Summary of Starz Q1 2026 Earnings Call

1Key Financial Results and Metrics

Total Revenue: $307 million, down from $323 million in Q4 2025, primarily due to timing of Canadian licensing revenue.

OTT Revenue: $211 million, slightly up from $210 million in Q4 2025, indicating effective pricing discipline.

Adjusted OIBDA: $58 million, an increase from Q4 2025, but down year-over-year due to lower revenue and higher content amortization.

Unlevered Free Cash Flow: $81 million, up $147 million year-over-year; equity free cash flow increased to $69 million.

Net Debt: $523 million; leverage ratio at 3.1x, with a target of 2.7x by year-end.

Content Spend: $113 million in Q1, expected to be below $650 million for the full year.

2Strategic Updates and Business Highlights

Celebrated the one-year anniversary of separation, highlighting improved structural strength and financial goals.

Achieved key targets: margins moving towards 20%, with a focus on converting 70% of adjusted OIBDA to unlevered free cash flow.

Launched new licensing revenue streams and expanded content library ownership.

Notable content performance: "Power Book IV: Force" and "Outlander" Season 8 achieved significant viewership milestones.

Announced new original series "Fightland" and "Black Rodeo," enhancing content ownership strategy.

Exited the Pay-Two agreement with Universal to improve margins and cash flow.

3Forward Guidance and Outlook

Reaffirmed full-year 2026 outlook: positive OTT revenue growth, low single-digit adjusted OIBDA growth, and $80 million to $120 million in unlevered free cash flow.

Revised target for achieving 20% adjusted OIBDA margin to the back half of 2027, one year earlier than previously expected.

Anticipated continued strong content slate and cash flow improvements in 2027.

4Bad News, Challenges, or Points of Concern

Total revenue decline from the previous quarter raises concerns about revenue stability.

Adjusted OIBDA decline year-over-year suggests challenges in maintaining profitability amidst rising content costs.

Increased leverage ratio due to trailing 12-month adjusted OIBDA may indicate financial strain, despite confidence in achieving targets.

The exit from the Universal deal, while beneficial in the long term, raises questions about sourcing high-performing content and potential impacts on subscriber acquisition.

5Notable Q&A Insights

Management emphasized the importance of pricing discipline over subscriber count, leading to lower churn and improved customer lifetime value.

The decision to implement a shareholder rights plan was aimed at stabilizing the business post-separation and ensuring focus on long-term value creation.

Confidence in the price increase to $11.99, with early feedback indicating successful absorption by customers.

Management expressed optimism about the return of shows like "P-Valley," anticipating strong viewer engagement despite long hiatuses. Overall, Starz demonstrated a solid financial performance in Q1 2026, with strategic initiatives aimed at enhancing content ownership and profitability. However, challenges remain in revenue consistency and content acquisition strategies.