STARZ Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics:

Total Revenue: $308 million, with OTT revenue at $221 million, marking the first year-over-year growth since Q4 2024.

Adjusted OIBDA: $60 million, exceeding expectations. The company raised its full-year adjusted OIBDA growth forecast from low-single digits to mid-single digits.

Unlevered Free Cash Flow: Negative $15 million for Q2, but positive $66 million year-to-date. The outlook for unlevered free cash flow has been raised to the mid- to upper-end of the $80 million to $120 million range.

Cash Content Spend: $182 million for the quarter, with expectations to remain below $600 million for the full year.

Net Debt: $566 million, with an adjusted OIBDA leverage ratio of 2.9x.

ARPU: Continued improvement due to a recent price increase, with expectations for further growth in the second half of 2026.

2Strategic Updates and Business Highlights:

Content Performance: The finale of "Outlander," the premiere of "Raising Kanan" Season 5, and the launch of "Fightland" contributed to strong audience engagement, marking the second-highest engagement quarter in STARZ's history.

Distribution Partnerships: Secured a long-term renewal with a major distribution partner and launched a partnership with Peacock, expanding access to 48 million subscribers. Additionally, a new bundle with Crunchyroll was announced.

Content Strategy: Focus on creating owned original content, with several projects in the pipeline, including "Blood of My Blood" and a Michael biopic.

3Forward Guidance and Outlook:

STARZ anticipates continued OTT revenue growth in the second half of 2026, supported by a strong content slate including "P-Valley" and the Michael biopic.

The company is confident in achieving its target of a 20% adjusted OIBDA margin by the second half of 2027.

The outlook for free cash flow generation is positive, with expectations for significant growth by 2029 as restructuring costs decline.

4Bad News, Challenges, or Points of Concern:

Negative Free Cash Flow: Although Q2 showed negative unlevered free cash flow, it was better than expected. However, the company must manage cash flow timing related to content payments.

Competitive Pressures: The ongoing secular decline in traditional video households continues to impact linear and other revenue streams, which totaled $87 million in Q2.

Subscriber Metrics: While the company did not disclose specific subscriber numbers, there are concerns about subscriber growth amidst recent price increases.

5Notable Q&A Insights:

"Fightland" Launch: The show performed well, with strong audience overlap with the "Power Universe," leading to increased engagement and subscriber win-backs.

Licensing Deal with Netflix: The deal for the "Power" library to join Netflix is seen as an opportunity to introduce the franchise to new audiences while maintaining exclusivity for sequels and spin-offs on STARZ.

Future Distribution Opportunities: The company is exploring additional bundling opportunities similar to the Peacock deal, which could enhance subscriber acquisition and reduce churn.

Content Ownership Strategy: STARZ is focused on building its content library for future monetization opportunities, with expectations for improved economics from owned content. Overall, STARZ reported a strong quarter with positive momentum in OTT revenue and strategic partnerships, while also addressing challenges related to cash flow and competitive pressures in the streaming landscape.