Starz Entertainment Q2 Earnings Call Highlights

Key Points

• Streaming momentum improved: Q2 OTT revenue grew year over year for the first time since Q4 2024, while subscribers increased despite an April price hike. Audience engagement reached its second-highest quarterly level, driven by titles including Outlander, Raising Kanan and Fightland.
• Profit and cash-flow outlook raised: Adjusted OIBDA reached $60 million, prompting Starz to raise its full-year growth outlook to the mid-single digits. The company also lifted unlevered free-cash-flow guidance to the mid-to-upper end of its prior $80 million–$120 million range.
• Financial flexibility and distribution expanding: Starz secured commitments to increase credit facilities by $100 million, expected to reduce annual interest costs by about $4 million. New and expanded partnerships with Peacock, Prime Video and Crunchyroll are intended to improve discoverability, reduce churn and broaden subscriber access.

Starz Entertainment NASDAQ: STRZ reported second-quarter results that management said reflected improving streaming revenue, audience engagement and free-cash-flow generation, prompting the company to raise its full-year adjusted OIBDA growth outlook and increase its unlevered free cash flow guidance.

Total revenue for the quarter was $308 million, including $221 million of over-the-top, or OTT, revenue and $87 million in linear and other revenue. CFO Scott Macdonald said OTT revenue grew year over year for the first time since the fourth quarter of 2024. Excluding $3 million of Canadian OTT revenue included in the prior-year period, OTT revenue would have risen 1.4% on a pro forma basis.

Macdonald said the company’s April price increase contributed to improved average revenue per user, with further ARPU gains expected in the second half as promotional subscriber cohorts convert to retail pricing. Management also said total subscribers increased during the quarter despite the price increase, though Starz does not regularly disclose subscriber totals.

Content Drives Engagement and Streaming Momentum

President and CEO Jeffrey Hirsch attributed the quarter’s performance to the finale of Outlander, the premiere of Raising Kanan Season 5 and The Housemaid. He said the company’s programming lineup produced its second-highest quarterly audience engagement level of all time and marked a fourth consecutive quarter of engagement growth since Starz separated from Lionsgate.

Hirsch also highlighted the debut of Fightland, Starz’s first owned original series. According to Hirsch, the show was Starz’s second-best-rated launch of a new intellectual property franchise and showed strong audience overlap with the Power universe. Alison Hoffman, president of Starz Networks, said the launch brought back lapsed users to the platform and could help reduce post-season churn among Power viewers.

Management said the company is emphasizing ownership of original programming as a way to improve content economics and create future licensing opportunities. Hirsch said Fightland costs approximately $2.5 million less per episode than prior programming arrangements while delivering the same amount of content. He added that Starz expects to announce further international arrangements for the series, following its co-commissioning partnership with Sky in the U.K.

Upcoming programming includes the return of P-Valley, Outlander: Blood of My Blood Season 2, the Michael biopic, and additional Power franchise installments. The company said Michael would premiere on the platform Aug. 10 and is expected to serve as a major programming tentpole.

Profit Outlook Raised as Cash Flow Inflection Develops

Adjusted OIBDA was $60 million in the second quarter, ahead of management’s expectations. Starz raised its full-year adjusted OIBDA growth forecast to the mid-single digits from a previous outlook for low-single-digit growth.

Macdonald said adjusted OIBDA is expected to decline to the mid-$30 million range in the third quarter because of higher programming amortization associated with Raising Kanan, Fightland and Blood of My Blood. The company expects fourth-quarter adjusted OIBDA in the mid-$60 million range. Starz reaffirmed its target of reaching a 20% adjusted OIBDA margin in the second half of 2027.

Unlevered free cash flow was negative $15 million in the quarter but positive $66 million year to date. Equity free cash flow was negative $33 million for the quarter and positive $35 million year to date. Macdonald said the quarterly outflow reflected the timing of content payments, as management had anticipated, but performance was still better than expected.

The company raised its full-year unlevered free cash flow outlook to the mid-to-upper end of its previously stated $80 million to $120 million range. Cash content spending was $182 million in the quarter, and Starz expects full-year cash content spending to be below $600 million following its exit from the Universal Pay-2 agreement.

Starz recorded a $147 million restructuring charge in the quarter related to its agreement to exit the Universal Pay-2 arrangement. Macdonald said management expects this to be the final content restructuring charge of that magnitude. He also said 2029 could represent a significant inflection point for free cash flow growth after final cash payments to Universal are completed in 2028.

Debt Refinancing and Distribution Expansion

Net debt stood at $566 million as of June 30, while the company’s adjusted OIBDA leverage ratio was 2.9x. The revolver was undrawn.

Starz obtained commitments to increase its credit facilities by $100 million, including a $67 million increase to its Term Loan A and a $33 million increase to its revolver. The transaction, expected to close in the third quarter, will allow the company to replace remaining programming notes with lower-cost corporate debt.

Macdonald said the refinancing is expected to improve annual free cash flow by about $4 million through lower cash interest expense. Even after adding the $67 million of term debt, the company expects to end 2026 with leverage of roughly 2.7x and remains focused on reaching leverage of 2.5x or below.

On distribution, Starz renewed a long-term agreement with one of its largest partners and launched an add-on subscription partnership with Peacock. Hirsch said the Peacock arrangement gives Starz access to the platform’s 48 million subscribers without additional platform investment. Starz also announced a Crunchyroll bundle on Prime Video.

Hoffman said the Peacock rollout is expected to deepen over multiple phases, improving discoverability and the purchase flow. She said the company expects to pursue additional bundling arrangements, arguing that Starz’s programming is complementary to broad-based streaming platforms and that bundles can help reduce churn while expanding marketing opportunities.

About Starz Entertainment (NASDAQ:STRZ)

Starz Entertainment NASDAQ: STRZ is a global media and entertainment company that operates premium subscription video services across linear television and digital streaming platforms. The company's core offering includes the STARZ and STARZ ENCORE linear networks in the United States, alongside its STARZPLAY streaming service, which is available in North America, parts of Europe, Latin America and select Asian markets. Through its multi-platform distribution strategy, Starz delivers a combination of original programming, feature films and licensed series to a broad subscriber base.

At the heart of Starz Entertainment's business is its investment in original content production.

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