Lions Gate Entertainment : Title Fiscal 2023 Q1 Trending Schedules

August 4, 2022

LIONS GATE ENTERTAINMENT CORP.

TRENDING SCHEDULES

BASIS OF PRESENTATION

Purpose of Trending Schedules

The trending schedules summarize unaudited financial information to facilitate your review and understanding of Lions Gate Entertainment Corp.'s (the "Company," "Lionsgate," "we," "us," and "our") operating results. The trending schedules set forth important financial measures utilized by the Company 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 U.S. GAAP.

Financial Measures

Lionsgate utilizes the non-GAAP measures Adjusted OIBDA, Adjusted Free Cash Flow, and Adjusted Net Income (Loss) Attributable to Lions Gate Entertainment Corp. Shareholders and Adjusted EPS as important financial measures, among other measures, to evaluate the operating performance of our business (as defined below). The following schedules also provide additional financial measures the Company believes are useful in evaluating our operating performance. These measures include certain leverage ratios, U.S. theatrical prints and advertising (P&A) and premium video-on-demand ("Premium VOD") expense incurred, amount of investment in content, number of subscribers, and filmed entertainment backlog.

Definitions of the non-GAAP measures are provided below:

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, and certain programming and content charges as a result of management changes and/or changes in strategy, and unusual gains or losses (such as charges related to Russia's invasion of Ukraine), when applicable.

• Adjusted depreciation and amortization represents depreciation 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 related costs, and certain unusual items, when applicable.
• COVID-19related 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), less certain unusual or non-recurring items, such as insurance recoveries on prior shareholder litigation and proceeds from the termination of interest rate swaps.

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.

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 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.

Adjusted OIBDA Leverage Ratios: Adjusted OIBDA Leverage Ratio is defined as Net Corporate Debt, divided by Adjusted OIBDA for the trailing twelve months on a combined (Starz and Lionsgate) basis. Net Corporate Debt represents total Corporate debt minus cash and equivalents. Corporate Debt excludes capital leases, convertible notes and production loans.

These measures are non-GAAP financial measures as defined in Regulation G promulgated by the Securities and Exchange Commission and are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. 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. The Company utilizes these measures, among others, to evaluate the performance of its business relative to its peers and the broader market. 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.

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.

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LIONS GATE ENTERTAINMENT CORP.

									TRENDING SCHEDULES
																	Three Months
															Fiscal Year
						Three Months Ended						Ended			Ended
(in millions)		6/30/21			9/30/21			12/31/21			3/31/22			3/31/22			6/30/22
Studio Business(1):
Motion Picture
Revenue	$	291	$	331	$	275	$	288	$	1,185	$	279
Gross Contribution		69			125			90			73			356			73
Segment Profit		44			102			68			50			263			51
Television Production
Revenue		386			336			439			370			1,531			432
Gross Contribution		13			38			29			45			124			31
Segment Profit			3			29			19			33			84			20
Total Studio Business:
Revenue		677			667			714			658			2,716			711
Gross Contribution		82			163			119			117			480			104
Segment Profit		47			130			87			83			347			70
Media Networks(2)
Revenue		382			385			389			380			1,536			381
Gross Contribution		109			28			50			56			243			(14)
Segment Profit		88			6			29			33			155			(37)
Eliminations
Revenue		(158)			(164)			(217)			(109)			(648)			(198)
Gross Contribution		9			(3)			(2)			(6)			(3)			(5)
Segment Profit		9			(3)			(2)			(6)			(3)			(5)
Corporate and Other
Corporate G&A		(24)			(25)			(22)			(27)			(97)			(23)
Adjusted OIBDA		$	120	$	108	$	92	$	83	$	402	$	5
Adjusted Depreciation & Amortization(2)		(10)			(11)			(12)			(10)			(43)			(10)
Restructuring and Other(3)		(3)			(4)			(1)			(10)			(17)			(8)
COVID-19 Related (Charges) Benefit(4)		(2)			1			3			1			3			1
Programming and Content Charges(5)		-			-			-			(37)			(37)			-
Charges Related to Russia's Invasion of Ukraine(6)		-			-			-			(6)			(6)			-
Adjusted Share-Based Compensation(7)		(35)			(20)			(23)			(23)			(100)			(8)
Purchase Accounting and Related Adjustments(8)		(50)			(45)			(50)			(49)			(194)			(48)
Operating Income (Loss)		$	20	$	30	$	9	$	(50)	$	9	$	(68)
Adjusted OIBDA - trailing twelve months	$	487	$	439	$	397	$	402				$	287

Notes:

The unaudited financial results in the trending schedules are presented solely for informational purposes and are not necessarily indicative of the future financial results of Lionsgate.

