ITEM 1A. RISK FACTORS.
You should carefully consider each of the following risks and uncertainties associated with Lionsgate and the ownership of Lionsgate securities. In addition, for more information you should review the specific descriptions of Lionsgate’s businesses under “Item 1. Business” as well as other information included in, or incorporated by reference into, this Annual Report. The following list of significant risk factors is not all-inclusive or necessarily in order of importance. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may materially adversely affect us in future periods.
Risks Related to Lionsgate’s Business
Lionsgate faces substantial capital requirements and significant financial risks.
The production, acquisition and distribution of motion picture and television content require substantial capital investment, and a significant period of time may elapse between the expenditure of funds and the receipt of revenues following release or distribution. Lionsgate cannot assure you that it will be able to successfully implement or continue arrangements intended to reduce production-related risks including the utilization of tax credits or participation in government or industry incentive programs. In addition, Lionsgate may experience production delays, cost increases or other disruptions resulting from events beyond its control. If a production incurs substantial budget overruns, Lionsgate may have to seek additional financing or fund such overruns itself. Lionsgate cannot assure you that additional financing, if required, will be available on acceptable terms, or at all, or that it will ultimately recoup these increased costs. Increased production costs or budget overruns incurred with respect to a particular film or television project may delay or prevent its completion, release, or result in a postponed release to a less favorable date, which could adversely affect box office performance and the overall financial success of the project. Any of the foregoing could have a material adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate’s revenues and results of operations fluctuate significantly.
Lionsgate’s results of operations depend significantly on the commercial success of the motion picture, television and other content that it sells, licenses or distributes, the performance of which cannot be predicted with certainty. Viewer preferences and audience acceptance are difficult to predict and may be influenced by numerous factors beyond Lionsgate’s control, including critical reception, the format in which content is released, the talent involved, genre and subject matter, audience response, the quality and volume of content released by competitors, the availability of alternative forms of entertainment (including user-generated content), general economic conditions and other tangible and intangible factors. Lionsgate may not be able to anticipate and respond effectively to shifts in consumer tastes and viewing behaviors.
Lionsgate’s results of operations may also fluctuate due to the timing, mix, number and availability of theatrical motion picture and home entertainment releases, as well as licensing windows for content. In addition, low viewership for television programming produced by Lionsgate may result in the cancellation or non-renewal of a program, which could lead to significant programming impairments in a given period, and reduced license fees or other revenues in future periods. Other than non-renewals or cancellation of television programs or series that may occur from time to time, Lionsgate is not aware of any current material cancellation of television programming releases or of content that Lionsgate sells, licenses or distributes.
In addition, the comparability of Lionsgate’s results of operations may be affected by changes in accounting guidance or changes in Lionsgate’s ownership of certain assets and businesses. As a result of the foregoing factors, Lionsgate’s results of operations may fluctuate and differ from period to period, and therefore, may not be indicative of the results for any future periods or directly comparable to prior reporting periods.
Lionsgate’s results may be affected by the performance of a limited number of content releases in any given period.
Lionsgate’s operating results in any period may depend significantly on the performance of a limited number of motion pictures or television programs released or licensed during that period. As a result, the underperformance of one or more projects, whether due to audience reception, critical response, competitive releases, marketing execution, timing, or other factors, could have an adverse effect on Lionsgate’s revenues, operating results and profitability for that period.
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This concentration risk may be exacerbated by the high upfront capital investment required to produce or acquire content and the inherent unpredictability of audience preferences. Losses or lower‑than‑expected returns from projects may not be offset by the performance of other content within the same period or fiscal year, and the impact of underperformance may extend beyond the initial release window. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate may incur significant write-offs if its projects do not perform well enough to recover costs.
Lionsgate is required to amortize capitalized production costs over the expected revenue streams as it recognizes revenue from films or other projects. The amount of production costs amortized in any period depends on, among other factors, Lionsgate’s estimates of total future revenues expected to be received from each project. Unamortized production costs are evaluated for impairment each reporting period on a project-by-project basis when events or changes in circumstances indicate that the fair value of a film is less than its unamortized cost. Such events and changes in circumstances may include, among others, adverse changes in the expected performance of a film prior to its release, actual costs substantially in excess of budgeted amounts, delays or changes in release plans, or actual performance following release that is less than previously expected. If, in any reporting period, Lionsgate revises downward its estimates of total anticipated revenues for a film or other project or revises upward its estimated production or distribution costs, Lionsgate may be required to accelerate amortization or record impairment charges with respect to the remaining unamortized costs, even if impairment charges were previously recorded for that project. These write‑offs or impairment charges could be significant and could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
A significant portion of Lionsgate’s library revenues is derived from a small number of titles.
In any given fiscal quarter, a limited number of titles may account for a substantial portion of the revenues generated from Lionsgate’s library. In addition, many titles in its library are not actively distributed at any given time and generate little or no revenue. The rights associated with titles in Lionsgate’s library also vary significantly and, in many cases, are subject to limitations as to media, territory or term. In certain instances, Lionsgate holds only partial rights, certain rights may be reserved by or granted to third parties, or Lionsgate’s distribution or exploitation rights may expire after a specified period. Lionsgate’s ability to maintain and grow its library revenues depends on, among other things, its ability to continue to acquire new content and rights to titles through production, distribution arrangements, acquisitions, mergers, joint ventures or other strategic relationships, and to renew or extend rights to titles that generate a significant portion of its revenues on acceptable terms. Any such failure could have a material adverse effect on its business, financial condition, operating results, liquidity and prospects.
Lionsgate has not entered into any agreements regarding material acquisitions of titles, renewals, business combinations, joint ventures or sales that have not yet closed.
Changes in consumer behavior, evolving technologies (including artificial intelligence) and shifts in distribution models may adversely affect Lionsgate’s business, financial condition or results of operations.
Lionsgate’s success depends in part on its ability to anticipate and adapt to evolving consumer preferences, content consumption patterns, technological developments and changes in industry business models. The way audiences discover, access and consume content continues to evolve, driven by new distribution platforms and increased competition from new entrants and emerging technologies. These developments have made revenue more difficult to predict and have increased pressure on pricing, release strategies and monetization models. Advances in content delivery technologies and the proliferation of new platforms and services have significantly increased the volume of available video content and altered consumer expectations regarding content availability, pricing and convenience. These changes include continued cord‑cutting, the growth of advertising‑based video‑on‑demand services and free ad‑supported streaming television (FAST) channels, and other evolving distribution models.
In addition, evolving technologies such as artificial intelligence (“AI”) may be used in ways that increase access to publicly available free or relatively inexpensive content that may reduce demand for Lionsgate’s products and services. Regulatory frameworks governing AI and other emerging technologies remain unsettled and affect aspects of Lionsgate’s existing business model, including how it creates, uses, protects and monetizes its intellectual property and how it produces, distributes and markets content.
In particular, AI technologies, including generative AI, machine learning and large language models, are rapidly evolving and becoming more widely adopted across the entertainment industry. Lionsgate has begun incorporating certain AI‑enabled tools into its operations, and competitors may gain advantages by adopting such technologies more quickly or more effectively.
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The use of AI technologies is relatively new and may give rise to operational, legal, regulatory, ethical and reputational risks that are difficult to predict, particularly as their use becomes more integral to Lionsgate’s business. If Lionsgate is unable to successfully leverage emerging technologies or adapt to changing consumer behavior, competitive dynamics, distribution platforms or business models, any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate faces substantial competition in all aspects of its business.
