LIONS GATE ENTERTAINMENT CORP /CN/ - Quarter Report: 2022 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________________________________

Form 10-Q

____________________________________________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File No.: 1-14880

____________________________________________________________________________________________________

Lions Gate Entertainment Corp.

(Exact name of registrant as specified in its charter)

____________________________________________________________________________________________________


British Columbia, Canada						N/A
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

250 Howe Street, 20th Floor

Vancouver, British Columbia V6C 3R8

and

2700 Colorado Avenue

Santa Monica, California 90404

(Address of principal executive offices)

____________________________________________________________________________________________________

(877) 848-3866

(Registrant’s telephone number, including area code)

____________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Class A Voting Common Shares, no par value per share

LGF.A

New York Stock Exchange

Class B Non-Voting Common Shares, no par value per share

LGF.B

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


Title of Each Class						Outstanding at February 6, 2023
Class A Voting Common Shares, no par value per share						83,471,030 shares
Class B Non-Voting Common Shares, no par value per share						145,486,584 shares

Table of Contents



Item			Page
PART I — FINANCIAL INFORMATION

1. Financial Statements			4
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			45
3. Quantitative and Qualitative Disclosures About Market Risk			91
4. Controls and Procedures			93

PART II — OTHER INFORMATION

1. Legal Proceedings			94
1A. Risk Factors			94
2. Unregistered Sales of Equity Securities and Use of Proceeds			94
3. Defaults Upon Senior Securities			94
4. Mine Safety Disclosures			94
5. Other Information			94
6. Exhibits			95

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FORWARD-LOOKING STATEMENTS

This report includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “potential,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “may,” “will,” “could,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on May 26, 2022, which risk factors are incorporated herein by reference, as updated by any update to the risk factors found under Part II, Item 1A. "Risk Factors" herein. These risk factors should not be construed as exhaustive and should be read with the other cautionary statements and information in our Annual Report on Form 10-K, and this report.

We caution you that forward-looking statements made in this report or anywhere else are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially and adversely from those made in or suggested by the forward-looking statements contained in this report as a result of various important factors, including, but not limited to: the economic, social and regulatory impacts associated with global pandemics, such as COVID-19; wars, such as Russia's invasion of Ukraine; the substantial investment of capital required to produce and market films and television series; budget overruns; limitations imposed by our credit facilities and notes; unpredictability of the commercial success of our motion pictures and television programming; risks related to acquisition and integration of acquired businesses; the effects of dispositions of businesses or assets, including individual films or libraries; the cost of defending our intellectual property; technological changes and other trends affecting the entertainment industry; potential adverse reactions or changes to business or employee relationships; and the other risks and uncertainties discussed under Part I, Item 1A. “Risk Factors” found in our Annual Report on Form 10-K filed with the SEC on May 26, 2022, which risk factors are incorporated herein by reference, as updated by any risk factors found under Part II, Item 1A. "Risk Factors" herein. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.

Any forward-looking statements, which we make in this report, speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

This Quarterly Report on Form 10-Q may contain references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.

Unless otherwise indicated or the context requires, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” refer to Lions Gate Entertainment Corp., a corporation organized under the laws of the province of British Columbia, Canada, and its direct and indirect subsidiaries.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	December 31, 2022		March 31, 2022
	(Amounts in millions)
ASSETS
Cash and cash equivalents	$	425.4	$	371.2

Accounts receivable, net	479.8		442.2
Other current assets	293.3		244.7
Total current assets	1,198.5		1,058.1
Investment in films and television programs and program rights, net	3,004.1		3,013.6
Property and equipment, net	87.8		81.2
Investments	65.0		56.0
Intangible assets	1,335.7		1,440.2
Goodwill	1,289.5		2,764.5
Other assets	611.9		577.6

Total assets	$	7,592.5	$	8,991.2
LIABILITIES
Accounts payable and accrued liabilities	$	588.0	$	585.8
Participations and residuals	532.4		468.5
Film related and other obligations	1,261.2		951.1
Debt - short term portion	39.2		222.8
Deferred revenue	157.8		174.9
Total current liabilities	2,578.6		2,403.1
Debt	2,042.6		2,202.1
Participations and residuals	284.5		265.1
Film related and other obligations	1,094.9		729.0
Other liabilities	258.4		298.7
Deferred revenue	53.4		49.8
Deferred tax liabilities	38.0		38.8
Redeemable noncontrolling interests	357.1		321.2
Commitments and contingencies (Note 16)
EQUITY
Class A voting common shares, no par value, 500.0 shares authorized, 83.4 shares issued (March 31, 2022 - 83.3 shares issued)	671.5		668.2
Class B non-voting common shares, no par value, 500.0 shares authorized, 145.5 shares issued (March 31, 2022 - 142.0 shares issued)	2,395.8		2,353.8
Accumulated deficit	(2,317.9)		(369.7)
Accumulated other comprehensive income	134.4		29.3
Total Lions Gate Entertainment Corp. shareholders' equity	883.8		2,681.6
Noncontrolling interests	1.2		1.8
Total equity	885.0		2,683.4
Total liabilities and equity	$	7,592.5	$	8,991.2

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions, except per share amounts)
Revenues	$	1,000.1	$	885.4	$	2,769.1	$	2,674.4
Expenses
Direct operating	584.7		517.9		1,744.7		1,487.2
Distribution and marketing	171.0		198.9		567.1		633.4
General and administration	115.0		112.5		340.0		353.1
Depreciation and amortization	46.3		46.3		133.9		134.1
Restructuring and other	75.3		0.5		316.5		7.2
Goodwill impairment	—		—		1,475.0		—
Total expenses	992.3		876.1		4,577.2		2,615.0
Operating income (loss)	7.8		9.3		(1,808.1)		59.4
Interest expense	(59.6)		(44.4)		(163.0)		(130.0)
Interest and other income	1.7		1.4		4.8		29.4
Other expense	(10.7)		(1.9)		(21.1)		(6.2)
Gain (loss) on extinguishment of debt	38.2		(1.1)		40.3		(28.2)
Gain (loss) on investments	43.4		(0.2)		42.1		1.2
Equity interests income (loss)	—		(2.5)		0.8		(1.4)
Income (loss) before income taxes	20.8		(39.4)		(1,904.2)		(75.8)
Income tax provision	(5.6)		(9.5)		(16.6)		(21.6)
Net income (loss)	15.2		(48.9)		(1,920.8)		(97.4)
Less: Net loss attributable to noncontrolling interests	1.4		3.3		7.3		13.9
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	16.6	$	(45.6)	$	(1,913.5)	$	(83.5)

Per share information attributable to Lions Gate Entertainment Corp. shareholders:
Basic net income (loss) per common share	$	0.07	$	(0.20)	$	(8.41)	$	(0.37)
Diluted net income (loss) per common share	$	0.07	$	(0.20)	$	(8.41)	$	(0.37)

Weighted average number of common shares outstanding:
Basic	228.8		225.0		227.4		223.7
Diluted	230.1		225.0		227.4		223.7

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Net income (loss)	$	15.2	$	(48.9)	$	(1,920.8)	$	(97.4)
Foreign currency translation adjustments, net of tax	3.6		(0.2)		(3.4)		(1.2)
Net unrealized gain on cash flow hedges, net of tax	8.4		21.1		108.5		16.2
Comprehensive income (loss)	27.2		(28.0)		(1,815.7)		(82.4)
Less: Comprehensive loss attributable to noncontrolling interests	1.4		3.3		7.3		13.9
Comprehensive income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	28.6	$	(24.7)	$	(1,808.4)	$	(68.5)

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY


	Three Months Ended
	Class A Voting			Class B Non-Voting			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Lions Gate Entertainment Corp. Shareholders' Equity		Noncontrolling Interests (a)		Total Equity
	Common Shares			Common Shares
	Number	Amount		Number	Amount
	(Amounts in millions)
Balance at September 30, 2022	83.4	$	670.4	145.2	$	2,373.5	$	(2,320.4)	$	122.3	$	845.8	$	1.6	$	847.4

Share-based compensation, net of share cancellations for taxes	—	1.0		0.3	22.2		—		—		23.2		—		23.2
Issuance of common shares	—	0.1		—	0.1		—		—		0.2		—		0.2

Noncontrolling interests	—	—		—	—		—		—		—		(0.3)		(0.3)
Net income	—	—		—	—		16.6		—		16.6		(0.1)		16.5
Other comprehensive income	—	—		—	—		—		12.1		12.1		—		12.1
Redeemable noncontrolling interests adjustments to redemption value	—	—		—	—		(14.1)		—		(14.1)		—		(14.1)
Balance at December 31, 2022	83.4	$	671.5	145.5	$	2,395.8	$	(2,317.9)	$	134.4	$	883.8	$	1.2	$	885.0

Balance at September 30, 2021	83.1	$	665.9	141.6	$	2,314.3	$	(143.0)	$	(89.2)	$	2,748.0	$	2.4	$	2,750.4
Exercise of stock options	—	—		0.1	0.7		—		—		0.7		—		0.7
Share-based compensation, net of share cancellations for taxes	—	1.1		0.1	19.9		—		—		21.0		—		21.0
Issuance of common shares	—	0.1		—	0.1		—		—		0.2		—		0.2
Noncontrolling interests	—	—		—	—		—		—		—		(1.1)		(1.1)
Net loss	—	—		—	—		(45.6)		—		(45.6)		0.5		(45.1)
Other comprehensive income	—	—		—	—		—		20.9		20.9		—		20.9
Redeemable noncontrolling interests adjustments to redemption value	—	—		—	—		(11.6)		—		(11.6)		—		(11.6)
Balance at December 31, 2021	83.1	$	667.1	141.8	$	2,335.0	$	(200.2)	$	(68.3)	$	2,733.6	$	1.8	$	2,735.4

_____________________

(a)Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 9).

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY


	Nine Months Ended
	Class A Voting			Class B Non-Voting			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Lions Gate Entertainment Corp. Shareholders' Equity		Noncontrolling Interests (a)		Total Equity
	Common Shares			Common Shares
	Number	Amount		Number	Amount
	(Amounts in millions)
Balance at March 31, 2022	83.3	$	668.2	142.0	$	2,353.8	$	(369.7)	$	29.3	$	2,681.6	$	1.8	$	2,683.4

Exercise of stock options	—	—		0.3	3.5		—		—		3.5		—		3.5
Share-based compensation, net of share cancellations for taxes	0.1	3.0		3.2	38.3		—		—		41.3		—		41.3
Issuance of common shares	—	0.3		—	0.2		—		—		0.5		—		0.5

Noncontrolling interests	—	—		—	—		—		—		—		(0.7)		(0.7)
Net loss	—	—		—	—		(1,913.5)		—		(1,913.5)		0.1		(1,913.4)
Other comprehensive income	—	—		—	—		—		105.1		105.1		—		105.1
Redeemable noncontrolling interests adjustments to redemption value	—	—		—	—		(34.7)		—		(34.7)		—		(34.7)
Balance at December 31, 2022	83.4	$	671.5	145.5	$	2,395.8	$	(2,317.9)	$	134.4	$	883.8	$	1.2	$	885.0

Balance at March 31, 2021	83.0	$	663.2	138.2	$	2,296.0	$	(82.9)	$	(83.3)	$	2,793.0	$	1.6	$	2,794.6

Exercise of stock options	—	0.4		0.3	3.0		—		—		3.4		—		3.4
Share-based compensation, net of share cancellations for taxes	0.1	3.3		3.3	35.8		—		—		39.1		—		39.1
Issuance of common shares	—	0.2		—	0.2		—		—		0.4		—		0.4

Noncontrolling interests	—	—		—	—		—		—		—		(0.3)		(0.3)
Net loss	—	—		—	—		(83.5)		—		(83.5)		0.5		(83.0)
Other comprehensive income	—	—		—	—		—		15.0		15.0		—		15.0
Redeemable noncontrolling interests adjustments to redemption value	—	—		—	—		(33.8)		—		(33.8)		—		(33.8)
Balance at December 31, 2021	83.1	$	667.1	141.8	$	2,335.0	$	(200.2)	$	(68.3)	$	2,733.6	$	1.8	$	2,735.4

_____________________

(a)Excludes redeemable noncontrolling interests, which are reflected in temporary equity (see Note 9).

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Operating Activities:
Net loss	$	(1,920.8)	$	(97.4)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	133.9		134.1
Amortization of films and television programs and program rights	1,284.4		1,118.7
Amortization of debt financing costs and other non-cash interest	20.1		37.1
Non-cash share-based compensation	59.8		77.5
Other amortization	55.8		71.5
Goodwill impairment	1,475.0		—
Content and other impairments	299.7		—


(Gain) loss on extinguishment of debt	(40.3)		28.2
Equity interests income (loss)	(0.8)		1.4
Gain on investments	(42.1)		(1.2)
Deferred income taxes	(0.5)		2.6
Changes in operating assets and liabilities:
Proceeds from the termination of interest rate swaps	188.7		—
Accounts receivable, net and other assets	(74.5)		(153.2)
Investment in films and television programs and program rights, net	(1,573.4)		(1,735.4)

Accounts payable and accrued liabilities	(46.0)		(17.4)
Participations and residuals	84.3		(56.3)
Program rights and other film obligations	(18.1)		25.0

Deferred revenue	(13.2)		75.0
Net Cash Flows Used In Operating Activities	(128.0)		(489.8)
Investing Activities:
Proceeds from the sale of Pantaya	—		123.6
Proceeds from the sale of equity method and other investments	46.3		—
Investment in equity method investees and other	(17.5)		(14.0)
Distributions from equity method investees	—		3.2
Acquisition of assets (film library and related assets)	—		(161.4)
Increase in loans receivable	—		(4.3)
Capital expenditures	(36.6)		(22.2)
Net Cash Flows Used In Investing Activities	(7.8)		(75.1)
Financing Activities:
Debt - borrowings, net of debt issuance and redemption costs	1,238.0		2,138.4
Debt - repurchases and repayments	(1,548.3)		(2,375.4)
Film related and other obligations - borrowings	1,384.0		954.0
Film related and other obligations - repayments	(694.8)		(305.3)
Settlement of financing component of interest rate swaps	(134.5)		(21.5)


Distributions to noncontrolling interest	(4.8)		(1.2)
Exercise of stock options	3.4		3.4
Tax withholding required on equity awards	(17.3)		(34.7)
Net Cash Flows Provided By Financing Activities	225.7		357.7
Net Change In Cash, Cash Equivalents and Restricted Cash	89.9		(207.2)
Foreign Exchange Effects on Cash, Cash Equivalents and Restricted Cash	(3.5)		(2.2)
Cash, Cash Equivalents and Restricted Cash - Beginning Of Period	384.6		528.7
Cash, Cash Equivalents and Restricted Cash - End Of Period	$	471.0	$	319.3

See accompanying notes.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Nature of Operations

Lionsgate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) encompasses world-class motion picture and television studio operations aligned with the STARZ premium global subscription platform to bring a unique and varied portfolio of entertainment to consumers around the world. The Company’s film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and a valuable collection of iconic film and television franchises.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Lionsgate and all of its majority-owned and controlled subsidiaries.

The unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to quarterly report on Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the three and nine months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2023. The balance sheet at March 31, 2022 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Certain amounts presented in prior periods have been reclassified to conform to the current period presentation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, including the potential impacts arising from the COVID-19 global pandemic and Russia's invasion of Ukraine, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The most significant estimates made by management in the preparation of the financial statements relate to ultimate revenue and costs used for the amortization of investment in films and television programs; estimates of future viewership used for the amortization of licensed program rights; estimates related to the revenue recognition of sales or usage-based royalties; fair value of equity-based compensation; fair value of assets and liabilities for allocation of the purchase price of companies acquired; income taxes including the assessment of valuation allowances for deferred tax assets; accruals for contingent liabilities; and impairment assessments for investment in films and television programs and licensed program rights, property and equipment, equity investments, goodwill and intangible assets. Actual results could differ from such estimates.

