What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-02-09 · 367 added, 841 removed, 575 unchanged (68% of the section changed)

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(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.

The Company’s film, television, subscription and location-based entertainment businesses are backed by an 18,000-title library and a valuable collection of iconic film and television franchises.

We classify our operations through three reporting segments:

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

COVID-19 Global Pandemic

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, 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 changes in future release dates for some titles and series).

Although film and television production have generally resumed in full, disruption of production activities could occur again, depending on local circumstances.

Additionally, although theaters have generally reopened, a shift in government mandates or guidance regarding COVID-19 restrictions may impact patronage and theater capacity going forward.

Moreover, we are unable to predict patronage and theater capacity going forward.

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 occur or may continue, which will, in turn, depend on the currently unknowable duration and severity of any impacts of COVID-19 and its variants, and among other things, the impact of governmental actions imposed in response to COVID-19 and its variants, and individuals’ and companies’ risk tolerance regarding health matters going forward.

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

See Part I, Item 1A.

“Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 26, 2022, as updated by any risk factors found under Part II, Item 1A.

"Risk Factors" herein.

In connection with the disruptions associated with the COVID-19 global pandemic and measures to prevent its spread and mitigate its effects both domestically and internationally, and the related economic disruption, certain incremental costs were incurred and expensed, as presented in the table below:

Three Months Ended Nine Months Ended

December 31, December 31,

2022 2021 2022 2021

(Amounts in millions)

COVID-19 related charges (benefit) included in:

Direct operating expense (1)

$ (1.8) $ (2.8) $ (8.8) $ (2.3)

Distribution and marketing expense — — — 0.3

Restructuring and other (2)

— 0.2 0.1 0.9

Total COVID-19 related charges (benefit) $ (1.8) $ (2.6) $ (8.7) $ (1.1)

(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 of $2.8 million and $10.7 million, respectively, in the three and nine months ended December 31, 2022 (three and nine months ended December 31, 2021 - insurance recoveries of $5.0 million and $13.6 million, respectively).

In the three and nine months ended December 31, 2022 and 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 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.

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

See further discussion in the Results of Operations section below.

There are a number of ways in which these uncertainties resulting from COVID-19 and its variants 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 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 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.

Media Networks Restructuring and Goodwill Impairment

Proposed Spin-off of Studio Business

In March 2023, we announced that we had confidentially submitted a draft registration statement on Form 10 with the SEC relating to the proposed spin-off of our Studio Business, consisting of our Television Production and Motion Picture segments (the "Form 10").

In July 2023, we publicly filed the Form 10 with the SEC.

The proposed spin-off will be subject to the satisfaction of a number of conditions and our Board of Directors may decide not to proceed with the spin-off at any time.

A failure to satisfy required conditions, or disruptions in market conditions, could delay the completion of the proposed spin-off for a significant period of time or prevent it from occurring at all.

Additionally, the proposed spin-off is complex in nature, and unanticipated developments or changes, including disruptions in general market conditions, changes in law or challenges in executing the spin-off, may affect our ability to complete the spin-off on the terms or on the timeline we announced, or at all.

These or other developments could cause us not to realize some or all of the expected benefits, or to realize them on a different timeline than expected.

Media Networks Restructuring

For the second quarter ended September 30, 2022, due to the macro and microeconomic conditions, including the competitive environment, continued inflationary trends and recessionary economies worldwide and its impact on our growth in subscribers worldwide, we began a plan to restructure our LIONSGATE+ business (formerly STARZPLAY International).

This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan).

For the third quarter ended December 31, 2022, due to the continuing macro and micro economic conditions which led to the LIONSGATE+ restructuring, we expanded our restructuring plan discussed above to identify additional cost-saving initiatives, which included a strategic review of content performance across Starz’s domestic and international platforms, resulting in certain programming being removed from those platforms and written down to fair value.

As a result of these restructuring initiatives, we recorded content impairment charges related to the Media Networks segment in the three and nine months ended December 31, 2022 of $80.8 million and $293.8 million, respectively.

The Company also incurred severance cost under these restructuring initiatives.

These charges are included in restructuring and other in the unaudited condensed consolidated statement of operations (see Note 14 to our unaudited condensed consolidated financial statements).

The Company is in the process of executing its LIONSGATE+ restructuring plan including exiting the territories discussed above and its strategic review of content performance for consideration of removal from the Company's various platforms and estimates it will incur additional charges ranging from approximately $100 million to $125 million related to certain contractual content commitments or programming content impairment charges, among other items, as the Company fully implements the plan.

Of these total estimated future charges, the net future cash outlay is estimated to range from approximately $75 million to $100 million, which includes content commitments on content in territories being exited and estimates of payments on content that may be abandoned as part of the ongoing strategic review, as well as the incremental cost related to the restructuring.

Of the content impairment charges recorded in the nine months ended December 31, 2022, approximately $85 million reflects the remaining amounts payable for this content.

As the Company continues to fully implement the plan, including further strategic review of content performance, the Company may incur additional content impairment charges beyond the estimates provided.

The Company expects the restructuring plan to be substantially completed by March 31, 2023.

Goodwill Impairment.

The Company's Starz domestic operations have also been impacted by these current market conditions, and the Company has revised its subscriber growth and forecasted cash flow assumptions and implemented certain cost-saving measures.

These changes in forecasted cash flow resulted in an impairment of $1.475 billion of goodwill related to the Media Networks reporting unit in the second quarter ended September 30, 2022.

Management's Discussion and Analysis, "Critical Accounting Policies and Estimates", Goodwill and Indefinite-Lived Intangible Assets and Note 5 to our unaudited condensed consolidated financial statements for further information.

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

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

As a result of these restructuring initiatives, we recorded content impairment charges related to the Media Networks segment in the three months ended June 30, 2023 of $28.0 million, which are included in restructuring and other in the unaudited condensed consolidated statement of operations (see Note 12 to our unaudited condensed consolidated financial statements).

We have incurred impairment charges from the inception of the plan through June 30, 2023 amounting to $407.3 million.

Under the current restructuring plan, the Company estimates it will incur additional charges ranging from approximately $5 million to $30 million related to certain contractual content commitments or programming content impairment charges, among other items, related to territories exited or to be exited.

The net future cash outlay is estimated to range from approximately $60 million to $90 million, which includes contractual commitments on content in territories being exited or to be exited, and payments on the remaining amounts payable for content previously written down.

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

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

While the modified contract covers the cost of the content during the shutdown period, there may be additional charges for remaining contractual commitments when the service is completely shut down in Latin America, which is expected toward the end of calendar 2023.

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

Industry Strikes

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

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

Subsequently, we have paused and may further pause certain theatrical and television productions as a result of the WGA and SAG-AFTRA strikes.

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

In addition, the pausing and restarting of productions may result in incremental costs, delay the completion and release of some of our content (investment in films, television programs and licensed programs) and could cause an impairment of our investment in film, television programs or licensed program rights if the incremental costs are significant, or the Company is unable to efficiently complete the production of the film, television show or program or decides to abandon the production.

The extent of these costs and delays will depend on the duration of the strikes and the ability to reschedule production in a timely and efficient manner.

The incremental costs incurred through June 30, 2023 as a result of the WGA strike were not material.

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

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None of the non-U.S.

countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2022 and 2021.

countries individually comprised greater than 10% of total revenues for the three months ended June 30, 2023 and 2022.

Studio Business

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• Starz Networks.

Starz Networks’ revenues are derived from the domestic distribution of our STARZ branded premium subscription video services through over-the-top ("OTT") platforms and U.S.

multichannel video programming distributors (“MVPDs”) including cable operators, satellite television providers and telecommunications companies (collectively, “Distributors”), and on a direct-to-consumer basis through the Starz App.

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

• LIONSGATE+.

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

(formerly STARZPLAY International).

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

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

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

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General and administration expenses include salaries and other overhead.

Corporate general and administrative expenses include corporate executive costs, costs of maintaining corporate facilities and common administrative support functions.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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In some cases, changes in the accounting estimates are reasonably likely to occur from period to period.

In addition, the evolving and uncertain nature of the COVID-19 global pandemic could materially impact our estimates, particularly those that require consideration of forecasted financial information, in the near to medium term.

Accordingly, actual results could differ materially from our estimates.

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

For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on May 26, 2022.

Accounting for Films and Television Programs and Licensed Program Rights

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For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later.

The initial estimate of ultimate revenue may include estimates of revenues outside of the initial license window (i.e., international, home entertainment and other distribution platforms) and are based on historical experience for similar programs (genre, duration, etc.) based on the estimated number of seasons.

The most sensitive factors affecting our estimate of ultimate revenues for a television series is whether the series will be ordered for a subsequent season and estimates of revenue in secondary markets other than the initial license fee, which may depend on a number of factors, including, among others, the ratings or viewership the program achieves on the customers' platforms.

Ultimates of revenue beyond the initial license fee are generally higher for programs that have been or are expected to be ordered for multiple seasons.

We regularly monitor the performance of each season, and evaluate whether impairment indicators are present (i.e., low ratings, cancellations or the season is not reordered), and based upon our review, we revise our estimates as needed and perform an impairment assessment if impairment indicators are present (see below).

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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.

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.

While not significant through June 30, 2023, certain license agreements and productions may include additional ancillary rights in addition to the rights for exploitation on the Starz Platforms.

A portion of the cost of these licenses and the cost of produced content, is allocated between the programming rights for exploitation on the Starz Platforms and investment in film and television programs for exploitation outside of the Starz Platforms in ancillary markets (e.g., home video, digital platforms, television, etc.) based on the relative fair value of those markets.

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

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

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

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.

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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.

Impairment Assessment.

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Estimate of Fair Value.

For content that is predominantly monetized individually (primarily investment in film and television programs related to the Motion Picture and Television Production segments), the fair value is determined based on a

discounted cash flow analysis of the cash flows directly attributable to the title.

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

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

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

For television programs, the discounted cash flow analysis used in the impairment evaluation includes key inputs such as estimates of future anticipated revenue, as discussed above.

See further discussion of Valuation Assumptions below.

For content that is predominantly monetized as a group (primarily licensed program rights in the Media Networks segment and internally produced programming, as discussed above), the fair value is determined based on the present value of the discounted cash flows of the group using the lowest level for which identifiable cash flows are independent of other produced and licensed content.

The Company's film groups are generally aligned 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.

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

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

For the second quarter ended September 30, 2022, due to the macro and microeconomic conditions, including the competitive environment, continued inflationary trends and recessionary economies worldwide and its impact on the our growth in subscribers worldwide, we began a plan to restructure our LIONSGATE+ business (formerly STARZPLAY International).

This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan).

These charges are included in restructuring and other in the unaudited condensed consolidated statement of operations (see Note 3 and Note 14 to our unaudited condensed consolidated financial statements).

In fiscal 2023, we began a plan to restructure our LIONSGATE+ business.

This restructuring, which included exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan), and identifying additional cost-saving initiatives, which included a strategic review of content performance across Starz’s domestic and international platforms, resulting in certain programming being removed from those platforms and written down to fair value.

As a result of these restructuring initiatives, we recorded content impairment charges related to the Media Networks segment in the three months ended June 30, 2023 of $28.0 million, which are included in restructuring and other in the unaudited condensed consolidated statement of operations (see Note 2 and Note 12 to our unaudited condensed consolidated financial statements).

We have incurred impairment charges from the inception of the plan through June 30, 2023 amounting to $407.3 million.

Valuation Assumptions.

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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.

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

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

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

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

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

We believe that our estimates have been materially accurate in the past;

however, due to the judgment involved in establishing reserves, we may have adjustments to our historical estimates in the future.

Our estimate of future returns affects reported revenue and operating income.

If we underestimate the impact of future returns in a particular period, then we may record less revenue in later periods when returns exceed the estimated amounts.

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 $0.3 million and $0.9 million, respectively, on our total revenue in the three and nine months ended December 31, 2022 (three and nine months ended December 31, 2021 - $0.5 million and $1.4 million, respectively).

Revenue from commissions are recognized as such services are provided.

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Goodwill and Indefinite-Lived Intangibles.

At December 31, 2022, the carrying value of goodwill and indefinite-lived intangible assets was $1.29 billion and $250.0 million, respectively.

At June 30, 2023, the carrying value of goodwill and indefinite-lived intangible assets was $1.29 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, 2022, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $493.9 million, net of $1.475 billion impairment recorded in the second quarter ended September

30, 2022, as discussed further below), 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, 2023, were Motion Picture (goodwill of $394 million), Media Networks (goodwill of $493.9 million), 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 Assessments:

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, and 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.

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%.

During the second quarter ended September 30, 2022, due to continued adverse macro and microeconomic conditions, including the competitive environment, continued inflationary trends and recessionary economies worldwide and its impact on our growth in subscribers worldwide, we began implementing a plan to restructure our LIONSGATE+ business (formerly STARZPLAY International).

This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan).

Our Starz domestic operations have also been impacted by these current market conditions and we have revised our subscriber growth and forecasted cash flow assumptions and implemented certain cost-saving measures.

Additionally, companies in the media and entertainment industry, and particularly those with significant streaming platforms, have experienced a decline in market valuations, and reflecting this industry trend, as well as potential capital market transactions, and the factors discussed above, the market price of our common shares had declined significantly through September 30, 2022.

