurance recoveries in excess of incremental costs associated with the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs resulting from circumstances associated with the COVID-19 global pandemic (three months ended June 30, 2021 - charges of $1.6 million).

We may incur additional incremental costs for direct operating expenses related to the COVID-19 global pandemic in future periods, depending on if there is a continued spread of recent and new variants.

We are in the process of seeking additional insurance recovery for some of the costs already incurred and expect to seek insurance recovery for any additional incremental costs.

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

Other direct operating expenses in the table above includes the amortization of the non-cash fair value adjustments on film and television assets associated with the application of purchase accounting related to recent acquisitions.

Other direct operating expenses in the table above includes share-based compensation, and the three months ended June 30, 2021 also includes the amortization of the non-cash fair value adjustments on film and television assets associated with the application of purchase accounting related to recent acquisitions.

Distribution and Marketing Expenses.

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

Distribution and marketing expenses by segment were as follows for the three months ended June 30, 2022 and 2021:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 2021 Amount Percent

1 unchanged sentence

Distribution and marketing expenses

Studio Business:

Motion Picture $ 55.5 $ 95.4 $ (39.9) (41.8) %

Television Production 8.4 7.9 0.5 6.3 %

Total Studio Business 63.9 103.3 (39.4) (38.1) %

Media Networks 147.5 114.2 33.3 29.2 %

COVID-19 related charges — 5.4 (5.4) (100.0) %

Other 0.1 0.1 — — %

$ 211.5 $ 217.6 $ (6.1) (2.8) %

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

_______________________

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

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

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 26.3 $ 57.9 $ (31.6) (54.6) %

Distribution and marketing expenses decreased in the three months ended June 30, 2022, due to lower Studio Business distribution and marketing expense, offset by increased Media Networks distribution and marketing expense.

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

The increase in Media Networks distribution and marketing expense was due to an increase at Starz Networks of $24.8 million resulting from an increase in spend to increase awareness of first season original series premieres and drive growth in subscribers, and an increase at STARZPLAY International of $8.5 million.

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

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

These charges are excluded from segment operating results.

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

General and Administrative Expenses.

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

General and administrative expenses by segment were as follows for the three months ended June 30, 2022 and 2021:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 % of Revenues 2021 % of Revenues Amount Percent

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General and administrative expenses

Studio Business

Motion Picture $ 22.6 $ 24.4 $ (1.8) (7.4) %

Television Production 11.1 10.0 1.1 11.0 %

Total Studio Business 33.7 34.4 (0.7) (2.0) %

Media Networks 23.5 21.1 2.4 11.4 %

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Total general and administrative expenses $ 103.7 11.6% $ 130.6 14.5% $ (26.9) (20.6) %

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

General and administrative expenses decreased in the three months ended June 30, 2022, resulting from decreased share-based compensation expense, Corporate, and Motion Picture general and administrative expenses, and purchase accounting and related adjustments, partially offset by increases in Media Networks and Television Production general and administrative expenses.

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

Corporate general and administrative expenses decreased $1.3 million, or 5.3%, primarily due to a decrease in incentive based compensation.

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

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

The decrease in share-based compensation expense included in general and administrative expense in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021 is primarily due to lower fair values associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved.

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

Three Months Ended

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General and administrative expense $ 7.5 $ 34.4

Restructuring and other (1)

Direct operating expense 0.2 0.1

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Total share-based compensation expense $ 8.4 $ 34.6

_______________________

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

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

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

Purchase accounting and related adjustments decreased $0.4 million, or 2.4%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.

Depreciation and Amortization Expense.

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

Depreciation and amortization of $42.4 million for the three months ended June 30, 2022 decreased $0.9 million from $43.3 million in the three months ended June 30, 2021 due to lower amortization expense related to our customer relationship intangible assets.

Restructuring and Other.

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

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

Restructuring and other increased $4.8 million in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, and includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the three months ended June 30, 2022 and 2021 (see Note 13 to our unaudited condensed consolidated financial statements):

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 2021 Amount Percent

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Severance (1)

— 0.9 (0.9) (100.0) %

Cash $ 2.8 $ 2.4 $ 0.4 16.7 %

Accelerated vesting on equity awards (see Note 11 to our unaudited condensed consolidated financial statements) 0.6 — 0.6 n/a

Total severance costs 3.4 2.4 1.0 41.7 %

COVID-19 related charges (2)

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Transaction and related costs (3)

0.3 0.7 (0.4) (57.1) %

4.5 0.5 4.0 nm

$ 8.0 $ 3.2 $ 4.8 150.0 %

_______________________

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

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

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

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

nm - Percentage not meaningful.

(1) Severance costs in the three months ended June 30, 2022 and 2021 were primarily related to restructuring activities in connection with cost-saving initiatives.

(2) Amounts represent certain incremental general and administrative costs associated with the COVID-19 global pandemic, such as costs related to transitioning the Company to a remote-work environment, costs associated with return-to-office safety protocols, and other incremental general and administrative costs associated with the COVID-19 global pandemic.

(3) Transaction and related costs in the three months ended June 30, 2022 and 2021 reflect transaction, integration and legal costs associated with certain strategic transactions, restructuring activities and legal matters.

Interest Expense.

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

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

Interest expense of $46.1 million in the three months ended June 30, 2022 increased $4.4 million from the three months ended June 30, 2021.

The following table sets forth the components of interest expense for the three months ended June 30, 2022 and 2021:

Three Months Ended

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(1) Amounts include payments associated with the Company's interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).

(2) Amounts include the amortization of unrealized losses in accumulated other comprehensive loss related to de-designated interest rate swaps which are being amortized to interest expense (see Note 16 to our unaudited condensed consolidated financial statements).

(2) Amounts include the amortization of unrealized losses in accumulated other comprehensive income (loss) related to de-designated interest rate swaps which are being amortized to interest expense.

The decrease is due to the amortization of unrealized gains in accumulated other comprehensive income (loss) related to the termination of certain of our interest rate swaps on May 20, 2022 (see Note 16 to our unaudited condensed consolidated financial statements).

Interest and Other Income.

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

Interest and other income of $1.3 million for the three months ended June 30, 2022 compared to interest and other income of $3.9 million for the three months ended June 30, 2021, due to insurance recoveries on prior shareholder litigation of $2.5 million in the prior year's quarter (see Note 15 to our unaudited condensed consolidated financial statements).

Other Expense.

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

Other expense of $5.0 million for the three months ended June 30, 2022 compared to other expense of $1.7 million for the three months ended June 30, 2021, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 17 to our unaudited condensed consolidated financial statements).

