Starz Entertainment Corp(US:STRZ)2025-08-14 20:09Part I. Financial Information Financial Statements (Unaudited) The unaudited financial statements for Q2 2025 reflect the company's post-separation financial position, showing a net loss of $42.5 million and increased cash Unaudited Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $51.6 | $17.8 | | Programming content, net | $1,092.7 | $1,096.3 | | Total assets | $2,091.6 | $2,173.2 | | Liabilities & Equity | | | | Programming related payables | $378.1 | $101.8 | | Debt | $611.7 | $699.9 | | Total liabilities | $1,379.3 | $1,406.8 | | Total equity | $712.3 | $766.4 | | Total liabilities and equity | $2,091.6 | $2,173.2 | Unaudited Condensed Consolidated Statements of Operations Consolidated Statement of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $319.7 | $347.6 | | Operating (loss) income | $(26.9) | $10.1 | | Net (loss) income from continuing operations | $(42.5) | $1.1 | | Basic and diluted net (loss) income per common share - continuing operations | $(2.54) | $0.07 | Unaudited Condensed Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows Highlights (in millions) | Cash Flow Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $65.4 | $(33.5) | | Net cash provided by (used in) investing activities | $75.2 | $(71.6) | | Net cash (used in) provided by financing activities | $(106.8) | $93.3 | | Net change in cash and cash equivalents | $33.8 | $(11.8) | | Cash and cash equivalents – end of period | $51.6 | $25.2 | Notes to Unaudited Condensed Consolidated Financial Statements - On May 6, 2025, Old Lionsgate completed the separation of its LG Studios Business from the Starz Business, resulting in two separate public companies: Starz Entertainment Corp. and Lionsgate Studios Corp. (New Lionsgate)34 - For accounting purposes, New Lionsgate is considered the divesting entity, and Starz is the divested entity; Starz's pre-separation financial information is prepared on a carve-out basis from Old Lionsgate's records36 - The company's Board of Directors approved a change in the fiscal year end from March 31 to December 31, effective starting with the year ending December 31, 202559 - In connection with the separation, Starz entered into a new credit agreement for a $300.0 million term loan and a $150.0 million revolving credit facility5371 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 8.0% revenue decline and $26.9 million operating loss, attributing it to lower subscribers and higher costs, partially offset by reduced marketing, with liquidity supported by new credit facilities Results of Operations Consolidated Results of Operations (in millions) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $319.7 | $347.6 | (8.0)% | | Operating (Loss) Income | $(26.9) | $10.1 | (366.3)% | | Net (Loss) Income from Continuing Operations | $(42.5) | $1.1 | (3,963.6)% | - Consolidated revenue decreased by $27.9 million (8.0%) YoY, driven by declines in both linear revenue ($14.6 million) and OTT revenue ($13.3 million) due to lower subscriber numbers215218 Subscriber Data (in millions) | Subscriber Type | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Domestic Subscribers | 17.59 | 18.93 | | Total Canada Subscribers | 1.49 | 2.37 | | Total Starz Networks Subscribers | 19.08 | 21.30 | | International OTT Subscribers | — | 2.60 | | Total Starz Subscribers | 19.08 | 23.90 | - Advertising and marketing expenses decreased by $19.3 million (23.3%) YoY, primarily due to increased efficiency in marketing operations and lower overall spend215225 - Programming amortization increased by $14.6 million (9.9%) YoY, attributed to the premieres of new original series like Black Mafia Family Season 4215220222 - General and administrative expenses rose by $2.5 million (9.4%) YoY, reflecting additional costs incurred as a standalone public company post-separation215229 Non-GAAP Measures Reconciliation of Operating (Loss) Income to Adjusted OIBDA (in millions) | Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating (loss) income | $(26.9) | $10.1 | | Depreciation and amortization | $48.7 | $41.6 | | Restructuring and other | $6.4 | $(0.6) | | Share-based compensation expense | $5.2 | $5.2 | | Adjusted OIBDA | $33.4 | $56.3 | - Starz Networks Adjusted OIBDA decreased by $23.9 million to $33.4 million in Q2 2025, down from $57.3 million in Q2 2024, primarily due to lower revenue and higher programming costs, partially offset by reduced marketing spend243245 Liquidity and Capital Resources - Post-separation, the company's primary liquidity sources are cash from operations, a new $300 million Term Loan A, and a new $150 million senior secured revolving credit facility248 - As of June 30, 2025, the company had cash and cash equivalents of $51.6 million, compared to $17.8 million at the beginning of the period246 Material Cash Requirements from Known Contractual Obligations (as of June 30, 2025, in millions) | Obligation | Total | Next 12 Months | Beyond 12 Months | | :--- | :--- | :--- | :--- | | On-Balance Sheet | | | | | Term Loan A | $300.0 | $— | $300.0 | | 5.5% Senior Notes | $325.1 | $— | $325.1 | | Programming related obligations | $88.2 | $88.2 | $— | | Off-Balance Sheet | | | | | Programming related obligations commitments | $419.2 | $260.1 | $159.1 | | Interest payments | $181.5 | $42.1 | $139.4 | | Total | $1,820.7 | $814.5 | $1,006.2 | Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rate and foreign currency fluctuations using derivative instruments like forward foreign exchange contracts and interest rate swaps - The company's main market risks are from interest rate changes on its variable-rate debt and foreign currency fluctuations283 - Starz uses forward foreign exchange contracts to hedge production costs denominated in British Pounds284 - The company has entered into $150.0 million worth of pay-fixed interest rate swaps to convert its floating-rate borrowings to fixed-rate borrowings, managing interest rate risk285286 Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, despite material changes from a new ERP system and post-separation control implementation - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025291 - A new enterprise resource planning (ERP) system was implemented during the quarter, which changed the company's internal control over financial reporting292 - New controls were implemented for processes that were previously performed by the former parent company, Old Lionsgate292 Part II. Other Information Legal Proceedings The company is involved in normal course legal proceedings, not expected to materially impact financial position, with details in Note 16 - Starz is involved in legal proceedings arising from the normal course of business but does not expect them to have a material adverse effect294 - Further details on legal matters, including a lawsuit filed by former noteholders, are provided in Note 16, Contingencies156294 Risk Factors No material changes were reported to the risk factors previously disclosed in the Annual Report on Form 10-K for FY2025 - No material changes were reported to the risk factors from the Annual Report on Form 10-K for the fiscal year ended March 31, 2025295 Unregistered Sales of Equity Securities and Use of Proceeds The company did not purchase any of its common shares during the three months ended June 30, 2025 - No common shares were purchased by the company during the three months ended June 30, 2025296 Exhibits This section lists all exhibits filed with the Form 10-Q, including separation agreements, credit agreements, and CEO/CFO certifications