Third Quarter
Revenue was $975.1 Million; Operating Loss was
$43.5 Million; Cash Flows
Provided by Operating Activities was $71.1
Million
Net Loss Attributable to Lionsgate
Shareholders was $106.6
Million or $0.45 Diluted Net
Loss Per Share
Adjusted Net Income Attributable to Lionsgate
Shareholders was $65.0 Million or
$0.27 Adjusted Diluted Earnings Per
Share
Adjusted OIBDA was $150.9
Million and Adjusted Free Cash Flow was $63.9
Million
STARZ Gains 700K
North American (U.S. & Canada)
OTT Subscribers Sequentially in the Quarter and Adds 340K Net Overall North American Subscribers While
Maintaining Mid-Teens Profit Margins
SANTA MONICA, Calif. and
VANCOUVER, BC, Feb. 8, 2024
/PRNewswire/ -- Lionsgate (NYSE: LGF.A, LGF.B) today reported
third quarter (quarter ended December 31,
2023) revenue of $975.1
million, operating loss of $43.5
million, and net loss attributable to Lionsgate shareholders
of $106.6 million or $0.45 diluted net loss per share on 235.1 million
diluted weighted average common shares outstanding. Adjusted
net income attributable to Lionsgate shareholders in the quarter
was $65.0 million or $0.27 adjusted diluted net earnings per share on
236.7 million diluted weighted average common shares
outstanding. Adjusted OIBDA was $150.9
million in the quarter.
"We're pleased to report another strong financial quarter in
which the performance of our diversified businesses gives us
confidence that we can continue to deliver the growth our investors
expect," said Lionsgate CEO Jon
Feltheimer. "The investments we made in the quarter to
acquire eOne and expand our partnership with 3 Arts, along with our
plan to launch Lionsgate Studios as an independent, publicly-traded
pure play content company, will continue to enhance the strength of
our businesses moving forward."
Trailing 12-month revenue from Lionsgate's film and
television library was $784
million. Though the Q3 fiscal 2023 licensing
of Schitt's Creek is no longer included in
trailing 12-month library revenue, library revenue grew
year-over-year excluding Schitt's Creek and
grew sequentially in the quarter as well. Lionsgate
ended the quarter with $283 million
in unrestricted cash. Studio backlog from the Motion Picture
and Television Production segments was $1.6
billion at December 31,
2023.
Third Quarter Results
The Studio Business, comprised of the Motion Picture
and Television Production segments, reported revenue of
$691.6 million, a decrease of 23%
from $894.2 million in the prior year
quarter. Segment profit of $108.5
million decreased by 27% from $148.0
million in the prior year quarter.
Motion Picture segment revenue increased by 53% to
$443.2 million compared to the prior
year quarter, and segment profit increased by 31% to $100.4 million compared to the prior year
quarter. Motion Picture revenue growth was driven by the
strong worldwide box office performance
of The Hunger Games: The Ballad of
Songbirds & Snakes and Saw
X, and segment profit was driven by the lift the
current Hunger Games release provided to the
library performance of previous Hunger
Games titles, the ancillary market performance
of John Wick: Chapter
Four and Saw X, and the continued
strength of multiplatform releases.
Television Production segment revenue and segment
profit decreased to $248.4
million and $8.1 million,
respectively, compared to segment revenue of $605.4 million and segment profit of $71.5 million in the prior year quarter.
The revenue and segment profit decline were driven by the strikes'
impact on episodic deliveries and our talent management business as
well as the comparison with the fiscal third quarter 2023's
licensing of Schitt's Creek.
Media Networks North American OTT subscribers grew
by 700K sequentially in the quarter and
overall North American net subscribers grew by
340K. Media Networks segment
revenue was up 10% year-over-year to $417.2 million
compared to $380.3 million in the
prior year quarter. Segment revenue was driven by growth in
domestic streaming revenue and LIONSGATE+ revenue, partially offset
by lower domestic linear revenue. Segment profit grew 73% to
$85.5 million compared to
$49.5 million in the prior year
quarter, driven by growth in domestic segment profit as well as
accelerated revenue recognition associated with
LIONSGATE+'s exit of Latin America. Domestic revenue
grew on a sequential basis for the second quarter in a row.
Lionsgate senior management will hold its analyst and investor
conference call to discuss its fiscal 2024 third quarter results
today, February 8th, at
5:00 PM ET/2:00 PM PT.
Interested parties may listen to the live webcast by visiting the
events page on the Lionsgate Investor
Relations website or via the
following link. A full replay will become available this
evening by clicking the same link.
About Lionsgate
Lionsgate (NYSE: LGF.A, LGF.B) 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 more than 20,000-title and
a valuable collection of iconic film and television franchises. A
digital age company driven by its entrepreneurial culture and
commitment to innovation, the Lionsgate brand is synonymous with
bold, original, relatable entertainment for audiences
worldwide.
For further information, investors should contact:
Nilay Shah
310-255-3651
nshah@lionsgate.com
For media inquiries, please contact:
Peter D. Wilkes
310-255-3726
pwilkes@lionsgate.com
The matters discussed in this press release include
forward-looking statements, including those regarding the
performance of future fiscal years. Such statements are
subject to a number of risks and uncertainties. Actual results in
the future could differ materially and adversely from those
described in the forward-looking statements as a result of various
important factors, including, but not limited to:
changes in our business strategy including the plan to potentially
spin-off our studio business; possible delays in closing, or the
inability to close, the Business Combination Agreement entered into
on December 22, 2023; 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; the impact of
global pandemics on our business; weakness in the
global economy and financial markets, including a recession and
past and future bank failures; wars, terrorism and multiple
international conflicts that could cause significant economic
disruption and political and social instability; labor disruptions
and strikes; and the other risk factors set forth in
Lionsgate's Form 10-Q filed with the Securities and Exchange
Commission on February 8, 2024.
The Company undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances.
Additional Information Available on Website
The
information in this press release should be read in conjunction
with the financial statements and footnotes contained in the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 2023, which has been
posted on the Company's website
at http://investors.lionsgate.com/financial-reports/sec-filings.
Trending schedules containing certain financial information
will also be available
at https://investors.lionsgate.com/financial-reports/quarterly-results/2024.
|
LIONS GATE
ENTERTAINMENT CORP.