Recent Accounting Pronouncements

Accounting Guidance Adopted in Fiscal 2023

Government Assistance: In November 2021, the Financial Accounting Standards Board ("FASB") issued guidance which requires certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2021, and therefore will be effective beginning with the Company's financial statements issued for the year ending March 31, 2023. While the adoption of this guidance will not have an impact on the Company's consolidated balance sheet or statement of operations, the adoption of this guidance may require additional annual disclosures in the Company's financial statements for the year ending March 31, 2023, which the Company is currently in the process of assessing.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounting Guidance Adopted in Fiscal 2022

Reference Rate Reform: In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions affected by the market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, if certain criteria are met. Additionally, in January 2021, the FASB issued additional guidance, which allows entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates. In December 2022, the FASB issued final guidance deferring the sunset date of the transition relief. The guidance is applicable to contract modifications made between March 12, 2020 and December 31, 2024 and hedging relationships that exist as of the beginning of an interim period that includes March 12, 2020 and new eligible hedging relationships designated in subsequent periods. The Company adopted this guidance on July 1, 2021 and is applying its provisions prospectively through December 31, 2024, with no material impact to the Company’s financial statements.

2. Acquisitions

Spyglass. On July 15, 2021, the Company purchased approximately 200 feature film titles (the "Spyglass Library") from Spyglass Media Group, LLC ("Spyglass"). The Company also formed a strategic content partnership through an investment of a minority preferred equity interest in Spyglass. The purchase price, including acquisition costs, of the Spyglass Library and preferred equity interest was $191.4 million, of which $171.4 million was paid at closing, $10.0 million was paid in July 2022, and the remaining $10.0 million is to be paid in July 2023. The Spyglass Library was accounted for as an asset acquisition and is included in investment in film and television programs on the Company's unaudited condensed consolidated balance sheet. The equity interest was accounted for as an equity-method investment (see Note 4).

3. Investment in Films and Television Programs and Licensed Program Rights

Total investment in films and television programs and licensed program rights by predominant monetization strategy is as follows:


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Investment in Films and Television Programs:
Individual Monetization
Released, net of accumulated amortization	$	540.8	$	557.5
Completed and not released	151.5		121.4
In progress	722.7		574.9
In development	73.5		102.7
	1,488.5		1,356.5
Film Group Monetization
Released, net of accumulated amortization	557.8		469.5
Completed and not released	401.4		253.2
In progress	193.6		427.6
In development	10.1		11.4
	1,162.9		1,161.7
Licensed program rights, net of accumulated amortization	352.7		495.4
Investment in films and television programs and licensed program rights, net	$	3,004.1	$	3,013.6

At December 31, 2022, acquired film and television libraries have remaining unamortized costs of $138.4 million, which are monetized individually and are being amortized using the individual-film-forecast method over a remaining period of approximately 18.4 years (March 31, 2022 - unamortized costs of $149.9 million).

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amortization of investment in film and television programs and licensed program rights by predominant monetization strategy is as follows for the three and nine months ended December 31, 2022 and 2021, and was included in direct operating expense in the unaudited condensed consolidated statements of operations:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Amortization expense:
Individual monetization	$	207.9	$	205.2	$	711.1	$	624.7
Film group monetization	82.8		98.6		227.7		219.3
Licensed program rights	94.4		84.8		345.6		274.7
	$	385.1	$	388.6	$	1,284.4	$	1,118.7

Impairments. Investment in films and television programs and licensed program rights includes write-downs to fair value. The following table sets forth impairments by segment and the line item in our unaudited condensed consolidated statement of operations they are recorded in for the three and nine months ended December 31, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Impairments by segment:
Included in direct operating expense:
Motion Picture	$	0.6	$	1.1	$	1.1	$	1.2
Television Production	—		1.5		4.7		28.1

Included in restructuring and other:
Impairments not included in segment operating results(1)	80.8		—		293.8		—
	$	81.4	$	2.6	$	299.6	$	29.3

________________

(1)Represents charges related to the Media Networks restructuring plan initiatives, including content impairment of programming in certain international territories associated with the restructuring of LIONSGATE+ (formerly STARPLAY International), and individual content charges pursuant to 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. See Note 14 for further information.

4. Investments

The Company's investments consisted of the following:


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Investments in equity method investees	$	63.4	$	53.9
Other investments	1.6		2.1
	$	65.0	$	56.0

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equity Method Investments:

The Company has investments in various equity method investees with ownership percentages ranging from approximately 6% to 49%. These investments include:

Spyglass. Spyglass is a global premium content company, focused on developing, producing, financing and acquiring motion pictures and television programming across all platforms for worldwide audiences.

STARZPLAY Arabia. STARZPLAY Arabia (Playco Holdings Limited) offers a STARZ-branded online subscription video-on-demand service in the Middle East and North Africa. On October 17, 2022, the Company sold a portion of its ownership interest in STARZPLAY Arabia and received net proceeds of $43.4 million, and the Company recorded a gain of $43.4 million on the sale which is included in gain (loss) on investments in our unaudited condensed consolidated statement of operations. Subsequent to the transaction, the Company continues to hold a minority ownership interest in STARZPLAY Arabia.

Roadside Attractions. Roadside Attractions is an independent theatrical distribution company.

Pantelion Films. Pantelion Films is a joint venture with Videocine, an affiliate of Televisa, which produces, acquires and distributes a slate of English and Spanish language feature films that target Hispanic moviegoers in the U.S.

Atom Tickets. Atom Tickets is the first-of-its-kind theatrical mobile ticketing platform and app.

Great Point Opportunity Fund. Great Point Opportunity Fund is an operating company that operates Lionsgate Studios Yonkers, a studio facility in Yonkers, New York.

42. 42 is a fully integrated management and production company, producing film, television and content, representing actors, writers, directors, comedians, presenters, producers, casting directors and media book rights; with offices in London and Los Angeles.

Other. In addition to the equity method investments discussed above, the Company holds ownership interests in other immaterial equity method investees.

Summarized Financial Information. Summarized financial information for the Company's equity method investees on an aggregate basis is set forth below:


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Current assets	$	197.6	$	125.3
Non-current assets	$	160.3	$	166.4
Current liabilities	$	188.4	$	253.9
Non-current liabilities	$	61.9	$	59.8


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Revenues	$	57.5	$	14.7	$	135.4	$	51.9
Gross profit	$	9.0	$	5.5	$	29.9	$	14.3
Net loss	$	(12.7)	$	(16.8)	$	(24.6)	$	(36.7)

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Goodwill

Changes in the carrying value of goodwill by reporting segment were as follows:


	Motion Picture		Television Production		Media Networks		Total
	(Amounts in millions)
Balance as of March 31, 2022	$	393.7	$	401.9	$	1,968.9	$	2,764.5
Impairments	—		—		(1,475.0)		(1,475.0)
Balance as of December 31, 2022	$	393.7	$	401.9	$	493.9	$	1,289.5

For 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 the Company's growth in subscribers worldwide, the Company began implementing a plan to restructure its LIONSGATE+ business (formerly STARZPLAY International). This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan). 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. 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 the Company's common shares had declined significantly through September 30, 2022. Accordingly, for the second quarter ended September 30, 2022, the Company updated its quantitative impairment assessment for all of its reporting units. In performing its quantitative impairment assessment, the fair value of the Company's reporting units was estimated by using a combination of discounted cash flow ("DCF") analyses and market-based valuation methodologies.

Based on its quantitative impairment assessment, the Company determined that the fair value of its reporting units exceeded the carrying values for all of its 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 the Company's Media Networks reporting unit goodwill, which is recorded in the "goodwill impairment" line item in the unaudited condensed consolidated statement of operations in the nine months ended December 31, 2022. 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, the Company 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.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Debt

Total debt of the Company, excluding film related and other obligations, was as follows:


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Corporate debt:
Revolving Credit Facility	$	—	$	—


Term Loan A	433.8		638.5
Term Loan B	834.8		844.2
5.500% Senior Notes	857.6		1,000.0


Total corporate debt	2,126.2		2,482.7
Unamortized debt issuance costs	(44.4)		(57.8)
Total debt, net	2,081.8		2,424.9
Less current portion	(39.2)		(222.8)
Non-current portion of debt	$	2,042.6	$	2,202.1

Senior Credit Facilities (Revolving Credit Facility, Term Loan A and Term Loan B)

Revolving Credit Facility Availability of Funds & Commitment Fee. The Revolving Credit Facility provides for borrowings and letters of credit up to an aggregate of $1.25 billion, and at December 31, 2022 there was $1.25 billion available. However, borrowing levels are subject to certain financial covenants as discussed below. There were no letters of credit outstanding at December 31, 2022. The Company is required to pay a quarterly commitment fee on the Revolving Credit Facility of 0.250% to 0.375% per annum, depending on the achievement of certain leverage ratios, as defined in the credit and guarantee agreement dated December 8, 2016, as amended (the "Credit Agreement"), on the total Revolving Credit Facility of $1.25 billion less the amount drawn.

Maturity Date:

•Revolving Credit Facility & Term Loan A: April 6, 2026 (see Debt Transactions section below for the April 2022 voluntary prepayment of the entire principal amount of the Term Loan A previously due March 22, 2023).

•Term Loan B: March 24, 2025.

Interest:

•Revolving Credit Facility & Term Loan A: The Revolving Credit Facility and term loan A facility due April 2026 (the "Term Loan A") bear interest at a rate per annum equal to LIBOR plus 1.75% (or an alternative base rate plus 0.75%) margin, with a LIBOR floor of zero. The margin is subject to potential increases of up to 50 basis points (two (2) increases of 25 basis points each) upon certain increases to net first lien leverage ratios, as defined in the Credit Agreement (effective interest rate of 6.14% as of December 31, 2022, before the impact of interest rate swaps).

•Term Loan B: The term loan B facility due March 2025 (the "Term Loan B") bears interest at a rate per annum equal to LIBOR plus 2.25% margin, with a LIBOR floor of zero (or an alternative base rate plus 1.25% margin) (effective interest rate of 6.64% as of December 31, 2022, before the impact of interest rate swaps).

Required Principal Payments:

•Term Loan A: Quarterly principal payments, at quarterly rates of 1.25% beginning September 30, 2022, 1.75% beginning September 30, 2023, and 2.50% beginning September 30, 2024 through March 31, 2026, with the balance payable at maturity.

•Term Loan B: Quarterly principal payments at a quarterly rate of 0.25%, with the balance payable at maturity.

The Term Loan A and Term Loan B also require mandatory prepayments in connection with certain asset sales, subject to certain significant exceptions, and the Term Loan B is subject to additional mandatory repayment from specified percentages of excess cash flow, as defined in the Credit Agreement.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Optional Prepayment:

•Revolving Credit Facility & Term Loan A: The Company may voluntarily prepay the Revolving Credit Facility and Term Loan A at any time without premium or penalty.

•Term Loan B: The Company may voluntarily prepay the Term Loan B at any time without premium or penalty.

Security. The Senior Credit Facilities are guaranteed by the guarantors named in the Credit Agreement and are secured by a security interest in substantially all of the assets of Lionsgate and the Guarantors (as defined in the Credit Agreement), subject to certain exceptions.

Covenants. The Senior Credit Facilities contain representations and warranties, events of default and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant exceptions, restrictions on the ability to declare or pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. In addition, a net first lien leverage maintenance covenant and an interest coverage ratio maintenance covenant apply to the Revolving Credit Facility and the Term Loan A and are tested quarterly. As of December 31, 2022, the Company was in compliance with all applicable covenants.

Change in Control. The Company may also be subject to an event of default upon a change in control (as defined in the Credit Agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50% of the Company’s common shares.

Potential Impact of LIBOR Transition. The Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the LIBOR has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after the end of 2021. For U.S dollar LIBOR, publication of the one-week and two-month LIBOR settings ceased on December 31, 2021, and publication of the overnight and 12-month LIBOR settings will cease after June 30, 2023. Immediately after June 30, 2023, the one-month, three-month and six-month U.S. dollar LIBOR settings will no longer be representative. Given these changes, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. It is also possible that U.S. LIBOR will be discontinued or modified prior to June 30, 2023.

The Company is unable to predict whether or when an alternative reference rate will become a standard global benchmark and suitable replacement for LIBOR. In July 2021, the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions and other market participants, recommended replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index based on transactions in the market for short-term treasury securities. The publication of SOFR began in April 2018, and, therefore, it has a very limited history. Whether SOFR attains market traction as a LIBOR replacement tool remains in question.

Under the terms of the Company's Credit Agreement, in the event of the discontinuance of LIBOR, a mutually agreed-upon alternate benchmark rate will be established to replace LIBOR. The Company and Lenders (as defined in the Credit Agreement) shall, in good faith, endeavor to establish an alternate benchmark rate that gives due consideration to prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and which places the lenders under the Credit Agreement and the Company in the same economic position that existed immediately prior to the discontinuation of LIBOR. The Company does not anticipate that the discontinuance or modification of LIBOR will materially impact its liquidity or financial position.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.500% Senior Notes

Interest: Bears interest at 5.500% annually (payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2021).

Maturity Date: April 15, 2029.

Optional Redemption:

(i)Prior to April 15, 2024, the Company may redeem the 5.500% Senior Notes in whole at any time, or in part from time to time, at a price equal to 100% of the principal amount of the notes to be redeemed plus a "make-whole" premium, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The make-whole premium is the greater of (i) 1.0% of the principal amount redeemed and (ii) the excess, if any, of the present value at such redemption date of the redemption price at April 15, 2024 (see redemption prices below) plus interest through April 15, 2024 (discounted to the redemption date at the treasury rate plus 50 basis points) over the principal amount of the notes redeemed on the redemption date.

(ii)On or after April 15, 2024, the Company may redeem the 5.500% Senior Notes in whole at any time, or in part from time to time, at certain specified redemption prices, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Such redemption prices are as follows (as a percentage of the principal amount redeemed): (i) on or after April 15, 2024 - 102.750%; (ii) on or after April 15, 2025 - 101.375%; and (iii) on or after April 15, 2026 - 100%. In addition, the Company may redeem up to 40% of the aggregate principal amount of the notes at any time and from time to time prior to April 15, 2024 with the net proceeds of certain equity offerings at a price of 105.500% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

Security. The 5.500% Senior Notes are unsubordinated, unsecured obligations of the Company.

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.

Change in Control. The occurrence of a change of control will be a triggering event requiring the Company to offer to purchase from holders all of the 5.500% Senior Notes, at a price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase. In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the 5.500% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

Capacity to Pay Dividends

At December 31, 2022, the capacity to pay dividends under the Senior Credit Facilities and the 5.500% 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.

Debt Transactions:

Fiscal 2023:

Term Loan A Prepayment. In April 2022, the Company voluntarily prepaid the entire outstanding principal amount of the Term Loan A due March 22, 2023 of $193.6 million, together with accrued and unpaid interest.

Senior Notes Repurchases. In the three and nine months ended December 31, 2022, the Company repurchased $123.7 million and $142.4 million, respectively, principal amount of the 5.500% Senior Notes for $81.6 million and $96.2 million, respectively, together with accrued and unpaid interest.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fiscal 2022:

Senior Notes Redemption and Issuance. On April 1, 2021, the Company redeemed in full all $518.7 million outstanding principal amount of its 5.875% Senior Notes due November 2024 ("5.875% Senior Notes") and all $545.6 million outstanding principal amount of its 6.375% Senior Notes due February 2024 ("6.375% Senior Notes"). In connection with the early redemption of the 5.875% Senior Notes and the 6.375% Senior Notes, the Company paid a prepayment premium of $15.2 million and $17.4 million, respectively, plus accrued and unpaid interest to the date of redemption, pursuant to the terms of the indentures governing the 5.875% Senior Notes and the 6.375% Senior Notes, respectively.

In connection with the redemption of the 5.875% Senior Notes and the 6.375% Senior Notes, on April 1, 2021, the Company issued $1.0 billion aggregate principal amount of 5.500% Senior Notes due April 15, 2029 ("5.500% Senior Notes").