Lionsgate operates as an independent producer and distributor. Most of the major U.S. studios are part of large diversified corporate groups that can have significantly greater financial resources, established relationships, broader portfolios and alternative revenue streams that may allow them to better withstand fluctuations in the performance of their motion picture and television operations. If Lionsgate is unable to compete successfully and profitably with existing or new competitors, its business could be adversely affected, which could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate relies on a few major retailers and distributors and the loss of any of those could reduce Lionsgate’s revenues and operating results.
A small number of retailers and distributors account for a material percentage of the revenues in home entertainment for the Motion Picture segment. Lionsgate does not have long-term agreements with retailers. In fiscal 2026, 2025 and 2024, Lionsgate generated approximately 18%, 16% and 14%, respectively, of its revenue from Amazon.com, Inc. and its subsidiaries. Lionsgate cannot assure you that it will maintain favorable relationships with its retailers and distributors (including with Starz) or that they will not be adversely affected by economic conditions, including as a result of global pandemics, wars, such as Russia’s invasion of Ukraine (including sanctions therefrom, though Lionsgate and, to the knowledge of Lionsgate, its directors and executive officers have not been, and are not expected to be, subject to any sanctions related to Russia’s invasion of Ukraine), bank failures, ongoing disruptions in financial markets and in commercial activity generally related to changes in monetary and fiscal policy, United States political developments, geopolitical events and other sources of instability, inflation or a recession. For additional information, see Note 17 to the consolidated financial statements.
Lionsgate’s content licensing arrangements, primarily those relating to the distribution of films in foreign territories, may include minimum guarantee arrangements which, absent such arrangements, could adversely affect its results of operations.
Lionsgate generates revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international marketplaces. Certain of such content licensing arrangements, primarily those relating to the distribution of films by third parties in foreign territories, may include a minimum guarantee. Revenue from these minimum guarantee arrangements amounted to approximately $174.6 million, $110.5 million and $151.0 million for the years ended March 31, 2026, 2025 and 2024, respectively. To the extent that receipts generated by such foreign distributor from distribution of the film in the territory exceed a formula-based threshold, the distributor will pay Lionsgate an amount in addition to the minimum guarantee (the “overage”). Absent these arrangements, the revenues derived by Lionsgate may be determined as a function of a revenue-sharing formulation that calculates the licensee fee payable to Lionsgate solely based on the actual performance of the film in the territory. In these situations, content that is not favorably received or underperforms may not achieve the level of revenue that Lionsgate would have received from a minimum guarantee arrangement, which could adversely impact Lionsgate’s business, operating results and financial condition.
Lionsgate does not have long-term arrangements with many of its production or co-financing partners and, as a result, Lionsgate may not have certain derivative rights related thereto.
Lionsgate typically does not enter into long-term production or overall arrangements with the creative producers of motion picture and television content that it produces, acquires or distributes. As a result, Lionsgate may not have ongoing rights or guaranteed access to future projects from such producers or co‑financing partners. In addition, while Lionsgate often seeks to obtain derivative rights, such as rights to produce or distribute prequels, sequels, remakes or other related content, there can be no assurance that such rights will be available, retained or exercised with respect to any particular property. There is no guarantee that Lionsgate will continue to produce, acquire or distribute future content from any creative producer or co‑financing partner, or that it will be able to exploit or extend the value of existing content through derivative works. The loss of relationships with key producers or partners, or the inability to obtain or maintain derivative rights could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate’s success depends on its ability to attract and retain key personnel and artistic talent.
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Lionsgate’s success depends upon the continued efforts, abilities and expertise of its executive teams and other key employees, including production, creative and technical personnel, as well as its ability to identify, attract, hire, train and retain such personnel. Although Lionsgate has employment agreements with certain senior executive officers and production executives, it does not maintain significant “key person” life insurance policies for any employee and such agreements cannot assure continued services of such employees. In addition, Lionsgate relies on the availability of a number of actors, writers, directors, producers and other creative talent, many of whom are engaged through third-party production companies who create its original programming. Competition for experienced executives and sought‑after creative talent is intense, and Lionsgate may be unable to attract or retain key personnel or artistic talent on acceptable terms, or at all. The loss of, or inability to attract or retain, key personnel or creative talent could disrupt operations, delay or impair content development and production, and could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate could be adversely affected by labor disputes, strikes or other union job actions.
Lionsgate is directly or indirectly dependent on the availability of highly specialized union members who are essential to the development and production of motion pictures and television content including writers, directors, actors and other creative talent, as well as technical and trade employees who are subject to collective bargaining agreements. A labor dispute, work stoppage, slowdown, strike involving one or more unions that provide such essential personnel could disrupt or delay Lionsgate’s ongoing development or production activities, increase costs, or delay or interrupt the release of motion picture or television content. Labor disputes have occurred in the past, such as the industry-wide strike by the Writers Guild of America in May 2023 and Screen Actors Guild in July 2023, and similar actions may occur in the future. Such disputes may restrict access to creative talent, result in work stoppages, disrupt production schedules, reduce the availability of content and may result in increased costs and decreased revenue. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Business interruptions resulting from circumstances or events beyond Lionsgate’s control could adversely affect its business operations.
Lionsgate’s operations may be vulnerable to service disruptions, outages and other interruptions caused by events or circumstances beyond its control, including fires, floods, earthquakes, power outages, telecommunications failures, software or hardware failures, loss of data, security breaches, cyberattacks, personnel misconduct or error, war or acts of terrorism, global pandemics, labor disruptions or other unforeseen events. Lionsgate’s headquarters are located in Southern California, a region that is subject to seismic activity, wildfires, flooding and other natural disasters. Although Lionsgate has implemented business continuity and disaster recovery plans to respond to certain disruptions, there can be no assurance that such plans will be effective in the event of a specific disaster. Extended disruptions, such as a prolonged power outage, data interruption or loss of key facilities, could materially impair Lionsgate’s ability to operate its business.
In addition, while Lionsgate maintains business interruption insurance for certain potential losses, including losses related to natural disasters, such insurance may not be sufficient to cover all losses or damages, and may not be available on acceptable terms in the future. Any unrecovered losses, extended interruptions or failures to resume normal operations could have a material adverse effect on its business, financial condition, operating results, liquidity and prospects.
Changes in Lionsgate’s business strategy, growth initiatives or restructuring activities may result in increased costs or otherwise affect its profitability.
In response to changes in its business environment, Lionsgate may from time to time adjust its business strategies, including expanding or emphasizing certain lines of business, investing in new or existing operations, or restructuring particular businesses, assets or operations. External factors such as technological developments, changing consumer patterns, changes in the acceptance of theatrical and television offerings, and broader macroeconomic conditions may also adversely affect the value of Lionsgate’s assets or the performance of its businesses. As a result of these strategic changes or external developments, Lionsgate may incur significant costs to implement changes to its business strategy, including restructuring charges, integration costs or other expenses, and may be required to record write‑downs or impairments of assets. In addition, investments in new or existing businesses may generate lower‑than‑expected or negative returns in the short term, and the ultimate prospects of such businesses may be uncertain. Any of these developments could increase Lionsgate’s costs, reduce anticipated returns or result in significant charges, and could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
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Lionsgate is subject to risks associated with possible acquisitions, dispositions, business combinations and joint ventures.