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

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

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

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

The analysis resulted in a goodwill impairment charge of $1.475 billion in

the second quarter ended September 30, 2022, related to our Media Networks reporting unit goodwill, which is recorded as a separate line item "goodwill impairment" in the unaudited condensed consolidated statement of operations (see Note 5 to the unaudited condensed consolidated financial statements).

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

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

During the third quarter ended December 31, 2022, we performed a qualitative goodwill impairment assessment for all reporting units which considered the continuing micro and macroeconomic environment, industry considerations, reporting unit performance and updated forecasts, and determined that since the prior quarter's quantitative assessment, there were no events or circumstances that rise to a level that would more-likely-than-not reduce the fair value of those reporting units below their carrying values;

therefore, no quantitative goodwill impairment analysis was performed.

For our annual goodwill impairment test for fiscal 2023, we performed a qualitative goodwill impairment assessment for all our reporting units.

Our qualitative assessment considered the increase in the market price of the Company’s common shares from September 30, 2022, the recent performance of the Company’s reporting units, and updated forecasts of performance and cash flows, as well as the continuing micro and macroeconomic environment, and industry considerations, and determined that since the quantitative assessment performed in the quarter ended September 30, 2022, there were no events or circumstances

that rise to a level that would more-likely-than-not reduce the fair value of those reporting units below their carrying values;

therefore, a quantitative goodwill impairment analysis was not required.

During the three months ended June 30, 2023, we evaluated events and circumstances in the quarter that would, more-likely-than-not, reduce the fair value of our reporting units below their carrying amount.

Our evaluation considered the decrease in the market price of the Company's common shares since March 31, 2023, the recent performance of the Company's reporting units, and updated forecasts of performance and cash flows, as well as the current micro and macroeconomic environments in relation to the current and expected performance of our reporting units.

Based on this evaluation, we determined that since the quantitative assessment performed in the quarter ended September 30, 2022 and our qualitative assessment performed for fiscal 2023, there were no events or circumstances that rise to a level that would more-likely-than-not reduce the fair value of those reporting units below their carrying values;

therefore, a quantitative goodwill impairment analysis was not required.

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

The recoverability of goodwill is dependent upon the continued growth of revenue and cash flows from our business activities.

Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our 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;

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;

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 global economy, consumer consumption levels of our content;

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

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

capital market transactions;

the duration and potential impact of strikes of unions which we rely on, such as the current strike of members of the WGA and SAG-AFTRA, on our ability to produce, acquire and distribute our content;

the commercial success of our television programming and motion pictures;

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Indefinite-Lived Intangibles Other Than Goodwill Impairment Assessment:

For fiscal 2022, we performed a qualitative impairment assessment of our indefinite-lived trade names.

Based on the qualitative impairment assessment of our trade names, we concluded that it is more-likely-than-not that the fair value of our trade names was more than its carrying amount, and therefore our trade names were not considered at risk of impairment.

For fiscal 2023, for our annual impairment assessment, we performed a qualitative impairment assessment of our indefinite-lived trade names.

Based on the qualitative impairment assessment of our trade names, we concluded that it is not more-likely-than-not that the fair value of our trade names was less than its carrying amount, and therefore our trade names were not considered at risk of impairment.

This qualitative analysis considered the relative impact of market-specific and macroeconomic factors.

The market-specific factors considered included recent projections of revenues and growth in OTT subscribers, both domestic and internationally, associated with the STARZ brand name.

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 second quarter ended September, 2022, due to the events and their impact discussed above related to our Media Networks reporting unit, we performed a quantitative impairment assessment of our indefinite-lived trade names.

Based on the quantitative impairment assessment of our trade names, we concluded that the fair value of our trade names was more than its carrying amount, and therefore our trade names were not considered at risk of impairment.

During the third quarter ended December 31, 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.

The Company also considered the same factors as discussed above in its evaluation of potential goodwill impairment including the global macroeconomic environment, 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 quarter ended June 30, 2023, 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, 2022, the carrying value of our finite-lived intangible assets was approximately $1.09 billion.

At June 30, 2023, the carrying value of our finite-lived intangible assets was approximately $1.02 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.

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.

For fiscal 2023, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption, 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 second quarter ended September 30, 2022, due to the events and their impact discussed above related to our Media Networks reporting unit, we updated our impairment analysis of our amortizable intangible assets.

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

During the third quarter ended December 31, 2022, there were no events or circumstances that would indicate that the carrying amount of our finite-lived intangible assets may not be recoverable.

During the quarter ended June 30, 2023, 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, 2022 Compared to Three Months Ended December 31, 2021

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the three months ended December 31, 2022 and 2021:

The following table sets forth our consolidated results of operations for the three months ended June 30, 2023 and 2022:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 2022 Amount Percent

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Total expenses 925.4 962.1 (36.7) (3.8) %

Operating income 7.8 9.3 (1.5) (16.1) %

Operating loss (16.8) (68.2) 51.4 (75.4) %

Interest expense (62.0) (46.1) (15.9) 34.5 %

Interest and other income 1.9 1.3 0.6 46.2 %

Other expense (10.7) (1.9) (8.8) nm

Other expense (5.7) (5.0) (0.7) 14.0 %

Gain (loss) on extinguishment of debt 21.2 (1.3) 22.5 nm

Gain (loss) on investments 43.4 (0.2) 43.6 nm

Gain on investments — 1.8 (1.8) (100.0) %

Equity interests income (loss) (0.3) 0.9 (1.2) (133.3) %

Income (loss) before income taxes 20.8 (39.4) 60.2 nm

Loss before income taxes (61.7) (116.6) 54.9 (47.1) %

Income tax provision (9.8) (6.0) (3.8) 63.3 %

Net income (loss) 15.2 (48.9) 64.1 nm

Net loss (71.5) (122.6) 51.1 (41.7) %

Net loss attributable to noncontrolling interest 0.8 3.6 (2.8) (77.8) %

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

shareholders $ 16.6 $ (45.6) $ 62.2 nm

Net loss attributable to Lions Gate Entertainment Corp.

shareholders $ (70.7) $ (119.0) $ 48.3 (40.6) %

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Consolidated revenues increased $114.7 million in the three months ended December 31, 2022 reflecting an increase of $180.3 million from our Studio Business offset by increased intersegment eliminations of $57.0 million and a decrease of $8.6 million from our Media Networks business.

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

Motion Picture revenue increased $13.5 million in the current quarter due primarily to higher digital home entertainment revenue and theatrical revenue, offset by lower television revenue and packaged media home entertainment revenue.

Motion Picture revenue included $16.2 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing a decrease of $12.0 million from the three months ended December 31, 2021.

Television Production revenue increased $166.8 million due to increased digital home entertainment revenue, increased domestic television revenue from higher intersegment revenues from the licensing of Starz original series, and increased international revenue.

Television Production revenue included $258.2 million of revenue from licensing Television Production segment product to our Media Networks segment, representing an increase of $69.0 million from the three months ended December 31, 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 LIONSGATE+, both in the Media Networks segment.

Media Networks revenue decreased $8.6 million reflecting a decrease of $20.8 million at Starz Network, partially offset by increased revenue at LIONSGATE+ of $12.2 million.

Consolidated revenues increased $14.7 million in the three months ended June 30, 2023 reflecting a decrease of $86.1 million from our Studio Business, offset by lower intersegment eliminations of $100.9 million.

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

Motion Picture revenue increased $127.7 million in the current quarter due to greater theatrical, digital media home entertainment, international and other revenue.

Motion Picture revenue included $16.5 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing an increase of $13.0 million from the three months ended June 30, 2022.

Television Production revenue decreased $213.8 million due to decreased domestic television revenue from lower third-party revenue and lower intersegment revenues from the licensing of Starz original series, decreased international revenue, and decreased digital media home entertainment revenue, partially offset by increased other revenue.

Television Production revenue included $81.0 million of revenue from licensing Television Production segment product to our Media Networks segment, representing a decrease of $113.9 million from the three months ended June 30, 2022.

The decrease in intersegment eliminations is primarily associated with lower Television Production revenues for licenses of original series to Starz Networks and LIONSGATE+, both in the Media Networks segment as discussed above.

Media Networks revenue was comparable, and reflected increased revenue at LIONSGATE+ of $12.1 million, offset by a decrease of $12.2 million at Starz Networks.

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

Direct Operating Expenses.

Direct operating expenses by segment were as follows for the three months ended December 31, 2022 and 2021:

Direct operating expenses by segment were as follows for the three months ended June 30, 2023 and 2022:

Three Months Ended

2022 2021 Increase (Decrease)

2023 2022 Change

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

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Other 0.4 nm 0.2 nm 0.2 nm

Intersegment eliminations (266.0) nm (215.5) nm (50.5) nm

Intersegment eliminations (87.4) nm (193.3) nm 105.9 (54.8) %

$ 481.2 53.0 % $ 596.5 66.7 % $ (115.3) (19.3) %

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Direct operating expenses increased in the three months ended December 31, 2022 due to higher direct operating expenses of our Studio Business partially offset by lower direct operating expenses of our Media Networks segment.

The increase at the Studio Business reflects higher direct operating expenses of the Television Production segment due to higher revenues from Television Production, and to a lesser extent, higher direct operating expenses of the Motion Picture segment.

The decrease in Media Networks direct operating expense was driven by a decrease at LIONSGATE+ of $14.7 million due to lower programming cost amortization and a benefit from foreign currency gains, partially offset by an increase at Starz Networks of $4.4 million.

Direct operating expenses decreased in the three months ended June 30, 2023 due to lower direct operating expenses for our Studio Business and the Media Networks segment, partially offset by lower intersegment eliminations.

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

The decrease in Media Networks direct operating expense was driven by decreases at Starz Networks of $26.1 million and LIONSGATE+ of $14.7 million due to lower programming cost amortization, and lower foreign exchange losses at LIONSGATE+.

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

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

COVID-19 Related Charges (Benefit).

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

In the three months ended December 31, 2022, direct operating expense included a benefit of $1.8

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 December 31, 2021 - benefit of $2.8 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 new variants which may result in disruptions to our operations.

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

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

In the three months ended June 30, 2023, direct operating expense included charges of $0.2 million, net of immaterial insurance recoveries (three months ended June 30, 2022 - benefit of $1.0 million, net of insurance recoveries of

$1.0 million).

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

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

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

Other direct operating expense includes share-based compensation, and 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 expense includes share-based compensation.

Distribution and Marketing Expenses.

Distribution and marketing expenses by segment were as follows for the three months ended December 31, 2022 and 2021:

Distribution and marketing expenses by segment were as follows for the three months ended June 30, 2023 and 2022:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 2022 Amount Percent

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Other 0.2 0.1 0.1 100.0 %

Intersegment eliminations (2.2) — (2.2) n/a

$ 244.2 $ 211.5 $ 32.7 15.5 %

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 84.4 $ 26.3 $ 58.1 220.9 %

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Distribution and marketing expenses decreased in the three months ended December 31, 2022, due to lower Media Networks distribution and marketing expense, and lower Studio Business distribution and marketing expense.

The decrease in Media Networks distribution and marketing expense was due to a decrease at Starz Networks of $14.7 million resulting from lower advertising purchased in the current year quarter and lower media spend for our Starz Originals, and a decrease at LIONSGATE+ of $6.5 million from the elimination of advertising and marketing activities in the exited international territories due to the restructuring of LIONSGATE+.

The decrease at the Studio Business reflects lower Motion Picture theatrical P&A and Premium VOD expense.

Distribution and marketing expenses increased in the three months ended June 30, 2023, due to higher Studio Business distribution and marketing expense, partially offset by lower Media Networks distribution and marketing expense.

The increase at the Studio Business reflects greater Motion Picture theatrical P&A and Premium VOD expense associated with the theatrical slate releases in the current quarter, and higher expense for films to be released in subsequent quarters.

The decrease in Media Networks distribution and marketing expense was due to a decrease at Starz Networks of $16.2 million due to lower spend for our Starz Originals' premieres in the current period, and a decrease at LIONSGATE+ of $14.3 million.

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

General and Administrative Expenses.

General and administrative expenses by segment were as follows for the three months ended December 31, 2022 and 2021:

General and administrative expenses by segment were as follows for the three months ended June 30, 2023 and 2022:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 % of Revenues 2022 % of Revenues Amount Percent

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Corporate 30.4 23.0 7.4 32.2 %

75.5 7.5% 74.8 8.4% 0.7 0.9 %

Share-based compensation expense 15.3 7.5 7.8 104.0 %

1 unchanged sentence

Total general and administrative expenses $ 123.6 13.6% $ 103.7 11.6% $ 19.9 19.2 %

General and administrative expenses increased slightly in the three months ended December 31, 2022, resulting from increased Media Networks and Television Production general and administrative expenses, purchase accounting and related adjustments and share-based compensation expense, partially offset by lower Motion Picture and corporate general and administrative expense.

General and administrative expenses increased in the three months ended June 30, 2023, resulting from increased share-based compensation expense, corporate, Motion Picture, Television Production, and Media Networks general and administrative expenses, partially offset by lower purchase accounting and related adjustments.

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

Share-based compensation expense included in general and administrative expense in the three months ended December 31, 2022 is comparable to the three months ended December 31, 2021 The following table presents share-based compensation expense by financial statement line item:

Corporate general and administrative expenses increased $7.4 million, or 32.2%, primarily due to an increase in incentive based compensation.