Credit Agreement Amendment. On April 6, 2021, the Company amended its Credit Agreement to, among other things, extend the maturity (the "Extension") of a portion of its revolving credit commitments, amounting to $1.25 billion, and a portion of its outstanding term A loans, amounting to $444.9 million to April 6, 2026, and make certain other changes to the covenants and other provisions therein.

Termination of a Portion of Revolving Credit Facility Commitments. On November 2, 2021, the Company terminated its revolving credit commitments with a maturity of March 22, 2023, amounting to $250.0 million remaining after giving effect to the Extension (the "Termination"). After giving effect to the Termination, the Company's remaining revolving credit commitments under its Credit Agreement amounted to $1.25 billion with a maturity of April 6, 2026 (the "Revolving Credit Facility").

Term Loan B Repurchases. During the nine months ended December 31, 2021, the Company completed a series of repurchases of the Term Loan B and, in aggregate, paid $95.3 million to repurchase $96.0 million principal amount of the Term Loan B (none in the three months ended December 31, 2021).

(Gain) Loss on Extinguishment of Debt:

In accounting for the fiscal 2022 Senior Notes redemption and issuance transactions and credit agreement amendment discussed above, a portion of the refinancing transactions was considered a modification of terms, and a portion was considered a debt extinguishment. During the three and nine months ended December 31, 2022 and 2021, the Company recorded a (gain) loss on extinguishment of debt related to the transactions described above as summarized in the table below:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
(Gain) Loss on Extinguishment of Debt:
Term Loan A prepayment	$	—	$	—	$	1.3	$	—
Senior Notes repurchases in 2022; Senior Notes redemption and issuance in 2021	(38.2)		—		(41.6)		24.7
Credit Agreement amendment (Revolving Credit Facility and Term Loan A)	—		—		—		1.7
Termination of a portion of Revolving Credit Facility commitments	—		1.1		—		1.1
Term Loan B repurchases and other	—		—		—		0.7
	$	(38.2)	$	1.1	$	(40.3)	$	28.2

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Film Related and Other Obligations


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Program rights and film obligations	$	260.9	$	278.4

Film related obligations:
Production Loans	1,435.7		966.3
Production Tax Credit Facility	231.2		224.0
Programming Notes	54.2		96.4
Backlog Facility and Other	233.6		—
IP Credit Facility	152.3		123.5
Total film related obligations	2,107.0		1,410.2
Unamortized debt issuance costs	(11.8)		(8.5)
Total film related obligations, net	2,095.2		1,401.7

Less current portion	(1,261.2)		(951.1)
Total non-current film related and other obligations	$	1,094.9	$	729.0

Program Rights and Film Obligations

Program rights and film obligations include minimum guarantees and accrued licensed program rights obligations, which represent amounts payable for film or television rights that the Company has acquired or licensed.

Film Related Obligations

Film related obligations include production loans, programming notes, the Company's Production Tax Credit Facility, IP Credit Facility, Backlog Facility and other.

Production Loans. Production loans represent individual and multi-title loans for the production of film and television programs that the Company produces. The majority of the Company's production loans have contractual repayment dates either at or near the expected completion or release dates, with the exception of certain loans containing repayment dates on a longer term basis, and incur primarily SOFR and LIBOR-based interest at a weighted average rate of 6.43% (before the impact of interest rate swaps, see Note 17 for interest rate swaps). Production loans amounting to $1,344.5 million are secured by collateral which consists of the underlying rights related to the intellectual property (i.e. film or television show), and $91.2 million are unsecured.

Programming Notes. Programming notes represent individual unsecured loans for the licensing of film and television programs that the Company licenses. The Company's programming notes have contractual repayment dates in January and April 2023, and incur SOFR and LIBOR-based interest at a weighted average rate of 7.93%.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Production Tax Credit Facility. In January 2021, as amended on March 29, 2022, the Company entered into a non-recourse senior secured revolving credit facility (the "Production Tax Credit Facility") based on and secured by collateral consisting solely of certain of the Company’s tax credit receivables. The maximum principal amount of the Production Tax Credit Facility is $235.0 million, subject to the amount of collateral available, which is based on specified percentages of amounts payable to the Company by governmental authorities pursuant to the tax incentive laws of certain eligible jurisdictions that arise from the production or exploitation of motion pictures and television programming in such jurisdiction. Cash collections from the underlying collateral (tax credit receivables) are used to repay the Production Tax Credit Facility. Advances under the Production Tax Credit Facility bear interest at a rate equal to SOFR plus 0.10% to 0.25% depending on the SOFR term (i.e., one, three or six months), plus 1.50% per annum or the base rate plus 0.50% per annum (effective interest rate of 5.96% at December 31, 2022). The Production Tax Credit Facility matures on January 27, 2025. As of December 31, 2022, there were no material amounts available under the Production Tax Credit Facility.

IP Credit Facility. In July 2021, as amended in September 2022, certain subsidiaries of the Company entered into a senior secured amortizing term credit facility (the "IP Credit Facility") based on and secured by the collateral consisting solely of certain of the Company’s rights in certain library titles, including the Spyglass and other recently acquired libraries. The maximum principal amount of the IP Credit Facility is $161.9 million, subject to the amount of collateral available, which is based on the valuation of cash flows from the libraries. The cash flows generated from the exploitation of the rights will be applied to repay the IP Credit Facility subject to cumulative minimum guaranteed payment amounts as set forth below:

Cumulative Period From
September 29, 2022 Through:

Cumulative Minimum Guaranteed Payment Amounts

Payment Due Date

(in millions)

September 30, 2023

$30.4

November 14, 2023

September 30, 2024

$60.7

November 14, 2024

September 30, 2025

$91.1

November 14, 2025

September 30, 2026

$121.4

November 14, 2026

July 30, 2027

$161.9

July 30, 2027

Advances under the IP Credit Facility bear interest at a rate equal to, at the Company’s option, SOFR plus 0.11% to 0.26% depending on the SOFR term (i.e., one or three months) plus 2.25% per annum (with a SOFR floor of 0.25%) or the base rate plus 1.25% per annum (effective interest rate of 7.02% at December 31, 2022). The IP Credit Facility matures on July 30, 2027.

Backlog Facility and Other:

Backlog Facility. In March 2022, as amended in August 2022, certain subsidiaries of the Company entered into a committed secured revolving credit facility (the "Backlog Facility") based on and secured by collateral consisting solely of certain of the Company's fixed fee or minimum guarantee contracts where cash will be received in the future. The maximum principal amount of the Backlog Facility is $175.0 million, subject to the amount of eligible collateral contributed to the facility. Advances under the Backlog Facility bear interest at a rate equal to Term SOFR plus 0.10% to 0.25% depending on the SOFR term (i.e., one, three or six months), plus an applicable margin amounting to 1.15% per annum. The applicable margin is subject to a potential increase to either 1.25% or 1.50% based on the weighted average credit quality rating of the collateral contributed to the facility (effective interest rate of 5.61% at December 31, 2022). The Backlog Facility revolving period ends on May 16, 2025, at which point cash collections from the underlying collateral is used to repay the facility. The facility maturity date is up to 2 years, 90 days after the revolving period ends, currently August 14, 2027. As of December 31, 2022, there was $175.0 million outstanding under the Backlog Facility, and there were no amounts available under the Backlog Facility (March 31, 2022 - no amounts outstanding).

Other. In June 2022, the Company borrowed $118.6 million under a loan agreement which was secured by contracted receivables which are not yet recognized as revenue under certain licensing agreements (the "June 2022 Distribution Loan"), which was to mature on December 28, 2025. The June 2022 Distribution Loan was fully repaid, with $18.6 million repaid during the quarter ended September 30, 2022, and the remaining outstanding amount of $100.0 million repaid on October 3, 2022.

In September 2022, the Company borrowed $43.4 million under a loan agreement which matures on March 28, 2026 (the "September 2022 Distribution Loan") and bears interest at a rate equal to Term SOFR plus 0.11%, plus an applicable margin amounting to 1.50% per annum (effective interest rate of 5.97% at December 31, 2022).

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 June 2022 Distribution Loan, the "Distribution Loans"), and bears interest at a rate equal to Term SOFR plus 0.11%, plus an applicable margin amounting to 2.10% per annum (effective interest rate of 6.57% at December 31, 2022). The December 2022 Distribution Loan provides for total borrowings up to an aggregate of $18.7 million.

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.

8. Fair Value Measurements

Fair Value

Accounting guidance and standards about fair value define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair Value Hierarchy

Fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The accounting guidance and standards establish three levels of inputs that may be used to measure fair value:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

The following table sets forth the assets and liabilities required to be carried at fair value on a recurring basis as of December 31, 2022 and March 31, 2022:


	December 31, 2022						March 31, 2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:	(Amounts in millions)
Equity securities with a readily determinable fair value	$	—	$	—	$	—	$	0.5	$	—	$	0.5
Forward exchange contracts (see Note 17)	—		13.2		13.2		—		3.5		3.5
Interest rate swaps (see Note 17)(1)	—		54.8		54.8		—		120.1		120.1

Liabilities:
Forward exchange contracts (see Note 17)	—		(4.3)		(4.3)		—		(2.8)		(2.8)
Interest rate swaps (see Note 17)	—		—		—		—		28.6		28.6

________________

(1)Amounts at March 31, 2022 exclude $88.1 million of financing component of interest rate swaps presented in the table below (none at December 31, 2022).

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the carrying values and fair values of the Company’s outstanding debt, film related obligations, and interest rate swaps at December 31, 2022 and March 31, 2022:


	December 31, 2022				March 31, 2022
	(Amounts in millions)
	Carrying Value		Fair Value(1)		Carrying Value		Fair Value(1)
			(Level 2)				(Level 2)
Term Loan A	$	429.5	$	412.1	$	631.9	$	625.7
Term Loan B	829.8		794.1		837.5		828.3
5.500% Senior Notes	831.0		500.3		965.8		962.5


Production Loans	1,431.7		1,435.7		963.7		966.3
Production Tax Credit Facility	228.8		231.2		221.1		224.0
Programming Notes	54.2		54.2		96.4		96.4
Backlog Facility and Other	231.2		233.6		—		—
IP Credit Facility	149.1		152.3		120.6		123.5
Financing component of interest rate swaps(2)	—		—		134.0		122.9

________________

(1)The Company measures the fair value of its outstanding debt and interest rate swaps using discounted cash flow techniques that use observable market inputs, such as LIBOR-based yield curves, swap rates, and credit ratings (Level 2 measurements).

(2)Amounts at March 31, 2022 include $88.1 million recorded as a reduction of assets under master netting arrangements (none at December 31, 2022).

The Company’s financial instruments also include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, other liabilities, and borrowings under the Revolving Credit Facility, if any. The carrying values of these financial instruments approximated the fair values at December 31, 2022 and March 31, 2022.

9. Noncontrolling Interests

Redeemable Noncontrolling Interests

The table below presents the reconciliation of changes in redeemable noncontrolling interests:


	Nine Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Beginning balance	$	321.2	$	219.1

Net loss attributable to redeemable noncontrolling interests	(7.4)		(14.4)
Noncontrolling interests discount accretion	13.4		17.7
Adjustments to redemption value	34.7		33.8
Cash distributions	(4.8)		(1.2)
Ending balance	$	357.1	$	255.0

Redeemable noncontrolling interests (included in temporary equity on the unaudited condensed consolidated balance sheets) relate to the November 12, 2015 acquisition of a controlling interest in Pilgrim Media Group and the May 29, 2018 acquisition of a controlling interest in 3 Arts Entertainment.

3 Arts Entertainment. The noncontrolling interest holders have a right to put the noncontrolling interest of 3 Arts Entertainment, at fair value, exercisable beginning May 29, 2023, for a 60 day period. Beginning 30 days after the expiration of the exercise period for the put rights held by the noncontrolling interest holders, the Company has a right to call the noncontrolling interest of 3 Arts Entertainment, at fair value, for a 60 day period.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pilgrim Media Group. Pursuant to an amendment dated April 2, 2021, the put and call rights associated with the Pilgrim Media Group 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.

Redeemable noncontrolling interests are measured at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date less the amount attributed to unamortized noncontrolling interest discount if applicable, or (ii) the historical value resulting from the original acquisition date value plus or minus any earnings or loss attribution, plus the amount of amortized noncontrolling interest discount, less the amount of cash distributions that are not accounted for as compensation, if any. The amount of the redemption value in excess of the historical values of the noncontrolling interest, if any, is recognized as an increase to redeemable noncontrolling interest and a charge to retained earnings or accumulated deficit.

Other Noncontrolling Interests

The Company has other immaterial noncontrolling interests that are not redeemable.

10. Revenue

The Company's Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places. The Company's Media Networks segment generates revenue primarily from the distribution of the Company's STARZ premium subscription video services.

Revenue by Segment, Market or Product Line

The table below presents revenues by segment, market or product line for the three and nine months ended December 31, 2022 and 2021:

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Revenue by Type:
Motion Picture
Theatrical	$	11.7	$	5.7	$	28.6	$	50.0
Home Entertainment
Digital Media	147.4		113.6		378.5		355.6
Packaged Media	19.3		31.3		55.3		96.4
Total Home Entertainment	166.7		144.9		433.8		452.0
Television	47.0		68.1		147.0		209.7
International	55.3		52.4		166.5		174.5
Other	8.1		4.2		15.7		11.1
Total Motion Picture revenues	288.8		275.3		791.6		897.3

Television Production
Television	377.5		340.4		973.1		840.7
International	65.7		55.8		219.4		180.2
Home Entertainment
Digital Media	131.2		12.8		205.1		70.6
Packaged Media	1.3		1.7		2.7		5.1
Total Home Entertainment	132.5		14.5		207.8		75.7
Other	29.7		27.9		68.3		64.2
Total Television Production revenues	605.4		438.6		1,468.6		1,160.8

Media Networks - Programming Revenues
Domestic	341.7		362.5		1,048.7		1,079.2
International	38.6		26.4		108.8		76.7
	380.3		388.9		1,157.5		1,155.9

Intersegment eliminations	(274.4)		(217.4)		(648.6)		(539.6)
Total revenues	$	1,000.1	$	885.4	$	2,769.1	$	2,674.4

Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog). Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at December 31, 2022 are as follows:


	Rest of Year Ending March 31, 2023		Year Ending March 31,
			2024		2025		Thereafter		Total
	(Amounts in millions)
Remaining Performance Obligations	$	502.3	$	744.9	$	451.3	$	263.9	$	1,962.4

The above table does not include estimates of variable consideration for transactions involving sales or usage-based royalties in exchange for licenses of intellectual property. The revenues included in the above table include all fixed fee contracts regardless of duration.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenues of $34.4 million and $116.6 million, including variable and fixed fee arrangements, were recognized during the three and nine months ended December 31, 2022, respectively, from performance obligations satisfied prior to March 31, 2022. These revenues were primarily associated with the distribution of television and theatrical product in electronic sell-through and video-on-demand formats, and to a lesser extent, the distribution of theatrical product in the domestic and international markets related to films initially released in prior periods.

Accounts Receivable, Contract Assets and Deferred Revenue

The timing of revenue recognition, billings and cash collections affects the recognition of accounts receivable, contract assets and deferred revenue. See the unaudited condensed consolidated balance sheets or Note 18 for accounts receivable, contract assets and deferred revenue balances at December 31, 2022 and March 31, 2022.

Accounts Receivable. Accounts receivable are presented net of a provision for doubtful accounts. The Company estimates provisions for accounts receivable based on historical experience for the respective risk categories and current and future expected economic conditions. To assess collectability, the Company analyzes market trends, economic conditions, the aging of receivables and customer specific risks, and records a provision for estimated credit losses expected over the lifetime of the receivables in direct operating expense.

The Company performs ongoing credit evaluations and monitors its credit exposure through active review of customers' financial condition, aging of receivable balances, historical collection trends, and expectations about relevant future events that may significantly affect collectability. The Company generally does not require collateral for its trade accounts receivable.

