Starz Entertainment (NasdaqGS:STRZ) Q4 2026 Earnings call February 26, 2026 05:00 PM ET Company ParticipantsAlison Hoffman - President of STARZ NetworksDoug Wardlaw - Media and Entertainment Equity Research AssociateJeffrey Hirsch - President and CEONilay Shah - Investor Relations ContactScott Macdonald - CFOConference Call ParticipantsBrent Penter - Equity Research AnalystDavid Joyce - Senior Equity AnalystMatthew Harrigan - Equity Research AnalystThomas Yeh - Executive Director and Equity Research Analyst ...

Financial Data and Key Metrics Changes - STARZ achieved an all-time high of 12.7 million OTT subscribers, growing year-over-year by 7.6% and adding 370,000 subscribers in Q4 alone [5][15] - Total revenue for the quarter was $323 million, up 60 basis points sequentially, driven by an increase in Distribution revenue [16] - Adjusted OIBDA for Q4 was $56 million, up over 100% sequentially, with a total of $204 million for the year, exceeding the $200 million outlook [17][18] - The company ended the year with a leverage ratio of 2.9x, better than the previous guidance of 3.1x [18] Business Line Data and Key Metrics Changes - The increase in OTT subscribers was partially offset by a decline in linear customers, with total U.S. subscribers growing to 17.6 million [15] - The growth in subscribers was driven by demand for scripted originals, including "Force" and "Spartacus" [16] Market Data and Key Metrics Changes - The company restructured its Canadian business into a Licensing revenue stream, focusing on the U.S. market [9] - The transition to a content licensing relationship in Canada impacted revenue recognition, contributing to the sequential revenue growth [16] Company Strategy and Development Direction - STARZ aims to increase margins to 20% by 2028, with a focus on owning more content and expanding its programming slate [10][22] - The company is positioned to capitalize on potential M&A opportunities due to increased consolidation in the media landscape [12] - STARZ plans to de-emphasize quarterly subscriber management and focus on long-term OTT revenue growth and profitability [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong start to 2026, driven by a compelling lineup of originals and a focus on underrepresented audiences [7][8] - The company expects unlevered free cash flow to range between $80 million and $120 million in 2026, with a continued focus on reducing leverage [18][19] Other Important Information - STARZ will not disclose subscriber numbers starting with the March 2026 quarter, focusing instead on revenue growth and profitability [12] - The company is excited about expanding bundling relationships, which are driving new additions and better retention [34][35] Q&A Session Summary Question: Can you walk us through some of the moving pieces regarding OTT revenue and total revenue? - Management indicated that OTT revenue is expected to grow, with a slight improvement in margins anticipated for 2026, while significant improvements are expected in 2027 and 2028 [21][22] Question: What kind of assets would you be interested in for potential M&A? - Management highlighted the importance of complementary assets that can transition from linear to digital, emphasizing a cautious approach to leverage [25][27] Question: How do you rank order your capital allocation priorities as free cash flow improves? - Management noted that as free cash flow improves, they will consider returning cash to shareholders while continuing to invest in the business [28] Question: Can you discuss the retention patterns for subscribers from recent shows? - Management stated that the programming slate is designed to maintain subscriber retention throughout the year, supported by longer-term offers [32][33] Question: How do you view the demand environment for your programming internationally? - Management expressed optimism about the international market, particularly in the U.K. and France, and highlighted the strong relationship with Sky as a key partnership [48] Question: How do you plan to manage pricing strategy going forward? - Management indicated that they aim to remain underpriced compared to broad-based streamers, allowing room for future price increases [50] Question: How do you weigh starting new shows versus spin-offs of existing successful shows? - Management emphasized the importance of franchising successful shows like "Power" and "Outlander" to drive engagement and launch new IP [53][55]

Starz Entertainment (NasdaqGS:STRZ) Q4 2026 Earnings call February 26, 2026 05:00 PM ET Speaker4I would now like to hand the conference over to your speaker today, Nilay from Investor Relations.Speaker6Good afternoon. Thank you for joining us for Starz Entertainment's fiscal 2025 fourth quarter earnings call. We'll begin with opening remarks from our President and CEO, Jeffrey Hirsch, followed by remarks from our CFO, Scott Macdonald. Also joining us on the call today is Alison Hoffman, President of STARZ N ...