The increase in share-based compensation expense included in general and administrative expense in the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 is primarily due to an increase in incentive based compensation and lower fair values in the prior year's quarter associated with performance-based stock option and other equity awards that are revalued at each reporting period until the stock option or equity award vests and the applicable performance goals are achieved.

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

Three Months Ended

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_______________________

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

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

Purchase accounting and related adjustments increased $1.2 million, or 7.6%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.

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

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

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

Purchase accounting and related adjustments decreased $6.0 million, or 37.5%, primarily due to lower noncontrolling interest

discount amortization of $4.9 million (see further detail in the reconciliation of operating loss to total segment profit further below).

Depreciation and Amortization Expense.

Depreciation and amortization of $46.3 million in the three months ended December 31, 2022 was comparable to depreciation and amortization of $46.3 million in the three months ended December 31, 2021.

Depreciation and amortization of $44.4 million for the three months ended June 30, 2023 increased $2.0 million from $42.4 million in the three months ended June 30, 2022.

Restructuring and Other.

Restructuring and other increased $74.8 million in the three months ended December 31, 2022 as compared to the three months ended December 31, 2021, and includes restructuring and severance costs, certain transaction

and other costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the three months ended December 31, 2022 and 2021 (see Note 14 to our unaudited condensed consolidated financial statements):

Restructuring and other increased $24.0 million in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, and includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the three months ended June 30, 2023 and 2022 (see Note 12 to our unaudited condensed consolidated financial statements):

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 2022 Amount Percent

1 unchanged sentence

Restructuring and other:

Content and other impairments (1)

Content impairments (1)

$ 28.0 $ — $ 28.0 n/a

Severance (2)

Cash 2.4 — 2.4 n/a

Cash 4.3 2.8 1.5 53.6 %

Accelerated vesting on equity awards (see Note 10 to our unaudited condensed consolidated financial statements)

0.5 0.6 (0.1) n/a

3.9 — 3.9 n/a

Total severance costs 4.8 3.4 1.4 41.2 %

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

— 0.2 (0.2) (100.0) %

Transaction and other costs (benefits) (3)

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(1) Media Networks Restructuring:

This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan).

Our Starz domestic operations have also been impacted by these current market conditions, and we have revised our subscriber growth and forecasted cash flow assumptions and implemented certain cost-saving measures.

These changes in forecasted cash flow resulted in an impairment of $1.475 billion of goodwill related to the Media Networks segment in the second quarter ended September 30, 2022, as discussed in Note 5 to our unaudited condensed consolidated financial statements.

For the third quarter ended December 31, 2022, due to the continuing macro and microeconomic conditions which led to the LIONSGATE+ restructuring, we expanded our restructuring plan discussed above to identify additional cost-saving initiatives, which included a strategic review of content performance across Starz's domestic and international platforms, resulting in certain programming being removed from those platforms and written down to fair value.

As a result of these restructuring initiatives, we recorded content impairment charges associated with impairment of programming related to the territories being exited and individual content abandonment upon removal of certain titles from the Starz platforms related to the Media Networks segment in the three months ended December 31, 2022 of $80.8 million.

We are in the process of executing our LIONSGATE+ restructuring plan including exiting the territories discussed above and our strategic review of content performance for consideration of removal from our various platforms and estimate we will incur additional charges ranging from approximately $100 million to $125 million related to certain contractual content commitments or programming content impairment charges, among other items, as we fully implement the plan.

Of the content impairment charges recorded in the nine months ended December 31, 2022, approximately $85 million reflects the remaining amounts payable for this content.

As we continue to fully implement the plan, including further strategic review of content performance, we may incur additional content impairment charges beyond the estimates provided.

We expect the restructuring plan to be substantially completed by March 31, 2023.

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

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

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

The Company has incurred impairment charges from the inception of the plan through June 30, 2023 amounting to $407.3 million.

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

While the modified contract covers the cost of the content during the shut down period, there may be additional charges for remaining contractual commitments when the service is completely shut down in Latin America, which is expected toward the end of calendar 2023.

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

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

(3) 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.

(4) Transaction and other costs in the three months ended December 31, 2022 and 2021 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs and benefits associated with certain legal matters.

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

(3) Transaction and other costs in the three months ended June 30, 2023 and 2022 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs and benefits associated with certain legal matters.

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

Interest Expense.

Interest expense of $59.6 million for the three months ended December 31, 2022 increased $15.2 million, from $44.4 million in the three months ended December 31, 2021.

The following table sets forth the components of interest expense for the three months ended December 31, 2022 and 2021:

Interest expense of $62.0 million in the three months ended June 30, 2023 increased $15.9 million from the three months ended June 30, 2022 due to higher average interest rates and balances on the revolving credit facility, and higher average interest rates on the term loans.

The following table sets forth the components of interest expense for the three months ended June 30, 2023 and 2022:

Three Months Ended

7 unchanged sentences

______________________

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

(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.

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 17 to our unaudited condensed consolidated financial statements).

(1) Amounts include payments and receipts associated with the Company's interest rate swaps (see Note 15 to our unaudited condensed consolidated financial statements) and interest payments associated with certain film related obligations (Production Tax Credit Facility, IP Credit Facility, Backlog Facility and other, see Note 5 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 primarily 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 15 to our unaudited condensed consolidated financial statements).

Interest and Other Income.

Interest and other income of $1.7 million for the three months ended December 31, 2022 compared to interest and other income of $1.4 million for the three months ended December 31, 2021.

Interest and other income of $1.9 million for the three months ended June 30, 2023 compared to interest and other income of $1.3 million for the three months ended June 30, 2022.

Other Expense.

Other expense of $10.7 million for the three months ended December 31, 2022 compared to other expense of $1.9 million for the three months ended December 31, 2021, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 18 to our unaudited condensed consolidated financial statements).

Other expense of $5.7 million for the three months ended June 30, 2023 compared to other expense of $5.0 million for the three months ended June 30, 2022, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 16 to our unaudited condensed consolidated financial statements).

Gain (Loss) on Extinguishment of Debt.

Gain on extinguishment of debt of $38.2 million for the three months ended December 31, 2022 represented a gain associated with the 5.500% Senior Notes repurchased at a discount in the current quarter, partially offset by the write-off of debt issuance costs.

This compared to a loss on extinguishment of debt of $1.1 million in the three months ended December 31, 2021 related to the write-off of debt issuance costs associated with the termination of a portion of our revolving credit commitments.

Gain on extinguishment of debt of $21.2 million for the three months ended June 30, 2023 represented a gain associated with the repurchase of $85.0 million principal amount of 5.500% Senior Notes at a discount.

In the three months ended June 30, 2022, the loss on extinguishment of debt of $1.3 million 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.

See Note 4 to our unaudited condensed consolidated financial statements.

Gain (Loss) on Investments.

Gain on investments of $43.4 million for the three months ended December 31, 2022 represented a gain associated with the sale of a portion of our ownership interest in STARZPLAY Arabia, compared to a loss on investments of $0.2 million for the three months ended December 31, 2021.

Gain on Investments.

There was no gain on investments for the three months ended June 30, 2023, as compared to a gain on investments of $1.8 million for the three months ended June 30, 2022 related to equity securities sold.

Equity Interests Income (Loss).

Equity interests income of nil in the three months ended December 31, 2022 compared to equity interests loss of $2.5 million in the three months ended December 31, 2021.

Equity interests loss of $0.3 million in the three months ended June 30, 2023 compared to equity interests income of $0.9 million in the three months ended June 30, 2022.

Income Tax Provision.

We had an income tax provision of $5.6 million in the three months ended December 31, 2022, compared to an income tax provision of $9.5 million in the three months ended December 31, 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, 2022 and 2021 was also impacted by an interest accrual on uncertain tax benefits, and the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Our income tax provision for the three months ended December 31, 2021 was also impacted by additional uncertain tax benefits related to state income taxes identified during state tax audits.

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

We had an income tax provision of $9.8 million in the three months ended June 30, 2023, compared to an income tax provision of $6.0 million in the three months ended June 30, 2022.

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

Our income tax provision for the three months ended June 30, 2023 and 2022 was also impacted by an interest accrual on uncertain tax benefits, and benefited from the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Net Loss Attributable to Lions Gate Entertainment Corp.

Shareholders.

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

This compares to net loss attributable to our shareholders for the three months ended December 31, 2021 of $45.6 million, or basic and diluted net loss per common share of $0.20 on 225.0 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.

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

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

ended June 30, 2022 of $119.0 million, or basic and diluted net loss per common share of $0.53 on 225.6 million weighted average common shares outstanding.

Segment Results of Operations and Non-GAAP Measures

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

See Note 15 to the unaudited condensed consolidated financial statements for our definition of segment profit and a reconciliation of segment profit to the Company's consolidated income (loss) before income taxes.

Segment Presentation

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

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

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

Segment profit is a GAAP financial measure and is disclosed in Note 13 to our unaudited condensed consolidated financial statements.

We also present below our total segment profit for all of our segments and the sum of our Motion Picture and Television Production segment profit as our "Studio Business" segment profit.

Total segment profit and Studio Business segment profit, when presented outside of the segment information and reconciliations included in Note 16 to our unaudited condensed consolidated financial statements, is considered a non-GAAP financial measure, and should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with United States GAAP.

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

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

Total segment profit and Studio Business segment profit is considered an important measure of the Company’s performance because it reflects the aggregate profit contribution from the Company's segments, both in total and for the Studio Business and represents a measure, consistent with our segment profit, that eliminates amounts that, in management’s opinion, do not necessarily reflect the fundamental performance of the Company’s businesses, are infrequent in occurrence, and in some cases are non-cash expenses.

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

The following table reconciles the GAAP measure, operating loss, to the non-GAAP measure, total segment profit, for the three months ended June 30, 2023 and 2022.

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

Three Months Ended

June 30, Change

2023 2022 Amount Percent

(Amounts in millions)

Operating loss $ (16.8) $ (68.2) $ 51.4 (75.4) %

Corporate general and administrative expenses 30.4 23.0 7.4 32.2 %

Adjusted depreciation and amortization (1)

10.0 10.1 (0.1) (1.0) %

Restructuring and other 32.0 8.0 24.0 nm

COVID-19 related charges (benefit) (2)

0.2 (1.0) 1.2 (120.0) %

Adjusted share-based compensation expense (3)

15.9 7.8 8.1 103.8 %

Purchase accounting and related adjustments (4)

44.4 48.3 (3.9) (8.1) %

Total segment profit $ 116.1 $ 28.0 $ 88.1 nm

_______________________

nm - Percentage not meaningful.

(1) Adjusted depreciation and amortization represents depreciation and amortization as presented on our consolidated statements of operations less the depreciation and amortization related to the non-cash fair value adjustments to property and equipment and intangible assets acquired in recent acquisitions which are included in the purchase accounting and related adjustments line item above, as shown in the table below:

Three Months Ended

(Amounts in millions)

Depreciation and amortization $ 44.4 $ 42.4

Amount included in purchase accounting and related adjustments (34.4) (32.3)

Adjusted depreciation and amortization $ 10.0 $ 10.1

(2) COVID-19 related charges (benefit) represent the incremental costs included in direct operating expense and distribution and marketing expense resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries.

(3) The following table reconciles total share-based compensation expense to adjusted share-based compensation expense:

Three Months Ended

(Amounts in millions)

Total share-based compensation expense $ 16.4 $ 8.4

Amount included in restructuring and other (i)

Adjusted share-based compensation $ 15.9 $ 7.8

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

(4) Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in recent acquisitions.

The following sets forth the amounts included in each line item in the financial statements:

Three Months Ended

(Amounts in millions)

Purchase accounting and related adjustments:

General and administrative expense (i)

$ 10.0 $ 16.0

Depreciation and amortization 34.4 32.3

$ 44.4 $ 48.3

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

Three Months Ended

(Amounts in millions)

Amortization of recoupable portion of the purchase price $ 1.3 $ 1.9

Noncontrolling interest discount amortization — 4.9

Noncontrolling equity interest in distributable earnings 8.7 9.2

$ 10.0 $ 16.0

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.

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

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 2022 Amount Percent

7 unchanged sentences

$ 908.6 $ 893.9 $ 14.7 1.6 %

Gross Contribution

Studio Business

Motion Picture $ 97.0 $ 90.2 $ 6.8 7.5 %

Television Production 82.3 28.6 53.7 187.8 %

Total Studio Business $ 179.3 $ 118.8 $ 60.5 50.9 %

Media Networks 72.4 49.5 22.9 46.3 %

Intersegment eliminations (8.4) (1.9) (6.5) nm

$ 243.3 $ 166.4 $ 76.9 46.2 %

Segment Profit

Segment Profit (Loss)

Studio Business

8 unchanged sentences

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

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

Motion Picture

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended December 31, 2022 and 2021:

The table below sets forth Motion Picture gross contribution and segment profit for the three months ended June 30, 2023 and 2022:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 2022 Amount Percent

10 unchanged sentences

Gross contribution as a percentage of revenue 24.3 % 26.2 %

The table below sets forth Motion Picture revenue by media and product category for the three months ended December 31, 2022 and 2021:

Three Months Ended December 31,

2022 2021 (1)

The table below sets forth Motion Picture revenue by media and product category for the three months ended June 30, 2023 and 2022:

Three Months Ended June 30,

2023 2022 Total Increase (Decrease)

15 unchanged sentences

____________________

(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 December 31, 2021 have been conformed to the current period presentation.