Changes in the provision for doubtful accounts consisted of the following:


	March 31, 2022		(Benefit) provision for doubtful accounts(1)		Uncollectible accounts written-off		December 31, 2022
	(Amounts in millions)
Trade accounts receivable	$	11.5	$	(1.0)	$	(0.4)	$	10.1

_______________________

(1)Represents collections on accounts receivable previously reserved.

Contract Assets. Contract assets relate to the Company’s conditional right to consideration for completed performance under the contract (e.g., unbilled receivables). Amounts relate primarily to contractual payment holdbacks in cases in which the Company is required to deliver additional episodes or seasons of television content in order to receive payment, complete certain administrative activities, such as guild filings, or allow the Company's customers' audit rights to expire. See Note 18 for contract assets at December 31, 2022 and March 31, 2022.

Deferred Revenue. Deferred revenue relates primarily to customer cash advances or deposits received prior to when the Company satisfies the corresponding performance obligation. Revenues of $11.4 million and $141.8 million, respectively, were recognized during the three and nine months ended December 31, 2022 related to the balance of deferred revenue at March 31, 2022.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11. Net Income (Loss) Per Share

Basic net income (loss) per share is calculated based on the weighted average common shares outstanding for the period. Basic net income (loss) per share for the three and nine months ended December 31, 2022 and 2021 is presented below:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions, except per share amounts)
Basic Net Income (Loss) Per Common Share:
Numerator:
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	16.6	$	(45.6)	$	(1,913.5)	$	(83.5)
Denominator:
Weighted average common shares outstanding	228.8		225.0		227.4		223.7
Basic net income (loss) per common share	$	0.07	$	(0.20)	$	(8.41)	$	(0.37)

Diluted net income (loss) per common share reflects share purchase options, including share appreciation rights ("SARs"), restricted share units ("RSUs") and restricted stock using the treasury stock method when dilutive, and any contingently issuable shares when dilutive. Diluted net income (loss) per common share for the three and nine months ended December 31, 2022 and 2021 is presented below:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions, except per share amounts)
Diluted Net Income (Loss) Per Common Share:
Numerator:
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	16.6	$	(45.6)	$	(1,913.5)	$	(83.5)




Denominator:
Weighted average common shares outstanding	228.8		225.0		227.4		223.7
Effect of dilutive securities:

Share purchase options	—		—		—		—
Restricted share units and restricted stock	1.3		—		—		—

Adjusted weighted average common shares outstanding	230.1		225.0		227.4		223.7
Diluted net income (loss) per common share	$	0.07	$	(0.20)	$	(8.41)	$	(0.37)

As a result of the net loss in the nine months ended December 31, 2022 and the three and nine months ended December 31, 2021, the dilutive effect of the share purchase options, RSUs and restricted stock, and contingently issuable shares were considered anti-dilutive and, therefore, excluded from diluted net loss per share. The weighted average anti-dilutive shares excluded from the calculation due to the net loss for the nine months ended December 31, 2022 totaled 2.5 million (three and nine months ended December 31, 2021 - 4.5 million and 5.3 million, respectively).

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Additionally, for the three and nine months ended December 31, 2022 and 2021, the outstanding common shares issuable presented below were excluded from diluted net income (loss) per common share because their inclusion would have had an anti-dilutive effect regardless of net income or loss in the period.


	Three Months Ended		Nine Months Ended
	December 31,		December 31,
	2022	2021	2022	2021
	(Amounts in millions)
Anti-dilutive shares issuable

Share purchase options	25.2	16.0	22.8	16.0
Restricted share units	5.6	—	2.5	0.6
Other issuable shares	4.3	2.3	3.2	2.1
Total weighted average anti-dilutive shares issuable excluded from diluted net income (loss) per common share	35.1	18.3	28.5	18.7

12. Capital Stock

(a) Common Shares

The Company had 500 million authorized Class A voting shares and 500 million authorized Class B non-voting shares at December 31, 2022 and March 31, 2022. The table below outlines common shares reserved for future issuance:


	December 31, 2022	March 31, 2022
	(Amounts in millions)
Stock options and share appreciation rights (SARs) outstanding	24.9	27.6
Restricted stock and restricted share units — unvested	14.5	7.9
Common shares available for future issuance	11.1	18.4
Shares reserved for future issuance	50.5	53.9

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(b) Share-based Compensation

The Company recognized the following share-based compensation expense during the three and nine months ended December 31, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Compensation Expense:
Stock options	$	1.5	$	4.1	$	5.6	$	15.6
Restricted share units and other share-based compensation	20.8		16.4		49.7		56.4
Share appreciation rights	1.0		2.1		2.4		5.5
	23.3		22.6		57.7		77.5
Impact of accelerated vesting on equity awards(1)	1.5		—		2.1		—
Total share-based compensation expense	$	24.8	$	22.6	$	59.8	$	77.5

Tax impact(2)	(4.1)		(4.4)		(10.4)		(15.3)
Increase in net loss or reduction in net income	$	20.7	$	18.2	$	49.4	$	62.2

___________________

(1)Represents the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.

(2)Represents the income tax benefit recognized in the unaudited condensed consolidated statements of operations for share-based compensation arrangements prior to the effects of changes in the valuation allowance.

Share-based compensation expense, by expense category, consisted of the following:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Share-Based Compensation Expense:
Direct operating	$	0.5	$	0.4	$	1.2	$	0.9
Distribution and marketing	0.2		0.2		0.6		0.5
General and administration	22.6		22.0		55.9		76.1
Restructuring and other	1.5		—		2.1		—
	$	24.8	$	22.6	$	59.8	$	77.5

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the stock option, SARs, restricted stock and restricted share unit activity during the nine months ended December 31, 2022:


	Stock Options and SARs					Restricted Stock and Restricted Share Units
	Class A Voting Shares			Class B Non-Voting Shares		Class A Voting Shares			Class B Non-Voting Shares
	Number of Shares		Weighted-Average Exercise Price	Number of Shares	Weighted-Average Exercise Price	Number of Shares		Weighted-Average Grant-Date Fair Value	Number of Shares	Weighted-Average Grant-Date Fair Value
	(Number of shares in millions)
Outstanding at March 31, 2022	5.4		$24.34	22.2	$15.36	—	(1)	$11.51	7.9	$11.87
Granted	—		—	0.3	$8.97	—	(1)	$10.27	11.9	$9.02
Options exercised or restricted stock or RSUs vested	—	(1)	$7.70	(0.4)	$10.17	—	(1)	$11.19	(5.0)	$11.99


Forfeited or expired	(1.1)		$16.58	(1.5)	$17.21	—		—	(0.3)	$10.59
Outstanding at December 31, 2022	4.3		$26.31	20.6	$15.22	—	(1)	$10.95	14.5	$9.49

__________________

(1)Represents less than 0.1 million shares.

During the three and nine months ended December 31, 2022 and 2021 the Company did not repurchase any common shares. To date, approximately $288.1 million common shares have been repurchased, leaving approximately $179.9 million of authorized potential repurchases.

13. Income Taxes

The income tax provision for the three and nine months ended December 31, 2022 and 2021 is calculated by estimating the Company's annual effective tax rate (estimated annual tax provision divided by estimated annual income before income taxes), and then applying the effective tax rate to income (loss) before income taxes for the period, plus or minus the tax effects of items that relate discretely to the period, if any.

The Company's income tax provision differs from the federal statutory rate multiplied by pre-tax income (loss) due to the mix of the Company's pre-tax income (loss) generated across the various jurisdictions in which the Company operates, changes in the valuation allowance against the Company's deferred tax assets, and certain minimum taxes and foreign withholding taxes. The Company's income tax provision for the three and 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. The Company's income tax provision for the three and nine months ended December 31, 2021 was also impacted by additional uncertain tax benefits related to state income taxes identified during state audits.

The Company's income tax provision can be affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, changes in uncertain tax positions, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. Restructuring and Other

Restructuring and other includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable. During the three and nine months ended December 31, 2022 and 2021, the Company also incurred certain other unusual charges or benefits, which are included in direct operating expense and distribution and marketing expense in the consolidated statements of operations as described below. The following table sets forth restructuring and other and these other unusual charges or benefits and the statement of operations line items they are included in for the three and nine months ended December 31, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Restructuring and other:
Content and other impairments(1)	$	80.8	$	—	$	299.7	$	—
Severance(2)
Cash	2.4		—		14.8		3.8
Accelerated vesting on equity awards (see Note 12)	1.5		—		2.1		—
Total severance costs	3.9		—		16.9		3.8
COVID-19 related charges included in restructuring and other(3)	—		0.2		0.1		0.9
Transaction and other costs (benefits)(4)	(9.4)		0.3		(0.2)		2.5
Total Restructuring and Other	75.3		0.5		316.5		7.2

Other unusual charges not included in restructuring and other or the Company's operating segments:
Content charges included in direct operating expense(5)	—		—		7.2		—
COVID-19 related charges (benefit) included in:
Direct operating expense(6)	(1.8)		(2.8)		(8.8)		(2.3)
Distribution and marketing expense	—		—		—		0.3

Total restructuring and other and other unusual charges not included in restructuring and other	$	73.5	$	(2.3)	$	314.9	$	5.2

_______________________

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(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, the Company began a plan to restructure its LIONSGATE+ business (formerly STARZPLAY International). This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan). 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 segment in the second quarter ended September 30, 2022, as discussed in Note 5.

For the third quarter ended December 31, 2022, due to the continuing macro and microeconomic conditions which led to the LIONSGATE+ restructuring, the Company expanded its 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, the Company 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 and nine months ended December 31, 2022 of $80.8 million and $293.8 million, respectively.

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.

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 the 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 and 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 three and 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.

(5)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 results and included in amortization of investment in film and television programs in direct operating expense on the unaudited condensed consolidated statement of operations.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(6)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 resulting from circumstances associated with the COVID-19 global pandemic, 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. The Company is in the process of seeking additional insurance recovery for some of these costs. The ultimate amount of insurance recovery cannot be estimated at this time.

Changes in the restructuring and other severance liability were as follows for the nine months ended December 31, 2022 and 2021:


	Nine Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Severance liability
Beginning balance	$	1.5	$	5.7
Accruals	14.8		3.8
Severance payments	(5.0)		(8.0)

Ending balance(1)	$	11.3	$	1.5

_______________________

(1)As of December 31, 2022, the remaining severance liability of approximately $11.3 million is expected to be paid in the next 12 months.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15. Segment Information

The Company’s reportable segments have been determined based on the distinct nature of their operations, the Company's internal management structure, and the financial information that is evaluated regularly by the Company's chief operating decision maker.

The Company has three reportable business segments: (1) Motion Picture, (2) Television Production and (3) Media Networks. We refer to our Motion Picture and Television Production segments collectively as our Studio Business.

Studio Business:

Motion Picture. Motion Picture consists of the development and production of feature films, acquisition of North American and worldwide distribution rights, North American theatrical, home entertainment and television distribution of feature films produced and acquired, and worldwide licensing of distribution rights to feature films produced and acquired.

Television Production. Television Production consists of the development, production and worldwide distribution of television productions including television series, television movies and mini-series, and non-fiction programming. Television Production includes the licensing of Starz original series productions to Starz Networks and LIONSGATE+, and the ancillary market distribution of Starz original productions and licensed product. Additionally, the Television Production segment includes the results of operations of 3 Arts Entertainment.

Media Networks Business:

Media Networks. Media Networks consists of the following product lines (i) Starz Networks, which includes the domestic distribution of STARZ branded premium subscription video services through over-the-top ("OTT") platforms and U.S. multichannel video programming distributors ("MVPDs") including cable operators, satellite television providers and telecommunication companies (collectively, "Distributors") and on a direct-to-consumer basis through the Starz App and (ii) LIONSGATE+, which represents revenues primarily from the OTT distribution of the STARZ premium subscription video services outside of the U.S. (formerly STARZPLAY International).

In the ordinary course of business, the Company's reportable segments enter into transactions with one another. The most common types of intersegment transactions include licensing motion pictures or television programming (including Starz original productions) from the Motion Picture and Television Production segments to the Media Networks segment. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses, assets, or liabilities recognized by the segment that is the counterparty to the transaction) are eliminated in consolidation and, therefore, do not affect consolidated results.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Segment information is presented in the table below:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Segment revenues
Studio Business:
Motion Picture	$	288.8	$	275.3	$	791.6	$	897.3
Television Production	605.4		438.6		1,468.6		1,160.8
Total Studio Business	894.2		713.9		2,260.2		2,058.1
Media Networks	380.3		388.9		1,157.5		1,155.9
Intersegment eliminations	(274.4)		(217.4)		(648.6)		(539.6)
	$	1,000.1	$	885.4	$	2,769.1	$	2,674.4
Intersegment revenues
Studio Business:
Motion Picture	$	16.2	$	28.2	$	30.0	$	35.4
Television Production	258.2		189.2		618.6		504.2
Total Studio Business	274.4		217.4		648.6		539.6
Media Networks	—		—		—		—
	$	274.4	$	217.4	$	648.6	$	539.6
Gross contribution
Studio Business:
Motion Picture	$	97.0	$	90.2	$	248.9	$	283.3
Television Production	82.3		28.6		136.6		79.6
Total Studio Business	179.3		118.8		385.5		362.9
Media Networks	72.4		49.5		104.0		187.1
Intersegment eliminations	(8.4)		(1.9)		(31.3)		3.7
	$	243.3	$	166.4	$	458.2	$	553.7
Segment general and administration
Studio Business:
Motion Picture	$	20.5	$	22.7	$	66.2	$	69.8
Television Production	10.8		9.3		32.0		28.8
Total Studio Business	31.3		32.0		98.2		98.6
Media Networks	22.9		21.0		70.5		65.0
	$	54.2	$	53.0	$	168.7	$	163.6
Segment profit
Studio Business:
Motion Picture	$	76.5	$	67.5	$	182.7	$	213.5
Television Production	71.5		19.3		104.6		50.8
Total Studio Business	148.0		86.8		287.3		264.3
Media Networks	49.5		28.5		33.5		122.1
Intersegment eliminations	(8.4)		(1.9)		(31.3)		3.7
	$	189.1	$	113.4	$	289.5	$	390.1

The Company's primary measure of segment performance is segment profit. Segment profit is defined as gross contribution (revenues, less direct operating and distribution and marketing expense) less segment general and administration expenses. Segment profit excludes, when applicable, corporate general and administrative expense, restructuring and other

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

The reconciliation of total segment profit to the Company’s income (loss) before income taxes is as follows:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Company’s total segment profit	$	189.1	$	113.4	$	289.5	$	390.1
Corporate general and administrative expenses	(21.3)		(21.8)		(69.4)		(70.5)
Adjusted depreciation and amortization(1)	(9.8)		(11.7)		(29.5)		(32.7)
Restructuring and other(2)	(75.3)		(0.5)		(316.5)		(7.2)
Goodwill impairment(3)	—		—		(1,475.0)		—
COVID-19 related benefit (charges) included in direct operating expense and distribution and marketing expense(4)	1.8		2.8		8.8		2.0
Content charges(5)	—		—		(7.2)		—

Adjusted share-based compensation expense(6)	(23.3)		(22.6)		(57.7)		(77.5)
Purchase accounting and related adjustments(7)	(53.4)		(50.3)		(151.1)		(144.8)
Operating income (loss)	7.8		9.3		(1,808.1)		59.4
Interest expense	(59.6)		(44.4)		(163.0)		(130.0)
Interest and other income	1.7		1.4		4.8		29.4
Other expense	(10.7)		(1.9)		(21.1)		(6.2)
Gain (loss) on extinguishment of debt	38.2		(1.1)		40.3		(28.2)
Gain (loss) on investments	43.4		(0.2)		42.1		1.2
Equity interests income (loss)	—		(2.5)		0.8		(1.4)
Income (loss) before income taxes	$	20.8	$	(39.4)	$	(1,904.2)	$	(75.8)

___________________

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


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Depreciation and amortization	$	46.3	$	46.3	$	133.9	$	134.1
Less: Amount included in purchase accounting and related adjustments	(36.5)		(34.6)		(104.4)		(101.4)
Adjusted depreciation and amortization	$	9.8	$	11.7	$	29.5	$	32.7

(2)Restructuring and other includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable (see Note 14).