Financial Data and Key Metrics Changes - Starz reported total revenue of $321 million for the quarter, an increase of $1.2 million sequentially [12] - Adjusted OIBDA was $22 million, down $11 million sequentially due to higher advertising and marketing costs [13] - The company ended the quarter with total net debt of $588 million, with leverage on a trailing 12-month basis at 3.4 times [14] Business Line Data and Key Metrics Changes - U.S. OTT subscribers increased by 110,000, ending the quarter with 12.3 million [11] - North American total subscribers reached 19.2 million, with a sequential increase of 120,000 [12] - OTT revenue rose by $1.7 million to $223 million, while linear and other revenue slightly decreased to $98 million [13] Market Data and Key Metrics Changes - U.S. OTT subscriber growth was driven by the successful debut of "Outlander: Blood of My Blood" and the premiere of "Ballerina" [11][8] - OTT engagement reached a 12-month high, indicating strong performance in content [8] Company Strategy and Development Direction - The company aims to grow its core business by increasing margins to 20% by the end of 2028 and converting 70% of adjusted OIBDA to unleveraged free cash flow [3] - A structural change in the Canadian operation was announced, moving to a content licensing agreement with Bell Canada to generate international licensing revenue [4] - Starz is focused on owning half of its content slate by 2027, which is expected to improve margins and reduce costs [5][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver on their plan despite significant headwinds in the media industry [10] - The company anticipates continued revenue and U.S. OTT subscriber growth in the fourth quarter, aiming for approximately $200 million of adjusted OIBDA for the year [11][8] - Management highlighted the potential for increased consolidation in the media landscape, positioning Starz to capitalize on M&A opportunities [6] Other Important Information - The company plans to decrease content investment year over year, which is expected to improve free cash flow in 2026 [9] - The partnership with Bell Canada and the co-commission on "Fightland" are expected to be modestly accretive to adjusted OIBDA and free cash flow in 2026 [6] Q&A Session Summary Question: Can you explain the cost savings and international revenue from producing your own shows? - Management indicated that owning IP allows for cost control and the potential for incremental revenue through international licensing [17][19] Question: Any updates on other shows announced alongside "Fightland"? - Management confirmed progress on several shows, with plans to have half the slate owned by Starz by 2027 [20][21] Question: Can you walk us through the EBITDA guidance for Q4? - Management expressed confidence in reaching the $200 million EBITDA target, needing approximately $52 million in Q4 [24][25] Question: What are the dynamics around churn and gross acquisitions? - Management noted that two-thirds of subscriber growth was from gross acquisitions, with churn at all-time lows [49] Question: Can you provide insights on the Canadian business model shift? - Management confirmed that the new licensing model is expected to provide stable revenue exceeding previous subscription revenues [52] Question: Is the $700 million cash spend outlook for 2026 still accurate? - Management affirmed that the expectation is to be just under $700 million in 2026, with further reductions anticipated in subsequent years [54]

Core Insights - Starz Entertainment Corp. reported modest results for 2Q25, missing revenue and adjusted EPS estimates, with revenue of $319.7 million, down 8.0% YoY from $347.6 million in 2Q24 [2][14] - The company experienced an operating loss of $26.9 million in 2Q25, compared to an operating income of $10.1 million in the prior-year period [2][14] - Starz ended the quarter with 12.2 million U.S. OTT subscribers, a sequential decline of 120,000, and total U.S. subscribers reached 17.6 million, down 410,000 from the previous quarter [2][15] Financial Performance - Adjusted OIBDA for 2Q25 was $33.4 million, down from $56.3 million in 2Q24, leading to a decrease in adjusted OIBDA margin to 10.4% from 16.2% [2][14] - The net loss for the quarter was $42.5 million, compared to a net income of $4.2 million in 2Q24, with diluted loss per share at $2.54 versus diluted earnings per share of $0.26 in 2Q24 [2][14] Subscriber Trends - The decline in subscribers was attributed to lower OTT additions and ongoing pressure on linear subscribers, particularly due to the underperformance of BMF Season 4 [2][15] - Despite the overall decline, the Outlander prequel, Blood of My Blood, achieved strong performance, becoming the third-highest series premiere in Starz history for subscriber additions [2][10] Strategic Outlook - Starz is focusing on a digital-first growth strategy and expects sequential revenue and OTT subscriber growth in upcoming quarters, supported by a strong content lineup [2][8] - The company aims to reach $200 million in adjusted OIBDA by year-end and convert 70% of that into free cash flow by 2026 [2][8] Valuation - The intrinsic value of Starz Entertainment Corp. is estimated at $18.00 per share, based on a 2026e EV/EBITDA multiple of 4.4x, maintaining a 'Buy' rating with an implied upside of 33.3% from the current market price of $13.50 [6][16] - The valuation is sensitive to fluctuations in adjusted EBITDA and EV/EBITDA multiples, with potential changes impacting the target prices significantly [18] Company Strategy - Starz is strategically exiting seven international territories to streamline its business and is prioritizing lower-cost original content production [21] - The company is targeting key demographics and aims to achieve a 20% margin run rate by FY28 to boost profitability [11][12]

Financial Data and Key Metrics Changes - Total revenue for the quarter was $319.7 million, down 2% sequentially and 7.4% year over year [12] - Adjusted OIBDA was $33.4 million, down from $92 million in the previous quarter, primarily due to higher content amortization [13] - The company ended the quarter with $573.5 million in total net debt, down $42.1 million sequentially, with a leverage ratio of 3.2 times [14] Business Line Data and Key Metrics Changes - The company had 12.18 million U.S. OTT subscribers, a sequential decline of 120,000, and a total of 19.08 million North American subscribers, down 520,000 sequentially [12] - OTT revenue was $221.1 million, while linear and other revenue was $98.6 million, reflecting declines due to lower OTT subscriber additions [13] Market Data and Key Metrics Changes - The linear subscriber base declined to 6.22 million, reflecting continued declines in Pay TV households [12] - The company expects sequential revenue and OTT subscriber growth in the next two quarters due to the successful premiere of "Blood of My Blood" [13] Company Strategy and Development Direction - The company aims for higher adjusted OIBDA margins, higher free cash flow, and lower leverage, with a target of reaching a 20% margin by the end of calendar 2028 [6][10] - The content slate includes high-performing returning series and new premieres, which are expected to drive subscriber growth and revenue [9][10] Management's Comments on Operating Environment and Future Outlook - Management views 2025 as a transition year for cash flow management, with a focus on deleveraging in 2026 and 2027 [14] - The company believes it is undervalued compared to peers and expects valuation disconnect to become more apparent as large media companies spin off their linear networks [6] Other Important Information - The company is excited about its content slate, including the return of "Spartacus" and the launch of "Fightland," which is expected to have a lower cost structure compared to previous productions [10][46] - The passage of the One Big Beautiful Bill Act allows the company to reduce federal tax liabilities, leading to no significant cash tax payments anticipated for the foreseeable future [14] Q&A Session Summary Question: What defines scale in this business and prerequisites for M&A? - Management has a clear plan for deleveraging and achieving a 20% margin, focusing on delivering that plan regardless of M&A participation [18] Question: What caused the underperformance of BMF and adjustments going forward? - BMF was still a large show but did not meet growth expectations due to gross adds issues; management is analyzing the situation and has new content in development [28] Question: Insights on ARPU and distribution relationships? - ARPU was slightly down due to more customers on multi-month offers, which helps reduce churn; no rate increases are planned for the next year [30][32] Question: Audience transition for "Blood of My Blood"? - The company has a strong track record of franchising, with spin-offs typically retaining over 85% of the original audience [38] Question: Confidence in the return of "Spartacus"? - There is significant demand for "Spartacus" to return, and the company has incorporated diverse characters to appeal to a broader audience [46]