1. We refer to our Motion Picture and Television Production segments collectively as our Studio Business.
2. Adjusted Depreciation and Amortization represents depreciation and amortization as presented on our unaudited condensed consolidated statement of operations less the depreciation and amortization related to amortization of 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.
3. Restructuring and other includes restructuring and severance costs, certain transaction and related costs, and certain unusual items, when applicable.
4. In connection with the disruptions associated with the COVID-19 global pandemic, during the first quarter of fiscal 2023, we have incurred a benefit of $1.0 million, net of insurance recoveries in incremental direct operating and distribution and marketing expense (first, second, third and fourth quarters of fiscal 2022 - charges of $1.6 million, benefit of $0.8 million, benefit of $2.8 million, and a benefit of $1.4 million, respectively, net of insurance recoveries). These charges are excluded from segment operating results.
5. During the fourth quarter of fiscal 2022, the Company performed a strategic review of original programming on the STARZ platform, which identified certain titles with limited viewership or strategic purpose which were removed from the STARZ service and abandoned by the Media Networks segment. As a result, the Company recorded certain programming and content charges of $36.9 million in fiscal 2022, which are excluded from segment operating results but included in direct operating expense in the consolidated statement of operations.
6. Amounts represent charges related to Russia's invasion of Ukraine, primarily related to bad debt reserves for accounts receivable from customers in Russia, included in direct operating expense in the consolidated statements of operations, and excluded from segment operating results.
7. 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.
8. Primarily represents 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.

* Amounts may not add precisely due to rounding

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LIONS GATE ENTERTAINMENT CORP.

TRENDING SCHEDULES

MEDIA NETWORKS SEGMENT DETAIL

															Fiscal Year	Three Months
						Three Months Ended						Ended		Ended
(in millions)		6/30/21			9/30/21			12/31/21			3/31/22			3/31/22		6/30/22
Starz Domestic Networks
Revenue	$	358	$	359	$	363	$	350	$	1,429	$	350
Gross Contribution		135			69			85			95			384		29
Product Line Profit		120			52			70			79			321		12
STARZPLAY International
Revenue		24			26			26			31			107		32
Gross Contribution		(26)			(41)			(36)			(39)			(141)		(42)
Product Line Profit		(31)			(47)			(42)			(46)			(165)		(49)
Total Media Networks Segment
		382			385			389			380			1,536		381
Revenue
Gross Contribution		109			28			50			56			243		(14)
Segment Profit	$	88	$	6	$	29	$	33	$	155	$	(37)
Subscriber Information
(units in millions at end of period)					As of									As of
			6/30/21			9/30/21			12/31/21			3/31/22					6/30/22
Starz Domestic
Linear		10.4			10.2			9.9			9.5					9.2
OTT		9.7			10.4			11.0			11.5					12.2
Total			20.1			20.6			20.9			21.0					21.4
Starz International
Linear		1.8			1.8			1.8			1.8					1.8
OTT		5.2			5.7			6.7			11.0					12.2
Total			7.0			7.5			8.5			12.8					14.0
Total Starz
Linear		12.2			12.0			11.7			11.3					11.0
OTT		14.9			16.1			17.7			22.5					24.4
Total Starz			27.1			28.1			29.4			33.8					35.4
Starz Play Arabia(1)			1.8			1.9			2.0			2.0					1.9
Total (including Starz Play Arabia)			28.9			30.0			31.4			35.8					37.3
Subscribers by Platform:
Linear Subscribers		12.2			12.0			11.7			11.3					11.0
OTT Subscribers(2)		16.7			18.0			19.7			24.5					26.3
Total Global Subscribers			28.9			30.0			31.4			35.8					37.3

Notes:

1. Represents subscribers of STARZPLAY Arabia, a non-consolidated equity method investee.
2. OTT Subscribers includes subscribers of STARZPLAY Arabia, as presented above.