(3)Goodwill impairment reflects the impairment charge recorded in the nine months ended December 31, 2022 related to the Media Networks reporting unit (see Note 5).

(4)During the three and nine months ended December 31, 2022 and 2021, the Company has incurred a net benefit in direct operating expense due to insurance recoveries in excess of the incremental costs expensed in the period (see Note 14). These charges (benefits) are excluded from segment operating results.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(5)Content charges represent certain charges included in direct operating expense in the consolidated statements of operations, and excluded from segment operating results (see Note 14 for further information).

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


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Total share-based compensation expense	$	24.8	$	22.6	$	59.8	$	77.5
Less:
Amount included in restructuring and other(i)	(1.5)		—		(2.1)		—
Adjusted share-based compensation	$	23.3	$	22.6	$	57.7	$	77.5

(i)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.

(7)Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in recent acquisitions. These adjustments include 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 the earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense. The following sets forth the amounts included in each line item in the financial statements:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Purchase accounting and related adjustments:
Direct operating	$	—	$	—	$	0.7	$	0.5
General and administrative expense	16.9		15.7		46.0		42.9
Depreciation and amortization	36.5		34.6		104.4		101.4
	$	53.4	$	50.3	$	151.1	$	144.8

See Note 10 for revenues by media or product line as broken down by segment for the three and nine months ended December 31, 2022 and 2021.

The following table reconciles segment general and administration expense to the Company's total consolidated general and administration expense:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
General and administration
Segment general and administrative expenses	$	54.2	$	53.0	$	168.7	$	163.6
Corporate general and administrative expenses	21.3		21.8		69.4		70.5
Share-based compensation expense included in general and administrative expense	22.6		22.0		55.9		76.1
Purchase accounting and related adjustments	16.9		15.7		46.0		42.9
	$	115.0	$	112.5	$	340.0	$	353.1

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reconciliation of total segment assets to the Company’s total consolidated assets is as follows:


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Assets
Motion Picture	$	1,740.4	$	1,622.6
Television Production	1,900.7		1,978.9
Media Networks	3,168.8		4,706.7
Other unallocated assets(1)	782.6		683.0
	$	7,592.5	$	8,991.2

_____________________

(1)Other unallocated assets primarily consist of cash, other assets and investments.

16. Contingencies

From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business.

The Company establishes an accrued liability for claims and legal proceedings when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters.

As of December 31, 2022, the Company is not a party to any material pending claims or legal proceeding and is not aware of any other claims that it believes could, individually or in the aggregate, have a material adverse effect on the Company's financial position, results of operations or cash flows.

Insurance Litigation

During the nine months ended December 31, 2021, the Company settled with all of the insurers in its previous lawsuits related to insurance reimbursements associated with its previous Starz shareholder litigation settlement, which resulted in a net settlement amount received by the Company of $22.7 million in the nine months ended December 31, 2021, which is included in the “interest and other income” line item on the unaudited condensed consolidated statements of operations.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

17. Derivative Instruments and Hedging Activities

Forward Foreign Exchange Contracts

The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. Changes in the fair value of the foreign exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income (loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged.

As of December 31, 2022, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 33 months from December 31, 2022):

December 31, 2022

Foreign Currency

Foreign Currency Amount

US Dollar Amount

Weighted Average Exchange Rate Per $1 USD

(Amounts in millions)

British Pound Sterling

24.0

GBP

in exchange for

$27.0

0.89

GBP

Czech Koruna

461.6

CZK

in exchange for

$18.6

24.78

CZK

Euro

14.4

EUR

in exchange for

$10.0

1.45

EUR

Canadian Dollar

27.3

CAD

in exchange for

$19.6

1.39

CAD

Polish Zloty

8.0

PLN

in exchange for

$1.8

4.49

PLN

Interest Rate Swaps

The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows. The Company primarily uses pay-fixed interest rate swaps to facilitate its interest rate risk management activities, which the Company generally designates as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these designated cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur. Changes in the fair value of interest rate swaps that are not designated as hedges are recorded in interest expense (see further explanation below).

Cash settlements related to interest rate contracts are generally classified as operating activities on the consolidated statements of cash flows. However, due to a financing component (debt host) on a portion of our previously outstanding interest rate swaps (see Terminated Swaps, Designated Cash Flow Hedges at March 31, 2022 table below), the cash flows related to these contracts are classified as financing activities through the date of termination.

May 2022 Transactions: In May 2022, the Company terminated certain of its interest rate swap contracts with effective dates of May 19, 2020, June 15, 2020 and August 14, 2020, (the "Terminated Swaps"), as presented in the Terminated Swaps tables below. As a result of the terminations, the Company received approximately $56.4 million. Simultaneously with the termination of the Terminated Swaps, the Company re-designated all other swaps previously not designated (i.e., swaps with effective dates of May 23, 2018, June 25, 2018, July 31, 2018 and December 24, 2018 (the "Re-designated Swaps")) as cash flow hedges of variable rate debt with an aggregate notional amount of $1.4 billion, as presented in the Designated Cash Flow Hedges table below. In addition to the $1.4 billion Re-designated Swaps, the Company also has $300.0 million of other interest rate swaps designated as cash flow hedges as of December 31, 2022. Accordingly, at December 31, 2022, the Company has a total of $1.7 billion of interest rate swaps designated as cash flow hedges (see Designated Cash Flow Hedges table below).

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Terminated Swaps:

Designated Cash Flow Hedges at March 31, 2022:


Effective Date	Notional Amount	Fixed Rate Paid	Maturity Date(1)
	(in millions)
May 19, 2020	$700.0	1.923%	March 23, 2030	(2)
May 19, 2020	$350.0	2.531%	March 23, 2027	(2)
June 15, 2020	$150.0	2.343%	March 23, 2027	(2)
August 14, 2020	$200.0	1.840%	March 23, 2030	(2)
Total	$1,400.0

__________________

(1)Subject to a mandatory early termination date of March 23, 2025.

(2)These pay-fixed interest rate swaps were considered hybrid instruments with a financing component (debt host) and an embedded at-market derivative that was designated as a cash flow hedge.

Not Designated Cash Flow Hedges at March 31, 2022:


Effective Date	Notional Amount	Fixed Rate Received	Maturity Date
	(in millions)
May 19, 2020	$700.0	2.915%	March 24, 2025
August 14, 2020	$200.0	2.723%	March 23, 2025
May 19, 2020	$300.0	2.885%	March 23, 2025
May 19, 2020	$50.0	2.744%	March 23, 2025
June 15, 2020	$100.0	2.808%	March 23, 2025
June 15, 2020	$50.0	2.728%	March 23, 2025
Total	$1,400.0

The receipt of approximately $56.4 million as a result of the termination was recorded as a reduction of the asset values of the derivatives amounting to $188.7 million and a reduction of the financing component (debt host) of the Terminated Swaps amounting to $131.3 million. At the time of the termination of the Terminated Swaps, there was approximately $180.4 million of unrealized gains recorded in accumulated other comprehensive income (loss) related to these Terminated Swaps. This amount will be amortized as a reduction of interest expense through the remaining term of the swaps unless it becomes probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the gain will be recorded as a reduction to interest expense at that time. In addition, the liability amount of $6.8 million for the Re-designated Swaps (see Designated Cash Flow Hedges table below) at the re-designation date will be amortized as a reduction of interest expense throughout the remaining term of the Re-designated Swaps, unless it becomes probable that the cash flows originally hedged will not occur, in which case the proportionate amount of the loss will be recorded to interest expense at that time.

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

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Designated Cash Flow Hedges. As of December 31, 2022, the Company had the following pay-fixed interest rate swaps which have been designated as cash flow hedges outstanding (all related to the Company's LIBOR-based debt, see Note 6 and Note 7):


Effective Date	Notional Amount	Fixed Rate Paid	Maturity Date
	(in millions)
May 23, 2018	$300.0	2.915%	March 24, 2025
May 23, 2018	$700.0	2.915%	March 24, 2025	(1)
June 25, 2018	$200.0	2.723%	March 23, 2025	(1)
July 31, 2018	$300.0	2.885%	March 23, 2025	(1)
December 24, 2018	$50.0	2.744%	March 23, 2025	(1)
December 24, 2018	$100.0	2.808%	March 23, 2025	(1)
December 24, 2018	$50.0	2.728%	March 23, 2025	(1)
Total	$1,700.0

__________________

(1)Represents the Re-designated Swaps as described in the May 2022 Transactions section above that were previously not designated cash flow hedges at March 31, 2022.

Financial Statement Effect of Derivatives

Unaudited condensed consolidated statements of operations and comprehensive income (loss): The following table presents the pre-tax effect of the Company's derivatives on the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended December 31, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts
Gain recognized in accumulated other comprehensive income (loss)	$	2.7	$	1.0	$	4.4	$	1.2
Gain (loss) reclassified from accumulated other comprehensive income (loss) into direct operating expense	$	(0.6)	$	1.0	$	(0.7)	$	0.6
Interest rate swaps
Gain (loss) recognized in accumulated other comprehensive income (loss)	$	6.5	$	8.3	$	87.8	$	(21.4)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	$	3.6	$	(4.2)	$	(5.7)	$	(11.5)

Derivatives not designated as cash flow hedges:


Interest rate swaps
Loss reclassified from accumulated other comprehensive income (loss) into interest expense	$	(2.1)	$	(8.5)	$	(9.9)	$	(25.5)

Total direct operating expense on consolidated statements of operations	$	584.7	$	517.9	$	1,744.7	$	1,487.2
Total interest expense on consolidated statements of operations	$	59.6	$	44.4	$	163.0	$	130.0

Unaudited condensed consolidated balance sheets: The Company classifies its forward foreign exchange contracts and interest rate swap agreements within Level 2 as the valuation inputs are based on quoted prices and market observable data of

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

similar instruments (see Note 8). The portion of the swaps reflecting the financing component (debt host) of the hybrid instrument discussed above is recorded at amortized cost and reduced over time based on payments. Pursuant to the Company's accounting policy to offset the fair value amounts recognized for derivative instruments, the Company presents the asset or liability position of the swaps that are with the same counterparty under a master netting arrangement net as either an asset or liability in its unaudited condensed consolidated balance sheets. As of December 31, 2022, there were no swaps outstanding that were subject to a master netting arrangement. As of March 31, 2022, the gross amount of swaps in an asset and liability position that were subject to a master netting arrangement was $169.6 million and $147.3 million, respectively, resulting in an asset recorded in other assets - non-current of $32.0 million and a liability recorded in other liabilities - non-current of $9.8 million.

As of December 31, 2022 and March 31, 2022, the Company had the following amounts recorded in the accompanying unaudited condensed consolidated balance sheets related to the Company's use of derivatives:


	December 31, 2022
	Other Current Assets		Other Non-Current Assets		Accounts Payable and Accrued Liabilities		Other Non-Current Liabilities
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts	$	13.2	$	—	$	4.3	$	—
Interest rate swaps	—		54.8		—		—



Fair value of derivatives	$	13.2	$	54.8	$	4.3	$	—


	March 31, 2022
	Other Current Assets		Other Non-Current Assets		Accounts Payable and Accrued Liabilities		Other Non-Current Liabilities
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts	$	3.5	$	—	$	2.8	$	—
Interest rate swaps	—		109.1		—		(39.4)
Derivatives not designated as cash flow hedges:

Interest rate swaps(1)	—		(77.1)		—		56.8
Fair value of derivatives	$	3.5	32.0		$	2.8	17.4

________________

(1)Includes $88.1 million and $46.0 million included in other non-current assets and other non-current liabilities, respectively, representing the financing element (debt host) of certain hybrid instruments, which was offset by the pay-variable receive-fixed interest rate swaps outstanding at March 31, 2022.

As of December 31, 2022, based on the current release schedule, the Company estimates approximately $3.3 million of gains associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive income will be reclassified into earnings during the one-year period ending December 31, 2023.

As of December 31, 2022, the Company estimates approximately $25.7 million of gains recorded in accumulated other comprehensive income associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending December 31, 2023.

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

18. Additional Financial Information

The following tables present supplemental information related to the unaudited condensed consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the unaudited condensed consolidated balance sheet to the total amounts reported in the unaudited condensed consolidated statement of cash flows at December 31, 2022 and March 31, 2022. At December 31, 2022 and March 31, 2022, restricted cash represents primarily amounts related to required cash reserves for interest payments associated with the Production Tax Credit Facility, IP Credit Facility and Backlog Facility.


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Cash and cash equivalents	$	425.4	$	371.2
Restricted cash included in other current assets	30.4		13.4
Restricted cash included in other non-current assets	15.2		—
Total cash, cash equivalents and restricted cash	$	471.0	$	384.6

Other Assets

The composition of the Company’s other assets is as follows as of December 31, 2022 and March 31, 2022:


	December 31, 2022		March 31, 2022
	(Amounts in millions)
Other current assets
Prepaid expenses and other	$	58.5	$	62.5
Restricted cash	30.4		13.4
Contract assets	57.7		40.5
Tax credits receivable	146.7		128.3
	$	293.3	$	244.7
Other non-current assets
Prepaid expenses and other	$	8.2	$	10.5
Restricted cash	15.2		—
Accounts receivable	25.1		39.0
Contract assets	5.3		9.3
Tax credits receivable	335.8		316.1
Operating lease right-of-use assets	167.5		170.7
Interest rate swap assets	54.8		32.0
	$	611.9	$	577.6

Accounts Receivable Monetization

Under the Company's accounts receivable monetization programs, the Company has entered into (1) individual agreements to monetize certain of its trade accounts receivable directly with third-party purchasers and (2) a revolving agreement to monetize designated pools of trade accounts receivable with various financial institutions, as further described below. Under these programs, the Company transfers receivables to purchasers in exchange for cash proceeds, and the Company continues to service the receivables for the purchasers. The Company accounts for the transfers of these receivables as a sale, removes (derecognizes) the carrying amount of the receivables from its balance sheets and classifies the proceeds received as cash flows from operating activities in the statements of cash flows. The Company records a loss on the sale of these receivables reflecting

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the net proceeds received (net of any obligations incurred), less the carrying amount of the receivables transferred. The loss is reflected in the "other expense" line item on the unaudited condensed consolidated statements of operations. The Company receives fees for servicing the accounts receivable for the purchasers, which represent the fair value of the services and were immaterial for the three and nine months ended December 31, 2022 and 2021.

Individual Monetization Agreements. The Company enters into individual agreements to monetize trade accounts receivable. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers. The following table sets forth a summary of the receivables transferred under individual agreements or purchases during the three and nine months ended December 31, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Carrying value of receivables transferred and derecognized	$	404.5	$	336.2	$	1,075.3	$	1,083.9
Net cash proceeds received	394.5		334.2		1,056.5		1,077.6
Loss recorded related to transfers of receivables	10.0		2.1		18.8		6.2

At December 31, 2022, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheets, but which the Company continues to service, related to the Company's individual agreements to monetize trade accounts receivable was $522.5 million (March 31, 2022 - $460.5 million).

Pooled Monetization Agreement. In December 2019, the Company entered into a revolving agreement, as amended in September 2022, to transfer up to $150.0 million of certain receivables to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred, which expires July 31, 2023. As customers pay their balances, the Company transfers additional receivables into the program. The transferred receivables are fully guaranteed by a bankruptcy-remote wholly-owned subsidiary of the Company, which holds additional receivables in the amount of $54.3 million as of December 31, 2022 that are pledged as collateral under this agreement. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the customers.