CONSOLIDATED BALANCE
SHEETS
|
|
|
December 31,
2023
|
|
March 31,
2023
|
|
(Unaudited, amounts
in millions)
|
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
$
283.0
|
|
$
272.1
|
|
Accounts receivable,
net
|
810.2
|
|
582.1
|
|
Other current
assets
|
432.4
|
|
264.2
|
|
Total current
assets
|
1,525.6
|
|
1,118.4
|
|
Investment in films and
television programs and program rights, net
|
2,772.7
|
|
2,947.9
|
|
Property and equipment,
net
|
95.1
|
|
89.5
|
|
Investments
|
71.5
|
|
64.7
|
|
Intangible assets,
net
|
1,028.5
|
|
1,300.1
|
|
Goodwill
|
801.4
|
|
1,289.5
|
|
Other assets
|
859.9
|
|
616.1
|
|
Total
assets
|
$
7,154.7
|
|
$
7,426.2
|
|
LIABILITIES
|
|
|
|
|
Accounts
payable
|
$
306.7
|
|
$
368.1
|
|
Content related
payables
|
282.2
|
|
184.1
|
|
Other accrued
liabilities
|
324.8
|
|
273.4
|
|
Participations and
residuals
|
622.7
|
|
549.3
|
|
Film related
obligations
|
1,318.6
|
|
1,007.2
|
|
Debt - short term
portion
|
50.3
|
|
41.4
|
|
Deferred
revenue
|
266.5
|
|
147.2
|
|
Total current
liabilities
|
3,171.8
|
|
2,570.7
|
|
Debt
|
2,238.2
|
|
1,978.2
|
|
Participations and
residuals
|
472.0
|
|
329.6
|
|
Film related
obligations
|
554.4
|
|
1,016.4
|
|
Other
liabilities
|
532.9
|
|
317.9
|
|
Deferred
revenue
|
81.5
|
|
52.0
|
|
Deferred tax
liabilities
|
18.5
|
|
31.8
|
|
Total
liabilities
|
7,069.3
|
|
6,296.6
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interest
|
409.1
|
|
343.6
|
|
|
|
|
|
EQUITY
(DEFICIT)
|
|
|
|
|
Class A voting common
shares, no par value, 500.0 shares authorized, 83.6 shares
issued
(March 31, 2023 - 83.5
shares issued)
|
673.4
|
|
672.3
|
|
Class B non-voting
common shares, no par value, 500.0 shares authorized, 151.5
shares
issued (March 31, 2023
- 145.9 shares issued)
|
2,459.3
|
|
2,430.9
|
|
Accumulated
deficit
|
(3,574.6)
|
|
(2,439.6)
|
|
Accumulated other
comprehensive income
|
116.4
|
|
120.9
|
|
Total Lions Gate
Entertainment Corp. shareholders' equity (deficit)
|
(325.5)
|
|
784.5
|
|
Noncontrolling
interests
|
1.8
|
|
1.5
|
|
Total equity
(deficit)
|
(323.7)
|
|
786.0
|
|
Total liabilities,
redeemable noncontrolling interest and equity (deficit)
|
$
7,154.7
|
|
$
7,426.2
|
|
LIONS GATE
ENTERTAINMENT CORP.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions, except per share amounts)
|
|
Revenues
|
$
975.1
|
|
$
1,000.1
|
|
$
2,899.1
|
|
$
2,769.1
|
|
Expenses
|
|
|
|
|
|
|
|
|
Direct
operating
|
510.8
|
|
584.7
|
|
1,549.1
|
|
1,744.7
|
|
Distribution and
marketing
|
220.0
|
|
171.0
|
|
686.0
|
|
567.1
|
|
General and
administration
|
121.0
|
|
115.0
|
|
368.1
|
|
340.0
|
|
Depreciation and
amortization
|
49.9
|
|
46.3
|
|
138.9
|
|
133.9
|
|
Restructuring and
other
|
116.9
|
|
75.3
|
|
371.0
|
|
316.5
|
|
Goodwill and
intangible asset impairment
|
—
|
|
—
|
|
663.9
|
|
1,475.0
|
|
Total
expenses
|
1,018.6
|
|
992.3
|
|
3,777.0
|
|
4,577.2
|
|
Operating income
(loss)
|
(43.5)
|
|
7.8
|
|
(877.9)
|
|
(1,808.1)
|
|
Interest
expense
|
(67.1)
|
|
(59.6)
|
|
(192.9)
|
|
(163.0)
|
|
Interest and other
income
|
1.8
|
|
1.7
|
|
6.5
|
|
4.8
|
|
Other
expense
|
(2.5)
|
|
(10.7)
|
|
(19.6)
|
|
(21.1)
|
|
Gain on extinguishment
of debt
|
—
|
|
38.2
|
|
21.2
|
|
40.3
|
|
Gain on investments,
net
|
4.4
|
|
43.4
|
|
2.7
|
|
42.1
|
|
Equity interests
income
|
4.2
|
|
—
|
|
5.7
|
|
0.8
|
|
Income (loss) before
income taxes
|
(102.7)
|
|
20.8
|
|
(1,054.3)
|
|
(1,904.2)
|
|
Income tax
provision
|
(4.7)
|
|
(5.6)
|
|
(12.5)
|
|
(16.6)
|
|
Net income
(loss)
|
(107.4)
|
|
15.2
|
|
(1,066.8)
|
|
(1,920.8)
|
|
Less: Net loss
attributable to noncontrolling interests
|
0.8
|
|
1.4
|
|
3.3
|
|
7.3
|
|
Net income (loss)
attributable to Lions Gate Entertainment Corp.
shareholders
|
$
(106.6)
|
|
$
16.6
|
|
$
(1,063.5)
|
|
$
(1,913.5)
|
|
|
|
|
|
|
|
|
|
Per share
information attributable to Lions Gate Entertainment Corp.
shareholders:
|
|
|
|
|
|
|
|
|
Basic net income
(loss) per common share
|
$
(0.45)
|
|
$
0.07
|
|
$
(4.56)
|
|
$
(8.41)
|
|
Diluted net income
(loss) per common share
|
$
(0.45)
|
|
$
0.07
|
|
$
(4.56)
|
|
$
(8.41)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
235.1
|
|
228.8
|
|
233.1
|
|
227.4
|
|
Diluted
|
235.1
|
|
230.1
|
|
233.1
|
|
227.4
|
|
LIONS GATE
ENTERTAINMENT CORP.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(107.4)
|
|
$
15.2
|
|
$ (1,066.8)
|
|
$ (1,920.8)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
49.9
|
|
46.3
|
|
138.9
|
|
133.9
|
|
Amortization of films
and television programs and program rights
|
371.2
|
|
385.1
|
|
1,138.7
|
|
1,284.4
|
|
Amortization of debt
financing costs and other non-cash interest
|
7.5
|
|
6.3
|
|
22.0
|
|
20.1
|
|
Non-cash share-based
compensation
|
31.7
|
|
24.8
|
|
75.3
|
|
59.8
|
|
Other
amortization
|
11.2
|
|
14.6
|
|
35.0
|
|
55.8
|
|
Goodwill and
intangible asset impairment
|
—
|
|
—
|
|
663.9
|
|
1,475.0
|
|
Content and other
impairments
|
77.8
|
|
80.8
|
|
317.4
|
|
299.7
|
|
Gain on extinguishment
of debt
|
—
|
|
(38.2)
|
|
(21.2)
|
|
(40.3)
|
|
Equity interests
income
|
(4.2)
|
|
—
|
|
(5.7)
|
|
(0.8)
|
|
Gain on investments,
net
|
(4.4)
|
|
(43.4)
|
|
(2.7)
|
|
(42.1)
|
|
Deferred income
taxes
|
(4.5)
|
|
(0.2)
|
|
(13.4)
|
|
(0.5)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Proceeds from the
termination of interest rate swaps
|
—
|
|
—
|
|
—
|
|
188.7
|
|
Accounts receivable,
net
|
(74.8)
|
|
(36.3)
|
|
57.4
|
|
(26.3)
|
|
Investment in films
and television programs and program rights, net
|
(259.7)
|
|
(486.2)
|
|
(926.2)
|
|
(1,573.4)
|
|
Other
assets
|
(5.7)