(1) Lionsgate Original Releases:

4 unchanged sentences

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

Theatrical revenue increased $6.0 million in the three months ended December 31, 2022 as compared to the three months ended December 31, 2021 due to an increase of $3.8 million from Lionsgate Original Releases including the release of Prey for the Devil in the current quarter.

Home entertainment revenue increased $21.8 million, or 15.0%, in the three months ended December 31, 2022, as compared to the three months ended December 31, 2021, due to higher digital media revenue of $33.8 million, and lower packaged media revenue of $12.0 million driven by Lionsgate Original Releases.

The increase in digital media revenue was due to an increase of $36.7 million from Lionsgate Original Releases driven by the license of Shotgun Wedding to a direct-to-streaming platform in the current quarter .

The decrease in packaged media revenue was due to a decrease of $7.9 million from Lionsgate Original Releases due to lower revenue from our fiscal 2022 and prior theatrical slates.

Television revenue decreased $21.1 million, or 31.0%, in the three months ended December 31, 2022, as compared to the three months ended December 31, 2021, due to a decrease from Lionsgate Original Releases of $17.2 million due to fewer television windows opening for our theatrical slate titles than in the prior year's quarter.

In particular, the current quarter included revenue from The Unbearable Weight of Massive Talent (a fiscal 2023 theatrical release), as compared to revenue from Voyagers and Spiral (both fiscal 2022 theatrical releases) in the prior year's quarter.

International revenue increased $2.9 million, or 5.5%, in the three months ended December 31, 2022, as compared to the three months ended December 31, 2021.

Theatrical revenue increased $55.0 million in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 due to an increase of $54.9 million from Lionsgate Original Releases driven by the performance of John Wick:

Chapter 4 in the current quarter (which was released on March 24, 2023), and to a lesser extent, a greater number of theatrical slate releases generating revenue in the quarter.

Home entertainment revenue increased $45.7 million, or 29.6%, in the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, due to higher digital media revenue of $41.9 million driven by Lionsgate Original Releases due to higher revenue from our theatrical slate titles, and in particular, the revenues generated from John Wick:

Chapter 4 in the current quarter.

Television revenue was comparable in the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

International revenue increased $15.3 million, or 23.3%, in the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 due to an increase from Lionsgate Original Releases of $19.0 million due to higher revenue generated from our fiscal 2023 theatrical slate titles in the current quarter as compared to the fiscal 2022 theatrical slate titles in the prior year's quarter, partially offset by decreased revenue from direct-to-platform releases.

Direct Operating Expense.

The increase in direct operating expenses is due to higher motion picture revenue and a slight increase in direct operating expense as a percent 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), which was partially offset by a benefit of $4.7 million from foreign currency gains.

Investment in film write-downs included in Motion Picture segment direct operating expense were approximately $0.6 million in the three months ended December 31, 2022, compared to approximately $1.1 million in the three months ended December 31, 2021.

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

The decrease 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 the lower amortization rate of the fiscal 2023 theatrical slate releases generating revenue in the current quarter and lower expense related to multi-platform and 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).

In addition, the current quarter included a decrease in development write-offs of $8.9 million on Lionsgate Original Releases, and lower expense of $6.4 million related to foreign exchange gains in the current quarter which compared to foreign exchange losses in the prior year's quarter.

Investment in film write-downs included in Motion Picture segment direct operating expense in the three months ended June 30, 2023 were $0.2 million, as compared to $0.5 million in the three months ended June 30, 2022.

Distribution and Marketing Expense.

The decrease in distribution and marketing expense in the three months ended December 31, 2022 is due to lower theatrical P&A and Premium VOD expense for releases in the current quarter, partially offset by increased theatrical P&A and Premium VOD expense for films to be released in subsequent quarters.

In the three months ended December 31, 2022, approximately $15.5 million of theatrical P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $7.2 million in the prior year's quarter in the Motion Picture segment.

The increase in distribution and marketing expense in the three months ended June 30, 2023 is due to higher theatrical P&A and Premium VOD expense due to higher expense associated with the theatrical slate releases in the current quarter, and higher expense for films to be released in subsequent quarters.

In the three months ended June 30, 2023 approximately $20.9 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $5.3 million in the three months ended June 30, 2022 in the Motion Picture segment.

Gross Contribution.

Gross contribution of the Motion Picture segment for the three months ended December 31, 2022 increased as compared to the three months ended December 31, 2021, due to higher Motion Picture revenue and lower distribution and marketing expense, partially offset by higher direct operating expense as a percentage of motion picture revenue.

Gross contribution of the Motion Picture segment for the three months ended June 30, 2023 increased as compared to the three months ended June 30, 2022 due to higher Motion Picture revenue, and lower direct operating expense as a percentage of Motion Picture revenue, partially offset by higher distribution and marketing expense.

General and Administrative Expense.

General and administrative expenses of the Motion Picture segment decreased $2.2 million, or 9.7% 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, 2023 increased $6.8 million, or 30.1%, primarily due to an increase in incentive based compensation.

Television Production

The table below sets forth Television Production gross contribution and segment profit for the three months ended December 31, 2022 and 2021:

The table below sets forth Television Production gross contribution and segment profit for the three months ended June 30, 2023 and 2022:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 2022 Amount Percent

9 unchanged sentences

Gross contribution as a percentage of revenue 16.3 % 7.1 %

The table below sets forth Television Production revenue and changes in revenue by media for the three months ended December 31, 2022 and 2021:

The table below sets forth Television Production revenue and changes in revenue by media for the three months ended June 30, 2023 and 2022:

Three Months Ended

December 31, Increase (Decrease)

June 30, Increase (Decrease)

2023 2022 Amount Percent

(Amounts in millions)

Television Production Revenue

Television Production (Amounts in millions)

Television $ 150.0 $ 301.3 $ (151.3) (50.2) %

1 unchanged sentence

Home Entertainment

Digital 131.2 12.8 118.4 nm

Digital 11.8 31.3 (19.5) (62.3) %

Packaged Media 0.4 0.9 (0.5) (55.6) %

Total Home Entertainment 132.5 14.5 118.0 nm

Total Home Entertainment 12.2 32.2 (20.0) (62.1) %

Other 24.4 19.5 4.9 25.1 %

$ 218.5 $ 432.3 $ (213.8) (49.5) %

_______________________

nm - Percentage not meaningful.

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

Domestic television revenue increased in the three months ended December 31, 2022 as compared to the three months ended December 31, 2021, due to an increase of $49.7 million from intersegment revenues from the licensing of Starz original series ( Heels Season 2, Power Book IV:

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

Ghost - Season 3, among others) to Starz Networks, partially offset by lower revenue from reality television programs.

International revenue in the three months ended December 31, 2022 increased $9.9 million, or 17.7%, due to an increase of $9.3 million from intersegment revenues from the licensing of Starz original series ( Heels Season 2, Power Book IV:

Force - Season 2, Nacho - Season 1 , among others) to LIONSGATE+.

Home entertainment revenue in the three months ended December 31, 2022 increased $118.0 million due to digital media revenue from Schitt's Creek Seasons 1 to 6 from the license to a streaming platform, and Nashville Seasons 1 to 6 in the current quarter.

Other revenue increased $1.8 million in the three months ended December 31, 2022 as compared to the three months ended December 31, 2021, and primarily includes revenue of 3 Arts Entertainment which is generated from commissions and executive producer fees earned related to talent management.

Domestic television revenue decreased in the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, due to significant third-party revenue in the prior year's quarter from The First Lady Season 1, and a decrease of $68.4 million from intersegment revenues from the licensing of Starz original series to Starz Networks (revenue in the prior year's quarter from Power Book III:

Raising Kanan Season 3 , The Serpent Queen Season 1 , P-Valley Season 2 , Party Down Season 3 and Power Book II:

Ghost Season 3 compared to revenue in the current quarter from Power Book III:

Raising Kanan Season 3 and Power Book II:

Ghost Season 4 ).

International revenue in the three months ended June 30, 2023 decreased $47.4 million, or 59.8% as compared to the three months ended June 30, 2022 due to a decrease of $31.5 million from intersegment revenues from the licensing of Starz original series to LIONSGATE+, and revenue in the prior year's quarter from The First Lady Season 1 and Home Economics Season 2.

Home entertainment revenue in the three months ended June 30, 2023 decreased $20.0 million, or 62.1% as compared to the three months ended June 30, 2022 due to a decrease of $13.6 million from digital media intersegment revenues from the licensing of Starz original series to Starz Networks and digital media revenue in the prior year's quarter for The First Lady Season 1.

Other revenue in the three months ended June 30, 2023 increased $4.9 million, or 25.1% from the three months ended June 30, 2022, and primarily includes revenue of 3 Arts Entertainment which is generated from commissions and executive producer fees earned related to talent management.

Direct Operating Expense.

Direct operating expense of the Television Production segment in the three months ended December 31, 2022 increased $113.1 million, or 28.1% due to the increase in Television Production revenues.

Direct operating expenses as a percentage of television production revenue decreased primarily due to the mix of titles generating revenue in the current quarter as compared to the prior year's quarter, and this quarter the decrease in direct operating expense as a percentage of revenue was related to the timing of the licensing of higher margin library and acquired titles.

Direct operating expense of the Television Production segment in the three months ended June 30, 2023 decreased $218.3 million, or 55.5% due to the decrease in Television Production revenues.

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

In addition, the current quarter included lower write-downs to fair value of investment in film and television programs (none in the current quarter as compared to $1.2 million in the prior year's quarter).

Gross Contribution.

Gross contribution of the Television Production segment for the three months ended December 31, 2022 increased as compared to the three months ended December 31, 2021, due to increased television production revenue, offset by increased television production direct operating expense.

Gross contribution of the Television Production segment for the three months ended June 30, 2023 increased as compared to the three months ended June 30, 2022, as the lower television production revenue was more than offset by lower direct operating expenses as a percentage of television production revenue.

General and Administrative Expense.

General and administrative expenses of the Television Production segment increased $1.5 million, or 16.1%, primarily due to an increase in salaries and related expenses.

General and administrative expenses of the Television Production segment increased $1.6 million, or 14.4% primarily due to an increase in incentive based compensation.

Media Networks

The table below sets forth Media Networks gross contribution and segment profit for the three months ended December 31, 2022 and 2021.

The table below sets forth Media Networks gross contribution and segment profit for the three months ended June 30, 2023 and 2022:

Three Months Ended

December 31, Increase (Decrease)

June 30, Change

2023 2022 Amount Percent

4 unchanged sentences

Distribution & marketing expense 117.0 147.5 (30.5) (20.7) %

Gross contribution 72.4 49.5 22.9 46.3 %

Gross contribution 57.7 (13.5) 71.2 nm

General and administrative expenses 25.8 23.5 2.3 9.8 %

4 unchanged sentences

Three Months Ended Three Months Ended

December 31, 2022 December 31, 2021

June 30, 2023 June 30, 2022

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

11 unchanged sentences

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,

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

June 30, June 30,

(Amounts in millions)

16 unchanged sentences

___________________

(1) Includes OTT subscribers totaling 8.5 million at December 31, 2022 and 3.5 million at December 31, 2021 for the international territories being exited.

(1) June 30, 2022 includes OTT subscribers totaling 8.0 million for the international territories exited.

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

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

Media Networks revenue decreased $8.6 million reflecting a decrease of $20.8 million at Starz Networks, partially offset by increased revenue at LIONSGATE+ of $12.2 million as a result of subscriber and revenue growth in the international territories.

Starz Networks' revenue decreased as a result of declines in revenue of $39.9 million from traditional linear services, which were partially offset by higher OTT revenue of $18.9 million resulting from increased subscriptions.

As previously announced in November 2022, LIONSGATE+ will exit its service in France, Germany, Italy, Spain, Benelux, the Nordics and Japan (which we also refer to as the "exited territories") by the end of the fiscal year ended March 31, 2023.

Revenue for these territories was approximately $10.4 million for the three months ended December 31, 2022.

During the three months ended December 31, 2022 and 2021, the following original series premiered on STARZ:

Three Months Ended December 31, 2022 Three Months Ended December 31, 2021 (1)

Title Premiere Date Title Premiere Date

Step Up Season 3

October 16, 2022 Hightown Season 2

October 17, 2021

Dangerous Liaisons Season 1

November 6, 2022 Power Book II:

Ghost Season 2

November 21, 2021

___________________

(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.

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 LIONSGATE+ international service, in its remaining territories, has and will continue to result in an increase in expenses as the service continues to expand.

The decrease in Media Networks direct operating expenses is due to a decrease at LIONSGATE+ of $14.7 million, partially offset by an increase at Starz Networks of $4.4 million in the three months ended December 31, 2022.

Direct operating expenses at LIONSGATE+ decreased primarily as a result of lower programming cost amortization of approximately $7.2 million resulting from the impairment write-downs of programming in the exited territories during the second quarter ended September 30, 2022, and a benefit of approximately $7.4 million from foreign currency gains.

The increase in Starz Networks direct operating expense was primarily due to higher programming amortization of $8.2 million related to theatrical releases under our output agreements, partially offset by lower programming cost amortization from Starz Originals of $3.3 million, and other decreases in direct operating expenses.