The following table sets forth a summary of the receivables transferred under the pooled monetization agreement during the three and nine months ended December 31, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
	(Amounts in millions)
Gross cash proceeds received for receivables transferred and derecognized	$	57.3	$	20.4	$	156.0	$	111.8
Less amounts from collections reinvested under revolving agreement	(33.3)		(12.1)		(83.3)		(76.0)
Proceeds from new transfers	24.0		8.3		72.7		35.8
Collections not reinvested and remitted or to be remitted	(24.2)		(10.8)		(48.0)		(44.4)
Net cash proceeds received (paid or to be paid)(1)	$	(0.2)	$	(2.5)	$	24.7	$	(8.6)

Carrying value of receivables transferred and derecognized (2)	$	57.0	$	20.3	$	154.2	$	110.9
Obligations recorded	$	1.0	$	—	$	4.4	$	0.9
Loss recorded related to transfers of receivables	$	0.7	$	(0.1)	$	2.6	$	—

___________________

(1)In addition, during the three and nine months ended December 31, 2022, the Company repurchased $6.5 million and $27.4 million, respectively, of receivables previously transferred, as separately agreed upon with the third-party purchasers, in order to monetize such receivables under the individual monetization program discussed above without being subject to the collateral requirements under the pooled monetization program (three and nine months ended December 31, 2021 - the Company repurchased $25.5 million of receivables previously transferred).

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LIONS GATE ENTERTAINMENT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2)Receivables net of unamortized discounts on long-term, non-interest bearing receivables.

At December 31, 2022, the outstanding amount of receivables derecognized from the Company's unaudited condensed consolidated balance sheet, but which the Company continues to service, related to the pooled monetization agreement was approximately $76.7 million (March 31, 2022 - $79.5 million).

Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in the components of accumulated other comprehensive income (loss), net of tax:


	Foreign currency translation adjustments		Net unrealized gain (loss) on cash flow hedges		Total
	(Amounts in millions)
March 31, 2022	$	(19.7)	$	49.0	$	29.3
Other comprehensive income (loss)	(3.4)		92.2		88.8
Reclassifications to net loss(1)	—		16.3		16.3
December 31, 2022	$	(23.1)	$	157.5	$	134.4

March 31, 2021	$	(15.1)	$	(68.2)	$	(83.3)
Other comprehensive loss	(1.2)		(20.2)		(21.4)
Reclassifications to net loss(1)	—		36.4		36.4
December 31, 2021	$	(16.3)	$	(52.0)	$	(68.3)

___________________

(1)Represents a loss of $0.7 million included in direct operating expense and a loss of $15.6 million included in interest expense on the unaudited condensed consolidated statement of operations in the nine months ended December 31, 2022 (nine months ended December 31, 2021 - gain of $0.6 million included in direct operating expense and loss of $37.0 million included in interest expense) (see Note 17).

Supplemental Cash Flow Information

Significant non-cash transactions during the nine months ended December 31, 2022 and 2021 include certain interest rate swap agreements, which are discussed in Note 17, "Derivative Instruments and Hedging Activities".

There were no significant non-cash financing activities for the nine months ended December 31, 2022 and 2021. The supplemental schedule of non-cash investing activities is presented below:


	Nine Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Non-cash investing activities:
Accrued equity-method investment	$	—	$	19.0

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) encompasses world-class motion picture and television studio operations aligned with the STARZ premium global subscription platform to bring a unique and varied portfolio of entertainment to consumers around the world. The Company’s film, television, subscription and location-based entertainment businesses are backed by a 17,000-title library and a valuable collection of iconic film and television franchises. We classify our operations through three reporting segments: 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.

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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

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. See Item 2. 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.

Revenues

Our revenues are derived from the Motion Picture, Television Production and Media Networks segments, as described below. We refer to our Motion Picture and Television Production segments collectively as our Studio Business. Our revenues are derived from the U.S., Canada, the United Kingdom and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the three and nine months ended December 31, 2022 and 2021.

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Studio Business

Motion Picture: Our Motion Picture segment includes revenues derived from the following:

•Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (distributed by us directly in the U.S. and through a sub-distributor in Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we receive a percentage of the box office results.

•Home Entertainment. Home entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) on packaged media and through digital media platforms (including pay-per-view and video-on-demand platforms, electronic sell through, and digital rental). In addition, we have revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, we share in the rental or sales revenues generated by the platform on a title-by-title basis.

•Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the linear pay, basic cable and free television markets. In addition, when a license in our traditional pay television window is made to a subscription video-on-demand ("SVOD") or other digital platform, the revenues are included here.

•International. International revenues are derived from (1) licensing of our productions, acquired films, our catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; and (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.

•Other. Other revenues are derived from, among others, the licensing of our film and television and related content (games, music, location-based entertainment royalties, etc.) to other ancillary markets.

Television Production: Our Television Production segment includes revenues derived from the following.

•Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television and syndication) of scripted and unscripted series, television movies, mini-series and non-fiction programming. Television revenues include fixed fee arrangements as well as arrangements in which we earn advertising revenue from the exploitation of certain content on television networks. Television revenues also include revenue from licenses to SVOD platforms in which the initial license of a television series is to an SVOD platform.

•International. International revenues are derived from the licensing and syndication to international markets of scripted and unscripted series, television movies, mini-series and non-fiction programming.

•Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series on packaged media and through digital media platforms.

•Other. Other revenues are derived from, among others, the licensing of our television programs to other ancillary markets, the sales and licensing of music from the television broadcasts of our productions, and from commissions and executive producer fees earned related to talent management.

Media Networks

Our Media Networks segment includes revenues derived from the following:

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

•LIONSGATE+. LIONSGATE+ revenues are primarily derived from OTT distribution of the STARZ premium subscription video services outside of the U.S. (formerly STARZPLAY International).

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

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Direct operating expenses include amortization of film and television production or acquisition costs, amortization of programming production or acquisition costs and programming related salaries, participation and residual expenses, provision for doubtful accounts, and foreign exchange gains and losses.

Participation costs represent contingent consideration payable based on the performance of the film or television program to parties associated with the film or television program, including producers, writers, directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild - American Federation of Television and Radio Artists, Directors Guild of America, and Writers Guild of America, based on the performance of the film or television program in certain ancillary markets or based on the individual’s (i.e., actor, director, writer) salary level in the television market.

Distribution and marketing expenses primarily include the costs of theatrical prints and advertising (“P&A”) and premium video-on-demand ("Premium VOD") expense and of DVD/Blu-ray duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical exhibitors and the advertising and marketing cost associated with the theatrical release of the picture. Premium VOD expense represents the advertising and marketing cost associated with the Premium VOD release of the picture. DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products. DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising. Marketing costs for Media Networks includes advertising, consumer marketing, distributor marketing support and other marketing costs. In addition, distribution and marketing costs includes our Media Networks segment operating costs for the direct-to-consumer service, transponder expenses and maintenance and repairs.

General and administration expenses include salaries and other overhead. Corporate general and administrative expenses include corporate executive costs, costs of maintaining corporate facilities and common administrative support functions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. As described more fully below, these estimates bear the risk of change due to the inherent uncertainty of the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. 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. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 to our audited consolidated financial statements in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on May 26, 2022.

Accounting for Films and Television Programs and Licensed Program Rights

Capitalized costs for films or television programs are amortized and tested for impairment based on whether the content is predominantly monetized individually or as a group.

Film and Television Programs Monetized Individually. For films and television programs monetized individually, film cost amortization, participations and residuals expense are based on management's estimates. Costs of acquiring and producing films and television programs and of acquired libraries that are monetized individually are amortized and estimated liabilities for participations and residuals costs are accrued using the individual-film-forecast method, based on the ratio of the current period's revenues to management’s estimated remaining total gross revenues to be earned ("ultimate revenue"). Management's judgment is required in estimating ultimate revenue and the costs to be incurred throughout the life of each film or television program.

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Management estimates ultimate revenues based on historical experience with similar titles or the title genre, the general public appeal of the cast, audience test results when available, actual performance (when available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general economic conditions and other tangible and intangible factors, many of which we do not control and which may change.

For motion pictures, ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. The most sensitive factor affecting our estimate of ultimate revenues for a film intended for theatrical release is the film's theatrical performance, as subsequent revenues from the licensing and sale in other markets have historically been highly correlated to its theatrical performance. After a film's release, our estimates of revenue from succeeding markets are revised based on historical relationships and an analysis of current market trends.

For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. The most sensitive factors affecting our estimate of ultimate revenues for a television series is whether the series will be ordered for a subsequent season and estimates of revenue in secondary markets other than the initial license fee. 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. We regularly monitor the performance of each season, and evaluate whether impairment indicators are present (i.e., low ratings, cancellations or the season is not reordered), and based upon our review, we revise our estimates as needed and perform an impairment assessment if impairment indicators are present (see below).

For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.

Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful or less successful than anticipated. Management regularly reviews and revises when necessary its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or a write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value (see below).

An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results in an impairment requiring a write-down of the film cost to the title’s fair value. These write-downs are included in amortization expense within direct operating expenses in our consolidated statements of operations. See further discussion below under Impairment Assessment.

Film and Television Programs Monetized as a Group. Licensed programming rights may include rights to more than one exploitation window under the Company's output and library agreements. For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated fair value of each window which generally results in the majority of the cost allocated to the first window on newer releases.

The cost of program rights for films and television programs (including original series) exhibited by the Media Networks segment are generally amortized on an accelerated or straight-line basis based on the historical viewership patterns, the current and anticipated number of exhibitions expected or the license period on a title-by-title or episode-by-episode basis. The number of exhibitions is estimated based on the number of exhibitions allowed in the agreement (if specified) and the expected usage of the content. Participations and residuals are expensed in line with the amortization of production costs.

Changes in management’s estimate of the anticipated exhibitions and viewership patterns of films and original series on our 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. A film group or individual film or television program is evaluated for impairment when events or changes in circumstances indicate that the fair value of an individual film or film group is less than its unamortized cost. If the result of the impairment test indicates that the carrying value exceeds the estimated fair value, an impairment charge will then be recorded for the amount of the difference.

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

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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. 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. 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. 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).

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. 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).

Valuation Assumptions. The discounted cash flow analysis includes cash flows estimates of ultimate revenue and costs as well as a discount rate (a Level 3 fair value measurement, see Note 8 to our unaudited condensed consolidated financial statements). The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the Company plus a risk premium representing the risk associated with producing a particular film or television program or film group. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in management’s future revenue estimates.

Revenue Recognition. Our Motion Picture and Television Production segments generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places. Our Media Networks segment generates revenue primarily from the distribution of our STARZ branded premium subscription video services.

Our content licensing arrangements include fixed fee and minimum guarantee arrangements, and sales or usage based royalties. Our fixed fee or minimum guarantee licensing arrangements in the television, digital media and international markets may, in some cases, include multiple titles, multiple license periods (windows) with a substantive period in between the windows, rights to exploitation in different media, or rights to exploitation in multiple territories, which may be considered distinct performance obligations. When these performance obligations are considered distinct, the fixed fee or minimum guarantee in the arrangement is allocated to the title, window, media right or territory as applicable, based on estimates of relative standalone selling prices. The amounts related to each performance obligation (i.e., title, window, media or territory) are recognized when the content has been delivered, and the window for the exploitation right in that territory has begun, which is the point in time at which the customer is able to begin to use and benefit from the content.

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Sales or usage based royalties represent amounts due to us based on the “sale” or “usage” of our content by the customer, and revenues are recognized at the later of when the subsequent sale or usage occurs, or the performance obligation to which some or all the sales or usage-based royalty has been allocated has been satisfied (or partially satisfied). Generally, when we license completed content (with standalone functionality, such as a movie, or television show), our performance obligation will be satisfied prior to the sale or usage. When we license intellectual property that does not have stand-alone functionality (e.g., brands, themes, logos, etc.), our performance obligation is generally satisfied in the same period as the sale or usage. The actual amounts due to us under these arrangements are generally not reported to us until after the close of the reporting period. We record revenue under these arrangements for the amounts due and not yet reported to us based on estimates of the sales or usage of these customers and pursuant to the terms of the contracts. Such estimates are based on information from our customers, historical experience with similar titles in that market or territory, the performance of the title in other markets and/or available data in the industry. While we believe these estimates are reasonable estimates of the amounts due under these arrangements, such estimated amounts could differ from the actual amounts to be subsequently reported by the customer, which could be higher or lower than our estimates, and could result in an adjustment to revenues in future periods.

Revenue from the theatrical release of feature films are treated as sales or usage-based royalties and recognized starting at the exhibition date and based on our participation in box office receipts of the theatrical exhibitor.

Digital media revenue sharing arrangements are recognized as sales or usage based royalties.

Revenue from 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.

Media Networks revenues may be based on a variable fee (i.e., a fee based on number of subscribers who receive our networks or other subscriber based factors) or to a lesser extent, may be based on a monthly fixed fee or minimum guarantee, subject to nominal annual escalations. Media Networks revenue is also generated through the distribution of our SVOD service directly to consumer through the Starz App. The variable distribution fee arrangements represent sales or usage based royalties, which are recognized over the period of such sales or usage by our distributor, which is the same period that the content is provided to the distributor. Estimates of revenue generated but not yet reported to us by our distribution partners are made based on the estimated number of subscribers using historical trends and recent reporting. Media Networks fixed fee or minimum guarantee programming revenue is recognized over the contract term based on the continuous delivery of the content to the distributor. Subscribers through the Starz App are billed in advance of the start of their monthly or annual membership and revenues are recognized ratably over each applicable membership period. Payments to distributors for marketing support costs for which Starz receives a discrete benefit are recorded as distribution and marketing costs, and payments to distributors for which Starz receives no discrete benefit are recorded as a reduction of revenue.

Goodwill and Indefinite-Lived Intangibles. At December 31, 2022, 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. Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments (component level). Reporting units are determined by the discrete financial information available for the component and whether that information is regularly reviewed by segment management. Components are aggregated into a single reporting unit if they share similar economic characteristics. Our reporting units for purposes of goodwill impairment testing, along with their respective goodwill balances at December 31, 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

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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.

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. We perform our annual impairment test as of January 1 in each fiscal year. A goodwill or indefinite-lived intangible asset impairment loss would be recognized for the amount that the carrying amount of a reporting unit, including goodwill or an indefinite-lived intangible asset, exceeds its fair value. An entity may perform a qualitative assessment of the likelihood of the existence of a goodwill or indefinite-lived intangible asset impairment. The qualitative assessment is an evaluation, based on all identified events and circumstances which impact the fair value of the reporting unit or indefinite-lived intangible asset, of whether or not it is more-likely-than-not that the fair value is less than the carrying value of the reporting unit or indefinite-lived intangible asset. If we believe that as a result of our qualitative assessment it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is greater than its carrying amount, a quantitative impairment test is not required but may be performed at the option of the Company. A quantitative assessment requires determining the fair value of our reporting units or indefinite-lived intangible assets. The determination of fair value requires considerable judgment and requires assumptions and estimates of many factors, including revenue and market growth, operating margins and cash flows, market multiples and discount rates.

In performing a quantitative assessment of goodwill, we determine the fair value of our reporting units by using a combination of discounted cash flow ("DCF") analyses and market-based valuation methodologies. The models rely on significant judgments and assumptions surrounding general market and economic conditions, short-term and long-term growth rates, discount rates, income tax rates, and detailed management forecasts of future cash flow and operating margin projections, and other assumptions, all of which are based on our internal forecasts of future performance as well as historical trends. The market-based valuation method utilizes EBITDA multiples from guideline public companies operating in similar industries and a control premium. The results of these valuation methodologies are weighted as to their relative importance and a single fair value is determined. The fair value of our reporting units is reconciled to the market value of our equity, determined based on the average prices of our common shares just prior to the period end. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual or interim goodwill impairment tests will prove to be an accurate prediction of the future.

Goodwill Impairment Assessments:

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. 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

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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). 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.

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; volatility in the equity and debt markets which could result in higher weighted-average cost of capital; capital market transactions; the commercial success of our television programming and motion pictures; our continual contractual relationships with our customers; including our affiliate agreements of our Media Networks business; our subscriber growth rates domestically and internationally across our traditional and OTT platforms and changes in consumer behavior. If our assumptions are not realized, it is possible that additional impairment charges may need to be recorded in the future.

