LIONSGATE REPORTS RESULTS FOR THIRD QUARTER FISCAL 2023

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS

December 31,
2022

March 31,
2022

(Unaudited, 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 interest

357.1

321.2

Commitments and contingencies

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

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, 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

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, amounts in millions)

Operating Activities:

Net income (loss)

$             15.2

$           (48.9)

$      (1,920.8)

$           (97.4)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

46.3

46.3

133.9

134.1

Amortization of films and television programs and program rights

385.1

388.6

1,284.4

1,118.7

Amortization of debt financing costs and other non-cash interest

6.3

12.9

20.1

37.1

Non-cash share-based compensation

24.8

22.6

59.8

77.5

Other amortization

14.6

21.0

55.8

71.5

Goodwill impairments

—

—

1,475.0

—

Content and other impairments

80.8

—

299.7

—

(Gain) loss on extinguishment of debt

(38.2)

1.1

(40.3)

28.2

Equity interests (income) loss

—

2.5

(0.8)

1.4

(Gain) loss on investments

(43.4)

0.2

(42.1)

(1.2)

Deferred income taxes

(0.2)

0.9

(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

(35.1)

(19.0)

(74.5)

(153.2)

Investment in films and television programs and program rights, net

(486.2)

(585.7)

(1,573.4)

(1,735.4)

Accounts payable and accrued liabilities

(36.1)

27.8

(46.0)

(17.4)

Participations and residuals

89.3

(61.3)

84.3

(56.3)

Program rights and other film obligations

(30.1)

61.0

(18.1)

25.0

Deferred revenue

18.3

(27.3)

(13.2)

75.0

Net Cash Flows Provided By (Used In) Operating Activities

11.4

(157.3)

(128.0)

(489.8)

Investing Activities:

Proceeds from the sale of Pantaya

—

—

—

123.6

Proceeds from the sale of equity method and other investments

43.4

—

46.3

—

Investment in equity method investees and other

—

(2.0)

(17.5)

(14.0)

Distributions from equity method investees

—

0.6

—

3.2

Acquisition of assets (film library and related assets)

—

—

—

(161.4)

Increase in loans receivable

—

(4.3)

—

(4.3)

Capital expenditures

(15.2)

(7.6)

(36.6)

(22.2)

Net Cash Flows Provided By (Used In) Investing Activities

28.2

(13.3)

(7.8)

(75.1)

Financing Activities:

Debt - borrowings, net of debt issuance and redemption costs

247.0

191.3

1,238.0

2,138.4

Debt - repurchases and repayments

(337.3)

(199.8)

(1,548.3)

(2,375.4)

Film related and other obligations - borrowings

246.0

178.3

1,384.0

954.0

Film related and other obligations - repayments

(322.6)

(118.7)

(694.8)

(305.3)

Settlement of financing component of interest rate swaps

—

(7.2)

(134.5)

(21.5)

Distributions to noncontrolling interest

(2.3)

(1.1)

(4.8)

(1.2)

Exercise of stock options

—

0.6

3.4

3.4

Tax withholding required on equity awards

(1.1)

(1.6)

(17.3)

(34.7)

Net Cash Flows Provided By (Used In) Financing Activities

(170.3)

41.8

225.7

357.7

Net Change In Cash, Cash Equivalents and Restricted Cash

(130.7)

(128.8)

89.9

(207.2)

Foreign Exchange Effects on Cash, Cash Equivalents and Restricted Cash

2.3

0.3

(3.5)

(2.2)

Cash, Cash Equivalents and Restricted Cash - Beginning Of Period

599.4

447.8

384.6

528.7

Cash, Cash Equivalents and Restricted Cash - End Of Period

$           471.0

$           319.3

$           471.0

$           319.3

LIONS GATE ENTERTAINMENT CORP.

SEGMENT INFORMATION (Continued)

Segment information is presented in the table below:

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, 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

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

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 OIBDA⁽¹⁾

$              167.8

$                91.6

$              220.1

$              319.6

(1)

See "Use of Non-GAAP Financial Measures" for the definition of Adjusted OIBDA and reconciliation to the most directly comparable GAAP financial measure.