The decrease in Media Networks distribution and marketing expense is due to a decrease of $14.7 million at Starz Networks and $6.5 million at LIONSGATE+.

Starz Networks distribution and marketing expense decreased as a result of lower overall spend for advertising purchased in the current year quarter and lower media spend for our Starz Originals' premieres.

The decrease in LIONSGATE+ distribution and marketing expense is due to the elimination of advertising and marketing activities in the exited territories.

Gross Contribution.

The increase in gross contribution compared to the three months ended December 31, 2021 was due to an decrease in negative gross contribution at LIONSGATE+ of $33.4 million due to higher revenue and lower direct operating expense.

This increase was partially offset by a decrease in gross contribution at Starz Networks of $10.5 million, due to lower revenue and higher direct operating expense, all as described above.

The decrease in the negative gross contribution at LIONSGATE+ is due to a reduction in expenses for the exited territories, which also benefited the gross margin.

The gross contribution for the exited territories was not significant for the three months ended December 31, 2022.

General and Administrative Expense.

General and administrative expenses of the Media Networks segment in the three months ended December 31, 2022 increased slightly from the prior year's quarter, due to increases of $1.8 million at Starz Networks, and $0.1 million at LIONSGATE+.

Nine Months Ended December 31, 2022 Compared to Nine Months Ended December 31, 2021

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the nine months ended December 31, 2022 and 2021:

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Studio Business

Motion Picture $ 791.6 $ 897.3 $ (105.7) (11.8) %

Television Production 1,468.6 1,160.8 307.8 26.5 %

Total Studio Business 2,260.2 2,058.1 202.1 9.8 %

Media Networks 1,157.5 1,155.9 1.6 0.1 %

Intersegment eliminations (648.6) (539.6) (109.0) 20.2 %

Total revenues 2,769.1 2,674.4 94.7 3.5 %

Direct operating 1,744.7 1,487.2 257.5 17.3 %

Distribution and marketing 567.1 633.4 (66.3) (10.5) %

General and administration 340.0 353.1 (13.1) (3.7) %

Depreciation and amortization 133.9 134.1 (0.2) (0.1) %

Restructuring and other 316.5 7.2 309.3 nm

Goodwill impairment 1,475.0 — 1,475.0 n/a

Total expenses 4,577.2 2,615.0 1,962.2 75.0 %

Operating income (loss) (1,808.1) 59.4 (1,867.5) nm

Interest expense (163.0) (130.0) (33.0) 25.4 %

Interest and other income 4.8 29.4 (24.6) (83.7) %

Other expense (21.1) (6.2) (14.9) 240.3 %

Gain (loss) on extinguishment of debt 40.3 (28.2) 68.5 nm

Gain on investments 42.1 1.2 40.9 nm

Equity interests income (loss) 0.8 (1.4) 2.2 (157.1) %

Loss before income taxes (1,904.2) (75.8) (1,828.4) nm

Income tax provision (16.6) (21.6) 5.0 (23.1) %

Net loss (1,920.8) (97.4) (1,823.4) nm

Net loss attributable to noncontrolling interest 7.3 13.9 (6.6) (47.5) %

Net loss attributable to Lions Gate Entertainment Corp.

shareholders $ (1,913.5) $ (83.5) $ (1,830.0) nm

_______________________

nm - Percentage not meaningful.

Consolidated revenues increased $94.7 million in the nine months ended December 31, 2022 reflecting an increase of $202.1 million from our Studio Business offset by increased intersegment eliminations of $109.0 million.

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

Motion Picture revenue decreased $105.7 million in the current period due to lower television, packaged media home entertainment, theatrical and international revenue, partially offset by higher digital media home entertainment and other revenue.

Motion Picture revenue included $30.0 million of revenue from licensing Motion Picture segment product to the Media Networks segment, representing a decrease of $5.4 million from the nine months ended December 31, 2021.

Television Production revenue increased $307.8 million due to increased digital home entertainment revenue, increased domestic television revenue from a greater number of television episodes delivered, including increased intersegment revenues from the licensing of Starz original series, and increased international and other revenue.

Television Production revenue included $618.6 million of revenue from licensing Television Production segment product to our Media Networks segment, representing an increase of $114.4 million from the nine months ended December 31, 2021.

Media Networks revenue increased $1.6 million reflecting increased revenue at LIONSGATE+ of $32.1 million, partially offset by a decrease of $30.5 million at Starz Networks.

The increase in intersegment eliminations is primarily associated with higher Television Production revenues for licenses of original series to Starz Networks and LIONSGATE+, both in the Media Networks segment as discussed above.

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, 2022 and 2021:

Nine Months Ended

2022 2021 Increase (Decrease)

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

(Amounts in millions)

Direct operating expenses

Studio Business

Motion Picture $ 379.6 48.0 % $ 398.5 44.4 % $ (18.9) (4.7) %

Television Production 1,306.1 88.9 1,058.1 91.2 248.0 23.4 %

Total Studio Business 1,685.7 74.6 1,456.6 70.8 229.1 15.7 %

Media Networks 677.0 58.5 574.8 49.7 102.2 17.8 %

COVID-19 related charges (benefit) (8.8) nm (2.3) nm (6.5) nm

Other 9.1 nm 1.4 nm 7.7 nm

Intersegment eliminations (618.3) nm (543.3) nm (75.0) 13.8 %

$ 1,744.7 63.0 % $ 1,487.2 55.6 % $ 257.5 17.3 %

_______________________

nm - Percentage not meaningful.

Direct operating expenses increased in the nine months ended December 31, 2022 due to higher direct operating expenses of our Studio Business and the Media Networks segment, partially offset by higher intersegment eliminations.

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

The increase in Media Networks direct operating expense was driven by increases at Starz Networks of $86.1 million and LIONSGATE+ of $16.1 million due to higher programming cost amortization, and foreign currency fluctuations at LIONSGATE+ related to the strengthening U.S.

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

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

COVID-19 Related Charges (Benefit).

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

In the nine months ended December 31, 2022, direct operating expense included a benefit of $8.8

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 (nine months ended December 31, 2021 - benefit of $2.3 million).

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

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

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

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

In addition, "other" direct operating expense includes share-based compensation, and the amortization of the non-cash fair value adjustments on film and television assets associated with the application of purchase accounting related to recent acquisitions.

Distribution and Marketing Expenses.

Distribution and marketing expenses by segment were as follows for the nine months ended December 31, 2022 and 2021:

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Distribution and marketing expenses

Studio Business:

Motion Picture $ 163.1 $ 215.5 $ (52.4) (24.3) %

Television Production 25.9 23.1 2.8 12.1 %

Total Studio Business 189.0 238.6 (49.6) (20.8) %

Media Networks 376.5 394.0 (17.5) (4.4) %

COVID-19 related charges — 0.3 (0.3) (100.0) %

Other 0.6 0.5 0.1 20.0 %

Intersegment eliminations 1.0 — 1.0 n/a

$ 567.1 $ 633.4 $ (66.3) (10.5) %

theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense $ 77.0 $ 114.3 $ (37.3) (32.6) %

Distribution and marketing expenses decreased in the nine months ended December 31, 2022, due to lower Studio Business and 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 period, and lower home entertainment distribution and marketing expense.

The decrease in Media Networks distribution and marketing expense was due to a decrease at Starz Networks of $13.6 million due to lower overall spend for advertising purchased in the current period and lower media spend for our Starz Originals' premieres, and a decrease at LIONSGATE+ of $3.9 million.

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

General and Administrative Expenses.

General and administrative expenses by segment were as follows for the nine months ended December 31, 2022 and 2021:

Nine Months Ended

December 31, Increase (Decrease)

2022 % of Revenues 2021 % of Revenues Amount Percent

(Amounts in millions)

General and administrative expenses

Studio Business

Motion Picture $ 66.2 $ 69.8 $ (3.6) (5.2) %

Television Production 32.0 28.8 3.2 11.1 %

Total Studio Business 98.2 98.6 (0.4) (0.4) %

Media Networks 70.5 65.0 5.5 8.5 %

Corporate 69.4 70.5 (1.1) (1.6) %

238.1 8.6% 234.1 8.8% 4.0 1.7 %

Share-based compensation expense 55.9 76.1 (20.2) (26.5) %

Purchase accounting and related adjustments 46.0 42.9 3.1 7.2 %

Total general and administrative expenses $ 340.0 12.3% $ 353.1 13.2% $ (13.1) (3.7) %

General and administrative expenses decreased in the nine months ended December 31, 2022, resulting from decreased share-based compensation expense, Motion Picture and corporate general and administrative expenses, partially offset by increases in Media Networks and Television Production general and administrative expenses and purchase accounting and related adjustments.

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

Corporate general and administrative expenses decreased $1.1 million, or 1.6%, primarily due to a decrease in incentive based compensation.

The decrease in share-based compensation expense included in general and administrative expense in the nine months ended December 31, 2022, as compared to the nine months ended December 31, 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:

Nine Months Ended

(Amounts in millions)

Share-based compensation expense by expense category

General and administrative expense $ 55.9 $ 76.1

Restructuring and other (1)

Direct operating expense 1.2 0.9

Distribution and marketing expense 0.6 0.5

Total share-based compensation expense $ 59.8 $ 77.5

_______________________

Purchase accounting and related adjustments increased $3.1 million, or 7.2%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.

Depreciation and Amortization Expense.

Depreciation and amortization of $133.9 million for the nine months ended December 31, 2022 decreased $0.2 million from $134.1 million in the nine months ended December 31, 2021.

Restructuring and Other.

Restructuring and other increased $309.3 million in the nine months ended December 31, 2022 as compared to the nine months ended December 31, 2021, and includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable.

Restructuring and other costs were as follows for the nine months ended December 31, 2022 and 2021 (see Note 14 to our unaudited condensed consolidated financial statements):

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Restructuring and other:

Content and other impairment (1)

$ 299.7 $ — $ 299.7 n/a

Severance (2)

Cash 14.8 3.8 11.0 289.5 %

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

2.1 — 2.1 n/a

Total severance costs 16.9 3.8 13.1 344.7 %

COVID-19 related charges (3)

0.1 0.9 (0.8) (88.9) %

Transaction and other costs (benefits) (4)

(0.2) 2.5 (2.7) nm

$ 316.5 $ 7.2 $ 309.3 nm

_______________________

nm - Percentage not meaningful

(1) Media Networks Restructuring:

For the second quarter ended September 30, 2022, due to the macro and microeconomic conditions, including the competitive environment, continued inflationary trends and recessionary economies worldwide and its impact on the Company's growth in subscribers worldwide, we began a plan to restructure our LIONSGATE+ business (formerly STARZPLAY International).

This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan).

For the third quarter ended December 31, 2022, due to the continuing macro and microeconomic conditions which led to the LIONSGATE+ restructuring, we expanded our restructuring plan discussed above to identify additional cost-saving initiatives, which included a strategic review of content performance across Starz's domestic and international platforms, resulting in certain programming being removed from those platforms and written down to fair value.

As a result of these restructuring initiatives, we recorded content impairment charges associated with impairment of programming related to the territories being exited and individual content abandonment upon removal of certain titles from the Starz platforms related to the Media Networks segment in the nine months ended December 31, 2022 of $293.8 million, respectively.

Of the content impairment charges recorded in the nine months ended December 31, 2022, approximately $85 million reflects the remaining amounts payable for this content.

As we continue to fully implement the plan, including further strategic review of content performance, we may incur additional content impairment charges beyond the estimates provided.

We expect the restructuring plan to be substantially completed by March 31, 2023.

Other Impairments:

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

The impairment reflects a decline in market conditions since the inception of the lease impacting potential sublease opportunities, and represents the difference between the estimated fair value, which was determined based on the expected discounted future cash flows of the lease asset, and the carrying value.

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

(4) Transaction and other costs in the nine months ended December 31, 2022 and 2021 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs and benefits associated with certain legal matters.

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

Goodwill Impairment.

Goodwill impairment of $1.475 billion for the nine months ended December 31, 2022 reflects the impairment charge recorded in the second quarter ended September 30, 2022 related to the Media Networks reporting unit, as discussed in Item 2.

Management's Discussion and Analysis, "Critical Accounting Policies and Estimates", Goodwill and Indefinite-Lived Intangible Assets (see Note 5 to our unaudited condensed consolidated financial statements).

There was no comparable charge in the nine months ended December 31, 2021.

Interest Expense.

Interest expense of $163.0 million in the nine months ended December 31, 2022 increased $33.0 million from the nine months ended December 31, 2021.

The following table sets forth the components of interest expense for the nine months ended December 31, 2022 and 2021:

Nine Months Ended

(Amounts in millions)

Interest Expense

Revolving credit facility $ 10.2 $ 4.9

Term loans 41.9 25.0

Senior Notes 40.3 41.0

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

Total interest expense $ 163.0 $ 130.0

______________________

(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.

Interest and Other Income.

Interest and other income of $4.8 million for the nine months ended December 31, 2022 compared to interest and other income of $29.4 million for the nine months ended December 31, 2021, due to insurance recoveries on prior shareholder litigation of $22.7 million in the prior year's period (see Note 16 to our unaudited condensed consolidated financial statements).

Other Expense.