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. 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.

Finite-Lived Intangible Assets. At December 31, 2022, the carrying value of our finite-lived intangible assets was approximately $1.09 billion. Our finite-lived intangible assets primarily relate to customer relationships associated with U.S. MVPDs, including cable operators, satellite television providers and telecommunications companies ("Traditional Affiliate"), which amounted to $1.08 billion. The amount of our customer relationship asset related to these Traditional Affiliate relationships reflects the estimated fair value of these customer relationships determined in connection with the acquisition of Starz on December 8, 2016, net of amortization recorded since the date of the Starz acquisition. Identifiable intangible assets with finite lives are amortized to depreciation and amortization expense over their estimated useful lives, ranging from 5 to 16 years. The Starz Traditional Affiliate customer relationship intangible asset is amortized in the proportion that current period revenues bear to management’s estimate of future revenue over the remaining estimated useful life of the asset, which results in greater amortization in the earlier years of the estimated useful life of the asset than the latter years.

Amortizable intangible assets are tested for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount of the asset may not be recoverable. If a triggering event has occurred, an impairment analysis is required. The impairment test first requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. The impairment test is performed at the lowest level of cash flows associated with the asset. If the carrying value of the asset exceeds the undiscounted future cash flows, the asset would not be deemed to be recoverable. Impairment would then be measured as the excess of the asset’s carrying value over its fair value.

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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. 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.

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. Should the revenues from our Traditional Affiliate relationships decline more than the assumed attrition rates used in our current estimates, either as a result of decreases in subscriber rates or changes of the terms of our renewals of our Traditional Affiliate contracts, we may have indicators of impairment which could result in an impairment of our customer relationships intangible assets, or we may need to further shorten the useful life or adopt a more accelerated method of amortization both of which would increase the amount of amortization expense we record.

Income Taxes. We are subject to federal and state income taxes in the U.S., and in several foreign jurisdictions. We record deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves in these jurisdictions. We recognize a future tax benefit to the extent that realization of such benefit is more likely than not on a jurisdiction-by-jurisdiction basis; otherwise, a valuation allowance is applied. In order to realize the benefit of our deferred tax assets, we will need to generate sufficient taxable income in the future in each of the jurisdictions which have these deferred tax assets. However, the assessment as to whether there will be sufficient taxable income in a jurisdiction to realize our net deferred tax assets in that jurisdiction is an estimate which could change in the future depending primarily upon the actual performance of our Company. We will be required to continually evaluate the more likely than not assessment that our net deferred tax assets will be realized, and if operating results deteriorate in a particular jurisdiction, we may need to record a valuation allowance for all or a portion of our deferred tax assets through a charge to our income tax provision. As of March 31, 2022, we had a valuation allowance of $362.8 million against certain U.S. and foreign deferred tax assets that may not be realized on a more likely than not basis.

Our quarterly income tax provision and our corresponding annual effective tax rate are based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. For interim financial reporting, we estimate the annual effective tax rate based on projected taxable income for the full year and record a quarterly tax provision in accordance with the expected annual effective tax rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process often results in a change to our expected annual effective tax rate for the year. When this occurs, we adjust our income tax provision during the quarter in which the change in estimate occurs so that the year-to-date income tax provision reflects the expected annual effective tax rate. Significant judgment is required in determining our expected annual effective tax rate and in evaluating our tax positions.

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

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RESULTS OF OPERATIONS

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

Consolidated Results of Operations

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


	Three Months Ended
	December 31,				Increase (Decrease)
	2022		2021		Amount		Percent
	(Amounts in millions)
Revenues
Studio Business
Motion Picture	$	288.8	$	275.3	$	13.5	4.9	%
Television Production	605.4		438.6		166.8		38.0	%
Total Studio Business	894.2		713.9		180.3		25.3	%
Media Networks	380.3		388.9		(8.6)		(2.2)	%
Intersegment eliminations	(274.4)		(217.4)		(57.0)		26.2	%
Total revenues	1,000.1		885.4		114.7		13.0	%
Expenses:
Direct operating	584.7		517.9		66.8		12.9	%
Distribution and marketing	171.0		198.9		(27.9)		(14.0)	%
General and administration	115.0		112.5		2.5		2.2	%
Depreciation and amortization	46.3		46.3		—		—	%
Restructuring and other	75.3		0.5		74.8		nm

Total expenses	992.3		876.1		116.2		13.3	%
Operating income	7.8		9.3		(1.5)		(16.1)	%
Interest expense	(59.6)		(44.4)		(15.2)		34.2	%

Interest and other income	1.7		1.4		0.3		21.4	%
Other expense	(10.7)		(1.9)		(8.8)		nm
Gain (loss) on extinguishment of debt	38.2		(1.1)		39.3		nm
Gain (loss) on investments	43.4		(0.2)		43.6		nm
Equity interests income (loss)	—		(2.5)		2.5		(100.0)	%
Income (loss) before income taxes	20.8		(39.4)		60.2		nm
Income tax provision	(5.6)		(9.5)		3.9		(41.1)	%
Net income (loss)	15.2		(48.9)		64.1		nm
Less: Net loss attributable to noncontrolling interest	1.4		3.3		(1.9)		(57.6)	%
Net income (loss) attributable to Lions Gate Entertainment Corp. shareholders	$	16.6	$	(45.6)	$	62.2	nm

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nm - Percentage not meaningful.

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Revenues. 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.

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:


	Three Months Ended
	December 31,
	2022				2021				Increase (Decrease)
	Amount		% of Segment Revenues		Amount		% of Segment Revenues		Amount		Percent
	(Amounts in millions)
Direct operating expenses
Studio Business:
Motion Picture	$	131.8	45.6	%	$	118.4	43.0	%	$	13.4	11.3	%
Television Production	515.5		85.2		402.4		91.7		113.1		28.1	%
Total Studio Business	647.3		72.4		520.8		73.0		126.5		24.3	%
Media Networks	204.7		53.8		215.0		55.3		(10.3)		(4.8)	%
COVID-19 related charges (benefit)	(1.8)		nm		(2.8)		nm		1.0		nm
Other	0.5		nm		0.4		nm		0.1		nm
Intersegment eliminations	(266.0)		nm		(215.5)		nm		(50.5)		nm
	$	584.7	58.5	%	$	517.9	58.5	%	$	66.8	12.9	%

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nm - Percentage not meaningful.

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. 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

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

Other. 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 three months ended December 31, 2022 and 2021:


	Three Months Ended
	December 31,				Increase (Decrease)
	2022		2021		Amount		Percent
	(Amounts in millions)
Distribution and marketing expenses
Studio Business:
Motion Picture	$	60.0	$	66.7	$	(6.7)	(10.0)	%
Television Production	7.6		7.6		—		—	%
Total Studio Business	67.6		74.3		(6.7)		(9.0)	%
Media Networks	103.2		124.4		(21.2)		(17.0)	%

Other	0.2		0.2		—		—	%

	$	171.0	$	198.9	$	(27.9)	(14.0)	%
U.S. theatrical P&A and Premium VOD expense included in Motion Picture distribution and marketing expense	$	27.7	$	35.0	$	(7.3)	(20.9)	%

_______________________

nm - Percentage not meaningful.

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. 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:

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	Three 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	$	20.5		$	22.7		$	(2.2)	(9.7)	%
Television Production	10.8			9.3			1.5		16.1	%
Total Studio Business	31.3			32.0			(0.7)		(2.2)	%
Media Networks	22.9			21.0			1.9		9.0	%
Corporate	21.3			21.8			(0.5)		(2.3)	%
	75.5		7.5%	74.8		8.4%	0.7		0.9	%
Share-based compensation expense	22.6			22.0			0.6		2.7	%

Purchase accounting and related adjustments	16.9			15.7			1.2		7.6	%

Total general and administrative expenses	$	115.0	11.5%	$	112.5	12.7%	$	2.5	2.2	%

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. 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:


	Three Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Share-based compensation expense by expense category
General and administrative expense	$	22.6	$	22.0
Restructuring and other(1)	1.5		—
Direct operating expense	0.5		0.4
Distribution and marketing expense	0.2		0.2
Total share-based compensation expense	$	24.8	$	22.6

_______________________

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

Purchase accounting and related adjustments represent the charge for the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the amortization of the recoupable portion of the purchase price and the expense associated with earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense. Purchase accounting and related adjustments increased $1.2 million, or 7.6%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.

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

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

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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):


	Three Months Ended
	December 31,				Increase (Decrease)
	2022		2021		Amount		Percent
	(Amounts in millions)
Restructuring and other:
Content and other impairments(1)	$	80.8	$	—	$	80.8	n/a
Severance(2)
Cash	2.4		—		2.4		n/a
Accelerated vesting on equity awards (see Note 12 to our unaudited condensed consolidated financial statements)	1.5		—		1.5		n/a
	3.9		—		3.9		n/a
COVID-19 related charges(3)	—		0.2		(0.2)		(100.0)	%
Transaction and other costs (benefits)(4)	(9.4)		0.3		(9.7)		nm
	$	75.3	$	0.5	$	74.8	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 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). 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 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 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.

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

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(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.

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:


	Three Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Interest Expense
Cash Based:
Revolving credit facility	$	2.9	$	1.4
Term loans	18.5		8.1
Senior Notes	13.0		13.9
Other(1)	18.9		8.1
	53.3		31.5
Amortization of debt issuance costs and other non-cash interest(2)	6.3		12.9
Total interest expense	$	59.6	$	44.4

_______________________

(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).

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.

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).

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. See Note 6 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.

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.

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

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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. 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.

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

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.

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	Three Months Ended
	December 31,				Increase (Decrease)
	2022		2021		Amount		Percent
	(Amounts in millions)
Revenue
Studio Business
Motion Picture	$	288.8	$	275.3	$	13.5	4.9	%
Television Production	605.4		438.6		166.8		38.0	%
Total Studio Business	$	894.2	$	713.9	$	180.3	25.3	%
Media Networks	380.3		388.9		(8.6)		(2.2)	%
Intersegment eliminations	(274.4)		(217.4)		(57.0)		26.2	%
	$	1,000.1	$	885.4	$	114.7	13.0	%
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
Studio Business
Motion Picture	$	76.5	$	67.5	$	9.0	13.3	%
Television Production	71.5		19.3		52.2		270.5	%
Total Studio Business	$	148.0	$	86.8	$	61.2	70.5	%
Media Networks	49.5		28.5		21.0		73.7	%
Intersegment eliminations	(8.4)		(1.9)		(6.5)		nm
	$	189.1	$	113.4	$	75.7	66.8	%

_______________________

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 three months ended December 31, 2022 and 2021:

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	Three Months Ended
	December 31,						Increase (Decrease)
	2022			2021			Amount		Percent
	(Amounts in millions)
Motion Picture Segment:
Revenue	$	288.8		$	275.3		$	13.5	4.9	%
Expenses:
Direct operating expense	131.8			118.4			13.4		11.3	%
Distribution & marketing expense	60.0			66.7			(6.7)		(10.0)	%
Gross contribution	97.0			90.2			6.8		7.5	%
General and administrative expenses	20.5			22.7			(2.2)		(9.7)	%
Segment profit	$	76.5		$	67.5		$	9.0	13.3	%

U.S. theatrical P&A and Premium VOD expense included in distribution and marketing expense	$	27.7		$	35.0		$	(7.3)	(20.9)	%

Direct operating expense as a percentage of revenue	45.6		%	43.0		%

Gross contribution as a percentage of revenue	33.6		%	32.8		%

Revenue. 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)						Total Increase (Decrease)
	Lionsgate Original Releases(2)		Other Film(3)		Total		Lionsgate Original Releases(2)		Other Film(3)		Total
					(Amounts in millions)
Motion Picture Revenue
Theatrical	$	9.5	$	2.2	$	11.7	$	5.7	$	—	$	5.7	$	6.0
Home Entertainment
Digital Media	107.7		39.7		147.4		71.0		42.6		113.6		33.8
Packaged Media	8.2		11.1		19.3		16.1		15.2		31.3		(12.0)
Total Home Entertainment	115.9		50.8		166.7		87.1		57.8		144.9		21.8
Television	37.6		9.4		47.0		54.8		13.3		68.1		(21.1)
International	41.2		14.1		55.3		38.8		13.6		52.4		2.9
Other	5.4		2.7		8.1		2.6		1.6		4.2		3.9
	$	209.6	$	79.2	$	288.8	$	189.0	$	86.3	$	275.3	$	13.5

____________________

(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.

(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.).

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

Theatrical revenue 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.

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.

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.

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.

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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.

Television Production

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


	Three Months Ended
	December 31,						Increase (Decrease)
	2022			2021			Amount		Percent
	(Amounts in millions)
Television Production Segment:
Revenue	$	605.4		$	438.6		$	166.8	38.0	%
Expenses:
Direct operating expense	515.5			402.4			113.1		28.1	%
Distribution & marketing expense	7.6			7.6			—		—	%
Gross contribution	82.3			28.6			53.7		187.8	%
General and administrative expenses	10.8			9.3			1.5		16.1	%
Segment profit	$	71.5		$	19.3		$	52.2	270.5	%

Direct operating expense as a percentage of revenue	85.2		%	91.7		%

Gross contribution as a percentage of revenue	13.6		%	6.5		%

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


	Three Months Ended
	December 31,				Increase (Decrease)
	2022		2021		Amount		Percent
	(Amounts in millions)
Television Production Revenue
Television	$	377.5	$	340.4	$	37.1	10.9	%
International	65.7		55.8		9.9		17.7	%
Home Entertainment
Digital	131.2		12.8		118.4		nm
Packaged Media	1.3		1.7		(0.4)		(23.5)	%
Total Home Entertainment	132.5		14.5		118.0		nm
Other	29.7		27.9		1.8		6.5	%
	$	605.4	$	438.6	$	166.8	38.0	%

_______________________

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+.

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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.

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.

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.

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.

Media Networks

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


	Three Months Ended
	December 31,						Increase (Decrease)
	2022			2021			Amount		Percent
	(Amounts in millions)
Media Networks Segment:
Revenue	$	380.3		$	388.9		$	(8.6)	(2.2)	%
Expenses:
Direct operating expense	204.7			215.0			(10.3)		(4.8)	%
Distribution & marketing expense	103.2			124.4			(21.2)		(17.0)	%
Gross contribution	72.4			49.5			22.9		46.3	%
General and administrative expenses	22.9			21.0			1.9		9.0	%
Segment profit	$	49.5		$	28.5		$	21.0	73.7	%

Direct operating expense as a percentage of revenue	53.8		%	55.3		%

Gross contribution as a percentage of revenue	19.0		%	12.7		%

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


	Three Months Ended				Three 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	$	341.7	$	38.6	$	380.3	$	362.5	$	26.4	$	388.9
Expenses:
Direct operating expense	182.1		22.6		204.7		177.7		37.3		215.0
Distribution & marketing expense	84.9		18.3		103.2		99.6		24.8		124.4
Gross contribution	74.7		(2.3)		72.4		85.2		(35.7)		49.5
General and administrative expenses	16.6		6.3		22.9		14.8		6.2		21.0
Segment profit	$	58.1	$	(8.6)	$	49.5	$	70.4	$	(41.9)	$	28.5

Subscriber Data. The number of period-end service subscribers is a key metric which management uses to evaluate a non-ad supported subscription video service. We believe this key metric provides useful information to investors as a growing or decreasing subscriber base is a key indicator of the health of the overall business. Service subscribers may impact revenue differently depending on specific distribution agreements we have with our distributors which may include fixed fees, rates per basic video household or a rate per STARZ subscriber. The table below sets forth, for the periods presented, subscriptions to our Media Networks and STARZPLAY Arabia services.


	December 31,	December 31,
	2022	2021
	(Amounts in millions)
Starz Domestic
Linear Subscribers	8.3	9.9
OTT Subscribers	11.6	11.0
Total	19.9	20.9
LIONSGATE+
Linear Subscribers	1.9	1.8
OTT Subscribers(1)	13.3	6.7
Total	15.2	8.5
Total Starz
Linear Subscribers	10.2	11.7
OTT Subscribers(1)	24.9	17.7
Total Starz	35.1	29.4


STARZPLAY Arabia(2)	2.1	2.0
Total Domestic and International Subscribers(2)	37.2	31.4

Subscribers by Platform:
Linear Subscribers	10.2	11.7
OTT Subscribers(1)(3)	27.0	19.7
Total Global Subscribers	37.2	31.4

___________________

(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.

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

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

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Revenue. 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+.

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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)
Revenues
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	%
Expenses:
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
Less: 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.

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Revenues. 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
	December 31,
	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. dollar. 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

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

Other. 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)	%
U.S. 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.

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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
	December 31,
	2022		2021
	(Amounts in millions)
Share-based compensation expense by expense category
General and administrative expense	$	55.9	$	76.1
Restructuring and other(1)	2.1		—
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 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 $3.1 million, or 7.2%, primarily due to the expense associated with the earned distributions related to 3 Arts Entertainment.

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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

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(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). 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 nine months ended December 31, 2022 of $293.8 million, respectively.

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 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 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.

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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
	December 31,
	2022		2021
	(Amounts in millions)
Interest Expense
Cash Based:
Revolving credit facility	$	10.2	$	4.9
Term loans	41.9		25.0
Senior Notes	40.3		41.0
Other(1)	50.5		22.0
	142.9		92.9
Amortization of debt issuance costs and other non-cash interest(2)	20.1		37.1
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. 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).

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.

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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 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 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

Segment Presentation

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	Nine Months Ended
	December 31,				Increase (Decrease)
	2022		2021		Amount		Percent
	(Amounts in millions)
Revenue
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:

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	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)	%
Expenses:
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)	%

U.S. 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		%

Revenue. 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)		Total
					(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)

____________________

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

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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.

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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	%
Expenses:
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		%

Revenue. 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	%

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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:

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	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	%
Expenses:
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
Expenses:
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

Revenue. 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.

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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

Title

Premiere Date

Title

Premiere Date

First Quarter:

Gaslit

April 24, 2022

The Girlfriend Experience Season 3

May 2, 2021

P-Valley Season 2

June 3, 2022

Run the World Season 1

May 16, 2021

Becoming Elizabeth Season 1

June 12, 2022

Blindspotting Season 1

June 13, 2021

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:

Third Quarter:(1)

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.

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. dollar.

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+.

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.

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+.

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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.

Corporate Debt

Our corporate debt at December 31, 2022, 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 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.

◦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.

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

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

Film Related Obligations

We utilize our film related obligations to fund our film and television productions or licenses. Our film related obligations at December 31, 2022 include the following:

•Production Loans: Production loans represent individual and multi-title loans for the production of film and television programs that we produce or license. The majority of the Company's production loans have contractual repayment dates either at or near the expected completion or release dates, with the exception of certain loans containing repayment dates on a longer term basis. At December 31, 2022, there was $1,435.7 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.

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

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

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•Backlog Facility and Other:

◦Backlog Facility. In March 2022, as amended in August 2022, certain subsidiaries of the Company entered into a committed secured revolving credit facility (the "Backlog Facility") based on collateral consisting solely of certain of the Company's fixed fee or minimum guarantee contracts where cash will be received in the future. The maximum principal amount of the Backlog Facility is $175.0 million, subject to the amount of eligible collateral contributed to the facility. The Backlog Facility revolving period finishes on May 16, 2025, at which point cash collections from the underlying collateral is used to repay the facility. The facility maturity date is up to 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.

◦Other. 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"). 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.

Accounts Receivable Monetization and Governmental Incentives

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

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

See Note 18 to our unaudited condensed consolidated financial statements for our accounts receivable monetization programs and our tax credit receivables.

Uses of Cash

Our principal uses of cash in operations include the funding of film and television productions, film and programming rights acquisitions, the distribution and marketing of films and television programs, and general and administrative expenses. We also use cash for debt service (i.e. principal and interest payments) requirements, equity method or other equity investments, quarterly cash dividends when declared, the purchase of common shares under our share repurchase program, capital expenditures, and acquisitions of or investment in businesses.

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).

•3 Arts Entertainment. The noncontrolling interest holders have a right to put the noncontrolling interest of 3 Arts Entertainment, at fair value, exercisable beginning May 29, 2023, for a 60 day period. Beginning 30 days after the expiration of the exercise period for the put rights held by the noncontrolling interest holders, the Company has a right to call the noncontrolling interest of 3 Arts Entertainment, at fair value, for a 60 day period.

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•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.

We may from time to time seek to retire or purchase or refinance our outstanding debt through cash purchases, and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, refinancings, or otherwise. Such repurchases or exchanges or refinancings, if any, will depend on prevailing market conditions, our liquidity requirements, our assessment of opportunities to lower interest expense, contractual restrictions and other factors, and such repurchases or exchanges could result in a charge from the early extinguishment of debt. The amounts involved may be material.

Anticipated Cash Requirements. The nature of our business is such that significant initial expenditures are required to produce, acquire, distribute and market films and television programs, while revenues from these films and television programs are earned over an extended period of time after their completion or acquisition. We expect to continue to increase our investments in film and television programs and film and programming rights acquisitions. 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.

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. 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. 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

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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:


	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)
Corporate debt(1):
Revolving credit facility	$	—	$	—	$	—
Term Loan A	433.8		26.7		407.1
Term Loan B	834.8		12.5		822.3
5.500% Senior Notes	857.6		—		857.6
Film related and other obligations(2)	2,367.9		1,261.2		1,106.7
Operating lease obligations	203.8		41.6		162.2

	4,697.9		1,342.0		3,355.9
Contractual commitments by expected repayment date (off-balance sheet arrangements)
Film related obligations commitments(3)	845.0		320.4		524.6
Interest payments on corporate debt(4)	474.1		98.9		375.2
Other contractual obligations	442.1		115.4		326.7
	1,761.2		534.7		1,226.5
Total future repayment of debt and other commitments under contractual obligations (5)	$	6,459.1	$	1,876.7	$	4,582.4

___________________

(1)See Note 6 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.

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

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

(5)Not included in the amounts above are $357.1 million of redeemable noncontrolling interest, as future amounts and timing are subject to a number of uncertainties such that we are unable to make sufficiently reliable estimations of future payments. 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 9 to our unaudited condensed consolidated financial statements.

We are obligated to pay programming fees for all qualifying films that are released theatrically in the U.S. by Sony’s Columbia Pictures, Screen Gems, Sony Pictures Classics and TriStar labels through 2021. We do not license films produced by Sony Pictures Animation. The programming fees to be paid by us to Sony are based on the quantity and domestic theatrical exhibition receipts of qualifying films. We also have an exclusive multiyear post pay-one output licensing agreement with Universal for live-action films theatrically released in the U.S. starting January 1, 2022. The Universal agreement provides us with rights to exhibit these films immediately following their pay-one windows. We are unable to estimate the amounts to be paid under the Universal agreement for films that have not yet been released in theaters, however, such amounts are expected to be significant.

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For additional details of contingencies, see Note 16 to our unaudited condensed consolidated financial statements.

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.

Share Repurchase Plan. On February 2, 2016, our Board of Directors authorized to increase our previously announced share repurchase plan from $300 million to $468 million. To date, approximately $288.1 million of our common shares have been purchased under the plan, leaving approximately $179.9 million of authorized potential repurchases. The remaining $179.9 million of our common shares authorized under the plan may be purchased from time to time at our discretion, including quantity, timing and price thereof, and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal requirements. During the three months ended December 31, 2022, the Company did not repurchase any common shares.

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

Capacity to Pay Dividends. At December 31, 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.

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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. 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
	December 31,
	2022		2021		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. 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 above), and a use of cash in financing activities of $134.5 million reflecting the pay down of the financing

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component of the Terminated Swaps (inclusive of payments made between April 1, 2022 and the termination date amounting to $3.2 million) (see Financing Activities below). See Note 17 to our unaudited condensed consolidated financial statements.

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


	Nine Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Proceeds from the sale of Pantaya	$	—	$	123.6
Proceeds from the sale of equity method and other investments	46.3		—
Investment in equity method investees and other	(17.5)		(14.0)
Distributions from equity method investees	—		3.2
Acquisition of assets (film library and related assets)	—		(161.4)
Increase in loans receivable	—		(4.3)
Capital expenditures	(36.6)		(22.2)
Net Cash Flows Used In Investing Activities	$	(7.8)	$	(75.1)

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.

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


	Nine Months Ended
	December 31,
	2022		2021
	(Amounts in millions)
Debt - borrowings, net of debt issuance and redemption costs	$	1,238.0	$	2,138.4
Debt - repurchases and repayments	(1,548.3)		(2,375.4)
Net repayments and repurchases of debt	(310.3)		(237.0)

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


Other financing activities	(153.2)		(54.0)
Net Cash Flows Provided By Financing Activities	$	225.7	$	357.7

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.

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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). Other financing activities also includes tax withholding required on equity awards of $17.3 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).

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Currency and Interest Rate Risk Management

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates. Our exposure to interest rate risk results from the financial debt instruments that arise from transactions entered into during the normal course of business. As part of our overall risk management program, we evaluate and manage our exposure to changes in interest rates and currency exchange risks on an ongoing basis. Hedges and derivative financial instruments will continue to be used in the future in order to manage our interest rate and currency exposure. We have no intention of entering into financial derivative contracts, other than to hedge a specific financial risk. See Note 17 to our unaudited condensed consolidated financial statements for additional information on our financial instruments, and see Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” found in our Annual Report on Form 10-K filed with the SEC on May 26, 2022.

Certain of our borrowings, primarily borrowings under our Senior Credit Facilities, and our production and related loans, IP Credit Facility and other obligations are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. The applicable margin with respect to loans under the revolving credit facility and Term Loan A is a percentage per annum equal to a LIBOR rate plus 1.75%. The applicable margin with respect to loans under our Term Loan B is a percentage per annum equal to a LIBOR rate plus 2.25%. Assuming

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the revolving credit facility is drawn up to its maximum borrowing capacity of $1.25 billion, based on the applicable LIBOR in effect as of December 31, 2022, each quarter point change in interest rates would result in a $2.0 million change in annual net interest expense on the revolving credit facility, Term Loan A, Term Loan B and interest rate swap agreements.

The variable interest film related obligations (which includes our production loans, programming notes, Production Tax Credit Facility, IP Credit Facility, Backlog Facility and other) incur primarily LIBOR and SOFR-based interest, with applicable margins ranging from 1.15% to 3.50% per annum. A quarter point increase of the interest rates on the variable interest film related obligations would result in $3.7 million in additional costs capitalized to the respective film or television asset for production loans and programming notes (based on the outstanding principal amount of such loans), and a $1.6 million change in annual net interest expense (based on the outstanding principal amount of such loans, and assuming the Production Tax Credit Facility and Backlog Facility are utilized up to their maximum capacity of $235.0 million and $175.0 million, respectively).

At December 31, 2022, our 5.500% Senior Notes had an outstanding carrying value of $831.0 million, and an estimated fair value of $500.3 million. A 1% increase in the level of interest rates would decrease the fair value of the 5.500% Senior Notes by approximately $20.7 million, and a 1% decrease in the level of interest rates would increase the fair value of the 5.500% Senior Notes by approximately $26.0 million.

The following table presents information about our financial instruments that are sensitive to changes in interest rates. The table also presents the cash flows of the principal amounts of the financial instruments, or the cash flows associated with the notional amounts of interest rate derivative instruments, and related weighted-average interest rates by expected maturity or required principal payment dates and the fair value of the instrument as of December 31, 2022:


	Three Months Ending March 31,			Year Ending March 31,																	Fair Value
	2023			2024			2025			2026			2027			Thereafter			Total		December 31, 2022
							(Amounts in millions)
Variable Rates:
Revolving Credit Facility(1)	$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—
Average Interest Rate	—			—			—			—			—			—
Term Loan A(1)	5.6			28.9			41.2			44.5			313.6			—			433.8		412.1
Average Interest Rate	6.14		%	6.14		%	6.14		%	6.14		%	6.14		%	—
Term Loan B(1)	3.1			12.5			819.2			—			—			—			834.8		794.1
Average Interest Rate	6.64		%	6.64		%	6.64		%	—			—			—
Film related obligations(2)	117.5			1,037.1			631.2			84.9			30.4			205.9			2,107.0		2,107.0
Average Interest Rate	7.33		%	6.50		%	6.17		%	6.43		%	7.02		%	5.82		%
Fixed Rates:
5.500% Senior Notes	—			—			—			—			—			857.6			857.6		500.3
Interest Rate	—			—			—			—			—			5.50		%
Interest Rate Swaps(3)
Variable to fixed notional amount	—			—			1,700.0			—			—			—			1,700.0		54.8

____________________

(1)The effective interest rate in the table above is before the impact of interest rate swaps.

(2)Represents amounts outstanding under film related obligations (i.e., production loans, Production Tax Credit Facility, programming notes, Backlog Facility and other, and IP Credit Facility), actual amounts outstanding and the timing of expected future repayments may vary in the future (see Note 7 to our unaudited condensed consolidated financial statements for further information).

(3)Represents interest rate swap agreements on certain of our LIBOR-based floating-rate debt with fixed rates paid ranging from 2.723% to 2.915% with maturities in March 2025. See Note 17 to our unaudited condensed consolidated financial statements.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2022, the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective as of December 31, 2022.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, the Company, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, has evaluated whether any changes occurred to the Company’s internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, such control. Based on that evaluation, there has been no such change during the quarter ended December 31, 2022.

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PART II

Item 1. Legal Proceedings.

From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business. Due to the inherent difficulty of predicting the outcome of litigation and claims, the Company often cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, if any, related to each pending matter may be.

For a discussion of certain claims and legal proceedings, see Note 16 - Contingencies to our unaudited condensed consolidated financial statements, which discussion is incorporated by reference into this Part II, Item 1, Legal Proceedings.

Item 1A. Risk Factors.

There were no material changes to the risk factors previously reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Securities

On May 31, 2007, our Board of Directors authorized the repurchase of up to $50 million of our common shares. On each of May 29, 2008 and November 6, 2008, our Board of Directors authorized additional repurchases up to an additional $50 million of our common shares. On December 17, 2013, our Board of Directors authorized the Company to increase its stock repurchase plan to $300 million and on February 2, 2016, our Board of Directors authorized the Company to further increase its stock repurchase plan to $468 million. To date, approximately $288.1 million (or 16,608,796) of our common shares have been purchased, leaving approximately $179.9 million of authorized potential repurchases. The remaining $179.9 million of our common shares may be purchased from time to time at the Company’s discretion, including quantity, timing and price thereof, and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal requirements. The share repurchase program has no expiration date.

No common shares were purchased by us during the three months ended December 31, 2022.

Additionally, during the three months ended December 31, 2022, 5,643 Class A voting shares and 177,516 Class B non-voting shares were withheld upon the vesting of restricted share units and restricted awards, share issuances and stock option exercises to satisfy minimum statutory federal, state and local tax withholding obligations.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit Number

Exhibit Description

Incorporated by Reference

Form

Exhibit

Filing Date/
Period End Date

3.1

Articles

8-K

3.1

12/8/2016

3.2

Notice of Articles

10-K

3.2

5/28/2021

31.1x

Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2x

Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1xx

Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002

101x

The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104x

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2022 (formatted as Inline XBRL and contained in Exhibit 101).

__________________________



x			Filed herewith
xx			Furnished herewith and not deemed to be "filed" for purposes of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act, or the Exchange Act, irrespective of any general incorporation language contained in such filing

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LIONS GATE ENTERTAINMENT CORP.

By:

/s/ JAMES W. BARGE

Name:

James W. Barge

DATE: February 9, 2023

Title:

Duly Authorized Officer and Chief Financial Officer