STRZ — Starz Entertainment Corp.

Summary of Starz Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $321 million, a slight increase of $1.2 million sequentially.
• U.S. OTT Subscribers: Increased by 110,000 in the quarter, totaling 12.3 million.
• Total North American Subscribers: 19.2 million, with a sequential increase of 120,000.
• Adjusted OIBDA: $22 million, down $11 million sequentially due to higher advertising and marketing costs.
• Net Debt: $588 million, with a leverage ratio of 3.4x, expected to improve to approximately 3.1x by year-end.
• Cash Flow: Anticipated fluctuations in cash flow due to content payment timing, with a goal to normalize in 2026.

2. Strategic Updates and Business Highlights

• Content Ownership Strategy: Starz aims to own 50% of its content slate by 2027 to improve margins and reduce costs. The first owned original series, "Fightland," is in production.
• Canadian Operations: Transitioning from a joint venture to a content licensing agreement with Bell Canada, expected to generate stable international licensing revenue.
• Subscriber Growth: Positive trends in U.S. OTT subscriber growth, aided by successful content like "Blood of My Blood" and "Ballerina."
• Content Slate: Strong upcoming releases include "Power: Origins," "Spartacus," and the final seasons of "Outlander" and "Power Book III: Raising Kanan."

3. Forward Guidance and Outlook

• 2025 Guidance: Affirmed expectations for positive U.S. OTT subscriber growth and approximately $200 million in adjusted OIBDA for the year.
• Content Investment: Expected to decrease year-over-year, which should improve free cash flow in 2026.
• Long-term Goals: Targeting a 20% margin by the end of 2028 through improved content ownership and operational efficiencies.

4. Bad News, Challenges, or Points of Concern

• Adjusted OIBDA Decline: The significant drop in adjusted OIBDA due to increased marketing costs raises concerns about cost management.
• Competitive Pressures: The media landscape is facing headwinds from consolidation and competition, complicating Starz's positioning as a complementary service.
• Churn Management: While churn rates are improving, reliance on gross subscriber additions may not be sustainable long-term without effective retention strategies.

5. Notable Q&A Insights

• Content Economics: CEO Jeffrey Hirsch highlighted that owning IP allows for cost control and potential international revenue through licensing, with savings of $1-2 million per hour on owned content.
• Subscriber Dynamics: Engagement metrics show a 12-month high in monthly active viewers, with a mix of gross additions and reduced churn contributing to subscriber growth.
• M&A Strategy: Hirsch expressed interest in acquiring linear networks transitioning to digital, emphasizing a cautious approach to maintain leverage ratios.
• Marketing Strategy: Starz is leveraging its bundling strategy to enhance subscriber acquisition and retention, with a focus on aligning content slates with partners.

Overall, Starz demonstrated a solid operational performance in Q3 2025, with strategic initiatives aimed at enhancing content ownership and subscriber growth, despite facing challenges in cost management and competitive pressures.