STRZ — Starz Entertainment Corp.

Summary of Starz Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• OTT Subscribers: Reached an all-time high of 12.7 million, growing 7.6% year-over-year, with an addition of 370,000 in Q4.
• Total Revenue: $323 million for Q4, up 60 basis points sequentially, driven by increased distribution revenue.
• Adjusted OIBDA: $56 million for Q4, more than doubling sequentially, with a total of $204 million for the year, exceeding the $200 million target.
• Leverage: Ended the year with a leverage ratio of 2.9x, better than the anticipated 3.1x.

2. Strategic Updates and Business Highlights

• Content Strategy: Successful programming slate including the revival of Spartacus and Power Book IV: Force Season 3, which saw a 57% increase in viewership.
• New Originals: Upcoming lineup includes Outlander finale, Power Book III: Raising Kanan, and Fightland, which is co-commissioned with Sky.
• Content Ownership: Shift towards owning more of its content, with plans to increase owned slate to 60%+.
• Bundling and Distribution: Focus on expanding bundling partnerships to enhance subscriber growth and retention.

3. Forward Guidance and Outlook

• 2026 Expectations: Projecting low single-digit percentage growth in adjusted OIBDA and unlevered free cash flow of $80 million to $120 million.
• Leverage Target: Aim to reduce leverage to approximately 2.7x by year-end 2026.
• Subscriber Reporting: Will cease disclosing subscriber numbers starting March 2026, focusing instead on revenue growth and profitability.

4. Bad News, Challenges, or Points of Concern

• Linear Subscriber Decline: While OTT subscribers grew, there was a noted decline in linear customers, indicating a shift in viewing habits.
• Competitive Pressures: The industry remains competitive, with pressures from larger streaming platforms necessitating careful pricing strategies.
• Cash Flow Volatility: Past quarters experienced volatility in cash flows and margins due to content spending and legacy constraints from being part of a larger studio.

5. Notable Q&A Insights

• Subscriber Retention: Strategies in place to enhance retention through a strong programming slate and longer-term subscription offers.
• M&A Strategy: Management is open to acquiring complementary assets but will maintain a leverage threshold of 2.5x to ensure financial stability.
• AI Utilization: AI is being explored for content development and operational efficiencies, although the creative process remains a human-centric endeavor.
• Franchise Strategy: Successful franchises like Power and Outlander are leveraged to launch new IP, enhancing audience engagement and acquisition.

This earnings call reflects Starz's strong performance in Q4 2025, with a positive outlook for 2026 driven by strategic content initiatives and a focus on profitability, despite some challenges in subscriber dynamics and competitive pressures.