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]