|
|
1.2
|
|
(24.3)
|
|
(48.2)
|
|
Accounts payable and
accrued liabilities
|
(1.4)
|
|
(36.1)
|
|
(93.4)
|
|
(46.0)
|
|
Participations and
residuals
|
(26.5)
|
|
89.3
|
|
10.4
|
|
84.3
|
|
Content related
payables
|
60.9
|
|
(30.1)
|
|
57.3
|
|
(18.1)
|
|
Deferred
revenue
|
(50.5)
|
|
18.3
|
|
38.8
|
|
(13.2)
|
|
Net Cash Flows
Provided By (Used In) Operating Activities
|
71.1
|
|
11.4
|
|
401.4
|
|
(128.0)
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
Purchase of eOne, net
of cash acquired
|
(331.1)
|
|
—
|
|
(331.1)
|
|
—
|
|
Proceeds from the sale
of equity method and other investments
|
5.0
|
|
43.4
|
|
5.2
|
|
46.3
|
|
Investment in equity
method investees and other
|
—
|
|
—
|
|
(11.3)
|
|
(17.5)
|
|
Increase in loans
receivable
|
(1.5)
|
|
—
|
|
(3.6)
|
|
—
|
|
Capital
expenditures
|
(6.4)
|
|
(15.2)
|
|
(24.7)
|
|
(36.6)
|
|
Net Cash Flows
Provided By (Used In) Investing Activities
|
(334.0)
|
|
28.2
|
|
(365.5)
|
|
(7.8)
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Debt -
borrowings
|
1,186.0
|
|
247.0
|
|
2,270.5
|
|
1,238.0
|
|
Debt - repurchases and
repayments
|
(821.9)
|
|
(337.3)
|
|
(1,987.4)
|
|
(1,548.3)
|
|
Film related
obligations - borrowings
|
318.9
|
|
246.0
|
|
1,262.6
|
|
1,384.0
|
|
Film related
obligations - repayments
|
(357.4)
|
|
(322.6)
|
|
(1,530.3)
|
|
(694.8)
|
|
Settlement of financing
component of interest rate swaps
|
—
|
|
—
|
|
—
|
|
(134.5)
|
|
Purchase of
noncontrolling interest
|
—
|
|
—
|
|
(0.6)
|
|
—
|
|
Distributions to
noncontrolling interest
|
(1.1)
|
|
(2.3)
|
|
(1.7)
|
|
(4.8)
|
|
Exercise of stock
options
|
0.2
|
|
—
|
|
0.5
|
|
3.4
|
|
Tax withholding
required on equity awards
|
(0.3)
|
|
(1.1)
|
|
(31.0)
|
|
(17.3)
|
|
Net Cash Flows
Provided By (Used In) Financing Activities
|
324.4
|
|
(170.3)
|
|
(17.4)
|
|
225.7
|
|
Net Change In Cash,
Cash Equivalents and Restricted Cash
|
61.5
|
|
(130.7)
|
|
18.5
|
|
89.9
|
|
Foreign Exchange
Effects on Cash, Cash Equivalents and Restricted
Cash
|
2.5
|
|
2.3
|
|
1.7
|
|
(3.5)
|
|
Cash, Cash
Equivalents and Restricted Cash - Beginning Of
Period
|
269.2
|
|
599.4
|
|
313.0
|
|
384.6
|
|
Cash, Cash
Equivalents and Restricted Cash - End Of Period
|
$
333.2
|
|
$
471.0
|
|
$
333.2
|
|
$
471.0
|
LIONS GATE ENTERTAINMENT CORP.
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, on a
direct-to-consumer basis through the Starz App, and through U.S.
multichannel video programming distributors ("MVPDs") including
cable operators, satellite television providers and
telecommunication companies (collectively, "Distributors") (in the
aggregate, the "Starz Domestic Platform"); and (ii) LIONSGATE+,
which represents revenues primarily from the OTT distribution of
the Company's STARZ branded premium subscription video services
outside of the U.S. The Starz Domestic Platform together with the
LIONSGATE+ platforms are referred to as the "Starz Platforms".
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.
|
LIONS GATE
ENTERTAINMENT CORP.
SEGMENT INFORMATION
(Continued)
|
|
|
Segment information is
presented in the tables below:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Segment
revenues
|
|
|
|
|
|
|
|
|
Studio
Business:
|
|
|
|
|
|
|
|
|
Motion
Picture
|
$
443.2
|
|
$
288.8
|
|
$
1,245.6
|
|
$
791.6
|
|
Television
Production
|
248.4
|
|
605.4
|
|
860.7
|
|
1,468.6
|
|
Total Studio
Business
|
691.6
|
|
894.2
|
|
2,106.3
|
|
2,260.2
|
|
Media
Networks
|
417.2
|
|
380.3
|
|
1,214.9
|
|
1,157.5
|
|
Intersegment
eliminations
|
(133.7)
|
|
(274.4)
|
|
(422.1)
|
|
(648.6)
|
|
$
975.1
|
|
$
1,000.1
|
|
$
2,899.1
|
|
$
2,769.1
|
|
Segment
profit
|
|
|
|
|
|
|
|
|
Studio
Business:
|
|
|
|
|
|
|
|
|
Motion
Picture
|
$
100.4
|
|
$
76.5
|
|
$
237.1
|
|
$
182.7
|
|
Television
Production
|
8.1
|
|
71.5
|
|
94.1
|
|
104.6
|
|
Total Studio
Business(1)
|
108.5
|
|
148.0
|
|
331.2
|
|
287.3
|
|
Media
Networks
|
85.5
|
|
49.5
|
|
184.1
|
|
33.5
|
|
Intersegment
eliminations
|
(12.0)
|
|
(8.4)
|
|
(43.8)
|
|
(31.3)
|
|
Total segment
profit(1)
|
$
182.0
|
|
$
189.1
|
|
$
471.5
|
|
$
289.5
|
|
Corporate general and
administrative expenses
|
(31.1)
|
|
(21.3)
|
|
(94.2)
|
|
(69.4)
|
|
Adjusted
OIBDA(1)
|
$
150.9
|
|
$
167.8
|
|
$
377.3
|
|
$
220.1
|
|
|
|
|
|
|
|
|
|
(1)
|
See "Use of Non-GAAP
Financial Measures" for the definition of Total Segment Profit,
Studio Business Segment Profit and Adjusted OIBDA and
reconciliation to the most directly comparable GAAP financial
measure.
|
The Company's primary measure of segment performance is segment
profit. Segment profit is defined as segment revenues, less segment
direct operating and segment distribution and marketing expense,
less segment general and administration expenses. Total segment
profit represents the sum of segment profit for our individual
segments, net of eliminations for intersegment transactions.
Segment profit and total segment profit excludes, when applicable,
corporate general and administrative expense, restructuring and
other costs, share-based compensation, certain programming and
content charges as a result of changes in management and/or
programming and content strategy, certain charges related to the
COVID-19 global pandemic, charges resulting from Russia's invasion of Ukraine, and purchase accounting and related
adjustments. Segment profit is a GAAP financial measure.
We also present above our total segment profit for all of our
segments and the sum of our Motion Picture and Television
Production segment profit as our "Studio Business" segment profit.
Total segment profit and Studio Business segment profit, when
presented outside of the segment information and reconciliations
included in the notes to our consolidated financial statements, is
considered a non-GAAP financial measure, and should be considered
in addition to, not as a substitute for, or superior to, measures
of financial performance prepared in accordance with United States
GAAP. We use this non-GAAP measure, among other measures, to
evaluate the aggregate operating performance of our business.
|
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, 2023 and 2022:
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Media Networks
revenue:
|
|
|
|
|
|
|
|
|
Starz
Networks
|
$
342.7
|
|
$
341.7
|
|
$
1,019.9
|
|
$
1,048.7
|
|
LIONSGATE+
|
74.5
|
|
38.6
|
|
195.0
|
|
108.8
|
|
$
417.2
|
|
$
380.3
|
|
$
1,214.9
|
|
$
1,157.5
|
|
Media Networks
segment profit (loss):
|
|
|
|
|
|
|
|
|
Starz
Networks
|
$
62.5
|
|
$
58.1
|
|
$
148.4
|
|
$
135.4
|
|
LIONSGATE+
|
23.0
|
|
(8.6)
|
|
35.7
|
|
(101.9)
|
|
$
85.5
|
|
$
49.5
|
|
$
184.1
|
|
$
33.5
|
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 following table
sets forth, for the periods presented, subscriptions to our Media
Networks and STARZPLAY Arabia services, excluding LIONSGATE+
subscribers in territories exited or to be exited:
|
|
As of
|
|
As of
|
|
|
6/30/22
|
|
9/30/22
|
|
12/31/22
|
|
3/31/23
|
|
6/30/23
|
|
9/30/23
|
|
12/31/23
|
|
|
(Amounts in
millions)
|
|
Starz
Domestic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTT
Subscribers
|
|
12.18
|
|
12.25
|
|
11.56
|
|
12.25
|
|
11.82
|
|
12.02
|
|
12.63
|
|
Linear
Subscribers
|
|
9.22
|
|
8.76
|
|
8.32
|
|
8.02
|
|
7.68
|
|
7.42
|
|
7.10
|
|
Total
|
|
21.40
|
|
21.01
|
|
19.88
|
|
20.27
|
|
19.50
|
|
19.44
|
|
19.73
|
|
LIONSGATE+ excluding
territories exited or to be exited(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTT
Subscribers(2)
|
|
2.29
|
|
2.75
|
|
3.17
|
|
3.47
|
|
3.73
|
|
3.77
|
|
3.25
|
|
Linear
Subscribers
|
|
1.80
|
|
1.81
|
|
1.83
|
|
1.81
|
|
1.80
|
|
1.79
|
|
1.75
|
|
Total
|
|
4.09
|
|
4.56
|
|
5.00
|
|
5.28
|
|
5.53
|
|
5.56
|
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Starz
excluding territories exited or to be exited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTT
Subscribers(2)
|
|
14.47
|
|
15.00
|
|
14.73
|
|
15.72
|
|
15.55
|
|
15.79
|
|
15.88
|
|
Linear
Subscribers
|
|
11.02
|
|
10.57
|
|
10.15
|
|
9.83
|
|
9.48
|
|
9.21
|
|
8.85
|
|
Total Starz
excluding territories exited or to be exited
|
|
25.49
|
|
25.57
|
|
24.88
|
|
25.55
|
|
25.03
|
|
25.00
|
|
24.73
|
|
STARZPLAY
Arabia(3)
|
|
1.94
|
|
2.00
|
|
2.10
|
|
2.55
|
|
2.80
|
|
3.04
|
|
3.19
|
|
Total Domestic and
International Subscribers (including STARZPLAY
Arabia)
excluding territories exited or to be
exited(2)
|
|
27.43
|
|
27.57
|
|
26.98
|
|
28.10
|
|
27.83
|
|
28.04
|
|
27.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Subscriber Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Starz North
America(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTT
Subscribers
|
|
12.85
|
|
12.93
|
|
12.24
|
|
12.95
|
|
12.51
|
|
12.73
|
|
13.43
|
|
Linear
Subscribers
|
|
11.03
|
|
10.57
|
|
10.15
|
|
9.83
|
|
9.48
|
|
9.21
|
|
8.85
|
|
Total
|
|
23.88
|
|
23.50
|
|
22.39
|
|
22.78
|
|
21.99
|
|
21.94
|
|
22.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscribers by
Platform excluding territories exited or to be
exited:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTT
Subscribers(2)(4)
|
|
16.41
|
|
17.00
|
|
16.83
|
|
18.27
|
|
18.35
|
|
18.83
|
|
19.07
|
|
Linear
Subscribers
|
|
11.02
|
|
10.57
|
|
10.15
|
|
9.83
|
|
9.48
|
|
9.21
|
|
8.85
|
|
Total Global
Subscribers excluding territories exited or to be
exited(2)
|
|
27.43
|
|
27.57
|
|
26.98
|
|
28.10
|
|
27.83
|
|
28.04
|
|
27.92
|
|
|
|
|
|
|
|
|
|
(1)
|
LIONSGATE+ consists of
OTT and linear subscribers in Canada and OTT subscribers in
India.
|
|
(2)
|
Excludes LIONSGATE+
subscribers in territories exited or to be exited in Australia,
Continental Europe, Japan, Latin America and the U.K. as
follows:
|
|
|
|
|
As of
|
|
As of
|
|
|
6/30/22
|
|
9/30/22
|
|
12/31/22
|
|
3/31/2023
|
|
6/30/23
|
|
9/30/23
|
|
12/31/23
|
|
|
(Amounts in
millions)
|
|
OTT
Subscribers
|
|
9.91
|
|
10.21
|
|
10.18
|
|
2.17
|
|
1.59
|
|
1.59
|
|
1.10
|
|
|
|
(3)
|
Represents subscribers
of STARZPLAY Arabia, a non-consolidated equity method
investee.
|
|
(4)
|
OTT subscribers
includes subscribers of STARZPLAY Arabia, as presented
above.
|
|
(5)
|
Starz North America
subscribers include subscribers in the U.S. (as presented in the
"Starz Domestic" line item) and Canada (included in the LIONSGATE+
subscriber amounts in the table above).
|
LIONS GATE ENTERTAINMENT CORP.
USE OF NON-GAAP FINANCIAL MEASURES
This earnings release presents the following important
financial measures utilized by Lions Gate Entertainment Corp. (the
"Company," "we," "us" or "our") that are not all financial measures
defined by generally accepted accounting principles ("GAAP"). The
Company uses non-GAAP financial measures, among other measures, to
evaluate the operating performance of our business. These non-GAAP
financial measures are in addition to, not a substitute for, or
superior to, measures of financial performance prepared in
accordance with United States GAAP.
Adjusted OIBDA: Adjusted OIBDA is defined as
operating income (loss) before adjusted depreciation and
amortization ("OIBDA"), adjusted for adjusted share-based
compensation ("adjusted SBC"), purchase accounting and related
adjustments, restructuring and other costs, certain charges
(benefits) related to the COVID-19 global pandemic, certain
programming and content charges as a result of management changes
and/or changes in strategy, and unusual gains or losses (such as
goodwill and intangible asset impairment and charges related to
Russia's invasion of Ukraine), when applicable.
- Adjusted depreciation and amortization represents depreciation
and amortization as presented on our consolidated statement of
operations, less the depreciation and amortization related to the
amortization of purchase accounting and related adjustments
associated with recent acquisitions. Accordingly, the full impact
of the purchase accounting is included in the adjustment for
"purchase accounting and related adjustments", described
below.
- Adjusted share-based compensation represents share-based
compensation excluding the impact of the acceleration of certain
vesting schedules for equity awards pursuant to certain severance
arrangements, which are included in restructuring and other
expenses, when applicable.
- Restructuring and other includes restructuring and severance
costs, certain transaction and other costs, and certain unusual
items, when applicable.
- COVID-19 related charges or benefits include incremental costs
associated with the pausing and restarting of productions including
paying/hiring certain cast and crew, maintaining idle facilities
and equipment costs, and when applicable, certain motion picture
and television impairments and development charges associated with
changes in performance expectations or the feasibility of
completing the project resulting from circumstances associated with
the COVID-19 global pandemic, net of insurance recoveries, which
are included in direct operating expense, when applicable. In
addition, the costs include early or contractual marketing spends
for film releases and events that have been canceled or delayed and
will provide no economic benefit, which are included in
distribution and marketing expense, when applicable.
- Programming and content charges include certain charges as a
result of changes in management and/or changes in programming and
content strategy, which are included in direct operating expenses,
when applicable.
- 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 non-cash charge
for the amortization of the recoupable portion of the purchase
price and the expense associated with the noncontrolling equity
interests in the distributable earnings related to 3 Arts
Entertainment, all of which are accounted for as compensation and
are included in general and administrative expense.
Adjusted OIBDA is calculated similar to how the Company defines
segment profit and manages and evaluates its segment operations.
Segment profit also excludes corporate general and administrative
expense.
Total Segment Profit and Studio Business Segment Profit and
Studio Business Adjusted OIBDA: We present the sum of our
Motion Picture and Television Production segment profit as our
"Studio Business" segment profit, and we define our Studio Business
Adjusted OIBDA as Studio Business segment profit less corporate
general and administrative expenses. Total segment profit and
Studio Business segment profit and Studio Business Adjusted OIBDA,
when presented outside of the segment information and
reconciliations included in our consolidated financial statements,
is considered a non-GAAP financial measure, and should be
considered in addition to, not as a substitute for, or superior to,
measures of financial performance prepared in accordance with
United States GAAP. We use this non-GAAP measure, among other
measures, to evaluate the aggregate operating performance of our
business.
The Company believes the presentation of total segment profit
and Studio Business segment profit is relevant and useful for
investors because it allows investors to view total segment
performance in a manner similar to the primary method used by the
Company's management and enables them to understand the fundamental
performance of the Company's businesses before non-operating items.
Total segment profit and Studio Business segment profit is
considered an important measure of the Company's performance
because it reflects the aggregate profit contribution from the
Company's segments, both in total and for the Studio Business and
represents a measure, consistent with our segment profit, that
eliminates amounts that, in management's opinion, do not
necessarily reflect the fundamental performance of the Company's
businesses, are infrequent in occurrence, and in some cases are
non-cash expenses. Not all companies calculate segment profit or
total segment profit in the same manner, and segment profit and
total segment profit as defined by the Company may not be
comparable to similarly titled measures presented by other
companies due to differences in the methods of calculation and
excluded items.
Adjusted Free Cash Flow: Free cash flow is
typically defined as net cash flows provided by (used in) operating
activities, less capital expenditures. The Company defines Adjusted
Free Cash Flow as net cash flows provided by (used in) operating
activities, less capital expenditures, plus or minus the net
increase or decrease in production and related loans (which
includes our production tax credit facility), plus or minus certain
unusual or non-recurring items, such as insurance recoveries on
prior shareholder litigation, proceeds from the termination of
interest rate swaps, and payments on impaired content in
territories exited or to be exited.
The adjustment for the production and related loans, exclusive
of our production tax credit facility, is made because the GAAP
based cash flows from operations reflects a non-cash reduction of
cash flows for the cost of films and television programs prior to
the time the Company pays for the film or television program
through the payment of the associated production or related loan
which occurs at or near completion of the production, or in some
cases, over the period revenues and cash receipts are being
generated, as more fully described below.
The cost of producing films and television programs, which is
reflected as a reduction of the GAAP based cash flows provided by
(used in) operating activities, is often financed through
production loans. The adjustment for production and related loans
is made in order to better align the timing of the cash flows
associated with producing films and television programs with the
timing of the repayment of the production loans, which is
consistent with how management views its production cash spend and
manages the Company's cash flows and working capital needs.
Borrowings on production loans offset the spend on investment in
films reflected in the GAAP based cash flows provided by (used in)
operating activities and thus increase the Adjusted Free Cash Flows
as compared to the GAAP based cash flows provided by (used in)
operating activities and subsequent payments on production loans
reflect the payment for the production of the film or TV program
and reduce Adjusted Free Cash Flows as compared to the GAAP based
cash flows provided by (used in) operating activities.
The adjustment for the production tax credit facility is made to
better reflect the timing of the cash requirements of the
production, since a portion of the amounts expended initially are
later refunded through the receipt of the tax credit, as more fully
described below. The production tax credit facility reduces the
timing difference between the payments for production cost and the
receipt of the tax credit and thus reflects the cash cost of the
film or television program at or near the time the film or
television program is produced and completed.
Part of the cost of a film or television program is effectively
funded through obtaining government incentives, however, the
incentives are not received until a future period which could be a
few years after the completion of the film. The tax credit facility
reflects borrowings collateralized by the tax credits to be
received in the future and thus by including these borrowings in
Adjusted Free Cash Flow it has the effect of better aligning the
receipt of the tax credits with the timing of the production and
completion of the film and television programs, which is consistent
with how management views its production cash spend and manages the
Company's cash flows and working capital needs. Borrowings under
the tax credit facility reduce the cash spend reflected in the GAAP
based cash flows provided by (used in) operating activities and
thus increase adjusted free cash flows and payments on the tax
credit facility offset the tax credit receivable collection
reflected in the GAAP based cash flows provided by (used in)
operating activities and reduce adjusted free cash flows as
compared to the GAAP based cash flows provided by (used in)
operating activities.
The Company believes that it is more meaningful to reflect the
impact of the payment for these films and television programs when
the payments are made under the production loans and the receipt of
the tax credit when the film is being produced in its Adjusted Free
Cash Flow.
The adjustment for the payments on impaired content represents
cash payments made on impaired content in territories exited or to
be exited under the LIONSGATE+ international restructuring. The
adjustment is made because these cash payments relate to content in
territories the Company has exited or is exiting, and therefore the
cash payments are not reflective of the ongoing operations of the
Company.
Adjusted Net Income (Loss) Attributable to Lions Gate
Entertainment Corp. Shareholders: Adjusted net
income (loss) attributable to Lions Gate Entertainment Corp.
shareholders is defined as net income (loss) attributable to Lions
Gate Entertainment Corp. shareholders, adjusted for share-based
compensation, purchase accounting and related adjustments,
restructuring and other items, insurance recoveries on prior
shareholder litigation and net gains or losses on investments and
other, gain or loss on extinguishment of debt, certain programming
and content charges, COVID-19 related charges (benefit), and
unusual gains or losses (such as goodwill and intangible asset
impairment and charges related to Russia's invasion of Ukraine), when applicable, as described in the
Adjusted OIBDA definition, net of the tax effect of the adjustments
at the applicable effective tax rate for each adjustment and net of
the impact of the adjustments on noncontrolling interest.
Adjusted Basic and Diluted EPS: Adjusted basic earnings
(loss) per share is defined as adjusted net income (loss)
attributable to Lions Gate Entertainment Corp. shareholders divided
by the weighted average shares outstanding. Diluted EPS is similar
to basic EPS but is adjusted for the effects of securities that are
diluted based on the level of adjusted net income (loss), similar
to GAAP.
Overall: These measures are non-GAAP financial measures
as defined in Regulation G promulgated by the SEC and are in
addition to, not a substitute for, or superior to, measures of
financial performance prepared in accordance with United States
GAAP.
We use these non-GAAP measures, among other measures, to
evaluate the operating performance of our business. We believe
these measures provide useful information to investors regarding
our results of operations and cash flows before non-operating
items. Adjusted OIBDA is considered an important measure of the
Company's performance because this measure eliminates amounts that,
in management's opinion, do not necessarily reflect the fundamental
performance of the Company's businesses, are infrequent in
occurrence, and in some cases are non-cash expenses. Adjusted Free
Cash Flow is considered an important measure of the Company's
liquidity because it provides information about the ability of the
Company to reduce net corporate debt, make strategic investments,
dividends and share repurchases. Adjusted Net Income (Loss)
Attributable to Lions Gate Entertainment Corp. Shareholders and
Adjusted EPS are considered important measures of the Company's
business operations as, similar to Adjusted OIBDA, these measures
eliminate amounts that, in management's opinion, do not necessarily
reflect the fundamental performance of the Company's
businesses.
These non-GAAP measures are commonly used in the entertainment
industry and by financial analysts and others who follow the
industry to measure operating performance. However, not all
companies calculate these measures in the same manner and the
measures as presented may not be comparable to similarly titled
measures presented by other companies due to differences in the
methods of calculation and excluded items.
A general limitation of these non-GAAP financial measures is
that they are not prepared in accordance with U.S. generally
accepted accounting principles. These measures should be reviewed
in conjunction with the relevant GAAP financial measures and are
not presented as alternative measures of operating income, cash
flow, net income (loss), or earnings (loss) per share as determined
in accordance with GAAP. Reconciliations of the adjusted metrics
utilized to their corresponding GAAP metrics are provided
below.
|
LIONS GATE
ENTERTAINMENT CORP.
RECONCILIATION OF
OPERATING INCOME (LOSS)
TO ADJUSTED OIBDA
AND TOTAL SEGMENT PROFIT
|
|
|
The following table
reconciles the GAAP measure, operating income (loss) to the
non-GAAP measures, Adjusted OIBDA and Total Segment
Profit:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Operating income
(loss)
|
$
(43.5)
|
|
$
7.8
|
|
$
(877.9)
|
|
$
(1,808.1)
|
|
Goodwill and
intangible asset impairment(1)
|
—
|
|
—
|
|
663.9
|
|
1,475.0
|
|
Adjusted depreciation
and amortization(2)
|
13.5
|
|
9.8
|
|
33.4
|
|
29.5
|
|
Restructuring and
other(3)
|
116.9
|
|
75.3
|
|
371.0
|
|
316.5
|
|
COVID-19 related
charges (benefit)(4)
|
(0.1)
|
|
(1.8)
|
|
(0.5)
|
|
(8.8)
|
|
Content
charges(5)
|
—
|
|
—
|
|
—
|
|
7.2
|
|
Adjusted share-based
compensation expense(6)
|
24.9
|
|
23.3
|
|
66.9
|
|
57.7
|
|
Purchase accounting
and related adjustments(7)
|
39.2
|
|
53.4
|
|
120.5
|
|
151.1
|
|
Adjusted
OIBDA
|
$
150.9
|
|
$
167.8
|
|
$
377.3
|
|
$
220.1
|
|
Corporate general and
administrative expenses
|
31.1
|
|
21.3
|
|
94.2
|
|
69.4
|
|
Total Segment
Profit
|
$
182.0
|
|
$
189.1
|
|
$
471.5
|
|
$
289.5
|
|
|
|
|
|
|
|
|
|
(1)
|
In the nine months
ended December 31, 2023, amounts reflect the goodwill impairment
charge of $493.9 million and $170.0 million for impairment of
indefinite-lived trade names, both related to the Media Networks
reporting unit, recorded in the quarter ended September 30, 2023.
In the nine months ended December 31, 2022, amounts reflect the
goodwill impairment charge of $1.475 billion related to the Media
Networks reporting unit, recorded in the quarter ended September
30, 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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Depreciation and
amortization
|
$
49.9
|
|
$
46.3
|
|
$
138.9
|
|
$
133.9
|
|
Less: Amount included
in purchase accounting and related adjustments
|
(36.4)
|
|
(36.5)
|
|
(105.5)
|
|
(104.4)
|
|
Adjusted depreciation
and amortization
|
$
13.5
|
|
$
9.8
|
|
$
33.4
|
|
$
29.5
|
|
|
|
(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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Restructuring and
other:
|
|
|
|
|
|
|
|
|
Content and other
impairments(a)
|
$
77.8
|
|
$
80.8
|
|
$
317.4
|
|
$
299.7
|
|
Severance(b)
|
|
|
|
|
|
|
|
|
Cash
|
23.9
|
|
2.4
|
|
32.9
|
|
14.8
|
|
Accelerated vesting on
equity awards
|
6.8
|
|
1.5
|
|
8.4
|
|
2.1
|
|
Total severance
costs
|
30.7
|
|
3.9
|
|
41.3
|
|
16.9
|
|
COVID-19 related
charges included in restructuring and other
|
—
|
|
—
|
|
—
|
|
0.1
|
|
Transaction and other
costs(c)
|
8.4
|
|
(9.4)
|
|
12.3
|
|
(0.2)
|
|
$
116.9
|
|
$
75.3
|
|
$
371.0
|
|
$
316.5
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Media Networks
Restructuring: In fiscal 2023, the Company began a plan
to restructure its LIONSGATE+ business, which initially included
exiting the business in seven international territories (France,
Germany, Italy, Spain, Benelux, the Nordics and Japan), and
identifying additional cost-saving initiatives. This plan included
a strategic review of content performance across Starz's domestic
and international platforms, resulting in certain programming being
removed from those platforms and written down to fair
value.
|
|
|
|
|
|
In July 2023, in
connection with a modification to shorten a long-term distribution
contract, the Company decided to shut down the LIONSGATE+ service
in Latin America.
|
|
|
|
|
|
During the nine months
ended December 31, 2023, the Company continued executing its
restructuring plan, including its evaluation of the programming on
Starz's domestic and international platforms. In connection with
this review, the Company cancelled certain ordered programming, and
identified certain other programming with limited strategic purpose
which was removed from the Starz platforms and abandoned by the
Media Networks segment. In addition, as a result of the continuing
review of its international territories, in order to continue
growing the profitability of STARZ and given the economic and
industry challenges in the United Kingdom ("U.K."), the Company has
made the strategic decision to shut down the LIONSGATE+ service in
the U.K. market, resulting in additional content impairment
charges.
|
|
|
|
|
|
As a result of these
restructuring initiatives, the Company recorded content impairment
charges related to the Media Networks segment in the three and nine
months ended December 31, 2023 of $77.8 million and $317.4 million,
respectively (three and nine months ended December 31, 2022 - $80.8
million and $293.8 million, respectively). The Company has incurred
impairment charges from the inception of the plan through December
31, 2023 amounting to $696.7 million.
|
|
|
|
|
|
Under the current
restructuring plan and ongoing strategic content review, the
Company estimates it will incur additional charges ranging from
approximately $30 million to $55 million related to certain
contractual content commitments or programming content impairment
charges, among other items, related to territories exited or to be
exited and content to be removed from its services. The net future
cash outlay is estimated to range from approximately $145 million
to $170 million, which includes contractual commitments on content
in territories being exited or to be exited, and payments on the
remaining amounts payable for content removed or that may be
removed from its services. The amounts above will depend on the
results of its strategic content review and amounts recoverable
from alternative distribution strategies, if any, on content in
domestic and foreign markets.
|
|
|
|
|
|
As the Company
continues to evaluate the Media Networks business and its current
restructuring plan in relation to the current micro and
macroeconomic environment and the announced plan to separate the
Company's Starz business (i.e., Media Networks segment) and Studio
Business (i.e., Motion Picture and Television Production segments),
including further strategic review of content performance and its
strategy on a territory-by-territory basis, the Company may decide
to expand its restructuring plan and exit additional territories or
remove certain content off its platform in the future. Accordingly,
the Company may incur additional content impairment and other
restructuring charges beyond the estimates above.
|
|
|
|
|
|
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. In the three and nine months ended December 31, 2023,
amounts were due to restructuring activities including integration
of the acquisition of eOne, LIONSGATE+ international restructuring
and our Motion Picture and Television Production
segments.
|
|
|
|
|
(c)
|
Transaction and other
costs in the three and nine months ended December 31, 2023 and 2022
reflect transaction, integration and legal costs associated with
certain strategic transactions, and restructuring activities and
also include costs and benefits associated with certain legal
matters. In the nine months ended December 31, 2023, transaction
and other costs also includes a benefit of $3.8 million associated
with an arrangement to migrate subscribers in some of the exited
territories to a third-party in connection with the LIONSGATE+
international restructuring. In the three and nine months ended
December 31, 2022, transaction and other costs includes a benefit
of $11.0 million for a settlement of a legal matter related to
the Media Networks segment.
|
|
|
|
|
(4)
|
Amounts represent the
incremental costs, if any, included in direct operating expense
resulting from circumstances associated with the COVID-19 global
pandemic, net of insurance recoveries. During the three and nine
months ended December 31, 2023 and 2022, 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. These
charges (benefits) are excluded from segment operating
results.
|
|
|
|
(5)
|
In the nine months
ended December 31, 2022, the amounts represent development costs
written off as a result of changes in strategy across the Company's
theatrical slate in connection with certain management changes and
changes in the theatrical marketplace in the Motion Picture
segment.
|
|
|
|
(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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Total share-based
compensation expense
|
$
31.7
|
|
$
24.8
|
|
$
75.3
|
|
$
59.8
|
|
Less: Amount included
in restructuring and other(a)
|
(6.8)
|
|
(1.5)
|
|
(8.4)
|
|
(2.1)
|
|
Adjusted share-based
compensation
|
$
24.9
|
|
$
23.3
|
|
$
66.9
|
|
$
57.7
|
|
|
|
|
(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. 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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Purchase accounting and
related adjustments:
|
|
|
|
|
|
|
|
|
Direct
operating
|
$
—
|
|
$
—
|
|
$
—
|
|
$
0.7
|
|
General and
administrative expense(a)
|
2.8
|
|
16.9
|
|
15.0
|
|
46.0
|
|
Depreciation and
amortization
|
36.4
|
|
36.5
|
|
105.5
|
|
104.4
|
|
$
39.2
|
|
$
53.4
|
|
$
120.5
|
|
$
151.1
|
|
|
|
|
(a)
|
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, as
presented in the table below. The earned distributions related to 3
Arts Entertainment represent the 3 Arts Entertainment
noncontrolling equity interest in the earnings of 3 Arts
Entertainment and are reflected as an expense rather than
noncontrolling interest in the consolidated statement of operations
due to the relationship to continued employment.
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Amortization of
recoupable portion of the purchase price
|
$
—
|
|
$
1.9
|
|
$
1.3
|
|
$
5.7
|
|
Noncontrolling
interest discount amortization
|
—
|
|
3.3
|
|
—
|
|
13.3
|
|
Noncontrolling equity
interest in distributable earnings
|
2.8
|
|
11.7
|
|
13.7
|
|
27.0
|
|
$
2.8
|
|
$
16.9
|
|
$
15.0
|
|
$
46.0
|
|
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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions, except per share amounts)
|
|
Reported Net Income
(Loss) Attributable to Lions Gate Entertainment Corp.
Shareholders
|
$
(106.6)
|
|
$
16.6
|
|
$
(1,063.5)
|
|
$
(1,913.5)
|
|
Adjusted share-based
compensation expense
|
24.9
|
|
23.3
|
|
66.9
|
|
57.7
|
|
Goodwill and
intangible asset impairment
|
—
|
|
—
|
|
663.9
|
|
1,475.0
|
|
Restructuring and
other
|
116.9
|
|
75.3
|
|
371.0
|
|
316.5
|
|
COVID-19 related
charges (benefit)
|
(0.1)
|
|
(1.8)
|
|
(0.5)
|
|
(8.8)
|
|
Content
charges
|
—
|
|
—
|
|
—
|
|
7.2
|
|
Purchase accounting
and related adjustments
|
39.2
|
|
53.4
|
|
120.5
|
|
151.1
|
|
Gain on extinguishment
of debt
|
—
|
|
(38.2)
|
|
(21.2)
|
|
(40.3)
|
|
Gain on investments,
net
|
(4.4)
|
|
(43.4)
|
|
(2.7)
|
|
(42.1)
|
|
Tax impact of above
items(1)
|
0.1
|
|
(0.7)
|
|
(9.7)
|
|
(3.8)
|
|
Noncontrolling
interest impact of above items(2)
|
(5.0)
|
|
(15.3)
|
|
(21.0)
|
|
(39.4)
|
|
Adjusted Net Income
(Loss) Attributable to Lions Gate Entertainment Corp.
Shareholders(3)
|
$
65.0
|
|
$
69.2
|
|
$
103.7
|
|
$
(40.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Basic
EPS
|
$
(0.45)
|
|
$
0.07
|
|
$
(4.56)
|
|
$
(8.41)
|
|
Impact of adjustments
on basic earnings per share
|
0.73
|
|
0.23
|
|
5.01
|
|
8.23
|
|
Adjusted Basic
EPS
|
$
0.28
|
|
$
0.30
|
|
$
0.45
|
|
$
(0.18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Diluted
EPS
|
$
(0.45)
|
|
$
0.07
|
|
$
(4.56)
|
|
$
(8.41)
|
|
Impact of adjustments
on diluted earnings per share
|
0.72
|
|
0.23
|
|
5.00
|
|
8.23
|
|
Adjusted Diluted
EPS
|
$
0.27
|
|
$
0.30
|
|
$
0.44
|
|
$
(0.18)
|
|
|
|
|
|
|
|
|
|
Adjusted weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
235.1
|
|
228.8
|
|
233.1
|
|
227.4
|
|
Diluted
|
236.7
|
|
230.1
|
|
235.8
|
|
227.4
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the tax
impact of the adjustments to net income attributable to Lions Gate
Entertainment Corp. shareholders, calculated using the applicable
effective tax rate of the adjustment. Beginning in the quarter
ended March 31, 2023, we are no longer adjusting for changes in our
valuation allowance and the three and nine months ended December
31, 2022 has been adjusted to reflect the current
presentation.
|
|
(2)
|
Represents the
noncontrolling interest impact of the adjustments related to
subsidiaries that are not wholly owned. The three and nine months
ended December 31, 2022 has been adjusted to reflect the
noncontrolling interest impact consistent with the current year
presentation.
|
|
(3)
|
The three and nine
months ended December 31, 2022 has been adjusted to reflect the
changes in footnotes (1) and (2) above.
|
|
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,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(Unaudited, amounts
in millions)
|
|
Net Cash Flows
Provided By (Used In) Operating
Activities(1)
|
$
71.1
|
|
$
11.4
|
|
$
401.4
|
|
$
(128.0)
|
|
Capital
expenditures
|
(6.4)
|
|
(15.2)
|
|
(24.7)
|
|
(36.6)
|
|
Net borrowings under
and (repayment) of production and related
loans(2):
|
|
|
|
|
|
|
|
|
Production loans and
programming notes
|
(34.6)
|
|
22.8
|
|
(205.9)
|
|
423.5
|
|
Production tax credit
facility
|
15.4
|
|
(4.0)
|
|
17.8
|
|
6.6
|
|
Proceeds from the
termination of interest rate swaps(3)
|
—
|
|
—
|
|
—
|
|
(188.7)
|
|
Payments on impaired
content in territories exited or to be
exited(4)
|
18.4
|
|
14.9
|
|
43.5
|
|
14.9
|
|
Adjusted Free Cash
Flow
|
$
63.9
|
|
$
29.9
|
|
$
232.1
|
|
$
91.7
|
|
|
|
|
|
|
|
|
|
(1)
|
Cash flows provided by
(used in) operating activities for the three and nine months ended
December 31, 2023 includes a net use of cash of approximately
($3.8) million and net benefit of approximately $40.1 million,
respectively, from the monetization of trade accounts receivable
programs (three and nine months ended December 31, 2022 - net
benefit of approximately $87.9 million and $77.0 million,
respectively).
|
|
(2)
|
See "Reconciliation for
Non-GAAP Adjustments for Net Borrowings Under and (Repayment) of
Production and Related Loans" for reconciliation to the most
directly comparable GAAP financial measure.
|
|
(3)
|
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 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.
|
|
(4)
|
Represents cash
payments made on impaired content in territories exited or to be
exited under the LIONSGATE+ international restructuring.
|
|
LIONS GATE
ENTERTAINMENT CORP.
RECONCILIATION OF
NON-GAAP ADJUSTMENTS FOR NET BORROWINGS UNDER AND REPAYMENT OF
PRODUCTION AND RELATED LOANS
|
|
|
The following tables
reconcile the non-GAAP adjustments for net borrowings under and
(repayment) of production and related loans to the changes in the
related
balance sheet amounts and the consolidated statement of cash
flows:
|
|
|
Three Months Ended
December 31, 2023
|
|
Non-GAAP
Adjustments
to Adjusted Free Cash
Flow
|
|
|
|
Total per
GAAP
Balance
Sheet and
Statement
of Cash
Flows
Amounts
|
|
Production
Loans and
Programming
Notes
|
|
Production
Tax Credit
Facility
|
|
Other Film
Related
Obligations
|
|
|
(Unaudited, amounts
in millions)
|
|
Film related
obligations at beginning of period (current and
non-current)
|
|
|
|
|
|
|
$
1,801.8
|
|
|
|
|
|
|
|
|
|
Cash flows provided by
(used in) financing activities:
|
|
|
|
|
|
|
|
|
Borrowings
|
$
298.2
|
|
$
20.9
|
|
$
(0.2)
|
|
318.9
|
|
Repayments
|
(332.8)
|
|
(5.5)
|
|
(19.1)
|
|
(357.4)
|
|
$
(34.6)
|
|
$
15.4
|
|
$
(19.3)
|
|
|
|
Cash flows provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Included in cash flows
provided by (used in) operating activities
|
|
|
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
Film related
obligations assumed from the acquisition of eOne
|
|
|
|
|
|
|
105.8
|
|
|
|
|
|
|
|
|
|
Film related
obligations at end of period (current and non-current)
|
|
|
|
|
|
|
$
1,873.0
|
|
|
|
Three Months Ended
December 31, 2022
|
|
Non-GAAP
Adjustments
to Adjusted Free Cash
Flow
|
|
|
|
Total per
GAAP
Balance
Sheet and
Statement
of Cash
Flows
Amounts
|
|
Production
Loans and
Programming
Notes
|
|
Production
Tax Credit
Facility
|
|
Other Film
Related
Obligations
|
|
|
(Unaudited, amounts
in millions)
|
|
Film related
obligations at beginning of period (current and
non-current)
|
|
|
|
|
|
|
$
2,167.9
|
|
|
|
|
|
|
|
|
|
Cash flows provided by
(used in) financing activities:
|
|
|
|
|
|
|
|
|
Borrowings
|
$
207.0
|
|
$
23.8
|
|
$
15.2
|
|
246.0
|
|
Repayments
|
(184.2)
|
|
(27.8)
|
|
(110.6)
|
|
(322.6)
|
|
$
22.8
|
|
$
(4.0)
|
|
$
(95.4)
|
|
|
|
Cash flows provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Included in cash flows
provided by (used in) operating activities
|
|
|
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
Film related
obligations at end of period (current and non-current)
|
|
|
|
|
|
|
$
2,095.2
|
|
|
|
Nine Months Ended
December 31, 2023
|
|
Non-GAAP
Adjustments
to Adjusted Free Cash
Flow
|
|
|
|
Total per
GAAP
Balance
Sheet and
Statement
of Cash
Flows
Amounts
|
|
Production
Loans and
Programming
Notes
|
|
Production
Tax Credit
Facility
|
|
Other Film
Related
Obligations
|
|
|
(Unaudited, amounts
in millions)
|
|
Film related
obligations at beginning of period (current and
non-current)
|
|
|
|
|
|
|
$
2,023.6
|
|
|
|
|
|
|
|
|
|
Cash flows provided by
(used in) financing activities:
|
|
|
|
|
|
|
|
|
Borrowings
|
$ 1,057.8
|
|
$
48.2
|
|
$ 156.6
|
|
1,262.6
|
|
Repayments
|
(1,263.7)
|
|
(30.4)
|
|
(236.2)
|
|
(1,530.3)
|
|
$
(205.9)
|
|
$
17.8
|
|
$
(79.6)
|
|
|
|
Cash flows provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Included in cash flows
provided by (used in) operating activities
|
|
|
|
|
|
|
11.3
|
|
|
|
|
|
|
|
|
|
Film related
obligations assumed from the acquisition of eOne
|
|
|
|
|
|
|
105.8
|
|
|
|
|
|
|
|
|
|
Film related
obligations at end of period (current and non-current)
|
|
|
|
|
|
|
$
1,873.0
|
|
|
|
Nine Months Ended
December 31, 2022
|
|
Non-GAAP
Adjustments
to Adjusted Free Cash
Flow
|
|
|
|
Total per
GAAP
Balance
Sheet and
Statement
of Cash
Flows
Amounts
|
|
Production
Loans and
Programming Notes
|
|
Production
Tax Credit
Facility
|
|
Other Film
Related
Obligations
|
|
|
(Unaudited, amounts
in millions)
|
|
Film related
obligations at beginning of period (current and
non-current)
|
|
|
|
|
|
|
$
1,401.8
|
|
|
|
|
|
|
|
|
|
Cash flows provided by
(used in) financing activities:
|
|
|
|
|
|
|
|
|
Borrowings
|
$
910.3
|
|
$
56.9
|
|
$ 416.8
|
|
1,384.0
|
|
Repayments
|
(486.8)
|
|
(50.3)
|
|
(157.7)
|
|
(694.8)
|
|
$
423.5
|
|
$
6.6
|
|
$ 259.1
|
|
|
|
Cash flows provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Included in cash flows
provided by (used in) operating activities
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
Film related
obligations at end of period (current and non-current)
|
|
|
|
|
|
|
$
2,095.2
|
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SOURCE Lionsgate