Other expense of $21.1 million for the nine months ended December 31, 2022 compared to other expense of $6.2 million for the nine months ended December 31, 2021, and represented the loss recorded related to our monetization of accounts receivable programs (see Note 18 to our unaudited condensed consolidated financial statements).

Gain (Loss) on Extinguishment of Debt.

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

In the nine months ended December 31, 2021, the loss on extinguishment of debt of $28.2 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, repurchases of the Term Loan B, and the termination of a portion of our revolving credit commitments.

See Note 6 to our unaudited condensed consolidated financial statements.

Gain on Investments.

Gain on investments of $42.1 million for the nine months ended December 31, 2022 primarily represented a gain associated with the sale of a portion of our ownership interest in STARZPLAY Arabia, compared to a gain on investments of $1.2 million for the nine months ended December 31, 2021.

Equity Interests Income (Loss).

Equity interests income of $0.8 million in the nine months ended December 31, 2022 compared to equity interests loss of $1.4 million in the nine months ended December 31, 2021.

Income Tax Provision.

We had an income tax provision of $16.6 million in the nine months ended December 31, 2022, compared to an income tax provision of $21.6 million in the nine months ended December 31, 2021.

Our income tax provision for the nine months ended December 31, 2022 and 2021 was also impacted by an interest accrual on uncertain tax benefits, and the release of uncertain tax benefits due to the close of audits or expiration of statutory limitations.

Our income tax provision for the nine months ended December 31, 2021 was also impacted by additional uncertain tax benefits related to state income taxes identified during state tax audits.

Net Loss Attributable to Lions Gate Entertainment Corp.

Shareholders.

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

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

Segment Results of Operations

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

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.

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Studio Business

Motion Picture $ 791.6 $ 897.3 $ (105.7) (11.8) %

Television Production 1,468.6 1,160.8 307.8 26.5 %

Total Studio Business $ 2,260.2 $ 2,058.1 $ 202.1 9.8 %

Media Networks 1,157.5 1,155.9 1.6 0.1 %

Intersegment eliminations (648.6) (539.6) (109.0) 20.2 %

$ 2,769.1 $ 2,674.4 $ 94.7 3.5 %

Gross Contribution

Studio Business

Motion Picture $ 248.9 $ 283.3 $ (34.4) (12.1) %

Television Production 136.6 79.6 57.0 71.6 %

Total Studio Business $ 385.5 $ 362.9 $ 22.6 6.2 %

Media Networks 104.0 187.1 (83.1) (44.4) %

Intersegment eliminations (31.3) 3.7 (35.0) nm

$ 458.2 $ 553.7 $ (95.5) (17.2) %

Segment Profit

Studio Business

Motion Picture $ 182.7 $ 213.5 $ (30.8) (14.4) %

Television Production 104.6 50.8 53.8 105.9 %

Total Studio Business $ 287.3 $ 264.3 $ 23.0 8.7 %

Media Networks 33.5 122.1 (88.6) (72.6) %

Intersegment eliminations (31.3) 3.7 (35.0) nm

$ 289.5 $ 390.1 $ (100.6) (25.8) %

_______________________

nm - Percentage not meaningful.

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 nine months ended December 31, 2022 and 2021:

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Motion Picture Segment:

Revenue $ 791.6 $ 897.3 $ (105.7) (11.8) %

Direct operating expense 379.6 398.5 (18.9) (4.7) %

Distribution & marketing expense 163.1 215.5 (52.4) (24.3) %

Gross contribution 248.9 283.3 (34.4) (12.1) %

General and administrative expenses 66.2 69.8 (3.6) (5.2) %

Segment profit $ 182.7 $ 213.5 $ (30.8) (14.4) %

theatrical P&A and Premium VOD expense included in distribution and marketing expense $ 77.0 $ 114.3 $ (37.3) (32.6) %

Direct operating expense as a percentage of revenue 48.0 % 44.4 %

Gross contribution as a percentage of revenue 31.4 % 31.6 %

The table below sets forth Motion Picture revenue by media and product category for the nine months ended December 31, 2022 and 2021:

Nine Months Ended December 31,

2022 2021 (1)

Total Increase (Decrease)

Lionsgate Original Releases (2)

Other Film (3)

Total Lionsgate Original Releases (2)

Other Film (3)

(Amounts in millions)

Motion Picture Revenue

Theatrical $ 24.0 $ 4.6 $ 28.6 $ 40.4 $ 9.6 $ 50.0 $ (21.4)

Home Entertainment

Digital Media 255.7 122.8 378.5 227.8 127.8 355.6 22.9

Packaged Media 27.2 28.1 55.3 53.9 42.5 96.4 (41.1)

Total Home Entertainment 282.9 150.9 433.8 281.7 170.3 452.0 (18.2)

Television 116.7 30.3 147.0 178.0 31.7 209.7 (62.7)

International 124.4 42.1 166.5 137.3 37.2 174.5 (8.0)

Other 10.0 5.7 15.7 6.6 4.5 11.1 4.6

$ 558.0 $ 233.6 $ 791.6 $ 644.0 $ 253.3 $ 897.3 $ (105.7)

____________________

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

Accordingly, amounts presented in the table above for the nine months ended December 31, 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:

Theatrical revenue decreased $21.4 million in the nine months ended December 31, 2022 as compared to the nine months ended December 31, 2021 due to a decrease of $16.4 million from Lionsgate Original Releases driven by fewer theatrical slate releases generating revenue in the period, and a decrease of $5.0 million from Other Film due to lower revenue from our acquired library titles.

Home entertainment revenue decreased $18.2 million, or 4.0%, in the nine months ended December 31, 2022, as compared to the nine months ended December 31, 2021, due to lower packaged media revenue of $41.1 million, partially offset by higher digital media revenue of $22.9 million driven by Lionsgate Original Releases.

The decrease in packaged media revenue was due to a decrease of $26.7 million from Lionsgate Original Releases due to lower revenue from our theatrical slate titles and multi-platform releases, and a decrease of $14.4 million from Other Film due to lower revenue from our acquired library titles.

The increase in digital media revenue was due to an increase of $27.9 million from Lionsgate Original Releases due to higher revenue from our theatrical slate titles and direct-to-platform (i.e., SVOD) releases.

Television revenue decreased $62.7 million, or 29.9%, in the nine months ended December 31, 2022, as compared to the nine months ended December 31, 2021, due to a decrease from Lionsgate Original Releases of $61.3 million due to fewer television windows opening for our theatrical slate titles than in the prior year's period, and lower revenue recognized for those titles.

In particular, the current period included revenue from the fiscal 2023 theatrical release, The Unbearable Weight of Massive Talent , and the fiscal 2022 theatrical releases, American Underdog and Moonfall.

These compared to revenue in the prior year's period from the fiscal 2022 theatrical releases, Spiral and Voyager , and the fiscal 2021 theatrical releases, Chaos Walking, Barb and Star Go to Vista Del Mar and Fatale .

International revenue decreased $8.0 million, or 4.6%, in the nine months ended December 31, 2022, as compared to the nine months ended December 31, 2021 due to a decrease from Lionsgate Original Releases of $12.9 million due to lower revenue generated from our fiscal 2022 theatrical slate titles in the current period as compared to the fiscal 2021 theatrical slate titles in the prior year's period, partially offset by increased revenue from direct-to-platform releases, and higher revenue generated from our fiscal 2023 theatrical slate titles in the current period as compared to the fiscal 2022 theatrical slate titles in the prior year's period.

Direct Operating Expense.

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

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 period as compared to the prior year's period, 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).

In addition, the current period included an increase in development write-offs of $12.8 million on Lionsgate Original Releases, and additional expense of $3.2 million related to foreign currency losses.

Investment in film write-downs included in Motion Picture segment direct operating expense in the nine months ended December 31, 2022 were $1.1 million, as compared to $1.2 million in the nine months ended December 31, 2021.

Distribution and Marketing Expense.

The decrease in distribution and marketing expense in the nine months ended December 31, 2022 is due to lower theatrical P&A and Premium VOD expense, and lower home entertainment distribution and marketing expense.

Theatrical P&A and Premium VOD expense decreased due to lower expense associated with fewer releases in the current period, partially offset by higher expense for films to be released in subsequent quarters.

In the nine months ended December 31, 2022 approximately $27.3 million of P&A and Premium VOD expense was incurred in advance for films to be released in subsequent quarters, compared to approximately $10.3 million in the nine months ended December 31, 2021 in the Motion Picture segment.

Gross Contribution.

Gross contribution of the Motion Picture segment for the nine months ended December 31, 2022 decreased as compared to the nine months ended December 31, 2021 due to lower Motion Picture revenue, and higher direct operating expense as a percentage of Motion Picture revenue, partially offset by lower distribution and marketing expense.

General and Administrative Expense.

General and administrative expenses of the Motion Picture segment in the nine months ended December 31, 2022 decreased $3.6 million, or 5.2%, 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 nine months ended December 31, 2022 and 2021:

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Television Production Segment:

Revenue $ 1,468.6 $ 1,160.8 $ 307.8 26.5 %

Direct operating expense 1,306.1 1,058.1 248.0 23.4 %

Distribution & marketing expense 25.9 23.1 2.8 12.1 %

Gross contribution 136.6 79.6 57.0 71.6 %

General and administrative expenses 32.0 28.8 3.2 11.1 %

Segment profit $ 104.6 $ 50.8 $ 53.8 105.9 %

Direct operating expense as a percentage of revenue 88.9 % 91.2 %

Gross contribution as a percentage of revenue 9.3 % 6.9 %

The table below sets forth Television Production revenue and changes in revenue by media for the nine months ended December 31, 2022 and 2021:

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

Television Production (Amounts in millions)

Television $ 973.1 $ 840.7 $ 132.4 15.7 %

International 219.4 180.2 39.2 21.8 %

Home Entertainment

Digital 205.1 70.6 134.5 190.5 %

Packaged Media 2.7 5.1 (2.4) (47.1) %

Total Home Entertainment 207.8 75.7 132.1 174.5 %

Other 68.3 64.2 4.1 6.4 %

$ 1,468.6 $ 1,160.8 $ 307.8 26.5 %

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

Domestic television revenue increased in the nine months ended December 31, 2022, as compared to the nine months ended December 31, 2021, due to a greater number of television episodes delivered, which included an increase of $71.5 million from intersegment revenues from the licensing of Starz original series (Power Book II:

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

Raising Kanan Season 2 , and Power Book IV:

Force Season 2, among others) to Starz Networks, and third-party revenue in the current period from The First Lady Season 1, Minx Season 2, Mythic Quest Season 3 and Home Economics Season 3.

International revenue in the nine months ended December 31, 2022 increased $39.2 million, or 21.8% as compared to the nine months ended December 31, 2021 due to revenue in the current period from Mythic Quest Season 3, The First Lady Season 1 and Acapulco Season 2, as compared to revenue in the prior year's period from Dear White People Season 4 and Acapulco Season 1.

In addition, the increase reflects an increase of $18.1 million from intersegment revenues from the licensing of Starz original series to LIONSGATE+.

Home entertainment revenue in the nine months ended December 31, 2022 increased $132.1 million, or 174.5% as compared to the nine months ended December 31, 2021 due to digital media revenue in the current period from Schitt's Creek Seasons 1 to 6 from the license to a streaming platform, Nashville Season 1 to 6, and Ghosts Season 1, which compared to digital media revenue in the prior year's period for Weeds Seasons 1 to 8 and Welcome to Flatch Season 1.

In addition, the increase reflects an increase of $23.4 million from digital media intersegment revenues from the licensing of Starz original series to Starz Networks.

Other revenue in the nine months ended December 31, 2022 increased slightly from the nine months ended December 31, 2021, and primarily includes revenue of 3 Arts Entertainment which is generated from commissions and executive producer fees earned related to talent management.

Direct Operating Expense.

Direct operating expense of the Television Production segment in the nine months ended December 31, 2022 increased $248.0 million, or 23.4% 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 period, primarily due to the mix of titles generating revenue in the current period as compared to the prior year's period.

The decrease in direct operating expense as a percentage of revenue was related to the timing of the licensing of higher margin library and acquired titles.

In addition, the current period included lower write-downs to fair value of investment in film and television programs, amounting to $4.7 million in aggregate, as compared to $28.1 million in the prior year's period.

Gross Contribution.

Gross contribution of the Television Production segment for the nine months ended December 31, 2022 increased as compared to the nine months ended December 31, 2021, due to increased television production revenue and slightly lower direct operating expenses as a percentage of television production revenue.

General and Administrative Expense.

