Starz Entertainment Corp. Q1 2026 Earnings Call Summary

Strategic Performance and Operational Evolution

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• Management attributes the business’s structural strength to its first year as a standalone entity, having met or exceeded all key financial targets including OIBDA and free cash flow conversion.

• The company is pivoting from a ‘quarterly sub chase’ to a strategy of pricing discipline, focusing on higher lifetime value customers through annual plans and fewer low-priced entry offers.

• A strategic exit from the Universal Pay-Two agreement was executed because high subscriber overlap with Amazon resulted in lower-than-projected viewership for those titles on the Starz platform.

• The content strategy is shifting toward ownership to control costs from inception and enable global monetization of intellectual property, moving away from the constraints of the previous studio structure.

• Operational efficiency is being driven by ‘de-aging’ the original programming slate and co-commissioning partnerships, such as the deal with Sky for the series Fightland.

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• Management views the current market environment as a financial inflection point where cash flow timing is aligning with industry norms and OIBDA is becoming more predictable.

Outlook and Strategic Roadmap

• The target for reaching a 20% adjusted OIBDA margin has been moved forward by 12 months to the second half of 2027, driven by the Universal deal exit and content cost reductions.

• Management expects ARPU to continue building through 2026 as promotional customers convert to higher retail rates following the April 1 price increase to $11.99.

• The company is on track to have 50% of its original slate owned by Starz by 2027, with aspirations to eventually own and control the majority of its portfolio.

• Full-year 2026 guidance assumes low single-digit adjusted OIBDA growth and leverage exiting the year at approximately 2.7x.

• Future margin expansion beyond the 20% goal is anticipated as the portfolio transitions more fully to owned originals in 2028 and 2029.

Restructuring and Risk Factors

• A $139 million restructuring charge was recorded in Q1, primarily for the write-off of content with limited strategic value.

• An additional restructuring charge related to the Universal Pay-Two exit will be recorded in Q2 2026, which is expected to significantly reduce cash content spend starting in 2027.

• A one-year shareholder rights plan was implemented in March to protect the company’s valuation and focus during its post-separation transition following significant share turnover.

• Management identified M&A as a secondary path for growth but emphasized that strategic initiatives must fit within strict leverage parameters and be complementary to the core audience.