LIONS GATE ENTERTAINMENT CORP.

SEGMENT INFORMATION (Continued)

The following table sets forth segment information by product line for the Media Networks segment 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

(Unaudited, amounts in millions)

Media Networks revenue:

Starz Networks

$              341.7

$              362.5

$          1,048.7

$          1,079.2

LIONSGATE+

38.6

26.4

108.8

76.7

$              380.3

$              388.9

$          1,157.5

$          1,155.9

Media Networks gross contribution:

Starz Networks

$                74.7

$                85.2

$              186.1

$              289.1

LIONSGATE+

(2.3)

(35.7)

(82.1)

(102.0)

$                72.4

$                49.5

$              104.0

$              187.1

Media Networks general and administration:

Starz Networks

$                16.6

$                14.8

$                50.7

$                47.4

LIONSGATE+

6.3

6.2

19.8

17.6

$                22.9

$                21.0

$                70.5

$                65.0

Media Networks segment profit (loss):

Starz Networks

$                58.1

$                70.4

$              135.4

$              241.7

LIONSGATE+

(8.6)

(41.9)

(101.9)

(119.6)

$                49.5

$                28.5

$                33.5

$              122.1

LIONS GATE ENTERTAINMENT CORP.

SEGMENT INFORMATION (Continued)

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.

As of

As of

6/30/21

9/30/21

12/31/21

3/31/22

6/30/22

9/30/22

12/31/22

(Amounts in millions)

Starz Domestic

Linear Subscribers

10.4

10.2

9.9

9.5

9.2

8.7

8.3

OTT Subscribers

9.7

10.4

11.0

11.5

12.2

12.3

11.6

Total

20.1

20.6

20.9

21.0

21.4

21.0

19.9

LIONSGATE+

Linear Subscribers

1.8

1.8

1.8

1.8

1.8

1.8

1.9

OTT Subscribers⁽¹⁾

5.2

5.7

6.7

11.0

12.2

13.0

13.3

Total

7.0

7.5

8.5

12.8

14.0

14.8

15.2

Total Starz

Linear Subscribers

12.2

12.0

11.7

11.3

11.0

10.5

10.2

OTT Subscribers⁽¹⁾

14.9

16.1

17.7

22.5

24.4

25.3

24.9

Total Starz

27.1

28.1

29.4

33.8

35.4

35.8

35.1

STARZPLAY Arabia⁽²⁾

1.8

1.9

2.0

2.0

1.9

2.0

2.1

Total Domestic and International Subscribers

28.9

30.0

31.4

35.8

37.3

37.8

37.2

Subscribers by Platform:

Linear Subscribers

12.2

12.0

11.7

11.3

11.0

10.5

10.2

OTT Subscribers⁽¹⁾⁽³⁾

16.7

18.0

19.7

24.5

26.3

27.3

27.0

Total Global Subscribers

28.9

30.0

31.4

35.8

37.3

37.8

37.2

     (1)   Includes OTT subscribers for the international territories being exited as follows:

As of

As of

6/30/21

9/30/21

12/31/21

3/31/22

6/30/22

9/30/22

12/31/22

(Amounts in millions)

OTT Subscribers

2.7

2.9

3.5

7.1

8.0

8.4

8.5

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

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

LIONS GATE ENTERTAINMENT CORP.

RECONCILIATION OF OPERATING INCOME (LOSS)

TO ADJUSTED OIBDA

The following table reconciles the GAAP measure, operating income (loss) to the non-GAAP measure, Adjusted OIBDA:

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, amounts in millions)

Operating income (loss)

$                  7.8

$                  9.3

$        (1,808.1)

$                59.4

Goodwill impairment⁽¹⁾

—

—

1,475.0

—

Adjusted depreciation and amortization⁽²⁾

9.8

11.7

29.5

32.7

Restructuring and other⁽³⁾

75.3

0.5

316.5

7.2

COVID-19 related charges (benefit)⁽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

Adjusted OIBDA

$              167.8

$                91.6

$              220.1

$              319.6

(1)

For the 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), and resulted in content impairment and severance charges included in restructuring and other as further discussed below. 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, the market price of the Company's common shares had declined significantly through September 30, 2022, Accordingly, 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.

(2)

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

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, 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

(3)   Restructuring and other includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when

        applicable, as shown in the table below:

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, amounts in millions)

Restructuring and other:

Content and other impairments^(a)

$                80.8

$                   —

$              299.7

$                   —

Severance^(b)

Cash

2.4

—

14.8

3.8

Accelerated vesting on equity awards

1.5

—

2.1

—

Total severance costs

3.9

—

16.9

3.8

COVID-19 related charges included in restructuring and other^(c)

—

0.2

0.1

0.9

Transaction and other costs (benefits)^(d)

(9.4)

0.3

(0.2)

2.5

$                75.3

$                  0.5

$              316.5

$                  7.2

(a)

Media Networks Restructuring:  For the second quarter ended September 30, 2022, as discussed above, the Company began a plan to restructure its LIONSGATE+ business (formerly STARZPLAY International). 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.   

(b)

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

(c)

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.

(d)

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.

(4)

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

(Unaudited, amounts in millions)

COVID-19 related charges (benefit) included in:

Direct operating expense^(a)

$                (1.8)

$                (2.8)

$                (8.8)

$                (2.3)

Distribution and marketing expense

—

—

—

0.3

$                (1.8)

$                (2.8)

$                (8.8)

$                (2.0)

(a)

Amounts reflected in direct operating expense include incremental costs associated with the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs, net of insurance recoveries. In the three and nine months ended December 31, 2022 and 2021, insurance recoveries exceeded the incremental costs expensed in the periods, 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.

(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.

(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

(Unaudited, amounts in millions)

Total share-based compensation expense

$                24.8

$                22.6

$                59.8

$                77.5

Less: Amount included in restructuring and other^(a)

(1.5)

—

(2.1)

—

Adjusted share-based compensation

$                23.3

$                22.6

$                57.7

$                77.5

(a)

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

(Unaudited, 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

LIONS GATE ENTERTAINMENT CORP.

RECONCILIATION OF OPERATING INCOME (LOSS)

TO OPERATING INCOME (LOSS) BEFORE GOODWILL IMPAIRMENT AND MEDIA NETWORKS
RESTRUCTURING CHARGES

The following table reconciles the GAAP measure, operating income (loss) to the non-GAAP measure,
operating income (loss) before goodwill impairment and Media Networks restructuring charges:

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, amounts in millions)

Operating income (loss)

$                  7.8

$                  9.3

$        (1,808.1)

$                59.4

Goodwill impairment

—

—

1,475.0

—

Media Networks restructuring charges⁽¹⁾

80.8

—

299.7

—

Operating income (loss) before goodwill impairment
and Media Networks restructuring charges

$                88.6

$                  9.3

$              (33.4)

$                59.4

(1)

  As a result of the Media Networks restructuring initiatives, the Company recorded content impairment charges associated with impairment of programming related to the international 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. Amounts in the nine months ended December 31, 2022 also include $5.9 million for severance charges related to the restructuring of the Company's LIONSGATE+ (formerly STARZPLAY International) business. These charges are included in the restructuring and other line item on the consolidated statement of operations.

LIONS GATE ENTERTAINMENT CORP.

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS TO ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO LIONS GATE ENTERTAINMENT CORP. SHAREHOLDERS, AND BASIC AND DILUTED EPS TO ADJUSTED BASIC AND DILUTED EPS

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, amounts in millions, except per share amounts)

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

$                16.6

$              (45.6)

$        (1,913.5)

$              (83.5)

Adjusted share-based compensation expense

23.3

22.6

57.7

77.5

Goodwill impairment

—

—

1,475.0

—

Restructuring and other

75.3

0.5

316.5

7.2

COVID-19 related charges (benefit)

(1.8)

(2.8)

(8.8)

(2.0)

Content charges

—

—

7.2

—

Purchase accounting and related adjustments⁽¹⁾

53.4

50.3

151.1

144.7

(Gain) loss on extinguishment of debt

(38.2)

1.1

(40.3)

28.2

Net gain (loss) on investments and other and insurance recoveries on prior shareholder litigation (2021)

(43.4)

0.2

(42.1)

(26.7)

Tax impact of above items⁽²⁾

(12.5)

(14.1)

(95.5)

(45.9)

Deferred tax valuation allowance⁽³⁾

(4.4)

1.0

97.0

5.8

Noncontrolling interest impact of above items

(9.0)

(8.4)

(24.7)

(22.9)

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

$                59.3

$                  4.8

$              (20.4)

$                82.4

Reported Basic EPS

$                0.07

$              (0.20)

$              (8.41)

$              (0.37)

Impact of adjustments on basic earnings per share

0.19

0.22

8.32

0.74

Adjusted Basic EPS

$                0.26

$                0.02

$              (0.09)

$                0.37

Reported Diluted EPS

$                0.07

$              (0.20)

$              (8.41)

$              (0.37)

Impact of adjustments on diluted earnings per share

0.19

0.22

8.32

0.73

Adjusted Diluted EPS

$                0.26

$                0.02

$              (0.09)

$                0.36

Adjusted weighted average number of common shares outstanding:

Basic

228.8

225.0

227.4

223.7

Diluted

230.1

229.5

227.4

229.1

(1)

Represents the amounts included in Adjusted OIBDA net of interest income on the amortization of non-cash fair value adjustments to finance lease obligations acquired in the acquisition of Starz.

(2)

Represents the tax impact of the adjustments to net income attributable to Lions Gate Entertainment Corp. shareholders, calculated using the blended statutory tax rate applicable to each adjustment.

(3)

Represents an adjustment for the net (benefit) charge from a net (decrease) increase in the valuation allowance for certain of the Company's deferred tax assets.

LIONS GATE ENTERTAINMENT CORP.

RECONCILIATION OF NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES

TO ADJUSTED FREE CASH FLOW

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

(Unaudited, amounts in millions)

Net Cash Flows Provided By (Used In) Operating Activities⁽¹⁾

$                11.4

$            (157.3)

$            (128.0)

$            (489.8)

Capital expenditures

(15.2)

(7.6)

(36.6)

(22.2)

Net borrowings under and (repayment) of production and related loans:

Production loans and programming notes

22.8

133.8

423.5

426.0

Production tax credit facility

(4.0)

8.1

6.6

91.4

Insurance recoveries on prior shareholder litigation

—

2.3

—

(22.7)

Proceeds from the termination of interest rate swaps⁽²⁾

—

—

(188.7)

—

Payments on impaired content in territories to be exited⁽³⁾

14.9

—

14.9

—

Adjusted Free Cash Flow

$                29.9

$              (20.7)

$                91.7

$              (17.3)

(1)

Cash flows provided by (used in) operating activities for the three and nine months ended December 31, 2022 includes a net benefit of approximately $87.9 million and $77.0 million respectively, from the monetization of trade accounts receivable programs (three and nine months ended December 31, 2021 - net use of cash of approximately ($79.6) million and ($125.8) million, respectively).

(2)

During the nine months ended December 31, 2022, the Company terminated certain interest rate swaps (a portion of which were considered hybrid instruments with a financing component and an embedded at-market derivative) and in exchange, 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 terminated 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). Since the termination of the interest rate swaps was an unusual event, the Company is excluding the $188.7 million reflected in cash provided by operating activities from its adjusted free cash flow. The Company continues to have $1.7 billion notional amount of interest rate swaps as a cash flow hedge of its variable interest rate debt.

(3)

Represents cash payments made on impaired content in territories to be exited under the LIONSGATE+ international restructuring.