STRZ — Starz Entertainment Corp.

Summary of Starz Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $307 million, down from $323 million in Q4 2025, primarily due to timing of Canadian licensing revenue.
• OTT Revenue: $211 million, slightly up from $210 million in Q4 2025, indicating effective pricing discipline.
• Adjusted OIBDA: $58 million, an increase from Q4 2025, but down year-over-year due to lower revenue and higher content amortization.
• Unlevered Free Cash Flow: $81 million, up $147 million year-over-year; equity free cash flow increased to $69 million.
• Net Debt: $523 million; leverage ratio at 3.1x, with a target of 2.7x by year-end.
• Content Spend: $113 million in Q1, expected to be below $650 million for the full year.

2. Strategic Updates and Business Highlights

• Celebrated the one-year anniversary of separation, highlighting improved structural strength and financial goals.
• Achieved key targets: margins moving towards 20%, with a focus on converting 70% of adjusted OIBDA to unlevered free cash flow.
• Launched new licensing revenue streams and expanded content library ownership.
• Notable content performance: "Power Book IV: Force" and "Outlander" Season 8 achieved significant viewership milestones.
• Announced new original series "Fightland" and "Black Rodeo," enhancing content ownership strategy.
• Exited the Pay-Two agreement with Universal to improve margins and cash flow.

3. Forward Guidance and Outlook

• Reaffirmed full-year 2026 outlook: positive OTT revenue growth, low single-digit adjusted OIBDA growth, and $80 million to $120 million in unlevered free cash flow.
• Revised target for achieving 20% adjusted OIBDA margin to the back half of 2027, one year earlier than previously expected.
• Anticipated continued strong content slate and cash flow improvements in 2027.

4. Bad News, Challenges, or Points of Concern

• Total revenue decline from the previous quarter raises concerns about revenue stability.
• Adjusted OIBDA decline year-over-year suggests challenges in maintaining profitability amidst rising content costs.
• Increased leverage ratio due to trailing 12-month adjusted OIBDA may indicate financial strain, despite confidence in achieving targets.
• The exit from the Universal deal, while beneficial in the long term, raises questions about sourcing high-performing content and potential impacts on subscriber acquisition.

5. Notable Q&A Insights

• Management emphasized the importance of pricing discipline over subscriber count, leading to lower churn and improved customer lifetime value.
• The decision to implement a shareholder rights plan was aimed at stabilizing the business post-separation and ensuring focus on long-term value creation.
• Confidence in the price increase to $11.99, with early feedback indicating successful absorption by customers.
• Management expressed optimism about the return of shows like "P-Valley," anticipating strong viewer engagement despite long hiatuses.

Overall, Starz demonstrated a solid financial performance in Q1 2026, with strategic initiatives aimed at enhancing content ownership and profitability. However, challenges remain in revenue consistency and content acquisition strategies.