Starz Entertainment (STRZ) Q1 2027 earnings summary

Executive summary

• Achieved or exceeded all key financial targets in the first year post-separation, including margin, cash flow conversion, and delevering goals, despite a 7.2% year-over-year revenue decline to $306.9 million and increased net loss from continuing operations to $164.9 million due to higher programming amortization and expenses.

• Structural changes and separation from Lions Gate Entertainment improved business predictability and focus on premium subscription video services.

• Strong content performance with record-setting premieres, new owned originals, and a robust upcoming slate, while strategic content review led to removal of programming with limited value.

• Exited the Universal Pay-2 agreement, accelerating the 20% margin target by 12 months to late 2027.

• M&A remains a potential growth path, but not required for value creation given core business strength.

Financial highlights

• Q1 2026 OTT revenue was $211.1 million, up sequentially but down 6.4% year-over-year; total revenue was $306.9 million, down from $323 million due to Canadian licensing timing and declines in both OTT and linear streams.

• Adjusted OIBDA reached $58.0 million, up sequentially but down from $93.3 million year-over-year due to lower revenue and higher content amortization.

• Recorded a $139 million restructuring charge in Q1, mainly from content write-offs and impairments.

• Unlevered free cash flow was $80.7 million, up $147 million year-over-year; equity free cash flow was $68.7 million, up $136 million.

• Net debt at March 31, 2026, was $523 million; leverage ratio at 3.1x, with a year-end target of 2.7x.

Outlook and guidance

• Reaffirmed full-year 2026 guidance: OTT revenue growth, low single-digit adjusted OIBDA growth, $80–$120 million unlevered free cash flow, and leverage at 2.7x by year-end.

• Margin expansion and improved free cash flow expected in 2027, driven by restructuring, owned originals ramping, and content cost reductions.

• ARPU expected to continue rising through 2026, supported by a recent price increase to $11.99.

• Management expects continued pressure on traditional linear revenue and a higher mix of discounting in OTT services.

• Termination of certain live-action film licensing agreements in Q2 2026 will result in estimated termination fees of $185–$205 million, payable in 2027–2028.