From time to time, Lionsgate may evaluate or pursue acquisitions, disposition of assets, business combinations, joint ventures or other strategic transactions intended to complement or expand its business. Such transactions involve significant risks and uncertainties, and Lionsgate may not realize the anticipated benefits of any transaction it undertakes. Risks associated with these transactions include the assumption of liabilities that are greater than expected or not identified during due diligence, significant transaction and integration cost, diversion of management’s time and resources, difficulties integrating operations, personnel, information technology and accounting systems, and challenges in managing the combined business, particularly if key personnel are lost during or following the integration process. In addition, acquisitions or business combinations may result in impairment charges related to goodwill and other intangible assets, development write‑offs or other transaction‑related expenses, which could adversely affect Lionsgate’s financial results. There can be no assurance that any acquisition, business combination or joint venture will be completed on acceptable terms, on a timely basis, or at all, or that Lionsgate will achieve anticipated operating efficiencies, cost savings, revenue growth, synergies or other expected benefits. Lionsgate may also decide to sell individual properties, libraries or other assets or businesses. While such dispositions may generate net proceeds, they may also reduce future revenues and earnings as a result of the loss of income‑producing assets, particularly if the disposed assets contributed meaningfully to Lionsgate’s business diversification. In addition, adverse market conditions or poor timing may result in unrealized asset value. These factors could diminish Lionsgate’s ability to service its indebtedness or repay its notes or other obligations at maturity. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Global and regional economic conditions may adversely affect Lionsgate’s business.
Global economic uncertainty and volatility resulting from events such as pandemics, wars, inflationary pressures, bank failures, recessions or other financial disruptions may cause a general tightening in the credit markets, reduced liquidity, increases in the rates of default and bankruptcy, heightened government intervention, decreased consumer confidence, slower economic activity and significant volatility in credit, equity and fixed income markets. Ongoing disruptions may also result from changes in monetary and fiscal policy, political developments in the United States, geopolitical events and other sources of instability. A decrease in economic activity in the U.S. or in other regions of the world in which Lionsgate operates could adversely affect demand for its content, thus reducing its revenues and earnings. Weak economic conditions may negatively impact the performance of theatrical, television and home entertainment releases. In addition, sustained inflation or rising price levels could shift consumer demand away from discretionary entertainment while simultaneously increasing Lionsgate’s operating and production costs. Further, instability or failures within the financial services sector could limit access to capital, increase borrowing costs or make it more difficult for Lionsgate to finance acquisitions or engage in other financing activities. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate faces economic, political, regulatory, and other risks associated with doing business internationally.
Lionsgate has operations and distributes content outside the U.S. and derives a portion of its revenue from international sources. As a result, its business is subject to certain risks inherent in international business, many of which are beyond its control. These risks include:
• difficulties in understanding and complying with local laws, regulations and business practices in foreign jurisdictions;
• laws and policies affecting trade, investment, taxation, repatriation of funds and withholding taxes;
• sanctions and other restrictions applicable to certain countries, entities and individuals (such as those imposed in connection with Russia’s invasion of Ukraine);
• trade disputes;
• compliance with anti-corruption laws such as the Foreign Corrupt Practices Act and the U.K. Bribery Act
• changes in local regulatory requirements including regulations designed to stimulate local productions, promote and preserve local culture and economic activity (including local content quotas, investment obligations, local ownership requirements, and levies to support local film funds);
• differing consumer protection laws, data privacy and cybersecurity laws, and changes in these laws;
• differing employee or labor laws and changes in these laws that may impact our ability to hire and retain foreign employees;
• strikes or other employment actions that may make it difficult to produce and/or localize content;
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• censorship requirements that may cause Lionsgate to remove or edit popular content, leading to consumer disappointment, brand tarnishment or consumer dissatisfaction;
• inability to adapt Lionsgate’s offerings successfully to differing languages, cultural tastes, and preferences in international markets;
• international jurisdictions where laws are less protective of intellectual property and varying attitudes towards the piracy of intellectual property;
• establishing and protecting a new brand identity in competitive markets;
• the instability of foreign economies and governments;
• currency exchange restrictions, export controls and currency devaluation risks in some foreign countries;
• geopolitical conflicts, including ongoing hostilities and regional tensions in Eastern Europe and the Middle East, may adversely affect global economic conditions, financial markets and our business.
• war and acts of terrorism; and
• the spread of communicable diseases, which may impact business in such jurisdictions.
Lionsgate’s actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of its business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse business consequences, which could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
If Entertainment One Canada Ltd. loses Canadian status, it could lose licenses, incentives and tax credits.
Through Lionsgate’s acquisition of eOne in December 2023, it acquired the economic interests in Entertainment One Canada Ltd., a Canadian corporation (“EOCL”). EOCL is able to benefit from a number of licenses, incentive programs and Canadian government tax credits as a result of it being “Canadian controlled” as defined in the Investment Canada Act. Lionsgate has taken measures to ensure that EOCL’s Canadian status is maintained. There can be no assurance, however, that EOCL will be able to continue to maintain its Canadian status. The loss of EOCL’s Canadian status could harm Lionsgate’s business, including the possible loss of future incentive programs and claw back of funding previously provided to EOCL.
Lionsgate’s business depends in part on the maintenance and protection of its intellectual property rights, and failure to protect those rights or the cost of pursuing or defending intellectual property claims may have a material adverse effect on its business .
Lionsgate’s ability to compete depends, in part, on maintaining and protecting its proprietary and intellectual property rights. Lionsgate attempts to maintain and protect its rights to its content through available copyright and trademark laws, contractual protections in agreements with employees, contractors and production partners, and licensing and distribution arrangements with reputable third parties for specific territories, media and terms. Despite these precautions, intellectual property laws may afford protection in certain countries, and unauthorized third parties may copy and distribute or otherwise exploit Lionsgate’s productions or certain portions or applications of its intended productions, without authorization. Moreover, there can be no assurance that Lionsgate or third-party content producers or parties from whom it may license or acquire content have, in all instances, obtained or maintained sufficient intellectual property rights, or entered into agreements containing appropriate “work made for hire,” assignment, nondisclosure or other protective provisions. As a result, Lionsgate may be required to expend significant resources to enforce its intellectual property rights, protect trade secrets, determine the scope or validity of its rights or those of others, or defend against claims of infringement or invalidity. Such actions may be costly, time‑consuming and disruptive, and may divert management attention and operational resources.
Lionsgate’s more successful and popular films, television programs and franchises may be particularly susceptible to infringement, especially in connection with or shortly after release. Alleged infringers may assert defenses such as fair use or similar doctrines, challenge the validity or enforceability of Lionsgate’s intellectual property rights, or assert counterclaims alleging improper enforcement. Even if such claims lack merit, they may result in adverse publicity, unfavorable interim rulings, significant litigation costs or delays, and there can be no assurance that Lionsgate will prevail in all cases. Conversely, Lionsgate may from time to time be subject to claims alleging that its productions, content or production techniques infringe or misappropriate the intellectual property rights of third parties, including patent rights. Such claims, whether or not meritorious, may require Lionsgate to incur significant legal and management costs, pay damages or license fees, modify business practices or technology, or be subject to injunctions or other restrictions. These risks may be amplified by the increasing number of third parties whose primary business is asserting intellectual property claims.
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In addition, Lionsgate may lose or cease to control certain intellectual property rights over time. Certain rights may expire, revert or be terminated under applicable copyright laws, or be subject to transfer or termination rights exercised by third parties. In other cases, Lionsgate may have acquired rights for a limited duration or subject to other restrictions, or the underlying content may enter the public domain. The loss of, or limitations on, Lionsgate’s ability to control or re‑acquire such rights on acceptable terms, if at all, could limit its ability to prevent third‑party exploitation of related content. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Piracy of motion picture and television content could adversely affect Lionsgate’s business over time.
Piracy is extensive in many parts of the world and has been facilitated by the increased availability of high-quality digital copies of content and technological advances that enable the rapid conversion, duplication and distribution of motion picture and television content in digital formats. This trend has made it easier to create, transmit and share unauthorized copies of content. The proliferation of unauthorized copies has reduced, and may continue to reduce, the revenues Lionsgate receives from the distribution and exploitation of its content. To address these risks, Lionsgate may be required to implement enhanced security, monitoring and anti-piracy measures, which could be costly and may not be fully effective. Lionsgate cannot assure you that technological, contractual or legal measures will successfully prevent or limit piracy or its adverse effects. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate’s business involves risks of claims arising from the content it produces, distributes or licenses, which could adversely affect its business, results of operations and financial condition.
As a producer and distributor of media content, Lionsgate, in the ordinary course of business, may be subject to claims alleging defamation, invasion of privacy, negligence, infringement of copyright or trademark rights, or other claims based on the nature and content of the materials it produces, distributes or licenses. Lionsgate may also face claims arising from statements made by its personnel or creative talent in connection with the promotion of its content or otherwise attributable to its business, as well as claims relating to mature or controversial subject matters. These types of claims have historically been asserted, sometimes successfully, against producers and distributors of media content. The defense and resolution of such claims may be costly, time‑consuming and disruptive, and adverse outcomes could result in damages, settlements, injunctions, restrictions on the distribution or exploitation of content, or other judicial or regulatory remedies.
In addition, such matters, regardless of their ultimate outcome, may generate negative publicity, which may be rapid and amplified by social media and digital platforms and may persist even after underlying issues have been addressed or resolved. Any resulting reputational harm may impair Lionsgate’s ability to market content effectively, secure or renew distribution and licensing arrangements, attract or retain creative talent, or maintain audience engagement, and may result in financial losses or increased operating costs.
While Lionsgate maintains insurance coverage for certain liabilities, such coverage may be subject to exclusions, deductibles or coverage limits and may not apply to particular claims. Any liability that is not covered by insurance, or that exceeds available insurance coverage, or any resulting adverse market or commercial effects, could have a materially adverse effect on Lionsgate’s business, financial condition and results of operations.
Lionsgate may be subject to litigation, regulatory investigations and other legal proceedings that could adversely affect its business, financial condition and results of operations.
From time to time, Lionsgate is involved in various legal proceedings, claims, regulatory investigations and arbitration proceedings, arising in the ordinary course of business. These matters may relate to, among other matters, intellectual property rights, employment and labor issues, consumer privacy and data protection, contractual and commercial disputes, and the production, distribution, and licensing of content. The outcome of such matters is inherently uncertain and may be difficult to predict. Legal and regulatory proceedings, whether successful or not, may be time-consuming, costly and disruptive to operations. Such matters may result in substantial damages, fines, penalties, consent decrees, injunctive relief or other sanctions, require changes to business practices or operations, generate negative publicity, require significant amounts of management time or result in the diversion of significant operational resources. In addition, Lionsgate’s insurance coverage may not be sufficient to cover all costs, liabilities or losses arising from existing or future claims. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition and results of operations.
Lionsgate relies upon cloud computing services to support certain aspects of its operations, and disruptions or interference with those services could adversely impact its operations and business.
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Lionsgate utilizes cloud‑based computing services to support elements of its technology infrastructure and business operations, including data processing, storage and related services. Lionsgate designs and operates certain software applications and systems to function within the technical architecture and service environment provided by its cloud service providers. As a result, Lionsgate’s operations may be dependent on the continued availability, stability, security and performance of those cloud services. Disruptions, service interruptions, outages or other performance issues affecting Lionsgate’s cloud service providers, whether due to technical failures, cybersecurity incidents, business disruptions, regulatory action, capacity constraints or other factors, could impair Lionsgate’s ability to operate and may result in data loss, service delays or interruptions, reduced operational efficiency, increased costs or reputational harm. In addition, migrating systems to alternative cloud service providers may be complex, time‑consuming and costly and may not be feasible on acceptable terms, if at all. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Lionsgate’s activities are subject to stringent and evolving obligations which may adversely impact its operations. Lionsgate’s actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of its business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
Data Privacy and Security. In the ordinary course of its business, Lionsgate collects, generate, uses, stores, processes, discloses, transmits, shares and transfers (collectively “process”) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, and third-party data, through its websites and applications and those of third parties. Among other purposes, Lionsgate uses this information to engage with users, promote its programming, and monitor the use of its digital platforms. Lionsgate’s processing of personal data subjects it to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
In the U.S., federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act and the Controlling the Assault of Non-Solicited Pornography and Marketing Act), and other similar laws (e.g., wiretapping laws). For example, numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact Lionsgate’s business and ability to provide its products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act (“CCPA”) applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines and allows private litigants affected by certain data breaches to recover significant statutory damages. Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future. These developments will further complicate compliance efforts and increase legal risk and compliance costs for Lionsgate and the third parties with whom Lionsgate works.
Outside the U.S., an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example, the European Union’s General Data Protection Regulation (the “EU GDPR”), the United Kingdom’s GDPR (the “UK GDPR” and, together with the EU GDPR, the “GDPR”), the EU Digital Services Act, Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018) and Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) impose strict requirements for processing personal data. For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million Euros (under the EU GDPR) or 17.5 million pounds sterling (under the UK GDPR), or 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. As another example, in Canada, PIPEDA and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), apply to Lionsgate’s operations, as well as the LGPD in Brazil. The LGPD broadly regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the GDPR.
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Additionally, regulators are increasingly scrutinizing companies that process children’s data. Numerous laws, regulations, and legally-binding codes, such as the Children’s Online Privacy Protection Act (“COPPA”), California’s Age-Appropriate Design Code, CCPA, other U.S. state comprehensive privacy and social media laws, GDPR, and the UK Age-Appropriate Design Code impose various obligations on companies that process children’s data, including requiring certain consents to process such data and extending certain rights to children and their parents with respect to that data or verifying a user’s age. Some of these obligations have wide ranging applications, including for services that do not intentionally target child users (defined in some circumstances as a user under the age of 18 years old). These laws may be, or in some cases, have already been, subject to legal challenges and changing interpretations, which may further complicate Lionsgate’s efforts to comply with these laws.
Additionally, under various privacy laws (such as the Video Privacy Protection Act) and other obligations, Lionsgate may be required to obtain certain consents to process personal data. Noncompliance with such obligations is increasingly subject to challenges by class action plaintiffs. Lionsgate’s inability or failure to obtain such consents could result in adverse consequences.
In the ordinary course of business, Lionsgate transfers personal data from Europe and other jurisdictions to the U.S. or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (“EEA”) and the United Kingdom (“U.K.”) have significantly restricted the transfer of personal data to the U.S. and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt or have already adopted similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the U.S. in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto (“DPF”) (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the DPF), these mechanisms are subject to legal challenges, and there is no assurance that Lionsgate can satisfy or rely on these measures to lawfully transfer personal data to the U.S.
If there is no lawful manner for Lionsgate to transfer personal data from the EEA, the UK or other jurisdictions to the U.S., or if the requirements for a legally-compliant transfer are too onerous, Lionsgate could face significant adverse consequences, including the interruption or degradation of its operations, the need to relocate part of or all its business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against processing or transferring of personal data necessary to operate its business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of the EEA for allegedly violating the GDPR’s cross-border data transfer limitations.
Lionsgate is also bound by contractual obligations related to data privacy and security, and its efforts to comply with such obligations may not be successful. We are also contractually subject to industry standards adopted by industry groups and, we are, and may become in the future, subject to such obligations. For example, Lionsgate is contractually subject to certain industry standards adopted by industry groups, such as the Payment Card Industry Data Security Standard (“PCI DSS”). The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access. Noncompliance with PCI DSS can result in penalties ranging from fines of $5,000 to $100,000 per month by credit card companies, litigation, damage to Lionsgate’s reputation, and revenue losses. Lionsgate relies on third parties to process payment card data, who may be subject to PCI DSS, and its business may be negatively affected if these parties are fined or suffer other consequences as a result of PCI DSS noncompliance. Moreover, Lionsgate publishes privacy policies, marketing materials and other statements regarding data privacy and security, including as required by applicable laws and regulations. Regulators in the United States are increasingly scrutinizing these materials, and if these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, misleading or misrepresentative of Lionsgate’s practices, it may be subject to investigation, enforcement actions by regulators or other adverse consequences.
Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires significant resources and has in the past and may continue to necessitate changes to Lionsgate’s information systems, policies and practices and to those of any third parties with whom it works.
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Lionsgate may at times fail (or be perceived to have failed) in efforts to comply with data privacy and security obligations. Moreover, despite its efforts, its personnel or third parties with whom it works may fail to comply with such obligations, which could negatively impact Lionsgate’s business operations and compliance posture. If Lionsgate or the third parties with whom it works fails, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, Lionsgate could face significant consequences, including, but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans or restrictions on processing personal data; or orders to destroy or not use personal data. In particular, plaintiffs have become increasingly active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on Lionsgate’s reputation, business, or financial condition, including, but not limited to: loss of customers; interruptions or stoppages in business operations; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize its products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to its business model or operations.
Our employees and personnel use generative AI and/or automated decision-making technologies to perform their work, and the disclosure and use of personal data in AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws and regulations regulating AI and/or automated decision-making technologies. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use AI and/or automated decision-making technologies, it could make our business less efficient and result in competitive disadvantages.
Consumer Protection Laws . The continued growth and development of the market for online commerce may lead to more stringent consumer protection laws both domestically and internationally, which may impose additional burdens on Lionsgate. If authorities start taking increased enforcement action related to statutes governing perceived unfair deceptive acts and practices, Lionsgate could suffer additional costs, complaints and/or regulatory investigations or fines. Several of these laws also have private rights of action. Lionsgate’s actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, reputational harm, and other adverse business consequences. Other changes in consumer protection laws and the interpretations thereof could have a materially adverse effect on Lionsgate’s business, financial condition and results of operations.
Levies/Taxes. Governments are increasingly looking to introduce regulations related to media and tax that may apply to Lionsgate’s services. For example, some international governments have enacted or are considering enacting laws that impose levies and other financial obligations on media operators located outside their jurisdiction. Other changes in levy or tax laws and the interpretations thereof could have a materially adverse effect on Lionsgate’s business, financial condition and results of operations.
Service disruptions, information security incidents or failures affecting Lionsgate or third-parties with whom it works could disrupt its operations, harm its reputation and adversely affect its business.
In the ordinary course of business, Lionsgate and the third-parties with whom it works collect, process, store and transmit proprietary, confidential and sensitive information, including personal data, intellectual property and trade secrets. Lionsgate’s information technology systems, and those of the third-parties with whom it works, are subject to operational and cybersecurity risks, including cyberattacks, unauthorized access, software or hardware failures, data loss, and other security incidents. These threats are becoming more prevalent and increasingly difficult to detect, and may arise from a variety of sources, including malicious actors, personnel (such as through theft or misuse), organized criminal groups, insiders, hacktivists and nation‑state or nation‑state‑supported actors, and may be heightened during periods of geopolitical conflict or instability.
Lionsgate and third-parties with whom it works face an evolving landscape of cybersecurity threats, including phishing and other social‑engineering attacks (including those incorporating deepfakes), malware, ransomware, denial‑of‑service attacks, credential‑based intrusions, supply‑chain compromises, software bugs and vulnerabilities, server malfunctions, telecommunications failures, attacks enhanced or facilitated by AI and other similar threats. Ransomware and extortion‑based attacks, in particular, have become more frequent across industries and may result in significant business interruptions, loss of data, reputational harm, diversion of management attention, and increased remediation and compliance costs. In certain circumstances, Lionsgate may be unwilling or unable to make extortion payments due to legal, regulatory or policy considerations.
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Further, a partially remote workforce poses increased risks to Lionsgate’s information technology systems and data, as certain employees work from home on a full or part-time basis, utilizing network connections outside Lionsgate’s premises. Additionally, sensitive information of Lionsgate, the third parties with whom it works, or its customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies. Business transactions (such as acquisitions or integrations) could expose Lionsgate to additional cybersecurity risks and vulnerabilities, as its systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, Lionsgate may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into Lionsgate’s information technology environment and security program.
Lionsgate also relies on third‑party service providers, including providers of cloud‑based infrastructure, data hosting, content delivery, communications and other information technology services, to support critical business functions. Lionsgate’s ability to monitor, control and ensure the cybersecurity practices of these third parties is inherently limited, and such providers may experience cybersecurity incidents, operational disruptions or system failures that adversely affect Lionsgate’s operations, data or services. Contractual protections or remedies may be insufficient to fully compensate Lionsgate for resulting losses. In addition, supply‑chain vulnerabilities have increased in frequency and severity, and it may be difficult to identify, assess or remediate in a timely manner. We cannot guarantee that third parties’ infrastructure in our supply chain or that of the third parties with whom we work have not been compromised.
Certain of the previously identified or similar threats have in the past and may in the future cause a security incident or other interruption resulting in the unauthorized, unlawful, or accidental acquisition of Lionsgate’s sensitive information or other adverse consequences, such as unavailability of network or information resources or services. Lionsgate maintains governance, risk management and technical safeguards designed to identify, assess and mitigate cybersecurity risks and to protect its information assets. However, no information security program can eliminate all risks, and vulnerabilities have in the past and may in the future fail to be detected, addressed or remediated in a timely manner. These vulnerabilities can be exploited and result in a security incident Lionsgate has previously experienced, and may continue to experience, attempts to compromise its systems, including phishing and other social‑engineering efforts, and there can be no assurance that future incidents will not be successful or materially disruptive.
A cybersecurity incident or systems disruption could impair Lionsgate’s ability to operate its business, disrupt the production, distribution or licensing of content, require significant expenditures to investigate and remediate, and result in regulatory investigations, reporting obligations, litigation, fines or penalties, contractual liabilities, reputational harm, loss of customers or revenue, or other adverse consequences. Certain data privacy and security obligations may require Lionsgate to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences.
Lionsgate’s contracts may not contain limitations of liability, and even where they do, there is no guarantee that the limitations of liability will be sufficient to protect Lionsgate from liabilities, damages, or claims related to its data privacy and security obligations. In addition, Lionsgate’s insurance coverage may not be sufficient to mitigate liabilities arising out of its privacy and security practices, and this coverage may not remain available on commercially reasonable terms.
The requirements of being a public company, including maintaining effective internal control over financial reporting and management systems, may strain Lionsgate’s resources, divert management’s attention and affect Lionsgate’s ability to attract and retain executive management and qualified board members.
As a public company, Lionsgate is subject to extensive reporting, disclosure, governance and compliance requirements under the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), rules and regulations promulgated by the SEC, the listing standards of U.S. and Canadian securities exchanges, and other applicable securities rules and regulations. Compliance with these requirements requires significant financial, legal and managerial resources and may place strain on Lionsgate’s internal controls, financial and management systems, and personnel.
In particular, the Exchange Act requires Lionsgate to file annual, quarterly, and current reports regarding its business and operating results, and the Sarbanes-Oxley Act requires Lionsgate to maintain effective disclosure controls and procedures and internal control over financial reporting. Maintaining, evaluating and, where necessary, improving these controls and procedures requires significant management and oversight. If Lionsgate identifies material weaknesses or deficiencies in its internal control over financial reporting, it may not timely detect errors, which could result in material misstatements in its consolidated financial statements. Effective internal control of financial reporting is necessary for Lionsgate to produce reliable financial reports and prevent fraud.
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In addition, Lionsgate is required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, which may result in significant costs and the diversion of management time and attention. The complexity of public company regulatory requirements may further divert management’s focus from operating the business, which could harm Lionsgate’s business, financial condition and operating results.
Purported noteholders have instituted suit against Old Lionsgate claiming that it breached the indenture governing certain 5.500% senior notes due 2029 by virtue of an amendment executed in connection with an exchange by certain noteholders for new notes.
On August 27, 2024, purported holders of former 5.500% Notes of Old Lionsgate (as defined and discussed in Note 8 to the consolidated financial statements) (now Starz Entertainment Corp. (“Starz”)) filed a complaint in New York State court asserting claims for breach of certain contractual provisions and breach of the implied covenant of good faith and fair dealing based on a May 2024 transaction in which Old Lionsgate exchanged approximately $390 million in aggregate principal amount of 5.500% Notes for new 5.500% exchange notes due 2029 (now, the 6.00% Notes) and entered into Supplemental Indenture No. 10 to the indenture governing the 5.500% Notes (the “LGEC Indenture”). The main basis for these claims is that Supplemental Indenture No. 10 allegedly implicated certain provisions of the LGEC Indenture that require consent of each affected holder for certain types of waivers, amendments, and supplements to the LGEC Indenture. The relief sought includes a request for a declaration that Supplemental Indenture No. 10 and the associated exchange transaction are null and void. On September 13, 2024, another purported holder sought to intervene as a plaintiff in the same suit asserting nearly identical claims, which intervention was granted on October 11, 2024. The second holder subsequently added additional theories against Old Lionsgate and brought claims against other parties. On May 23, 2025, both plaintiffs filed amended complaints in view of the completion of the Starz Separation. On June 10, 2025, Old Lionsgate filed a motion to dismiss, which, on March 17, 2026, was granted in part and denied in part. Old Lionsgate has since filed a notice of appeal with respect to the portions of the motion to dismiss that were denied. The parties are now proceeding to discovery.
There can be no assurance that the plaintiffs will not be successful in obtaining relief sought in their existing or amended complaints. If the plaintiffs are successful in obtaining a declaratory judgment, they may also issue the trustee of the 5.500% Notes a notice of default and seek accelerated payments for amounts due under the 5.500% Notes. These actions may result in an outcome that could have a material adverse impact on Lionsgate’s and Starz’s business, operations and financial conditions as well as their stakeholders, as any such actions could require payments on the 5.500% Notes earlier than expected. Even if Starz and/or Lionsgate are successful in defending against such claims, it may expend significant management time and attention and funds to defend against such claims.
Risks Related to Lionsgate’s Indebtedness
Lionsgate has incurred significant indebtedness that could adversely affect its business and profitability and its ability to meet other obligations.
As of March 31, 2026, Lionsgate and its subsidiaries had an outstanding aggregate principal amount of corporate debt of approximately $1,979.4 million, and film related obligations of approximately $1,959.1 million. Lionsgate’s debt service obligations (principal and interest) on such corporate debt and film related obligations over the next twelve months is estimated to be approximately $1,455.5 million. This amount is based on the applicable SOFR rate as of March 31, 2026, net of payments and receipts from Lionsgate’s interest rate swaps and excludes amounts that may be required for future borrowings under its senior secured revolving credit facility. See Part II. Item 7. Management’s Discussion & Analysis of Financial Condition and Results of Operations — Uses of Cash for more information. See Part II. Item 7. Management’s Discussion & Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources- Corporate Debt for more information on such indebtedness.
This significant amount of debt could potentially have important consequences for Lionsgate and its debt and equity investors, including:
• requiring a substantial portion of cash flow from operations to be used to service interest payments;
• making it more difficult to satisfy debt service requirements and other obligations;
• increasing the risk of a future credit ratings downgrade of its debt, which could raise future borrowing costs and limit the future availability of debt financing;
• increasing vulnerability to adverse economic, industry and market conditions;
• reducing cash flow available to fund capital expenditures, strategic initiatives and other corporate purposes;
• limiting flexibility to plan for, or respond to, changes in its business or industry;
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• placing Lionsgate at a competitive disadvantage relative to its competitors with lower levels of leverage;
• limiting Lionsgate’s ability to incur additional indebtedness as needed, pursue business opportunities as they arise, pay cash dividends or repurchase common shares; and
• limiting Lionsgate’s ability to conduct its business because of financial and operating covenants in the agreements governing its existing and future indebtedness and exposing it to potential events of default (if not cured or waived) under covenants contained in its debt instruments.
To the extent that Lionsgate incurs additional indebtedness, these risks could be magnified. Lionsgate’s actual future cash requirements may also be greater than expected, and its cash flow from operations may be insufficient to repay outstanding indebtedness as it becomes due. In such circumstances, Lionsgate may need to refinance its indebtedness, borrow additional funds, sell assets or pursue other financing alternatives, and there can be no assurance that it will be able to do so on acceptable terms, or at all.
In addition, Lionsgate may seek additional capital which could result in dilution to existing shareholders or issuance of securities with rights senior to those of its shareholders. Decisions to obtain additional capital will depend on a number of factors, including business plans, operating performance and capital market conditions. Rising interest rates or disruptions in capital markets could make it more difficult and expensive for Lionsgate to raise additional capital or refinance its existing indebtedness. Any issuance of equity, equity-linked or debt securities could dilute existing shareholders, create securities with rights, preferences or privileges senior to the rights of Lionsgate’s common shares or negatively affect the market price of its common shares.
Lionsgate may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful.
A significant portion of Lionsgate’s cash flow from operations is expected to be dedicated to the payments of principal and interest obligations. Lionsgate’s ability to make scheduled payments on, or refinance, its debt will depend on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors beyond its control, including global pandemics, wars, recessions and their effects. If Lionsgate’s cash flow from operations declines significantly, it could result in the inability to pay principal, premium, if any, and interest on its indebtedness.
If Lionsgate’s cash flows and capital resources are insufficient to fund its debt service obligations, it could face substantial liquidity constraints that could be required to reduce or delay investments and capital expenditures, dispose of material assets or operations, seek additional debt or equity capital, or restructure or refinance its indebtedness. During periods of economic instability, including disruptions to, and volatility in, the U.S. and global credit and financial markets, it has been difficult to obtain financing on acceptable terms or at all. There can be no assurance that any such alternative actions would be successful or sufficient to meet Lionsgate’s scheduled debt service obligations. In addition, agreements governing Lionsgate’s corporate indebtedness restrict its ability to dispose of assets and use the proceeds from those dispositions, as well as its ability to raise debt or certain types of equity to be used to repay other indebtedness when it becomes due. Lionsgate may be unable to consummate those dispositions or to obtain proceeds in amounts sufficient to satisfy its obligations when due. Furthermore, there can also be no assurance that Lionsgate will not face credit rating downgrades as a result of weaker than anticipated performance of its businesses, fluctuations in its leverage or cost of capital or other factors. Any future downgrade could adversely affect Lionsgate’s borrowing costs, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse effect on its business.
Lionsgate conducts a substantial portion of its operations through subsidiaries, certain of which are not guarantors of its corporate indebtedness. As a result, repayment of such indebtedness depends on the generation of cash flow by those subsidiaries and their ability to make such funds available to Lionsgate through dividends, intercompany loans or other permitted distributions. Subsidiaries that are not guarantors do not have any obligation to pay amounts due on such indebtedness or to make funds available for that purpose, and they may not be able to, or may not be permitted to, make distributions to enable Lionsgate to make payments in respect of its indebtedness. While the agreements governing Lionsgate’s corporate indebtedness limit the ability of Lionsgate’s subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments, those limitations are subject to qualifications and exceptions. If Lionsgate does not receive sufficient distributions from its subsidiaries, it may be unable to make required principal and interest payments on its indebtedness.
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Despite its existing level of indebtedness, Lionsgate and its subsidiaries may be able to incur additional debt, which could further exacerbate its financial risks.
Lionsgate and its subsidiaries may be able to incur significant additional indebtedness in the future. Although the agreements governing Lionsgate’s corporate indebtedness include restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be substantial. In addition, such restrictions also generally do not prevent Lionsgate from incurring certain obligations that do not constitute indebtedness under such agreements, including certain qualified receivables financings and similar arrangements. If Lionsgate incurs additional debt or debt‑like obligations, the risks associated with its existing indebtedness, including increased debt service requirements, reduced financial flexibility and heightened vulnerability to adverse economic and business conditions, could intensify, which could adversely affect Lionsgate’s financial condition and results of operations.
The terms of Lionsgate’s corporate indebtedness restrict its operations and may limit its ability to respond to changes or to take certain actions.
The agreements governing Lionsgate’s corporate indebtedness contain restrictive covenants that impose operating and financial restrictions on Lionsgate and limit its ability to engage in activities that may be in its long-term best interests. These restrictions limit Lionsgate’s ability, among other things, to: incur, assume or guarantee additional indebtedness; issue certain disqualified stock; declare or pay dividends or make other distributions, or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans or investments; incur liens; restrict dividends, loans or asset transfers from its restricted subsidiaries; sell, transfer or otherwise dispose of assets, including capital stock of subsidiaries and sale/leaseback transactions; consolidate or merge with or into, or sell substantially all of its assets to, another person; enter into transactions with affiliates; and enter into new lines of business.
In addition, Lionsgate’s senior secured revolving credit facility requires Lionsgate to comply with specified financial covenants, including maintaining certain financial ratios. Lionsgate’s ability to satisfy those covenants can be affected by events beyond its control, including impact of global pandemics, wars, recessions, tariffs, government actions and changes consumer behavior. As a result, there can be no assurance that Lionsgate will be able to continue to meet these financial covenant requirements.
A breach of the covenants under the agreements governing Lionsgate’s corporate indebtedness, or nonpayment of any principal or interest when due thereunder, could result in an event of default. Upon an event of default, creditors may have the right to accelerate repayment of the related indebtedness, which could trigger cross‑acceleration or cross‑default provisions under other debt arrangements. In addition, an event of default under Lionsgate’s senior secured revolving credit facility would permit the lenders thereunder to terminate commitments to extend further credit. If Lionsgate is unable to repay amounts due upon acceleration, the lenders may seek to exercise remedies against the collateral securing such indebtedness. In these circumstances, Lionsgate and its subsidiaries may not have sufficient assets to satisfy all obligations under its indebtedness.
Lionsgate’s variable-rate indebtedness exposes it to interest rate risk, which could increase its debt service obligations.
Certain of Lionsgate’s indebtedness, including borrowings under its senior secured revolving credit facility and certain film-related obligations, bears, and is expected to bear, interest at variable rates and therefore, exposes Lionsgate to interest rate risk. If interest rates were to increase, Lionsgate’s debt service obligations on the variable rate indebtedness would increase even though the principal amount remains unchanged, and its net income and cash flows, including cash available for servicing its indebtedness, will correspondingly decrease. Higher interest expense could adversely affect Lionsgate’s net income, cash flows and liquidity, including the cash available to service its indebtedness, and could have a materially adverse effect on Lionsgate’s financial condition and results of operations.
The value of the assets securing Lionsgate’s indebtedness, including its intellectual property and content library, may decline, which could adversely affect its borrowing capacity and financial flexibility.
Certain of Lionsgate’s indebtedness is secured by collateral, including intellectual property, distribution rights, receivables and other assets derived from its film and television content library. The value of this collateral may fluctuate based on a variety of factors, including changes in market conditions, performance, consumer demand, technological and distribution developments and assumptions regarding future revenues, as well as impairment charges or other valuation adjustments. A decline in the value of Lionsgate’s intellectual property or content library assets could reduce availability under secured credit facilities, require repayments or additional collateral support, or adversely affect Lionsgate’s ability to refinance or extend indebtedness on acceptable terms. Any of the foregoing could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
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Lionsgate may face refinancing risk upon the maturity of its indebtedness.
A portion of Lionsgate’s indebtedness will mature or require refinancing from time to time. Lionsgate’s ability to refinance or replace such indebtedness on acceptable terms, or at all, will depend on a number of factors, including its financial condition, operating performance, credit ratings, interest rate environment, capital market conditions and broader economic and industry factors beyond its control. If Lionsgate is unable to refinance maturing indebtedness when required, or can do so only on less favorable terms, its interest expense, liquidity and financial flexibility could be adversely affected, which could have a materially adverse effect on Lionsgate’s business, financial condition, operating results, liquidity and prospects.
Risks Related to Tax Rules and Regulations
The Internal Revenue Service may not agree that Lionsgate should be treated as a non-U.S. corporation for U.S. federal tax purposes and may not agree that its U.S. affiliates should not be subject to certain adverse U.S. federal income tax rules.
Under current U.S. federal tax law, a corporation is generally considered for U.S. federal tax purposes to be a tax resident in the jurisdiction of its organization or incorporation. Because Lionsgate is incorporated outside of the U.S., it would generally be classified as a non-U.S. corporation (and, therefore, a non-U.S. tax resident) under these rules. However, Section 7874 of the Internal Revenue Code (the “Code”) (“Section 7874”) provides an exception to this general rule under which a non-U.S. incorporated entity may, in certain circumstances, be treated as a U.S. corporation (or surrogate foreign corporation) for U.S. federal tax purposes if it acquires a domestic entity (referred to as a “domestic entity acquisition”), and after the domestic entity acquisition, 80% or more (by vote or value) of the non-U.S. incorporated entity’s stock (60% or more for purposes of a surrogate foreign corporation determination) is held by former shareholders of the domestic entity by reason of holding stock in the domestic entity. This exception generally does not apply to situations in which, prior to the domestic entity acquisition, 80% or more (by vote and value) of the stock of the domestic entity was held directly or indirectly by a parent corporation (referred to as the “common parent”), and, after the domestic entity acquisition, the same common parent holds 80% or more (by vote and value) of the stock of the non-U.S. incorporated entity (referred to as the “internal group restructuring exception”).
There is limited guidance regarding the application of Section 7874, including the application of the rules to the facts as they currently exist. If Lionsgate were to be treated as a U.S. corporation for federal tax purposes, it could be subject to substantially greater U.S. tax liability than currently contemplated as a non-U.S. corporation. In addition, non-U.S. shareholders of Lionsgate would be subject to U.S. withholding tax on the gross amount of any dividends paid by us to such shareholders (subject to an exemption or reduced rate available under an applicable tax treaty). Alternatively, if Lionsgate were to be treated as a surrogate foreign corporation for federal tax purposes, it and its U.S. affiliates (including the U.S. affiliates historically owned by it) may, in some circumstances, be subject to certain adverse U.S. federal income tax rules (which, among other things, could retroactively increase its transition tax under Section 965 from 8%-15.5% to 35% (as well as that of its prospective U.S. acquiror as the case may be) and limit its ability to utilize certain U.S. tax attributes to offset U.S. taxable income, such as the use of net operating losses and certain tax credits, or to offset the gain resulting from certain transactions, such as from the transfer or license of property to a foreign related person during the 10-year period following the merger).
Future changes to U.S. and non-U.S. tax laws could adversely affect Lionsgate.
The U.S. Congress, the Organisation for Economic Co-operation and Development (“OECD”) and other government agencies in jurisdictions where Lionsgate and its affiliates will conduct business have had an extended focus on issues related to the taxation of multinational corporations. For the past several years, the primary focus has been in the area of “base erosion and profit shifting,” including situations where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As part of its so-called Base Erosion and Profit Shifting (“BEPS”) project, OECD and the G-20 developed changes to numerous long-standing international tax principles. More recently, countries are increasingly seeking ways to tax what is sometimes referred to as the digitalized economy. For example, in response to the increasing globalization and digitalization of trade and business operations, OECD is working on a proposal as an extension of its BEPS project to establish a global minimum corporate taxation rate. The rules are designed to ensure that large multinational groups pay corporate income taxes at the minimum rate of 15% in the countries where they operate. As of February 2026, 60 jurisdictions have enacted or introduced legislation to implement these rules, while an additional 8 jurisdictions have taken concrete steps toward doing so.
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Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The U.S. Congress and various state legislatures are currently evaluating, or may in the future propose, tax legislation, including, at the federal level, new laws, such as the One Big Beautiful Bill Act (“OBBBA”), to address the expiration of provisions enacted under the Tax Cuts and Jobs Act of 2017, the impact of which will depend on final implementation and interpretation. Many countries in the European Union, as well as a number of other countries and organizations such as OECD, are increasingly scrutinizing the tax positions of companies and actively considering changes to existing tax laws that, if enacted, could increase its tax obligations in countries where it does business. For example, the OECD has urged its member countries to raise taxes to protect against future fiscal risks attributed to high deficit and debt levels. There can be no assurance that Canadian federal income tax laws, the judicial interpretation thereof, or the administrative policies and assessing practices of the Canada Revenue Agency will not be changed in a manner that adversely affects Lionsgate or the holders of Lionsgate new common shares. If U.S. or other foreign tax authorities change applicable tax laws, its overall taxes could increase, and its business, financial condition or results of operations may be adversely impacted.
Changes in foreign, state and local tax incentives may increase the cost of original programming content to such an extent that they are no longer feasible.
Original programming requires substantial financial commitment, which can occasionally be offset by foreign, state or local tax incentives. However, there is a risk that the tax incentives will not remain available for the duration of a series. If tax incentives are no longer available or reduced substantially, it may result in increased costs for it to complete the production or make the production of additional seasons more expensive. If Lionsgate is unable to produce original programming content on a cost-effective basis its business, financial condition and results of operations would be materially adversely affected.
Lionsgate’s tax rate is uncertain and may vary from expectations.
There is no assurance that Lionsgate will be able to maintain any particular worldwide effective corporate tax rate because of uncertainty regarding the tax policies in the jurisdictions in which it and its affiliates operate. Lionsgate’s actual effective tax rate may vary from its expectations, and such variance may be material. Additionally, tax laws or their implementation and applicable tax authority practices in any particular jurisdiction could change in the future, possibly on a retroactive basis, and any such change could have an adverse impact on Lionsgate and its affiliates.
Legislative or other governmental action in the U.S. could adversely affect Lionsgate’s business.
Legislative action may be taken by the U.S. Congress that, if ultimately enacted, could limit the availability of tax benefits or deductions that Lionsgate expects to claim, override tax treaties upon which it expects to rely, or otherwise increase the taxes that the U.S. imposes on Lionsgate’s worldwide operations. Such changes could materially adversely affect Lionsgate’s effective tax rate and/or require it to take further action, at potentially significant expense, to seek to preserve its effective tax rate. In addition, if proposals were enacted that had the effect of limiting Lionsgate’s ability as a Canadian company to take advantage of tax treaties with the U.S., it could incur additional tax expense and/or otherwise incur business detriment.
Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect Lionsgate’s effective tax rates.
Lionsgate is subject to income taxes in Canada, the U.S. and foreign tax jurisdictions. It also conducts business and financing activities between its entities in various jurisdictions, and it is subject to complex transfer pricing regulations in the countries in which it operates. Although uniform transfer pricing standards are emerging in many of the countries in which it operates, there is still a relatively high degree of uncertainty and inherent subjectivity in complying with these rules. In addition, due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. Lionsgate’s future effective tax rates could be affected by changes in tax laws or regulations or the interpretation thereof (including those affecting the allocation of profits and expenses to differing jurisdictions), by changes in the amount of revenue or earnings that it derives from international sources in countries with high or low statutory tax rates, by changes in the valuation of its deferred tax assets and liabilities, by changes in the expected timing and amount of the release of any tax valuation allowance, or by the tax effects of stock-based compensation. Unanticipated changes in its effective tax rates could affect its future results of operations. Further, Lionsgate may be subject to examination of its income tax returns by federal, state, and foreign tax jurisdictions. Lionsgate regularly assesses the likelihood of outcomes resulting from possible examinations to determine the adequacy of its provision for income taxes. In making such assessments, it exercises judgment in estimating its provision for income taxes. While Lionsgate believes its estimates are reasonable, it cannot assure you that final determinations from any examinations will not be materially different from those reflected in its historical income tax provisions and accruals. Any adverse outcome from any examinations may have an adverse effect on its business and operating results, which could cause the market price of its securities to decline.
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