Loss on Extinguishment of Debt.

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

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

Loss on extinguishment of debt of $1.3 million for the three months ended June 30, 2022 represented a loss for the write-off of debt issuance costs associated with the voluntary prepayment of the entire outstanding amount of Term Loan A due March 22, 2023.

In the three months ended June 30, 2021, the loss on extinguishment of debt of $26.6 million related to the write-off of a portion of debt issuance costs (including a portion of call premiums) associated with the redemption of the 5.875% Senior Notes and 6.375% Senior Notes and associated issuance of the 5.500% Senior Notes, the amendment of our credit agreement to extend the maturity of a portion of our revolving credit commitments and a portion of our outstanding term A loans, and repurchases of the Term Loan B.

See Note 5 to our unaudited condensed consolidated financial statements.

Loss on Investments.

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

Equity Interests Loss.

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

Gain on Investments.

Gain on investments of $1.8 million for the three months ended June 30, 2022 compared to a loss on investments of $0.1 million for the three months ended June 30, 2021 due to equity securities sold in the current quarter.

Equity Interests Income.

Equity interests income of $0.9 million in the three months ended June 30, 2022 compared to equity interests income of $0.7 million in the three months ended June 30, 2021.

Income Tax Provision.

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

We had an income tax provision of $6.0 million in the three months ended June 30, 2022, compared to an income tax provision of $6.5 million in the three months ended June 30, 2021.

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

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

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

Our income tax provision for the three months ended June 30, 2022 and 2021 was also impacted by an interest accrual 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, 2021 was $45.6 million, or basic and diluted net loss per common share of $0.20 on 225.0 million weighted average common shares outstanding.

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

Net loss attributable to our shareholders for the three months ended June 30, 2022 was $119.0 million, or basic and diluted net loss per common share of $0.53 on 225.6 million weighted average common shares outstanding.

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

months ended June 30, 2021 of $45.4 million, or basic and diluted net loss per common share of $0.20 on 221.8 million weighted average common shares outstanding.

Segment Results of Operations

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The Company's primary measure of segment performance is segment profit.

Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses.

Segment profit excludes, when applicable, corporate general and administrative expense, restructuring and other costs, share-based compensation, certain programming and content charges as a result of changes in management and associated programming and content strategy, certain charges related to the COVID-19 global pandemic, and purchase accounting and related adjustments.

The Company believes the presentation of segment profit is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by the Company's management and enables them to understand the fundamental performance of the Company's businesses.

The reconciliation of segment profit to the Company's consolidated income (loss) before income taxes is presented in Note 14 to the unaudited condensed consolidated financial statements.

See Note 14 to the unaudited condensed consolidated financial statements for our definition of segment profit and a reconciliation of segment profit to the Company's consolidated loss before income taxes.

Segment Presentation

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

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

Three Months Ended

June 30, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Studio Business

Motion Picture $ 278.8 $ 291.2 $ (12.4) (4.3) %

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

Television Production 432.3 386.1 46.2 12.0 %

Total Studio Business $ 711.1 $ 677.3 $ 33.8 5.0 %

Media Networks 381.2 382.3 (1.1) (0.3) %

Intersegment eliminations (198.4) (158.4) (40.0) 25.3 %

$ 893.9 $ 901.2 $ (7.3) (0.8) %

Gross Contribution

Studio Business

Motion Picture $ 73.1 $ 68.7 $ 4.4 6.4 %

Television Production 30.7 13.0 17.7 136.2 %

Total Studio Business $ 103.8 $ 81.7 $ 22.1 27.1 %

Media Networks (13.5) 109.3 (122.8) (112.4) %

Intersegment eliminations (5.1) 8.6 (13.7) (159.3) %

$ 85.2 $ 199.6 $ (114.4) (57.3) %

Segment Profit

Studio Business

Motion Picture $ 50.5 $ 44.3 $ 6.2 14.0 %

Television Production 19.6 3.0 16.6 553.3 %

Total Studio Business $ 70.1 $ 47.3 $ 22.8 48.2 %

Media Networks (37.0) 88.2 (125.2) (142.0) %

Intersegment eliminations (5.1) 8.6 (13.7) (159.3) %

$ 28.0 $ 144.1 $ (116.1) (80.6) %

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

Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended June 30, 2022 and 2021:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 2021 Amount Percent

7 unchanged sentences

Segment profit $ 50.5 $ 44.3 $ 6.2 14.0 %

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

theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 26.3 $ 57.9 $ (31.6) (54.6) %

Direct operating expense as a percentage of revenue 53.9 % 43.6 %

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

Three Months Ended December 31,

The table below sets forth Motion Picture revenue by media and product category for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

2022 2021 Total Increase (Decrease)

Feature Film (1)

Lionsgate Original Releases (1)

Other Film (2)

Total Feature Film (1)

Total Lionsgate Original Releases (1)

Other Film (2)

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____________________

(1) Feature Film:

Includes theatrical releases through our Lionsgate and Summit Entertainment film labels, which includes films developed and produced in-house, films co-developed and co-produced and films acquired from third parties.

(1) During the quarter ended March 31, 2022, we changed the presentation of the categories in the table above to "Lionsgate Original Releases" and "Other Film", and changed the definitions of these categories as described further below, in order to be consistent with how management is now reviewing the Motion Picture segment.

Through December 31, 2021, we had previously presented a "Feature Film" and "Other Film" category.

Accordingly, amounts presented in the table above for the three months ended June 30, 2021 have been conformed to the current period presentation.

(2) 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.).

(3) Other Film:

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

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

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

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

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

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

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

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

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

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 $17.5 million in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 due to a decrease of $17.5 million from Lionsgate Original Releases driven by fewer theatrical slate releases generating revenue in the quarter.

Home entertainment revenue increased $8.1 million, or 5.5%, in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, due to higher digital media revenue of $20.0 million, offset by lower packaged media revenue of $11.9 million driven by Lionsgate Original Releases.

The increase in digital media revenue was due to an increase of $13.6 million from Lionsgate Original Releases due to higher revenue from direct-to-platform (i.e., SVOD) releases, and an increase of $6.4 million from Other Film due to higher revenue from our acquired library titles.

Television revenue decreased $5.5 million, or 10.8%, in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, due to a decrease from Lionsgate Original Releases of $10.8 million due to fewer television windows opening for our theatrical slate titles than in the prior year's quarter, offset by an increase from Other Film of $5.3 million due to higher revenue from our acquired library titles.

International revenue increased $2.9 million, or 4.6%, in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021 due to an increase from Lionsgate Original Releases, and from our Other Film acquired library titles.

Direct Operating Expense.

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

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

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

The increase in direct operating expenses is due to higher expense as a percentage of motion picture revenue in the current quarter.

The increase in direct operating expenses as a percentage of motion picture revenue is driven by the change in the mix of titles and product categories generating revenue in the current quarter as compared to the prior year's quarter, including higher expense related to direct-to-platform Lionsgate Original Releases (which require less marketing cost and generally carry less risk, and thus the film cost is higher as a percentage of revenue) representing approximately 3.7% of the increase, and increased development write-offs on Lionsgate Original Releases in the current quarter, representing approximately 4.7% of the increase.

Investment in film write-downs included in Motion Picture segment direct operating expense in the three months ended June 30, 2022 were $0.5 million, as compared to none in the three months ended June 30, 2021.

Distribution and Marketing Expense.

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

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

The decrease in distribution and marketing expense in the three months ended June 30, 2022 is due to lower theatrical P&A and Premium VOD expense associated with fewer releases in the current quarter.

In the three months ended June 30, 2022 approximately $5.3 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $2.7 million in the three months ended June 30, 2021 in the Motion Picture segment.

Gross Contribution.

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

Gross contribution of the Motion Picture segment for the three months ended June 30, 2022 increased as compared to the three months ended June 30, 2021 due to lower Motion Picture distribution and marketing expense, partially offset by lower Motion Picture revenue and higher direct operating expense as a percentage of Motion Picture revenue.

General and Administrative Expense.

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

General and administrative expenses of the Motion Picture segment in the three months ended June 30, 2022 decreased $1.8 million, or 7.4%, primarily due to a decrease in incentive based compensation.

Television Production

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

The table below sets forth Television Production gross contribution and segment profit for the three months ended June 30, 2022 and 2021:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 2021 Amount Percent

9 unchanged sentences

Gross contribution as a percentage of revenue 7.1 % 3.4 %

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

The table below sets forth Television Production revenue and changes in revenue by media for the three months ended June 30, 2022 and 2021:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Television Production Revenue

Television Production (Amounts in millions)

Television $ 301.3 $ 272.2 $ 29.1 10.7 %

7 unchanged sentences

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

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

Ghost Season 2 , Power Book IV:

Force Season 1, Step Up:

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

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

High Water Season 3, Power Book IV:

Force Season 1, and Power Book II:

Ghost Season 2).

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

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

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

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

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

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

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

Domestic television revenue increased in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, due to an increase of $14.0 million from intersegment revenues from the licensing of Starz original series (Power Book III:

Raising Kanan, The Serpent Queen Season 1 , P-Valley Season 2 , Party Down Season 3 , among others) to Starz Networks, and increased third-party revenue from reality television programs.

International revenue in the three months ended June 30, 2022 increased $11.8 million, or 17.5% as compared to the three months ended June 30, 2021 due to an increase of $12.9 million from intersegment revenues from the licensing of Starz original series ( The Serpent Queen Season 1, Power Book III:

Raising Kanan Season 2, Party Down Season 3, P-Valley Season 2) to STARZPLAY International.

Home entertainment revenue in the three months ended June 30, 2022 increased $5.4 million, or 20.1% as compared to the three months ended June 30, 2021 due to digital media revenue from Heels Season 1 and The First Lady Season 1 in the current quarter, which compared to digital media revenue in the prior year's quarter for Weeds Seasons 1 to 8 and Welcome to Flatch Season 1.

Other revenue in the three months ended June 30, 2022 was comparable to the three months ended June 30, 2021, and primarily includes revenue of 3 Arts Entertainment.

Direct Operating Expense.

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

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

Direct operating expense of the Television Production segment in the three months ended June 30, 2022 increased $28.0 million, or 7.7% due to the increase in Television Production revenues.

Direct operating expenses as a percentage of television production revenue decreased slightly as compared to the prior year's quarter, which included higher write-downs to fair value of investment in film and television programs.

The current quarter included write-downs to fair value of investment in film and television programs amounting to $1.2 million in aggregate, as compared to $25.0 million in the prior year's quarter.

Gross Contribution.

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

Gross contribution of the Television Production segment for the three months ended June 30, 2022 increased as compared to the three months ended June 30, 2021, due to increased 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 decreased $0.2 million, or 2.1%.

General and administrative expenses of the Television Production segment increased $1.1 million, or 11.0% primarily due to an increase in salaries and related expenses.

Media Networks

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

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

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

The table below sets forth Media Networks gross contribution and segment profit for the three months ended June 30, 2022 and 2021:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2022 2021 Amount Percent

11 unchanged sentences

Three Months Ended Three Months Ended

December 31, 2021 December 31, 2020

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

June 30, 2022 June 30, 2021

Starz Networks STARZPLAY International Total Media Networks Starz Networks STARZPLAY International Total Media Networks

(Amounts in millions)

7 unchanged sentences

Subscriber Data.

The number of period-end service subscribers is a key metric to evaluate a non-ad supported subscription video service as a growing or decreasing subscriber base is a key indicator of the health of the overall business.

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.

December 31, December 31,

June 30, June 30,

(Amounts in millions)

18 unchanged sentences

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

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

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

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

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

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

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

Three Months Ended December 31, 2021 (1)

Three Months Ended December 31, 2020 (2)

Hightown Season 2

Inside the NXIVM Cult

Power Book II:

Ghost Season 2

The Spanish Princess Season 2

___________________

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

(2) In addition, while Power Book II:

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

Direct Operating and Distribution and Marketing Expenses .

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

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

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

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

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

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

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

Gross Contribution.

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

General and Administrative Expense.

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

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

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

Consolidated Results of Operations

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

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

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

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

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

(Amounts in millions)

Motion Picture $ 897.3 $ 788.6 $ 108.7 13.8 %

Television Production 1,160.8 621.0 539.8 86.9 %

Media Networks 1,155.9 1,161.7 (5.8) (0.5) %

Intersegment eliminations (539.6) (176.3) (363.3) 206.1 %

Total revenues 2,674.4 2,395.0 279.4 11.7 %

Direct operating 1,487.2 1,249.0 238.2 19.1 %

Distribution and marketing 633.4 484.6 148.8 30.7 %

General and administration 353.1 343.3 9.8 2.9 %

Depreciation and amortization 134.1 142.9 (8.8) (6.2) %

Restructuring and other 7.2 18.9 (11.7) (61.9) %

Total expenses 2,615.0 2,238.7 376.3 16.8 %

Operating income 59.4 156.3 (96.9) (62.0) %

Interest expense (130.0) (135.2) 5.2 (3.8) %

Interest and other income 29.4 2.2 27.2 nm

Other expense (6.2) (4.5) (1.7) 37.8 %

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

Gain on investments 1.2 0.3 0.9 nm

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

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

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

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

Net loss attributable to noncontrolling interest 13.9 11.5 2.4 20.9 %

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

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

_______________________

nm - Percentage not meaningful.

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

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

These increases were partially offset by lower home entertainment revenue.

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

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

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

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

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

Direct Operating Expenses.

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

Nine Months Ended

2021 2020 Increase (Decrease)

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

(Amounts in millions)

Direct operating expenses

Motion Picture $ 398.5 44.4 % $ 373.0 47.3 % $ 25.5 6.8 %

Television Production 1,058.1 91.2 494.3 79.6 563.8 114.1 %

Media Networks 574.8 49.7 504.6 43.4 70.2 13.9 %

COVID-19 related charges (2.3) nm 36.6 nm (38.9) (106.3) %

Other 1.4 nm 2.5 nm (1.1) (44.0) %

Intersegment eliminations (543.3) nm (162.0) nm (381.3) 235.4 %

$ 1,487.2 55.6 % $ 1,249.0 52.2 % $ 238.2 19.1 %

_______________________

nm - Percentage not meaningful.

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

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

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

COVID-19 Related Charges.

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

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

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

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

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

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

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

Distribution and Marketing Expenses.

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

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

(Amounts in millions)

Distribution and marketing expenses

Motion Picture $ 215.5 $ 101.7 $ 113.8 111.9 %

Television Production 23.1 20.9 2.2 10.5 %

Media Networks 394.0 345.5 48.5 14.0 %

COVID-19 related charges 0.3 16.1 (15.8) (98.1) %

Other 0.5 0.4 0.1 25.0 %

$ 633.4 $ 484.6 $ 148.8 30.7 %

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

_______________________

nm - Percentage not meaningful.

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

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

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

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

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

These charges are excluded from segment operating results.

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

General and Administrative Expenses.

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

Nine Months Ended

December 31, Increase (Decrease)

2021 % of Revenues 2020 % of Revenues Amount Percent

(Amounts in millions)

General and administrative expenses

Motion Picture $ 69.8 $ 79.8 $ (10.0) (12.5) %

Television Production 28.8 31.5 (2.7) (8.6) %

Media Networks 65.0 65.3 (0.3) (0.5) %

Corporate 70.5 76.9 (6.4) (8.3) %

234.1 8.8% 253.5 10.6% (19.4) (7.7) %

Share-based compensation expense 76.1 55.2 20.9 37.9 %

Purchase accounting and related adjustments 42.9 34.6 8.3 24.0 %

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

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

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

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

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

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

Nine Months Ended

(Amounts in millions)

Share-based compensation expense by expense category

General and administrative expense $ 76.1 $ 55.2

Restructuring and other (1)

Direct operating expense 0.9 1.5

Distribution and marketing expense 0.5 0.5

Total share-based compensation expense $ 77.5 $ 60.0

_______________________

Purchase accounting and related adjustments increased $8.3 million, or 24.0%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.

Depreciation and Amortization Expense.

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

amortization expense related to our customer relationship intangible assets.

Restructuring and Other.

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

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

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

(Amounts in millions)

Restructuring and other:

Severance (1)

Cash $ 3.8 $ 11.6 $ (7.8) (67.2) %

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

Total severance costs 3.8 14.4 (10.6) (73.6) %

COVID-19 related charges (2)

0.9 1.6 (0.7) (43.8) %

Transaction and related costs (3)

2.5 2.9 (0.4) (13.8) %

$ 7.2 $ 18.9 $ (11.7) (61.9) %

_______________________

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

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

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

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

Interest Expense.

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

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

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

Nine Months Ended

(Amounts in millions)

Interest Expense

Revolving credit facility $ 4.9 $ 3.2

Term loans 25.0 29.2

Senior Notes 41.0 48.9

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

Total interest expense $ 130.0 $ 135.2

______________________

(1) Amounts include payments associated with the Company's interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).

Interest and Other Income.

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

Other Expense.

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

Loss on Extinguishment of Debt.

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

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

See Note 5 to our unaudited condensed consolidated financial statements.

Gain on Investments.

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

Equity Interests Loss.

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

Income Tax Provision.

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

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

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

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

Shareholders.

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

This compares to net income attributable to our

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

Segment Results of Operations

The segment results of operations presented below do not include the elimination of intersegment transactions which are eliminated when presenting consolidated results, and exclude items separately identified in the restructuring and other line item in the unaudited condensed consolidated statements of operations.

The Company's primary measure of segment performance is segment profit.

Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses.

The reconciliation of segment profit to the Company's consolidated income (loss) before income taxes is presented in Note 14 to the unaudited condensed consolidated financial statements.

Motion Picture

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

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

(Amounts in millions)

Motion Picture Segment:

Revenue $ 897.3 $ 788.6 $ 108.7 13.8 %

Direct operating expense 398.5 373.0 25.5 6.8 %

Distribution & marketing expense 215.5 101.7 113.8 111.9 %

Gross contribution 283.3 313.9 (30.6) (9.7) %

General and administrative expenses 69.8 79.8 (10.0) (12.5) %

Segment profit $ 213.5 $ 234.1 $ (20.6) (8.8) %

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

Direct operating expense as a percentage of revenue 44.4 % 47.3 %

Gross contribution as a percentage of revenue 31.6 % 39.8 %

_______________________

nm - Percentage not meaningful.

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

Nine Months Ended December 31,

2021 2020 Total Increase (Decrease)

Feature Film (1)

Other Film (2)

Total Feature Film (1)

Other Film (2)

(Amounts in millions)

Motion Picture Revenue

Theatrical $ 38.8 $ 11.2 $ 50.0 $ 1.5 $ 0.6 $ 2.1 $ 47.9

Home Entertainment

Digital Media 174.7 180.9 355.6 193.9 173.1 367.0 (11.4)

Packaged Media 42.7 53.7 96.4 55.7 54.1 109.8 (13.4)

Total Home Entertainment 217.4 234.6 452.0 249.6 227.2 476.8 (24.8)

Television 169.9 39.8 209.7 121.7 32.2 153.9 55.8

International 120.8 53.7 174.5 86.6 59.4 146.0 28.5

Other 5.9 5.2 11.1 5.8 4.0 9.8 1.3

$ 552.8 $ 344.5 $ 897.3 $ 465.2 $ 323.4 $ 788.6 $ 108.7

____________________

(1) Feature Film:

(2) Other Film:

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

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

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

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

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

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

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

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

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

Direct Operating Expense.

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

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

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

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

Distribution and Marketing Expense.

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

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

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

Gross Contribution.

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

General and Administrative Expense.

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

Television Production

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

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

(Amounts in millions)

Television Production Segment:

Revenue $ 1,160.8 $ 621.0 $ 539.8 86.9 %

Direct operating expense 1,058.1 494.3 563.8 114.1 %

Distribution & marketing expense 23.1 20.9 2.2 10.5 %

Gross contribution 79.6 105.8 (26.2) (24.8) %

General and administrative expenses 28.8 31.5 (2.7) (8.6) %

Segment profit $ 50.8 $ 74.3 $ (23.5) (31.6) %

Direct operating expense as a percentage of revenue 91.2 % 79.6 %

Gross contribution as a percentage of revenue 6.9 % 17.0 %

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

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

Television Production (Amounts in millions)

Television $ 840.7 $ 332.3 $ 508.4 153.0 %

International 180.2 120.4 59.8 49.7 %

Home Entertainment

Digital 70.6 119.8 (49.2) (41.1) %

Packaged Media 5.1 4.9 0.2 4.1 %

Total Home Entertainment 75.7 124.7 (49.0) (39.3) %

Other 64.2 43.6 20.6 47.2 %

$ 1,160.8 $ 621.0 $ 539.8 86.9 %

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

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

Raising Kanan, Power Book IV:

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

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

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

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

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

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

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

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

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

Direct Operating Expense.

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

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

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

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

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

Gross Contribution.

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

General and Administrative Expense.

General and administrative expenses of the Television Production segment decreased $2.7 million, or 8.6% due to 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, 2021 and 2020.

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

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

Nine Months Ended

December 31, Increase (Decrease)

2021 2020 Amount Percent

(Amounts in millions)

Media Networks Segment:

Revenue $ 1,155.9 $ 1,161.7 $ (5.8) (0.5) %

Direct operating expense 574.8 504.6 70.2 13.9 %

Distribution & marketing expense 394.0 345.5 48.5 14.0 %

Gross contribution 187.1 311.6 (124.5) (40.0) %

General and administrative expenses 65.0 65.3 (0.3) (0.5) %

Segment profit $ 122.1 $ 246.3 $ (124.2) (50.4) %

Direct operating expense as a percentage of revenue 49.7 % 43.4 %

Gross contribution as a percentage of revenue 16.2 % 26.8 %

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

Nine Months Ended Nine Months Ended

December 31, 2021 December 31, 2020

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

(Amounts in millions)

Media Networks Segment:

Revenue $ 1,079.2 $ 76.7 $ 1,155.9 $ 1,081.8 $ 41.9 $ 38.0 $ 1,161.7

Direct operating expense 471.7 103.1 574.8 438.3 58.3 8.0 504.6

Distribution & marketing expense 318.4 75.6 394.0 256.5 59.5 29.5 345.5

Gross contribution 289.1 (102.0) 187.1 387.0 (75.9) 0.5 311.6

General and administrative expenses 47.4 17.6 65.0 47.5 12.6 5.2 65.3

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

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

STARZPLAY International revenue increased as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since December 31, 2020.

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

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

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

Media Networks revenue decreased $1.1 million reflecting a decrease of $8.6 million at Starz Networks, partially offset by increased revenue at STARZPLAY International of $7.5 million as a result of subscriber and revenue growth in the international territories previously launched, and additional territories launched since June 30, 2021.

Starz Networks' revenue decreased as a result of declines in revenue of $37.0 million from traditional linear services, which were mostly offset by higher OTT revenue of $27.8 million resulting from increased subscriptions.

During the three months ended June 30, 2022 and 2021, the following original series premiered on STARZ:

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021

Title Premiere Date Title Premiere Date

First Quarter:

The Girlfriend Experience Season 3

Vida Season 3

Run the World Season 1

Hightown Season 1

Blindspotting Season 1

Second Quarter:

Power Book III:

Raising Kanan Season 1

Gaslit April 24, 2022 The Girlfriend Experience Season 3

P-Valley Season 2

Heels Season 1

Power Book II:

Ghost Season 1

BMF - Black Mafia Family Season 1

Third Quarter:

Hightown Season 2

Inside the NXIVM Cult

Power Book II:

Ghost Season 2

The Spanish Princess Season 2

___________________

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

(2) In addition, while Power Book II:

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

June 3, 2022 Run the World Season 1

Becoming Elizabeth Season 1

June 12, 2022 Blindspotting Season 1

June 13, 2021

Who is Ghislaine Maxwell June 26, 2022

Direct Operating and Distribution and Marketing Expenses .

3 unchanged sentences

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

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

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

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

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

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

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

The increase in Media Networks direct operating expenses is due to increases at Starz Networks of $72.8 million and STARZPLAY International of $15.6 million in the three months ended June 30, 2022.

The increase in Starz Networks direct operating expense was primarily due to higher programming cost amortization related to our Starz Originals of $79.5 million primarily related to higher cost original series premieres, partially offset by lower programming amortization of $13.3 million related to theatrical releases under our programming output agreements.

Direct operating expenses at STARZPLAY International increased as a result of the continued expansion of STARZPLAY International and foreign currency fluctuations related to the strengthening U.S.

The increase in Media Networks distribution and marketing expense is due to an increase of $24.8 million at Starz Networks and $8.5 million at STARZPLAY International, resulting from an increase in spend to increase awareness of first season original series premieres and drive growth in subscribers.

Gross Contribution.

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

described above.

The decrease in gross contribution compared to the three months ended June 30, 2021 was due to decreases at Starz Networks of $106.2 million and STARZPLAY International of $16.6 million, driven by higher direct operating expense and distribution and marketing expense, partially offset by higher STARZPLAY International revenue, all as described above.

General and Administrative Expense.

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

General and administrative expenses in the three months ended June 30, 2022 increased slightly from the prior year's quarter, due to increases of $1.1 million at Starz Networks, and $1.3 million at STARZPLAY International.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

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

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

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

Sources of Cash

Our liquidity and capital requirements in the three months ended June 30, 2022 were provided principally through cash generated from operations, corporate debt, our film related financing and other obligations (as further discussed below), and the monetization of trade accounts receivable.

As of June 30, 2022, we had cash and cash equivalents of $378.5 million.

Corporate Debt

Our corporate debt at June 30, 2022, excluding film related financing and other obligations discussed further below, consisted of the following:

• Senior Credit Facilities:

◦ Revolving Credit Facility.

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

We have a $1.25 billion revolving credit facility (with no amounts outstanding at June 30, 2022) 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, of which a portion of its outstanding loans, amounting to $444.9 million at December 31, 2021 is due April 2026 (the "2026 Term Loan A") and a portion of its outstanding loans, amounting to $199.0 million at December 31, 2021 is due March 2023 (the "2023 Term Loan A" and together with the 2026 Term Loan A, the "Term Loan A").

We have a term loan A facility due April 2026 (the "Term Loan A"), with $444.9 million outstanding at June 30, 2022.

◦ Term Loan B.

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

• Senior Notes:

We have a term loan B facility due March 2025 (the "Term Loan B", and, together with the Revolving Credit Facility and the Term Loan A, the "Senior Credit Facilities"), with $841.0 million outstanding at June 30, 2022.

• Senior Notes:

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

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

We have $1.0 billion outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at June 30, 2022.

In July 2022, we repurchased $18.7 million principal amount of the 5.500% Senior Notes for $14.6 million, together with accrued and unpaid interest.

See Note 18 - Subsequent Events to our unaudited condensed consolidated financial statements.

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

Film Related Financing and Other Obligations

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

Our film related financing and other obligations at June 30, 2022 include the following:

• Production Loans:

Production loans represent individual 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 date, with the exception of certain loans containing repayment dates on a longer term basis.

At June 30, 2022, there was $1,135.0 million outstanding of production loans.

• Programming Notes:

Programming notes represent individual loans for the license of film and television programs that we license.

The Company's programming notes have contractual repayment dates in July 2022.

At June 30, 2022, there was $56.2 million outstanding of programming notes.

• Production Tax Credit Facility:

We have a $235.0 million non-recourse senior secured revolving credit facility due January 2025 based on collateral consisting of certain of the Company’s tax credit receivables (the "Production Tax Credit Facility").

At June 30, 2022, there was $233.7 million outstanding of production and related loans.

• IP Credit Facility:

In July 2021, as amended on September 30, 2021, certain of our subsidiaries entered into a senior secured amortizing term credit facility due July 2026 (the "IP Credit Facility") based on the collateral consisting solely of certain of our rights in certain library titles, including the Spyglass and other recently acquired libraries.

The maximum principal amount of the IP Credit Facility is $140.0 million, subject to the amount of collateral available, which is based on the valuation of cash flows from the libraries.

At June 30, 2022, there was $114.0 million outstanding under the IP Credit Facility.

• Backlog Financing Facility and Other:

◦ Backlog Financing Facility.

In March 2022, as amended in August 2022, certain subsidiaries of the Company entered into a committed secured revolving credit facility (the "Backlog Financing Facility") based on collateral consisting 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 Financing Facility as of June 30, 2022 was $125.0 million, subject to the amount of eligible collateral contributed to the facility.

In August 2022, the Company amended its Backlog Financing Facility and increased the maximum principal amount of the Backlog Financing Facility from $125.0 million to $175.0 million (see Note 18 - Subsequent Events to our unaudited condensed consolidated financial statements).

The Backlog Financing 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 2 years and 90 days after the revolving period ends, currently August 14, 2027.

As of June 30, 2022, there was $125.0 million outstanding under the Backlog Financing Facility.

On June 28, 2022, the Company borrowed $118.6 million under a loan agreement which is secured by contracted receivables which are not yet recognized as revenue under certain licensing agreements (the "Distribution Loan Agreement").

The loan agreement matures on December 28, 2025.

Outstanding loan balances 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.

See Note 6 to our unaudited condensed consolidated financial statements for a discussion of our film related and other financing obligations.

Accounts Receivable Monetization and Governmental Incentives

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

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 17 to our unaudited condensed consolidated financial statements for our accounts receivable monetization programs and our tax credit receivables.

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

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

Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Redeemable Noncontrolling Interests.

In addition, the Company has a redeemable noncontrolling interest balance of $336.6 million as of June 30, 2022 related to its acquisition of a controlling interest in Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests (see Note 8 to our unaudited condensed consolidated financial statements).

• 3 Arts Entertainment.

The noncontrolling interest holders have a right to put the noncontrolling interest of 3 Arts Entertainment, at fair value, exercisable beginning May 29, 2023, for a 60 day period.

Beginning 30 days after the expiration of the exercise period for the put rights held by the noncontrolling interest holders, the Company has a right to call the noncontrolling interest of 3 Arts Entertainment, at fair value, for a 60 day period.

• Pilgrim Media Group.

Pursuant to an amendment dated April 2, 2021, the put and call rights associated with the noncontrolling interest were extended and modified, such that the noncontrolling interest holder has a right to put and the Company has a right to call a portion of the noncontrolling interest, equal to 25% of Pilgrim Media Group, at fair value, exercisable for thirty (30) days beginning November 12, 2022.

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

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

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

The amounts involved may be material.

1 unchanged sentence

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.

We expect to continue to increase our investments in film and television programs and film and programming rights acquisitions.

In addition, the launch of the Company's STARZPLAY international service has and will require capital investment as the service expands to other international territories.

In the short-term, while a portion of our revenue has been reduced as a result of disruptions associated with the COVID-19 global pandemic, our cash requirements for productions and marketing spends have also been reduced.

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

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

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

In the short-term, we currently expect that our cash requirements for productions will increase and that our cash requirements for marketing spends will be comparable in fiscal 2023 as compared to fiscal 2022, due to the expected increase in film and television programs, productions or acquisitions in fiscal 2023.

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

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

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 through our cash flow from operations, our revolving credit facility, single-purpose production or license financing, government incentive programs, film funds, distribution commitments, the monetization of trade accounts receivable, our Production Tax Credit Facility and our IP Credit Facility.

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, production loans and programming notes, government incentive programs, film funds, the monetization of trade accounts receivable, our Production Tax Credit Facility, our IP Credit Facility, our Backlog Financing Facility, and other financing obligations.

In addition, we continue to expand our STARZPLAY international service and may acquire businesses or assets, including individual films or libraries that are complementary to our business.

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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 and the condition of the capital markets at the time we seek financing.

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

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

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 and other obligations.

The following table sets forth our significant contractual and other obligations as of June 30, 2022 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 June 30, 2022 (on-balance sheet arrangements)

Corporate debt (1) :

Revolving credit facility $ — $ — $ —

Term Loan A 444.9 22.2 422.7

Term Loan B 841.0 12.5 828.5

5.500% Senior Notes (1)

1,000.0 18.7 981.3

Film related and other obligations (2)

1,782.5 1,090.3 692.2

Operating lease obligations 200.8 41.9 158.9

4,269.2 1,185.6 3,083.6

Contractual commitments by expected repayment date (off-balance sheet arrangements)

Film related obligations commitments (3)

920.9 416.3 504.6

Interest payments on corporate debt (4)

634.3 134.8 499.5

Other contractual obligations 386.8 120.3 266.5

1,942.0 671.4 1,270.6

Total future repayment of debt and other commitments under contractual obligations (5)

$ 6,211.2 $ 1,857.0 $ 4,354.2

___________________

(1) See Note 5 to our unaudited condensed consolidated financial statements for further information on our corporate debt.

In July 2022, we repurchased $18.7 million principal amount of the 5.500% Senior Notes for $14.6 million, together with accrued and unpaid interest.

See Note 18 - Subsequent Events to our unaudited condensed consolidated financial statements for further information.

(2) Film related and other obligations include program rights and film obligations, and film related financing and other obligations (i.e., production loans, Production Tax Credit Facility, programming notes, Backlog Financing Facility and other, and IP Credit Facility), included on the consolidated balance sheets.

See Note 6 to our unaudited condensed consolidated financial statements for further information.

(3) 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.

(4) Includes cash interest payments on our corporate debt, excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

(5) Not included in the amounts above are $336.6 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 8 to our unaudited condensed consolidated financial statements).

We are obligated to pay programming fees for all qualifying films that are released theatrically in the U.S.

by Sony’s Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels through 2021.

We do not license films produced by Sony Pictures Animation.

The programming fees to be paid by us to Sony are based on the quantity and domestic theatrical exhibition receipts of qualifying films.

We also 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.

In addition, as of June 30, 2022, we had gross unrecognized tax benefits of $70.2 million.

We are unable to reasonably predict the ultimate amount or timing of settlement of our unrecognized tax benefits because, until formal resolutions are reached, reasonable estimates of the amount and timing of cash settlements with the respective taxing authorities are not practicable.

However, we estimate the liability for unrecognized tax benefits will decrease in the next twelve months by $80.9 million as a result of projected audit settlements in certain jurisdictions.

For additional details of contingencies, see Note 15 to our unaudited condensed consolidated financial statements.

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, 2021, the Company was in compliance with all applicable covenants.

As of June 30, 2022, the Company was in compliance with all applicable covenants.

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

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

As of June 30, 2022, the Company was in compliance with all applicable covenants.

Share Repurchase Plan.

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

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

During the three months ended June 30, 2022, the Company did not repurchase any common shares.

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

In November 2018, our Board of Directors suspended our quarterly cash dividend to focus on driving long-term shareholder value by investing in global growth opportunities for Starz, while also strengthening the Company's balance sheet.

Capacity to Pay Dividends.

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

At June 30, 2022, 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 $122.6 million and accumulated deficit of $504.7 million were deemed free of restrictions from paying dividends at June 30, 2022.

Discussion of Operating, Investing, Financing Cash Flows

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

Cash, cash equivalents and restricted cash increased by $24.8 million for the three months ended June 30, 2022 and decreased by $261.3 million for the three months ended June 30, 2021, 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, 2021 and 2020 were as follows:

Nine Months Ended

Cash flows used in operating activities for the three months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

2022 2021 Net Change

(Amounts in millions)

Operating income $ 59.4 $ 156.3 $ (96.9)

Operating income (loss) $ (68.2) $ 20.3 $ (88.5)

Depreciation and amortization 42.4 43.3 (0.9)

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Interest and other income and expense, net (3.7) 2.2 (5.9)

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

Current income tax provision (5.8) (5.6) (0.2)

Other amortization 23.1 25.5 (2.4)

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Changes in operating assets and liabilities:

Proceeds from the termination of interest rate swaps 188.7 — 188.7

Accounts receivable, net and other assets 5.4 (149.6) 155.0

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Changes in operating assets and liabilities (429.5) (810.4) 380.9

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

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

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

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

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

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

Net Cash Flows Used In Operating Activities $ (0.2) $ (348.7) $ 348.5

Cash flows used in operating activities for the three months ended June 30, 2022 were $0.2 million compared to cash flows used in operating activities of $348.7 million for the three months ended June 30, 2021.

The lower cash used in operating activities is due to lower cash used from changes in operating assets and liabilities as shown above, partially offset by lower cash flows from operations before changes in operating assets and liabilities.

The lower use of cash from changes in operating assets and liabilities was driven by proceeds from the termination of interest rate swaps (see further discussion below for interest rate swap transactions in the current quarter), decreases in accounts receivable, net and other assets, increases in accounts payable and accrued liabilities and other changes in operating assets and liabilities, partially offset by increased cash used for investment in films and television programs and program rights.

In addition, cash flows used in operating activities for the three months ended June 30, 2022 included a net benefit of approximately $13.9 million from the monetization of accounts receivables programs, as compared to a net use of cash of approximately $51.0 million for the three months ended June 30, 2021 (see Note 17 to our unaudited condensed consolidated financial statements).

During the three months ended June 30, 2022, we terminated certain interest rate swaps (a portion of which were considered hybrid instruments with a financing component and an embedded at-market derivative that was a designated cash flow hedge), and received approximately $56.4 million.

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

See Note 16 to our unaudited condensed consolidated financial statements.

Investing Activities.

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

Nine Months Ended

Cash flows provided by (used in) investing activities for the three months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

(Amounts in millions)

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Investment in equity method investees and other (7.5) (2.0)

Acquisition of assets (film library and related assets) (161.4) —

Distributions from equity method investees — 0.5

Capital expenditures (9.6) (6.4)

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

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

Net Cash Flows Provided By (Used In) Investing Activities $ (14.8) $ 115.7

Cash flows used in investing activities of $14.8 million for the three months ended June 30, 2022 compared to cash flows provided by investing activities of $115.7 million for the three months ended June 30, 2021, primarily due to the receipt of proceeds during the three months ended June 30, 2021 from the sale of Pantaya (see Note 2 to our unaudited condensed consolidated financial statements).

Financing Activities.

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

Nine Months Ended

Cash flows provided by (used in) financing activities for the three months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

(Amounts in millions)

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Net repayments and repurchases of debt (196.7) (174.0)

Production and related loans - borrowings, net of debt issuance costs 742.4 219.2

Production and related loans - repayments (225.0) (51.9)

Net proceeds from production and related loans 517.4 167.3

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

IP Credit Facility and other financing repayments (80.3) —

Net proceeds from IP Credit Facility and other financing 131.3 —

Repurchase of common shares — (2.2)

Film related financing and other obligations - borrowings, net of debt issuance costs 522.9 309.2

Film related financing and other obligations - repayments (152.6) (146.0)

Net proceeds from film related financing and other obligations 370.3 163.2

Other financing activities (133.8) (17.5)

Net Cash Flows Provided By Financing Activities $ 357.7 $ 89.0

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

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

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

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

Net Cash Flows Provided By (Used In) Financing Activities $ 39.8 $ (28.3)

Cash flows provided by financing activities of $39.8 million for the three months ended June 30, 2022 compared to cash flows used in financing activities of $28.3 million for the three months ended June 30, 2021.

Cash flows provided by financing activities for the three months ended June 30, 2022 primarily reflects net film related financing and other obligations borrowings of $370.3 million, offset by net debt repayments of $196.7 million due to the April 2022 voluntarily prepayment of the entire outstanding principal amount of $193.6 million of the Term Loan A due March 22, 2023 and required repayments on the Term Loan B.

In addition, other financing activities in the three months ended June 30, 2022 includes $134.5 million for interest rate swap settlement payments due to $134.5 million for the pay down of the financing component of our terminated interest rate swaps in the current quarter (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million) (see discussion above in Operating Activities , and Note 16 to our unaudited condensed consolidated financial statements).

Other financing activities also includes tax withholding required on equity awards of $1.1 million.

Cash flows used in financing activities of $28.3 million for the three months ended June 30, 2021 primarily reflects net debt repayments of $174.0 million, and net film related financing and other obligations borrowings of $163.2 million, as production activity increased in the three months ended June 30, 2021.

In addition, other financing activities in the three months ended June 30, 2021 includes $6.9 million for interest rate swap settlement payments due to a financing component on a portion of our interest rate swaps (see Note 16 to our unaudited condensed consolidated financial statements).

Net debt repayments and

repurchases of $174.0 million in the three months ended June 30, 2021 included the below transactions and associated debt issuance and redemption costs, along with required repayments on our term loans:

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

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

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

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

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

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

Production and Related Loans and IP Credit Facility

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

Table of Debt and Contractual Commitments

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

Three Months Ending March 31, Year Ending March 31,

2022 2023 2024 2025 2026 Thereafter Total

(Amounts in millions)

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

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

Term Loan A 5.4 210.3 28.9 41.1 44.5 313.7 643.9

Term Loan B 3.1 12.5 12.5 819.2 — — 847.3

5.500% Senior Notes — — — — — 1,000.0 1,000.0

Film related and other obligations (1)

214.6 644.1 212.5 251.1 30.5 36.3 1,389.1

Operating lease obligations 3.1 43.0 33.8 30.1 24.2 59.3 193.5

226.2 909.9 287.7 1,141.5 99.2 1,409.3 4,073.8

Contractual commitments by expected repayment date (off-balance sheet arrangements)

Film obligations commitments (2)

147.7 612.0 96.4 53.5 28.7 32.9 971.2

Interest payments (3)

30.7 113.3 98.1 94.2 61.1 178.8 576.2

Other contractual obligations 73.9 90.1 48.6 24.0 14.6 44.7 295.9

252.3 815.4 243.1 171.7 104.4 256.4 1,843.3

Total future repayment of debt and other commitments under contractual obligations (4)

$ 478.5 $ 1,725.3 $ 530.8 $ 1,313.2 $ 203.6 $ 1,665.7 $ 5,917.1

___________________

(1) Film related and other obligations include program rights and film obligations, production and related loans, and our IP Credit Facility and other financing obligations.

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

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

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

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

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

See Note 6 to our unaudited condensed consolidated financial statements.

(2) Film obligations commitments include distribution and marketing commitments, minimum guarantee commitments, program rights commitments, and production loan commitments.

Distribution and marketing commitments represent contractual commitments for future expenditures associated with distribution and marketing of films which we will distribute.

The payment dates of these amounts are primarily based on the anticipated release date of the film.

Minimum guarantee commitments represent contractual commitments related to the purchase of film rights for pictures to be delivered in the future.

Program rights commitments represent contractual commitments under programming license agreements related to films that are not available for exhibition until some future date (see below for further details).

Production loan commitments represent amounts committed for future film production and development to be funded through production financing and recorded as a production loan liability when incurred.

Future payments under these commitments are based on anticipated delivery or release dates of the related film or contractual due dates of the commitment.

The amounts include estimated future interest payments associated with the commitment.

(3) Includes cash interest payments on our debt, excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

(4) Not included in the amounts above are $255.0 million of redeemable noncontrolling interests, 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 8 to our unaudited condensed consolidated financial statements).

We are obligated to pay programming fees for all qualifying films that are released theatrically in the U.S.

by Sony’s Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels through 2021.

We do not license films produced by Sony Pictures Animation.

The programming fees to be paid by us to Sony are based on the quantity and domestic theatrical exhibition receipts of qualifying films.

Since the term of the output programming agreement with Sony applies to all films released theatrically through December 31, 2021, the Company is obligated to pay fees for films that have not yet been released in theaters.

We are unable to estimate the amounts to be paid under these agreements for films that have not yet been released in theaters, however, such amounts are expected to be significant.

We have also entered into agreements with a number of other motion picture producers and are obligated to pay fees for the rights to exhibit certain films that are released by these producers.

• During the three months ended June 30, 2022, the Company completed a series of repurchases of the Term Loan B and, in aggregate, paid $51.1 million to repurchase $51.5 million principal amount of the Term Loan B.

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

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

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements and other relationships with unconsolidated entities that will affect our liquidity or capital resources.

We have no special purpose entities that provided off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in leasing, hedging or research and development services that could expose us to liability that is not reflected on the face of our unaudited condensed consolidated financial statements.

Our commitments to fund operating leases, minimum guarantees, production and related loans, equity method investment funding requirements and all other contractual commitments not reflected on the face of our unaudited condensed consolidated financial statements are presented in the table above.

As disclosed in Note 9 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.9 billion at June 30, 2022 (March 31, 2022 - $1.8 billion).

The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.5 billion at June 30, 2022 (March 31, 2022 - $1.3 billion).

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis