Third Quarter Revenue was $1.0 Billion; Operating Income was $7.8 Million; Net Income Attributable to
Lionsgate Shareholders was $16.6
Million or $0.07 Diluted
Earnings Per Share
Adjusted OIBDA was $167.8 Million
Film & Television Library Revenue was a
Record $845 Million for Trailing 12
Months
Adjusted Net Income Attributable to Lionsgate
Shareholders was $59.3 Million or
$0.26 Adjusted Diluted Earnings Per
Share
Operating Income was $88.6 Million Before Impact of Media Networks
Restructuring Charge
SANTA
MONICA, Calif. and VANCOUVER,
BC, Feb. 9, 2023 /PRNewswire/ -- Lionsgate
(NYSE: LGF.A, LGF.B) today reported third quarter (quarter ended
December 31, 2022) revenue of
$1.0 billion, operating income of
$7.8 million and net income
attributable to Lionsgate shareholders of $16.6 million or $0.07 diluted net earnings per share on 230.1
million diluted weighted average common shares
outstanding. Adjusted net income attributable to Lionsgate
shareholders in the quarter was $59.3
million or $0.26 adjusted
diluted net earnings per share on 230.1 million diluted weighted
average common shares outstanding, with adjusted OIBDA of
$167.8 million.
"We reported a strong financial quarter with record trailing
12-month library revenues affirming the value of our intellectual
properties," said Lionsgate CEO Jon
Feltheimer. "We enter our fourth quarter with
encouraging signs across all of our businesses: a rebounding
domestic box office just as we bring our biggest slate in years to
theatres; renewals of six key Lionsgate Television series during or
immediately after the close of the quarter; and improved STARZ
economics due to its international reorganization."
Revenue from Lionsgate's 17,000-title film and television
library rose to a record $845
million for the trailing 12 months. Lionsgate ended
the quarter with $425 million in
available cash and an undrawn revolving credit facility of
$1.25 billion. During the
quarter, the Company purchased $124
million of its bonds for $82
million, a $42 million
reduction in its net debt. In addition, during the quarter
the Company sold a partial interest in STARZPLAY Arabia and
recognized a $43 million cash
gain.
Third Quarter Results
Segment Results
Media Networks segment revenue of $380.3
million compared to $388.9
million in the prior year quarter. Segment revenue
reflected growth in domestic streaming revenue and LIONSGATE+
(previously "STARZPLAY International") revenue partially offset by
lower domestic linear revenue. Segment profit increased to
$49.5 million compared to segment
profit of $28.5 million in the prior
year quarter, driven by lower domestic marketing costs and an
improved international cost structure. Total global
subscribers, including STARZPLAY Arabia (a non-consolidated equity
method investee), decreased sequentially to 37.2
million, driven by linear and OTT pressures
domestically. Excluding the international subscribers in the
seven markets that LIONSGATE+ is exiting, total global subscribers
were up 2.9% year-over-year but down sequentially to 28.7
million.
During the quarter, as part of our global assessment and
curation of our Media Networks cost structure and content strategy,
we recognized an $80.8 million
restructuring charge primarily associated with our Domestic Media
Networks' decision to remove certain series from its
service.
The Studio Business, comprised of the Motion Picture and
Television Production segments, reported revenue of $894.2 million, an increase of 25% from
$713.9 million in the prior year
quarter. Segment profit of $148.0
million increased by 71% from $86.8
million in the prior year quarter. The year-over-year
increase in revenue and segment profit was driven primarily by
strong library sales and the timing of scripted content
deliveries.
Motion Picture segment revenue increased by 5% to $288.8 million compared to $275.3 million in the prior year quarter.
Segment profit increased by 13% to $76.5
million compared to $67.5
million in the prior year quarter. Motion Picture
revenue and segment profit growth represented strength in our
multi-platform and direct-to-platform businesses, and segment
profit growth also reflected favorable foreign exchange rates.
Television Production segment revenue increased by 38% to
$605.4 million compared to
$438.6 million in the prior year
quarter. Segment profit increased by 270% to $71.5 million compared to $19.3 million in the prior year quarter.
The revenue and segment profit increases were driven by growth in
content deliveries to Media Networks and third parties as well as
strength in library sales.
Lionsgate senior management will hold its analyst and investor
conference call to discuss its fiscal 2023 third quarter results at
5:00 PM ET/2:00 PM PT this
afternoon, February 9.Interested parties may listen to the
live webcast by visiting the events page on the Lionsgate Investor
Relations website or
via https://event.choruscall.com/mediaframe/webcast.html?webcastid=rinWrWoV.
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 17,000-title library 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 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: the potential effects of the COVID-19
global pandemic on the Company, and on economic and business
conditions (including as a result of the spread of recent and new
variants); the potential effects of Russia's invasion of Ukraine on the Company, and on economic and
business conditions; 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; other trends
affecting the entertainment industry; and the other risk factors
set forth in Lionsgate's Form 10-Q filed with the Securities and
Exchange Commission on February 9,
2023. 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
February 9, 2023, which will be
posted on the Company's website
at http://investors.lionsgate.com/financial-reports/sec-filings,
when filed with the Securities and Exchange Commission.
Trending schedules containing certain financial information
will also be available
at https://investors.lionsgate.com/financial-reports/quarterly-results/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
The Company's reportable segments have been determined based on
the distinct nature of their operations, the Company's internal
management structure, and the financial information that is
evaluated regularly by the Company's chief operating decision
maker.
The Company has three reportable business segments: (1) Motion
Picture, (2) Television Production and (3) Media Networks. We refer
to our Motion Picture and Television Production segments
collectively as our Studio Business.
Studio Business:
Motion Picture. Motion Picture consists of the
development and production of feature films, acquisition of North
American and worldwide distribution rights, North American
theatrical, home entertainment and television distribution of
feature films produced and acquired, and worldwide licensing of
distribution rights to feature films produced and acquired.
Television Production. Television Production consists of
the development, production and worldwide distribution of
television productions including television series, television
movies and mini-series, and non-fiction programming. Television
Production includes the licensing of Starz original series
productions to Starz Networks and LIONSGATE+, and the ancillary
market distribution of Starz original productions and licensed
product. Additionally, the Television Production segment includes
the results of operations of 3 Arts Entertainment.
Media Networks Business:
Media Networks. Media Networks consists of the
following product lines (i) Starz Networks, which includes the
domestic distribution of STARZ branded premium subscription video
services through over-the-top ("OTT") platforms and U.S.
multichannel video programming distributors ("MVPDs") including
cable operators, satellite television providers and
telecommunication companies (collectively, "Distributors") and on a
direct-to-consumer basis through the Starz App and (ii) LIONSGATE+,
which represents revenues primarily from the OTT distribution of
the STARZ premium subscription video services outside of the U.S.
(formerly STARZPLAY International).
In the ordinary course of business, the Company's reportable
segments enter into transactions with one another. The most common
types of intersegment transactions include licensing motion
pictures or television programming (including Starz original
productions) from the Motion Picture and Television Production
segments to the Media Networks segment. While intersegment
transactions are treated like third-party transactions to determine
segment performance, the revenues (and corresponding expenses,
assets, or liabilities recognized by the segment that is the
counterparty to the transaction) are eliminated in consolidation
and, therefore, do not affect consolidated results.
|
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.
|
The Company's primary measure of segment performance is segment
profit. Segment profit is defined as gross contribution (revenues,
less direct operating and distribution and marketing expense) less
segment general and administration expenses. Segment profit
excludes, when applicable, corporate general and administrative
expense, restructuring and other costs, share-based compensation,
certain programming and content charges as a result of changes in
management and/or programming and content strategy, certain charges
related to the COVID-19 global pandemic, charges related to
Russia's invasion of Ukraine, and purchase accounting and related
adjustments. The Company believes the presentation of segment
profit is relevant and useful for investors because it allows
investors to view segment performance in a manner similar to the
primary method used by the Company's management and enables them to
understand the fundamental performance of the Company's
businesses.
|
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.
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
(benefit) 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 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 benefit 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 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.
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.
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 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.
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 thru the receipt of the tax credit. 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.
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 to be exited
under the LIONSGATE+ international restructuring. The adjustment is
made because these cash payments relate to content in territories
the Company 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 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 blended statutory rate and net
of the impact of the adjustments on noncontrolling interest and
certain changes in our deferred tax valuation allowance.
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.
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
|
|
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.
|
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SOURCE Lionsgate