General and administrative expenses of the Television Production segment increased $3.2 million, or 11.1% 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 nine months ended December 31, 2022 and 2021:

Nine Months Ended

December 31, Increase (Decrease)

2022 2021 Amount Percent

(Amounts in millions)

Media Networks Segment:

Revenue $ 1,157.5 $ 1,155.9 $ 1.6 0.1 %

Direct operating expense 677.0 574.8 102.2 17.8 %

Distribution & marketing expense 376.5 394.0 (17.5) (4.4) %

Gross contribution 104.0 187.1 (83.1) (44.4) %

General and administrative expenses 70.5 65.0 5.5 8.5 %

Segment profit $ 33.5 $ 122.1 $ (88.6) (72.6) %

Direct operating expense as a percentage of revenue 58.5 % 49.7 %

Gross contribution as a percentage of revenue 9.0 % 16.2 %

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

Nine Months Ended Nine Months Ended

December 31, 2022 December 31, 2021

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

(Amounts in millions)

Media Networks Segment:

Revenue $ 1,048.7 $ 108.8 $ 1,157.5 $ 1,079.2 $ 76.7 $ 1,155.9

Direct operating expense 557.8 119.2 677.0 471.7 103.1 574.8

Distribution & marketing expense 304.8 71.7 376.5 318.4 75.6 394.0

Gross contribution 186.1 (82.1) 104.0 289.1 (102.0) 187.1

General and administrative expenses 50.7 19.8 70.5 47.4 17.6 65.0

Segment profit $ 135.4 $ (101.9) $ 33.5 $ 241.7 $ (119.6) $ 122.1

Media Networks revenue increased $1.6 million reflecting increased revenue at LIONSGATE+ of $32.1 million as a result of subscriber and revenue growth in the international territories, mostly offset by a decrease of $30.5 million at Starz Networks.

Revenue for the international territories announced to be exited was approximately $30.3 million for the nine months ended December 31, 2022 and accounted for approximately $6.0 million of the $32.1 million increase in LIONSGATE+ revenue mentioned above.

Starz Networks' revenue decreased as a result of declines in revenue of $111.6 million from traditional linear services, which were offset by higher OTT revenue of $79.6 million resulting from increased subscriptions.

During the nine months ended December 31, 2022 and 2021, the following original series premiered on STARZ:

Nine Months Ended December 31, 2022 Nine Months Ended December 31, 2021

Media Networks revenue was comparable and reflected increased revenue at LIONSGATE+ of $12.1 million, mostly offset by a decrease of $12.2 million at Starz Networks.

The increase in revenue at LIONSGATE+ was due to revenue from the distribution of Starz Originals and licensed content to third-party distributors outside of the Starz Platforms in ancillary markets of approximately $14.0 million, an increase in revenue from the continuing LIONSGATE+ territories of approximately $7.5 million, all of which was offset by a decrease in revenue from the LIONSGATE+ exited territories of approximately $9.4 million.

Starz Networks' revenue decreased $12.2 million primarily as a result of declines in revenue of $21.1 million from traditional linear services, which were offset by higher OTT revenue of $7.8 million resulting from increased subscriptions.

During the three months ended June 30, 2023 and 2022, the following original series premiered on STARZ:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Title Premiere Date Title Premiere Date

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First Quarter:

Gaslit April 24, 2022 The Girlfriend Experience Season 3

P-Valley Season 2

June 3, 2022 Run the World Season 1

Becoming Elizabeth Season 1

June 12, 2022 Blindspotting Season 1

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

Run the World Season 2

May 26, 2023 P-Valley Season 2

Outlander Season 7A

June 16, 2023 Becoming Elizabeth Season 1

June 12, 2022

Who is Ghislaine Maxwell June 26, 2022

Second Quarter:

Power Book III:

Raising Kanan Season 2

August 14, 2022 Power Book III:

Raising Kanan Season 1

July 18, 2021

Serpent Queen Season 1

September 11, 2022 Heels Season 1

August 15, 2021

BMF - Black Mafia Family Season 1

September 26, 2021

Third Quarter:

Step Up Season 3

October 16, 2022 Hightown Season 2

October 17, 2021

Dangerous Liaisons Season 1

November 6, 2022 Power Book II:

Ghost Season 2

November 21, 2021

___________________

(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.

Direct Operating and Distribution and Marketing Expenses .

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In addition, the LIONSGATE+ international service, in its remaining territories, 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 Starz Networks of $86.1 million and LIONSGATE+ of $16.1 million in the nine months ended December 31, 2022.

The increase in Starz Networks direct operating expense was primarily due to higher programming cost amortization related to our Starz Originals of $87.7 million primarily related to higher cost original series premieres, and higher programming cost amortization of $8.7 million related to library content, partially offset by lower programming amortization of $4.5 million related to theatrical releases under our programming output agreements, and a benefit in the current period of $10.0 million associated with the modification of a content licensing arrangement.

Direct operating expenses at LIONSGATE+ increased as a result of higher programming cost amortization of approximately $9.4 million and foreign currency loss of approximately $5.6 million related to the strengthening U.S.

The decrease in Media Networks distribution and marketing expense is due to a decrease of $13.6 million at Starz Networks due to overall spend for advertising purchased in the current period and lower media spend for our Starz Originals' premieres, and a decrease of $3.9 million at LIONSGATE+.

The decrease in Media Networks direct operating expenses is due to decreases at Starz Networks of $26.1 million and LIONSGATE+ of $14.7 million in the three months ended June 30, 2023.

The decrease in Starz Networks direct operating expense was primarily due to lower programming cost amortization related to our Starz Originals of $6.4 million primarily related to lower cost original series premieres, lower programming cost amortization of $8.1 million related to library content, and lower programming amortization of $6.0 million related to theatrical releases under our programming output agreements.

Direct operating expenses at LIONSGATE+ decreased as a result of lower programming cost amortization of approximately $17.3 million in connection with the exited territories and lower expense of approximately $6.9 million related to foreign exchange gains in the current quarter which compared to foreign exchange losses in the prior year's quarter, partially offset by higher amortization of investment in films and television programs of $10.5 million associated with the distribution of Starz Originals and licensed content to third-party distributors outside of the Starz Platforms in ancillary markets.

The decrease in Media Networks distribution and marketing expense is due to a decrease of $16.2 million at Starz Networks primarily due to lower spend for our Starz Originals' premieres in the current period, and a decrease of $14.3 million at LIONSGATE+ primarily due to a decrease in direct response advertising in connection with the exited territories.

Gross Contribution.

The decrease in gross contribution compared to the nine months ended December 31, 2021 was due to a decrease in gross contribution at Starz Networks of $103.0 million, partially offset by an decrease in negative gross contribution at LIONSGATE+ of $19.9 million, driven by higher direct operating expense and lower Starz Networks revenue, partially offset by higher LIONSGATE+ revenue and lower distribution and marketing expense, as described above.

The gross contribution on the international territories announced to be exited was approximately $36.1 million for the nine months ended December 31, 2022.

The increase in gross contribution compared to the three months ended June 30, 2022 was due to an increase in gross contribution at Starz Networks of $30.1 million, and lower negative gross contribution at LIONSGATE+ of $41.1 million, driven by lower direct operating expense and distribution and marketing expense, and higher LIONSGATE+ revenue, partially offset by lower Starz Networks revenue, as described above.

The negative gross contribution related to the exited territories was approximately $17.6 million for the three months ended June 30, 2022.

General and Administrative Expense.

General and administrative expenses in the nine months ended December 31, 2022 increased slightly from the prior year's period, due to increases of $3.3 million at Starz Networks, and $2.2 million at LIONSGATE+.

General and administrative expenses in the three months ended June 30, 2023 increased from the prior year's quarter, due to increases of $4.6 million at Starz Networks, partially offset by a decrease of $2.3 million at LIONSGATE+.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

Our liquidity and capital requirements in the nine months ended December 31, 2022 were provided principally through cash generated from operations, corporate debt, our film related obligations (as further discussed below), and the monetization of trade accounts receivable.

As of December 31, 2022, we had cash and cash equivalents of $425.4 million.

Our liquidity and capital requirements in the three months ended June 30, 2023 were provided principally through cash generated from operations, corporate debt, our film related obligations (as further discussed below), and the monetization of trade accounts receivable.

As of June 30, 2023, we had cash and cash equivalents of $322.7 million.

Corporate Debt

Our corporate debt at December 31, 2022, excluding film related obligations discussed further below, consisted of the following:

Our corporate debt at June 30, 2023, excluding film related obligations discussed further below, consisted of the following:

• Senior Credit Facilities:

◦ Revolving Credit Facility.

We have a $1.25 billion revolving credit facility (with no amounts outstanding at December 31, 2022) due April 2026 (the "Revolving Credit Facility").

We have a $1.25 billion revolving credit facility (with no amounts outstanding at June 30, 2023) due April 2026 (the "Revolving Credit Facility").

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

◦ Term Loan A.

We have a term loan A facility due April 2026 (the "Term Loan A"), with $433.8 million outstanding at December 31, 2022.

We have a term loan A facility due April 2026 (the "Term Loan A"), with $422.6 million outstanding at June 30, 2023.

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

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

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

◦ 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 $834.8 million outstanding at December 31, 2022.

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 $828.5 million outstanding at June 30, 2023.

• Senior Notes:

We have $857.6 million outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at December 31, 2022.

We have $715.0 million outstanding of 5.500% senior notes due 2029 (the "5.500% Senior Notes") at June 30, 2023.

See Note 4 to our unaudited condensed consolidated financial statements for a discussion of our corporate debt.

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

Our film related obligations at December 31, 2022 include the following:

Our film related obligations at June 30, 2023 include the following:

• Production Loans:

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

At December 31, 2022, there was $1,435.7 million outstanding of production loans.

At June 30, 2023, there was $1,374.4 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 January and April 2023.

At December 31, 2022, there was $54.2 million outstanding of programming notes.

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

The Company's programming notes have contractual repayment dates in August 2023.

At June 30, 2023, there was $62.2 million outstanding of programming notes.

• Production Tax Credit Facility:

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

At December 31, 2022, there was $231.2 million outstanding under the Production Tax Credit Facility.

At June 30, 2023, there was $235.0 million outstanding under the Production Tax Credit Facility.

• IP Credit Facility:

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

At December 31, 2022, there was $152.3 million outstanding under the IP Credit Facility.

At June 30, 2023, there was $133.1 million outstanding under the IP Credit Facility.

• Backlog Facility and Other:

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The Backlog Facility revolving period finishes on May 16, 2025, at which point cash collections from the underlying collateral is used to repay the facility.

The facility maturity date is up to 2 years and 90 days after the revolving period ends, currently August 14, 2027.

As of December 31, 2022, there was $175.0 million outstanding under the Backlog Facility.

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

As of June 30, 2023, there was $175.0 million outstanding under the Backlog Facility.

In September 2022, the Company borrowed $43.4 million under a loan agreement which is secured by contracted receivables which are not yet recognized as revenue under certain licensing agreements, which matures on March 28, 2026 (the "September 2022 Distribution Loan").

In December 2022, the Company borrowed $16.2 million under a loan agreement which matures on November 1, 2025 (the "December 2022 Distribution Loan", and together with the September 2022 Distribution Loan and the previously outstanding June 2022 Distribution Loan, the "Distribution Loans").

In December 2022, the Company borrowed $16.2 million under a loan agreement which matures on November 1, 2025 (the "December 2022 Distribution Loan").

In June 2023, the Company borrowed an aggregate of $158.1 million under a loan agreement (the "June 2023 Distribution Loan", and together with the September 2022 Distribution Loan and December 2022 Distribution Loan, the "Distribution Loans"), of which $110.0 million matures on June 30, 2026, and $48.1 million matures on August 6, 2025.

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

As of December 31, 2022, $58.6 million remains outstanding under the Distribution Loans.

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

As of June 30, 2023, $206.1 million remains outstanding under the Distribution Loans.

See Note 5 to our unaudited condensed consolidated financial statements for a discussion of our film related obligations.

Accounts Receivable Monetization and Governmental Incentives

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Redeemable Noncontrolling Interests.

In addition, the Company has a redeemable noncontrolling interest balance of $357.1 million as of December 31, 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 9 to our unaudited condensed consolidated financial statements).

In addition, the Company has a redeemable noncontrolling interest balance of $347.2 million as of June 30, 2023 related to its acquisition of a controlling interest, consisting of a limited liability company interest, in each of Pilgrim Media Group and 3 Arts Entertainment, which may require the use of cash in the event the holders of the noncontrolling interests require the Company to repurchase their interests (see Note 7 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.

Pursuant to an amendment dated July 31, 2023, the put rights associated with the 3 Arts Entertainment noncontrolling interest were extended, such that the noncontrolling interest holders have a right to put the noncontrolling interest of 3 Arts Entertainment, at fair value, exercisable beginning August 15, 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 had a right to put and the Company had 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.

On November 14, 2022, the noncontrolling interest holder exercised the right to put a portion of the noncontrolling interest, equal to 25% of Pilgrim Media Group.

As of December 31, 2022, the purchase of shares pursuant to the exercise of the put had not been completed.

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.

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

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

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

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In addition, the LIONSGATE+ international service, in its remaining territories, has and will require capital investment as the service continues to expand.

We are in the process of executing our LIONSGATE+ restructuring plan previously discussed under Item 2.

Management's Discussion and Analysis, "Overview", including exiting certain territories and our strategic review of content performance for consideration of removal from our various platforms, and estimate we will incur additional charges ranging from approximately $100 million to $125 million related to certain contractual content commitments or programming content impairment charges, among other items, as we fully implement the plan.

Of these total estimated future charges, the net future cash outlay is estimated to range from approximately $75 million to $100 million, which is inclusive of the amounts payable for the content, as well as the incremental cost related to the restructuring.

Of the content impairment charges recorded in the nine months ended December 31, 2022, approximately $85 million reflects the remaining amounts payable for this content.

As we continue to fully implement the plan, including further strategic review of content performance, we may incur additional content impairment charges beyond the estimates provided.

We expect the restructuring plan to be substantially completed by March 31, 2023.

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.