* Amounts may not add precisely due to rounding

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					LIONS GATE ENTERTAINMENT CORP.
						TRENDING SCHEDULES
					KEY PERFORMANCE INDICATORS (KPIs)
															Three Months
														Fiscal Year
						Three Months Ended						Ended		Ended
(in millions, except per share data)		6/30/21			9/30/21			12/31/21			3/31/22			3/31/22		6/30/22
Adjusted Free Cash Flow(1)(2)(3)	$	(192)	$	195	$	(21)	$	88	$	70	$	(62)
Basic EPS	$	(0.20)	$	0.03	$	(0.20)	$	(0.46)	$	(0.84)	$	(0.53)
Basic WAS		221.8			224.4			225.0			225.2			224.1		225.6
Diluted EPS	$	(0.20)	$	0.03	$	(0.20)	$	(0.46)	$	(0.84)	$	(0.53)
Diluted WAS		221.8			228.5			225.0			225.2			224.1		225.6
Adjusted Basic EPS(1)	$	0.19	$	0.16	$	0.02	$	0.06	$	0.43	$	(0.23)
Adjusted Diluted EPS(1)	$	0.18	$	0.15	$	0.02	$	0.06	$	0.42	$	(0.23)
Investment in Content
Motion Picture	$	148	$	136	$	140	$	41			465	$	101
Television Production		381			374			272			261			1,287		398
Media Networks		207			230			393			304			1,135		286
Eliminations		(159)			(167)			(219)			(130)			(675)		(176)
Total		$	577	$	572	$	586	$	476	$	2,212	$	608
U.S. Theatrical P&A and Premium VOD expense	$	58	$	22	$	35	$	39	$	153	$	26
						As of									As of
			6/30/21			9/30/21			12/31/21			3/31/22					6/30/22
Remaining Performance Obligations(4)	$	1,467	$	1,640	$	1,763	$	1,768				$	1,940
Adjusted OIBDA Leverage Ratio(5)		4.7x			4.7x			5.5x			5.2x					6.6x

Notes:

1. See appendix for reconciliation to the nearest GAAP measure.
2. Adjusted Free Cash Flow amounts for the quarter ended June 30, 2022 includes a net benefit of approximately $13.9 million from the monetization of trade accounts receivable programs. Adjusted Free Cash Flow amounts for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021 includes a net benefit (use of cash) of approximately ($25.5) million, ($79.6) million, $4.7 millionand ($51.0) million, respectively, from the monetization of trade accounts receivable programs.
3. Adjusted Free Cash Flow for the quarter ended December 31, 2021 has been adjusted from amounts previously reported to exclude $2.3 million of repayment of insurance recoveries previously received on prior shareholder litigation.
4. In connection with the adoption of new revenue recognition rules, effective April 1, 2018, the Company is reporting remaining performance obligations in lieu of the legacy backlog metric. Remaining performance obligations represent deferred revenue on the balance sheet plus fixed fee or minimum guarantee contracts where the revenue will be recognized and the cash received in the future (i.e., backlog). Remaining performance obligations do not include estimates
   of variable consideration for transactions involving sales or usage-based royalties (i.e., where our revenue is dependent upon the sales or usage by our customers) in exchange for licenses of intellectual property. For comparative purposes, the backlog portion of remaining performance obligations (excluding deferred revenue) related to our Motion Picture and Television Production segments at June 30, 2022 and March 31, 2022 was $1.5 billion and $1.3 billion, respectively.
5. The leverage ratio represents net corporate debt divided by the trailing twelve months of Adjusted OIBDA as set forth below:

Net Corporate Debt		6/30/21			9/30/21			12/31/21			3/31/22				6/30/22
Corporate Debt	$	2,553	$	2,500	$	2,491	$	2,483	$	2,286
Less: Cash and equivalents		(262)			(443)			(314)			(371)				(379)
Net Corporate Debt		$	2,291	$	2,057	$	2,177	$	2,112		$	1,907
Corporate Debt excludes finance lease obligations
Adjusted OIBDA Leverage Ratio	$	2,291	$	2,057	$	2,177	$	2,112	$	1,907
Net Corporate Debt per above
Adjusted OIBDA for the trailing twelve months		487			439			397			402				287
Leverage Ratio			4.7x			4.7x			5.5x			5.2x				6.6x

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				APPENDIX 1
RECONCILIATION OF NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW
																	Three Months
															Fiscal Year
						Three Months Ended						Ended			Ended
(in millions)		6/30/21			9/30/21			12/31/21			3/31/22			3/31/22			6/30/22
Net Cash Flows Provided By (Used In) Operating Activities(1)	$	(349)	$	16		$	(157)	$	(171)	$	(661)	$	(0)
Capital expenditures		(6)			(8)			(8)			(11)			(33)			(10)
Net borrowings under and (repayment) of production and related loans:
Production loans and programming notes		101			191			134			260			686			128
Production tax credit facility		62			21			8			10			101			9
Insurance recoveries on prior shareholder litigation(2)		-			(25)			2			-			(23)			-
Proceeds from the termination of interest rate swaps(3)		-			-			-			-			-			(189)
Adjusted Free Cash Flow(2)		$	(192)	$	195		$	(21)	$	88	$	70	$	(62)

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 ADJUSTED BASIC AND DILUTED EPS

															Fiscal Year		Three Months
						Three Months Ended						Ended			Ended
(in millions)		6/30/21			9/30/21			12/31/21			3/31/22			3/31/22			6/30/22
Reported Net Income (Loss) Attributable to
Lions Gate Entertainment Corp. Shareholders	$	(45)	$	8	$	(46)	$	(105)	$	(188)	$	(119)
Adjusted share-based compensation expense		35			20			23			23			100			8
Restructuring and other		3			4			1			10			17			8
COVID-19 related charges (benefit)		2			(1)			(3)			(1)			(3)			(1)
Programming and content charges		-			-			-			37			37			-
Charges related to Russia's invasion of Ukraine		-			-			-			6			6			-
Purchase accounting and related adjustments(4)		50			45			50			49			194			48
Loss (gain) on extinguishment of debt		27			0			1			-			28			1
Insurance recoveries on prior shareholder litigation and net (gain) loss on investments and other		(2)			(24)			0			-			(27)			(2)
Tax impact of above items(5)		(24)			(9)			(14)			(26)			(72)			(12)
Deferred tax valuation allowance(6)		6			(1)			1			30			36			26
Noncontrolling interest impact of above items		(8)			(6)			(8)			(9)			(31)			(9)
Adjusted Net Income (Loss) Attributable to Lions Gate
Entertainment Corp. Shareholders		$	42	$	35	$	5	$	13	$	95	$	(52)
Reported Basic EPS	$	(0.20)	$	0.03	$	(0.20)	$	(0.46)	$	(0.84)	$	(0.53)
Impact of adjustments on basic earnings (loss) per share		0.39			0.13			0.22			0.52			1.27			0.30
Adjusted Basic EPS		$	0.19	$	0.16	$	0.02	$	0.06	$	0.43	$	(0.23)
Reported Diluted EPS	$	(0.20)	$	0.03	$	(0.20)	$	(0.46)	$	(0.84)	$	(0.53)
Impact of adjustments on diluted earnings (loss) per share		0.38			0.12			0.22			0.52			1.26			0.30
Adjusted Diluted EPS		$	0.18	$	0.15	$	0.02	$	0.06	$	0.42	$	(0.23)
Adjusted Weighted Average number of common shares
outstanding:
Basic		221.8			224.4			225.0			225.2			224.1			225.6
Diluted		229.2			228.5			229.5			230.6			229.4			225.6

Notes:

1. Cash flows provided by (used in) operating activities for the quarter ended June 30, 2022 includes a net benefit of approximately $13.9 million from the monetization of trade accounts receivable programs. Cash flows provided by (used in) operating activities for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021 includes a net benefit (use of cash) of approximately ($25.5) million, ($79.6) million, $4.7 million and ($51.0) million, respectively, from the monetization of trade accounts receivable programs.
2. Adjusted Free Cash Flow for the quarter ended December 31, 2021 has been adjusted from amounts previously reported to exclude $2.3 million of repayment of insurance recoveries previously received on prior shareholder litigation.
3. During the three months ended June 30, 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.
4. 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.
5. Represents the tax impact of the adjustments to net income (loss) attributable to Lions Gate Entertainment Corp. shareholders, calculated using the blended statutory tax rate applicable to each adjustment.
6. 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.

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