Under the current Media Networks business restructuring plan previously discussed under "Item 2.

Management's Discussion and Analysis of Results of Operations and Financial Condition - Overview", we estimate we will incur additional charges ranging from approximately $5 million to $30 million related to certain contractual content commitments or programming content impairment charges, among other items related to territories exited or to be exited.

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

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

While the modified contract covers the cost of the content during the shut down period, there may be additional charges for remaining contractual commitments when the service is completely shut down in Latin America, which is expected toward the end of calendar 2023.

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

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

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

principal and interest payments) requirements for the next 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 in our remaining international territories.

principal and interest payments) requirements for the next 12 months and beyond, including the funding of future film and television production, film and programming rights acquisitions and theatrical and home entertainment release schedules, and future equity method or other investment funding requirements, and international expansion in our remaining international territories.

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

Our current financing strategy is to fund operations and to leverage investment in films and television programs in the short-term and long-term through our cash flow from operations, our revolving credit facility, production loans and programming notes, government incentive programs, the monetization of trade accounts receivable, our Production Tax Credit Facility, our IP Credit Facility, our Backlog Facility, and other obligations.

In addition, we continue to expand our LIONSGATE+ international service, in its remaining territories, and may acquire businesses or assets, including individual films or libraries that are complementary to our business.

In addition, we continue to invest in our LIONSGATE+ international service, in its remaining territories, and may acquire businesses or assets, including individual films or libraries that are complementary to our business.

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

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

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

Additionally, circumstances related to 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.

Our ability to obtain any additional financing will depend on, among other things, our business plans, operating

performance, the condition of the capital markets at the time we seek financing, and short and long-term debt ratings assigned by independent rating agencies.

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

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

Material Cash Requirements from Known Contractual and Other Obligations.

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

The following table sets forth our significant contractual and other obligations as of December 31, 2022 and the estimated timing of payment:

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

The following table sets forth our significant contractual and other obligations as of June 30, 2023 and the estimated timing of payment:

Total Next 12 Months Beyond 12 Months

(Amounts in millions)

Future annual repayment of debt and other obligations recorded as of December 31, 2022 (on-balance sheet arrangements)

Future annual repayment of debt and other obligations recorded as of June 30, 2023 (on-balance sheet arrangements)

Corporate debt (1) :

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5.500% Senior Notes 715.0 — 715.0

Film related and other obligations (2)

Film related obligations (2)

2,185.8 1,314.0 871.8

Content related payables (3)

255.6 203.1 52.5

Operating lease obligations 193.9 43.4 150.5

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813.6 479.6 334.0

Interest payments on corporate debt (4)

Interest payments (5)

509.6 189.2 320.4

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(1) See Note 4 to our unaudited condensed consolidated financial statements for further information on our corporate debt.

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

See Note 7 to our unaudited condensed consolidated financial statements for further information.

(2) See Note 5 to our unaudited condensed consolidated financial statements for further information on our film related obligations

(3) Content related payables include minimum guarantees and accrued licensed program rights obligations included on our consolidated balance sheet, which represent amounts payable for film or television rights that we have acquired or licensed.

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

(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) Includes cash interest payments on our corporate debt and film related obligations, based on the applicable SOFR and LIBOR interest rates at June 30, 2023, net of payments and receipts from the Company's interest rate swaps, and excluding the interest payments on the revolving credit facility as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

(6) Not included in the amounts above are $347.2 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.

On November 14, 2022, the noncontrolling interest holder exercised the right to put a portion of the noncontrolling interest, equal to 25% of Pilgrim Media Group.

As of December 31, 2022, the purchase of shares pursuant to the exercise of the put had not been completed.

See Note 7 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.

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

starting January 1, 2022.

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

As of December 31, 2022, the Company was in compliance with all applicable covenants.

As of June 30, 2023, 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, 2022, the Company was in compliance with all applicable covenants.

As of June 30, 2023, 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 months ended December 31, 2022, the Company did not repurchase any common shares.

During the three months ended June 30, 2023, the Company did not repurchase any common shares.

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

Capacity to Pay Dividends.

At December 31, 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 $1,920.8 million and accumulated deficit of $2,317.9 million were deemed free of restrictions from paying dividends at December 31, 2022.

At June 30, 2023, the capacity to pay dividends under the Senior Credit Facilities and the Senior Notes significantly exceeded the amount of the Company's accumulated deficit or net loss, and therefore the Company's net loss of $71.5 million and accumulated deficit of $2,516.3 million were deemed free of restrictions from paying dividends at June 30, 2023.

Discussion of Operating, Investing, Financing Cash Flows

Cash, cash equivalents and restricted cash increased by $89.9 million for the nine months ended December 31, 2022 and decreased by $207.2 million for the nine months ended December 31, 2021, before foreign exchange effects on cash.

Cash, cash equivalents and restricted cash increased by $79.9 million for the three months ended June 30, 2023 and increased by $24.8 million for the three months ended June 30, 2022, before foreign exchange effects on cash.

Components of these changes are discussed below in more detail.

Operating Activities.

Cash flows used in operating activities for the nine months ended December 31, 2022 and 2021 were as follows:

Nine Months Ended

Cash flows provided by (used in) operating activities for the three months ended June 30, 2023 and 2022 were as follows:

Three Months Ended

2023 2022 Net Change

(Amounts in millions)

Operating income (loss) $ (1,808.1) $ 59.4 $ (1,867.5)

Depreciation and amortization 133.9 134.1 (0.2)

Amortization of films and television programs and program rights 1,284.4 1,118.7 165.7

Non-cash share-based compensation 59.8 77.5 (17.7)

Goodwill impairment 1,475.0 — 1,475.0

Content and other impairments 299.7 — 299.7

Cash interest (142.9) (92.9) (50.0)

Interest and other income and expense, net (16.3) 23.2 (39.5)

Current income tax provision (17.1) (19.0) 1.9

Other amortization 55.8 71.5 (15.7)

Cash flows from operations before changes in operating assets and liabilities 1,324.2 1,372.5 (48.3)

Changes in operating assets and liabilities:

Proceeds from the termination of interest rate swaps 188.7 — 188.7

Accounts receivable, net and other assets (74.5) (153.2) 78.7

Investment in films and television programs and program rights (1,573.4) (1,735.4) 162.0

Accounts payable and accrued liabilities (46.0) (17.4) (28.6)

Other changes in operating assets and liabilities 53.0 43.7 9.3

Changes in operating assets and liabilities (1,452.2) (1,862.3) 410.1

Net Cash Flows Used In Operating Activities $ (128.0) $ (489.8) $ 361.8

Cash flows used in operating activities for the nine months ended December 31, 2022 were $128.0 million compared to cash flows used in operating activities of $489.8 million for the nine months ended December 31, 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 period), lower increases in accounts receivable, net and other assets, lower cash used for investment in films and television programs and program rights, and higher cash from other changes in operating assets and liabilities, partially offset by higher decreases in accounts payable and accrued liabilities.

In addition, cash flows used in operating activities for the nine months ended December 31, 2022 included a net benefit of approximately $77.0 million from the monetization of accounts receivables programs, as compared to a net use of cash of approximately $125.8 million for the nine months ended December 31, 2021 (see Note 18 to our unaudited condensed consolidated financial statements).

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

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).

Net Cash Flows Provided By (Used In) Operating Activities $ 29.2 $ (0.2) $ 29.4

Cash flows provided by operating activities for the three months ended June 30, 2023 were $29.2 million compared to cash flows used in operating activities of $0.2 million for the three months ended June 30, 2022.

The increase in cash provided by operating activities is due to lower cash used from changes in operating assets and liabilities of $83.5 million, 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 lower cash used for investment in film and television programs and program rights, greater decreases in accounts receivable, net, and lower decreases in accounts payable and accrued liabilities, partially offset by proceeds in the prior year's quarter from the termination of interest rate swaps (see further discussion below for interest rate swap transactions in the prior year's quarter).

In addition, cash flows used in operating activities for the three months ended June 30, 2023 included a net use of cash of approximately $30.9 million from the monetization of accounts receivables programs, as compared to a net benefit of approximately $13.9 million for the three months ended June 30, 2022 (see Note 16 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 presented in the "proceeds from the termination of interest rate swaps" line item on the unaudited condensed consolidated statement of cash flows), and a use of cash in financing activities of $134.5 million reflecting the pay down of the financing component of the Terminated Swaps (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million) (see Financing Activities below).

See Note 15 to our unaudited condensed consolidated financial statements.

Investing Activities.

Cash flows used in investing activities for the nine months ended December 31, 2022 and 2021 were as follows:

Nine Months Ended

Cash flows used in investing activities for the three months ended June 30, 2023 and 2022 were as follows:

Three Months Ended

(Amounts in millions)

Proceeds from the sale of Pantaya $ — $ 123.6

Proceeds from the sale of equity method and other investments $ — $ 2.3

Investment in equity method investees and other — (7.5)

Distributions from equity method investees — 3.2

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

Increase in loans receivable (0.9) —

1 unchanged sentence

Net Cash Flows Used In Investing Activities $ (9.8) $ (14.8)

Cash flows used in investing activities of $7.8 million for the nine months ended December 31, 2022 compared to cash flows used in investing activities of $75.1 million for the nine months ended December 31, 2021, primarily due to proceeds from the sale of a portion of our ownership interest in STARZPLAY Arabia in the nine months ended December 31, 2022, compared to cash used for the acquisition of a film library and related assets offset by the receipt of proceeds during the nine months ended December 31, 2021 from the sale of Pantaya.

Cash flows used in investing activities of $9.8 million for the three months ended June 30, 2023 compared to cash flows used in investing activities of $14.8 million for the three months ended June 30, 2022, primarily due to lower cash used for investment in equity method investees and other.

Financing Activities.

Cash flows provided by financing activities for the nine months ended December 31, 2022 and 2021 were as follows:

Nine Months Ended

Cash flows provided by financing activities for the three months ended June 30, 2023 and 2022 were as follows:

Three Months Ended

(Amounts in millions)

2 unchanged sentences

Net repayments and repurchases of debt (70.1) (196.7)

Film related and other obligations - borrowings 1,384.0 954.0

Film related and other obligations - repayments (694.8) (305.3)

Net proceeds from film related and other obligations 689.2 648.7

Film related obligations - borrowings 569.9 522.9

Film related obligations - repayments (423.7) (152.6)

Net proceeds from film related obligations 146.2 370.3

Other financing activities (15.6) (133.8)

Net Cash Flows Provided By Financing Activities $ 60.5 $ 39.8

Cash flows provided by financing activities of $225.7 million for the nine months ended December 31, 2022 compared to cash flows provided by financing activities of $357.7 million for the nine months ended December 31, 2021.

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

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

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

• During the nine months ended December 31, 2022, we repurchased $142.4 million principal amount of the 5.500% Senior Notes for $96.2 million.

In addition, other financing activities in the nine months ended December 31, 2022 includes $134.5 million for interest rate swap settlement payments due to $134.5 million for the pay down of the financing component of our terminated interest rate swaps in the current period (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million) (see discussion above in Operating Activities , and Note 17 to our unaudited condensed consolidated financial statements).

Cash flows provided by financing activities of $60.5 million for the three months ended June 30, 2023 compared to cash flows provided by financing activities of $39.8 million for the three months ended June 30, 2022.

Cash flows provided by financing activities for the three months ended June 30, 2023 primarily reflects net film related obligations borrowings of $146.2 million due to net borrowings under production loans and the Production Tax Credit Facility of $3.6 million and net borrowings under the Backlog Facility, IP Credit Facility and Distribution Loans of $142.6 million, offset by net debt repayments and repurchases of $70.1 million.

Net debt repayments and repurchases of $70.1 million in the three months ended June 30, 2023 included the below transaction, along with required repayments on our term loans:

• During the three months ended June 30, 2023, we repurchased $85.0 million principal amount of the 5.500% Senior Notes for $61.4 million.

Cash flows provided by financing activities of $39.8 million for the three months ended June 30, 2022 primarily reflects net film related and other obligations borrowings of $370.3 million, offset by net debt repayments of $196.7 million due to the April 2022 voluntary 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 a financing component on a portion of our interest rate swaps (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million) (see discussion above in Operating Activities , and Note 15 to our unaudited condensed consolidated financial statements).

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

Cash flows provided by financing activities of $357.7 million for the nine months ended December 31, 2021 primarily reflects net film related and other obligations borrowings of $648.7 million, as production activity increased in the nine months ended December 31, 2021, 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 a financing component on a portion of our interest rate swaps (see Note 17 to our unaudited condensed consolidated financial statements).

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

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

• On April 1, 2021, in connection with the redemption of the 5.875% Senior Notes and the 6.375% Senior Notes, we issued $1.0 billion aggregate principal amount of 5.500% Senior Notes.

• 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, we 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.

Remaining Performance Obligations and Backlog

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

As disclosed in Note 10 to our unaudited condensed consolidated financial statements, remaining performance obligations were $2.0 billion at December 31, 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 $1.6 billion at December 31, 2022 (March 31, 2022 - $1.3 billion).

As disclosed in Note 8 to our unaudited condensed consolidated financial statements, remaining performance obligations were $1.9 billion at June 30, 2023 (March 31, 2023 - $1.9 billion).

The backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments was $1.5 billion at June 30, 2023 (March 31, 2023 - $1.5 billion).

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis