Q2 2026 Starz Entertainment Corp Earnings Call

August 7, 2026

Speaker #2: With desire, I gain control. In the moment, you’ll find there’s no one as cold as me, and I just need a little more music.

Speaker #2: With desire, I take control. In the moment, you'll find there's no one as cold as me, and I just need a little more music.

[Company Representative] (Starz): Southpaw, lefty. I call this my night game. UK, play work. Run for your life, man. Gang shit, bang shit. This is just a different realm. Lame shit, same shit. 'Round dogs that'll get you killed. Real shit, kill switch. Up the pole, you won't feel shit. Careful who you chill with. That might be who you kill with. Cash out, lash out. You won't make niggas crash out. It's really not a problem. I mean, if it's a problem. Your man got some hands. He want box. My man got that blick. He want pop. He on his third body. He won't stop. You niggas fuck around, we'll make it hot.

Speaker #1: Cell 4, lefty. I call this my night game. UK, play, work, run for your life, and gang shit, bang shit—this is just a different drill.

Speaker #1: Lame shit, damn shit, round hoes that'll get you killed. Real shit, kill switch, off the pole you won't feel shit. Careful who you deal with; that might be who you kill with.

Speaker #1: Cash out, lash out, you gon' make niggas crash out. It's really not a problem; I mean, if it's a problem, your man got some hands, you won't box.

Speaker #1: My man got that blick, he won't pop. He on his third body, he won't stop. You niggas fuck around, we'll make it hot.

[Company Representative] (Starz): With desire, I take control. Oh, in the moment, you'll find no one's as cold as me. I just need a little more me. With desire, I take control. Oh, in the moment, you'll find no one's as cold as me.

Speaker #2: With desire, I gain control. In the moment, you’ll find there’s no one as cold as me, and I just need a little more music.

Speaker #2: With desire, I take control. In the moment, you'll find there's no one as cold as me, and I just—

Operator: Good day, and thank you for standing by. Welcome to the Starz Q2 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nilay Shah, Head of Investor Relations. Please go ahead.

Speaker #3: Good day, and thank you for standing by. Welcome to the Starz second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker #3: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone.

Speaker #3: You will then hear an automated message advising you are hand is raised. To withdraw your question, please press STAR 11 again. Please be advised that today's conference is being recorded.

Speaker #3: I would now like to hand the conference over to your speaker today, Nilay Shah, Head of Investor Relations. Please go ahead.

Speaker #4: Thank you for joining us for STARZ Entertainment's second quarter 2026 earnings call. We'll begin with opening remarks from our President and CEO, Jeffrey Hirsch, followed by remarks from our CFO, Scott Macdonald.

Nilay Shah: Thank you for joining us for Starz Entertainment Q2 2026 earnings call. We will begin with opening remarks from our President and CEO, Jeffrey Hirsch, followed by remarks from our CFO, Scott Macdonald. Also joining us on the call today is Alison Hoffman, President of Starz Networks. After our opening remarks, we will open the call for questions. The matters discussed on this call include forward-looking statements, including those regarding expected future performance. Such statements are subject to a number of risks and uncertainties. Actual results could differ materially and adversely from those described in the forward-looking statements as a result of various factors. This includes the risk factors set forth in our most recently filed 10-KT for Starz Entertainment Corp. Starz undertakes no obligation to update these forward-looking statements due to new information or any future events unless required by law.

Speaker #4: Also joining us on the call today is Alison Hoffman, President of STARZ Networks. After our opening remarks, we'll open the call for questions. The matters discussed on this call include forward-looking statements, including those regarding expected future performance.

Speaker #4: Such statements are subject to a number of risks and uncertainties. Actual results could differ materially and adversely from those described in the forward-looking statements as a result of various factors.

Speaker #4: This includes the risk factors set forth in our most recently filed 10-KT for STARS Entertainment Corp. STARS undertakes no obligation to update these forward-looking statements due to new information or any future events unless required by law.

Nilay Shah: This includes the risk factors set forth in our most recently filed 10-KT for Starz Entertainment Corp. Starz undertakes no obligation to update these forward-looking statements due to new information or any future events unless required by law. The matters discussed today will also include non-GAAP financial measures and key performance indicators. These non-GAAP measures include Adjusted OIBDA, unlevered free cash flow, equity free cash flow, and net debt. The reconciliation for these to the most directly comparable US GAAP measures and additional required information is available in the 8-K we filed this morning, which is available on the Starz investor relations website at investors.starz.com. This non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with US GAAP. I will now turn the call over to Jeff.

Speaker #4: The matters discussed today will also include non-GAAP financial measures and key performance indicators. These non-GAAP measures include adjusted EBITDA, unleveraged free cash flow, equity free cash flow, and net debt.

Nilay Shah: The matters discussed today will also include non-GAAP financial measures and key performance indicators. These non-GAAP measures include Adjusted OIBDA, unlevered free cash flow, equity free cash flow, and net debt. The reconciliation for these to the most directly comparable US GAAP measures and additional required information is available in the 8-K we filed this morning, which is available on the Starz investor relations website at investors.starz.com. This non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with US GAAP. I will now turn the call over to Jeff.

Speaker #4: The reconciliation for these to the most directly comparable US GAAP measures, and additional required information, is available in the 8-K we filed this morning, which is available on the Starz Investor Relations website at investors.starz.com.

Speaker #4: This non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP.

Speaker #4: I'll now turn the call over to Jeff.

Speaker #5: Thank you, Nilay, and thank you all for joining us this morning. We delivered another strong quarter and entered the back half of 2026 with significant momentum across the business.

Jeffrey Hirsch: Thank you, Nilay, and thank you all for joining us this morning. We delivered another strong quarter and entered the back half of 2026 with significant momentum across the business. We just completed a strong weekend with the penultimate episode of "Raising Kanan" Season 5 and the premiere of our first-owned original, "Fightland." "Raising Kanan" delivered the strongest episode of the season. Most notably, Season 5 has grown its audience from the first season five years ago, a rare achievement in today's television landscape. I am happy to report that "Fightland" premiered as Starz' second best-rated new IP launch of all time. Its opening weekend demonstrates significant audience overlap with the Power Universe, which will expand audience engagement and reduce subscriber churn. Now turning to the quarter.

Speaker #5: We just completed a strong weekend with the penultimate episode of Raising Canyon Season 5. And the premiere of our first owned original, Flight Land.

Speaker #5: 'Raising Canyon' delivered the strongest episode of the season. Most notably, Season 5 has grown its audience from the first season five years ago, a rare achievement in today's television landscape.

Speaker #5: And I'm happy to report that Flight Land premiered as STARZ's second-best-rated new IP launch of all time. Its opening weekend demonstrates significant audience overlap with the Power universe, which will expand audience engagement and reduce subscriber churn.

Speaker #5: Now turning to the quarter, our excellent second quarter results were driven by the finale of Outlander, the premiere of Raising Canyon Season 5, and the Housemate.

Jeffrey Hirsch: Our excellent Q2 results were driven by the finale of "Outlander," the premiere of "Raising Kanan" Season 5, and "The Housemaid." The content portfolio in the quarter generated the second-highest audience engagement quarter of all time. This marks the fourth consecutive quarter of engagement growth since we separated. Consumer demand for our content, coupled with the results of our rate increase, delivered significant sequential OTT revenue growth. Perhaps more importantly, we returned to year-over-year OTT revenue growth in the quarter. Total revenue also increased sequentially in the quarter, despite a difficult comparison to the Q1. We expect this revenue trend to continue, putting us on a solid path toward achieving our outlook of positive annual OTT revenue growth in 2026.

Speaker #5: The content portfolio in the quarter generated the second highest audience engagement quarter of all time. This marks the fourth consecutive quarter of engagement growth since we separated.

Speaker #5: Consumer demand for our content, coupled with the results of our rate increase, delivered significant sequential OTT revenue growth. And, perhaps more importantly, we returned to year-over-year OTT revenue growth in the quarter.

Speaker #5: Total revenue also increased sequentially in the quarter, despite a difficult comparison to the first quarter. We expect this revenue trend to continue, putting us on a solid path toward achieving our outlook of positive annual OTT revenue growth in 2026.

Speaker #5: The strength of the quarter, our improved visibility into the second half of the year, and the early performance of Flight Land increase our confidence that 2026 is shaping up to be a more significant inflection year for STARS than we initially anticipated.

Jeffrey Hirsch: The strength of the quarter, our improved visibility into the H2, and the early performance of "Fightland" increase our confidence that 2026 is shaping up to be a more significant inflection year for Starz than we initially anticipated. As a result, we are now raising our Adjusted OIBDA growth forecast and our unlevered free cash flow guidance, which Scott will get into in more detail. We also continue to see a clear and accelerating path toward our leverage target and our 20% margin target, supported by improved OTT economics, greater scale and owned content, and continued operating discipline. Looking ahead, our content slate supports the momentum we are seeing across the business and positions us well for our updated outlook.

Speaker #5: As a result, we are now raising our adjusted EBITDA growth forecast and our unleveraged free cash flow guidance, which Scott will get into in more detail.

Speaker #5: We also continue to see a clear and accelerating path toward our leverage target and our 20% margin target, supported by improved OTT economics, greater scale and owned content, and continued operating discipline.

Speaker #5: Looking ahead, our content slate supports the momentum we are seeing across the business and positions us well for the updated outlook. We have the highly anticipated return of P-Valley, the continued expansion of the Outlander universe through Blood of My Blood Season 2, and the upcoming Michael biopic following its impressive theatrical run.

Jeffrey Hirsch: We have the highly anticipated return of "P-Valley," the continued expansion of the "Outlander" universe through "Blood of My Blood" Season 2, and the upcoming Michael biopic following its impressive theatrical run. Further out, we continue to build our own content pipeline beyond "Fightland" with the Untitled Black Rodeo Drama starting production this month and several other Starz-owned projects in development. During the quarter, we also made significant strides in the distribution side of the business. We have secured a long-term renewal with one of our largest distribution partners while expanding our fully distributed portfolio with two new partners. First, we launched a new partnership with Peacock during the quarter, making Starz available as an add-on subscription to the platform for the first time. This partnership allows us to market Starz to an additional 48 million subscribers, creating a new opportunity for customer acquisition and revenue growth.

Speaker #5: Further out, we continue to build our own content pipeline beyond Flight Land, with the untitled Black Rodeo show starting production this month and several other STARZ-owned projects in development.

Speaker #5: During the quarter, we also made significant strides on the distribution side of the business. We have secured a long-term renewal with one of our largest distribution partners, while expanding our fully distributed portfolio with two new partners.

Speaker #5: First, we launched a new partnership with Peacock during the quarter, making STARZ available as an add-on subscription to the platform for the first time.

Speaker #5: This partnership allows us to market STARS to an additional 48 million subscribers, creating a new opportunity for customer acquisition and revenue growth. Second, we recently announced a new bundle with Crunchyroll on Prime Video, further demonstrating our ability to reach highly engaged audiences through targeted partnerships.

Jeffrey Hirsch: This partnership allows us to market Starz to an additional 48 million subscribers, creating a new opportunity for customer acquisition and revenue growth. Second, we recently announced a new bundle with Crunchyroll on Prime Video, further demonstrating our ability to reach highly engaged audiences through targeted partnerships. Together, these relationships expand our distribution footprint, increase awareness of the Starz brand, and support our growth strategy while allowing us to reach large audiences without incremental platform investment. As our core business continues to strengthen and progress toward our goals of 20% Adjusted OIBDA margin, delevering, and increasing unlevered free cash flow conversion, we have the flexibility to be selective as we evaluate strategic initiatives. Our priority remains executing against our operating plan.

Jeffrey Hirsch: Second, we recently announced a new bundle with Crunchyroll on Prime Video, further demonstrating our ability to reach highly engaged audiences through targeted partnerships. Together, these relationships expand our distribution footprint, increase awareness of the Starz brand, and support our growth strategy while allowing us to reach large audiences without incremental platform investment. As our core business continues to strengthen and progress toward our goals of 20% Adjusted OIBDA margin, delevering, and increasing unlevered free cash flow conversion, we have the flexibility to be selective as we evaluate strategic initiatives. Our priority remains executing against our operating plan. We will only pursue M&A where it accelerates our strategy and creates value beyond what we could achieve organically. The progress we are reporting today is not being driven by a single title, a single partnership, or a single quarter.

Speaker #5: Together, these relationships expand our distribution footprint, increase awareness of the STARZ brand, and support our growth strategy, while allowing us to reach large audiences without incremental platform investment.

Speaker #5: As our core business continues to strengthen and progress toward our goals of 20% adjusted EBITDA margin, deleveraging, and increasing unleveraged free cash flow conversion, we have the flexibility to be selective as we evaluate strategic initiatives.

Speaker #5: Our priority remains executing against our operating plan. We will only pursue M&A where it accelerates our strategy and creates value beyond what we could achieve organically.

Jeffrey Hirsch: We will only pursue M&A where it accelerates our strategy and creates value beyond what we could achieve organically. The progress we are reporting today is not being driven by a single title, a single partnership, or a single quarter. It is the direct result of disciplined execution against the priorities we use to manage the business, growing OTT revenue, expanding profitability, improving free cash conversion, and reducing leverage. We have built a stronger business with a deeper and more balanced content slate, and we continue to create value through ownership, partnerships, and disciplined capital allocation. With that, I will turn it over to Scott to take you through the financial details and our updated outlook.

Speaker #5: The progress we are reporting today is not being driven by a single title, a single partnership, or a single quarter. It is the direct result of disciplined execution against the priorities we use to manage the business.

Jeffrey Hirsch: It is the direct result of disciplined execution against the priorities we use to manage the business, growing OTT revenue, expanding profitability, improving free cash conversion, and reducing leverage. We have built a stronger business with a deeper and more balanced content slate, and we continue to create value through ownership, partnerships, and disciplined capital allocation. With that, I will turn it over to Scott to take you through the financial details and our updated outlook.

Speaker #5: Growing OTT revenue, expanding profitability, improving free cash conversion, and reducing leverage. We have built a stronger business with a deeper and more balanced content slate and we continue to create value through ownership, partnerships, and disciplined capital allocation.

Speaker #5: With that, I will turn it over to Scott to take you through the financial details and our updated outlook.

Speaker #2: Thank you, Jeff, and good morning, everyone. I'm pleased to report that the second quarter was another strong quarter during which we delivered on or ahead of our expectations.

Scott Macdonald: Thank you, Jeff, and good morning, everyone. I'm pleased to report that Q2 was another strong quarter during which we delivered on or ahead of our expectations. Our financial story is simple. Growing OTT revenue, expanding Adjusted OIBDA, generating meaningful free cash flow, and reducing leverage. Based on our Q2 performance, we are updating our full-year guidance across several of these metrics, which I will walk through during my remarks. Total revenue in Q2 was $308 million. OTT revenue was $221 million, growing year-over-year for the first time since Q4 2024 and giving us strong momentum entering H2. On a comparative basis, the year-over-year growth in OTT revenue was negatively impacted by $3 million of OTT revenue related to our Canadian operations reflected in Q2 2025.

Speaker #2: Our financial story is simple: growing OTT revenue, expanding adjusted EBITDA, generating meaningful free cash flow, and reducing leverage. Based on our second-quarter performance, we are updating our full-year guidance across several of these metrics, which I will walk through during my remarks.

Speaker #2: Total revenue in the second quarter was $308 million. OTT revenue was $221 million, growing year over year for the first time since the fourth quarter of 2024 and giving a strong momentum entering the back half of the year.

Speaker #2: On a comparative basis, the year-over-year growth in OTT revenue was negatively impacted by $3 million of OTT revenue related to our Canadian operations reflected in Q2 2025.

Speaker #2: On a pro forma basis, excluding this $3 million, OTT revenue would have increased by 1.4% this quarter. As a reminder, we transitioned our Canadian operations from a distribution partnership with Bell to a content licensing model at the end of 2025.

Scott Macdonald: On a pro forma basis, excluding this $3 million, OTT revenue would have increased by 1.4% this quarter. As a reminder, we transitioned our Canadian operations from a distribution partnership with Bell to a content licensing model at the end of 2025. ARPU continued to improve in Q2 as the April price increase flowed through the base. We expect further ARPU expansion in H2 2026 as additional promotional cohorts convert to retail rates. Importantly, the revenue improvement we are seeing this quarter is coming through both better pricing and increased subscribers. Not one at the expense of the other, which is exactly the balance we set out to strike. Linear and other revenue was $87 million, reflecting the continued secular pressure on traditional video households we've discussed on prior calls. Adjusted OIBDA was $60 million for the quarter, ahead of our expectations.

Speaker #2: Our pool continued to improve in Q2 as the April price increase flowed through the base. We expect further ARPU expansion in the second half of 2026 as additional promotional cohorts convert to retail rates.

Speaker #2: Importantly, the revenue improvement we are seeing this quarter is coming through both better pricing and increased subscribers. Not one at the expense of the other, which is exactly the balance we set out to strike.

Speaker #2: Linear and other revenue was $87 million, reflecting the continued secular pressure on traditional video households we've discussed on prior calls. Adjusted EBITDA was $60 million for the quarter, ahead of our expectations.

Scott Macdonald: Adjusted OIBDA was $60 million for the quarter, ahead of our expectations. From a quarterly cadence perspective, we expect Q3 Adjusted OIBDA to be in the mid-30s. This will be our lowest quarter of the year due to higher programming amortization from the airing of "Raising Kanan" Season 5, "Fightland" Season 1, and "Blood of My Blood" Season 2, all during Q3. We expect Q4 to finish the year strongly in the mid-60s. Accordingly, we are raising our 2026 Adjusted OIBDA growth guidance from low single digits to mid-single digits, and we remain confident in achieving our 20% Adjusted OIBDA margin target in H2 2027. Unlevered free cash flow was -$15 million in Q2 and +$66 million year to date. Equity free cash flow was -$33 million in the quarter and +$35 million year to date.

Speaker #2: From a quarterly cadence perspective, we expect Q3 adjusted EBITDA to be in the mid-30s. This will be our lowest quarter of the year due to higher programming amortization from the airing of Raising Cane in Season 5, Flight Land Season 1, and Blood of My Blood Season 2 all during Q3.

Scott Macdonald: From a quarterly cadence perspective, we expect Q3 Adjusted OIBDA to be in the mid-30s. This will be our lowest quarter of the year due to higher programming amortization from the airing of "Raising Kanan" Season 5, "Fightland" Season 1, and "Blood of My Blood" Season 2, all during Q3. We expect Q4 to finish the year strongly in the mid-60s. Accordingly, we are raising our 2026 Adjusted OIBDA growth guidance from low single digits to mid-single digits, and we remain confident in achieving our 20% Adjusted OIBDA margin target in H2 2027. Unlevered free cash flow was -$15 million in Q2 and +$66 million year to date. Equity free cash flow was -$33 million in the quarter and +$35 million year to date.

Speaker #2: We expect Q4 to finish the year strongly, in the mid-60s. Accordingly, we are raising our 2026 adjusted EBITDA growth guidance from low single digits to mid-single digits, and we remain confident in achieving our 20% adjusted EBITDA margin target in the back half of 2027.

Speaker #2: Unleveraged ed free cash flow was negative $15 million in the second quarter and positive $66 million year to date. Equity free cash flow was negative $33 million in the quarter and positive $35 million year to date.

Speaker #2: As noted last quarter, we expected free cash flow to be negative in Q2, given the timing of content payments. And while that timing dynamic did play out, our free cash flow still came in ahead of our expectations.

Scott Macdonald: As noted last quarter, we expected free cash flow to be negative in Q2, given the timing of content payments. While that timing dynamic did play out, our free cash flow still came in ahead of our expectations. The free cash flow inflection we have guided to all year is materializing, and we are raising our unlevered free cash flow outlook to the mid to upper end of our previously provided $80 million to $120 million range. Conversion of Adjusted OIBDA to unlevered free cash flow remains on track against our 70% target. Cash content spend was $182 million for the quarter. Now that we have exited the Universal Pay 2 agreement, we expect to report full year cash content spend below $600 million on our cash flow statement and see continued improvement in the convergence of cash content spend and programming amortization this year.

Speaker #2: The free cash flow inflection we've guided to all year is materializing, and we are raising our unleveraged free cash flow outlook to the mid to upper end of our previously provided $80 million to $120 million range.

Speaker #2: Conversion of adjusted EBITDA to unleveraged free cash flow remains on track against our 70% target. Cash content spend was $182 million for the quarter.

Speaker #2: Now that we have exited the universal pay-two agreement, we expect to report a full-year cash content flow statement and see continued improvement in the convergence of cash content spend and programming amortization this year.

Scott Macdonald: Now that we have exited the Universal Pay 2 agreement, we expect to report full year cash content spend below $600 million on our cash flow statement and see continued improvement in the convergence of cash content spend and programming amortization this year. Net debt was $566 million as of 30 June 2026, and our Adjusted OIBDA leverage ratio was 2.9 times. Our revolver remains undrawn, and we continue to maintain significant liquidity and financial flexibility. Today, I am pleased to announce that we have obtained firm commitments to increase our credit facilities by $100 million, comprised of a $67 million increase to our Term Loan A and a $33 million increase to our revolver, which we expect to close in Q3. Importantly, this transaction is not being undertaken to fund operations or support liquidity needs.

Speaker #2: Net debt was $566 million as of June 30, 2026, and our adjusted EBITDA leverage ratio was 2.9x. Our revolver remains undrawn, and we continue to maintain significant liquidity and financial flexibility.

Scott Macdonald: Net debt was $566 million as of 30 June 2026, and our Adjusted OIBDA leverage ratio was 2.9 times. Our revolver remains undrawn, and we continue to maintain significant liquidity and financial flexibility. Today, I am pleased to announce that we have obtained firm commitments to increase our credit facilities by $100 million, comprised of a $67 million increase to our Term Loan A and a $33 million increase to our revolver, which we expect to close in Q3. Importantly, this transaction is not being undertaken to fund operations or support liquidity needs. Rather, it allows us to replace the remaining balance of our programming notes, which are working capital facilities that carry significantly higher interest costs than our credit facilities.

Speaker #2: Today, I am pleased to announce that we have obtained firm commitments to increase our credit facilities by $100 million, comprised of a $67 million increase to our Term Loan A and a $33 million increase to our revolver, which we expect to close in the third quarter.

Speaker #2: Importantly, this transaction is not being undertaken to fund operations or support liquidity needs. Rather, it allows us to replace the remaining balance of our programming notes, which our working capital facilities that carry significantly higher interest costs than our credit facilities.

Scott Macdonald: Rather, it allows us to replace the remaining balance of our programming notes, which are working capital facilities that carry significantly higher interest costs than our credit facilities. By refinancing these obligations into lower cost corporate debt, we expect to improve annual free cash flow by approximately $4 million through lower cash interest expense while simplifying our capital structure. More importantly, even after incorporating this additional $67 million of term debt, we still expect to end 2026 with leverage of approximately 2.7 times. Put differently, the underlying deleveraging occurring in the business is even stronger than our expected year-end leverage ratio would suggest. Absent this refinancing transaction, year-end leverage would be meaningfully lower by approximately 0.3 times, underscoring the strength of our Adjusted OIBDA growth and free cash flow generation.

Speaker #2: By refinancing these obligations into lower-cost corporate debt, we expect to improve annual free cash flow by approximately $4 million through lower cash interest expense, while simplifying our capital structure.

Scott Macdonald: By refinancing these obligations into lower cost corporate debt, we expect to improve annual free cash flow by approximately $4 million through lower cash interest expense while simplifying our capital structure. More importantly, even after incorporating this additional $67 million of term debt, we still expect to end 2026 with leverage of approximately 2.7 times. Put differently, the underlying deleveraging occurring in the business is even stronger than our expected year-end leverage ratio would suggest. Absent this refinancing transaction, year-end leverage would be meaningfully lower by approximately 0.3 times, underscoring the strength of our Adjusted OIBDA growth and free cash flow generation. As a result, we remain highly confident in the path toward 2.5 times leverage and below, and believe the combination of growing Adjusted OIBDA, increasing free cash flow, and lower financing costs will continue to strengthen our balance sheet over time.

Speaker #2: More importantly, even after incorporating this additional $67 million of term debt, we still expect to end 2026 with leverage of approximately 2.7 times. Put differently, the underlying deleveraging occurring in the business is even stronger than our expected year-end leverage ratio would suggest.

Speaker #2: Absent this refinancing transaction, year-end leverage would be meaningfully lower by approximately 0.3 times, underscoring the strength of our adjusted EBITDA growth and free cash flow generation.

Speaker #2: As a result, we remain highly confident in the path toward 2.5 times leverage and below, and believe the combination of growing adjusted EBITDA, increasing free cash flow, and lower financing costs will continue to strengthen our balance sheet over time.

Scott Macdonald: As a result, we remain highly confident in the path toward 2.5 times leverage and below, and believe the combination of growing Adjusted OIBDA, increasing free cash flow, and lower financing costs will continue to strengthen our balance sheet over time. As a reminder, the agreement to exit the Universal Pay 2 was signed in April 2026. Thus, we recorded the associated restructuring charge of $147 million this quarter rather than in Q1. We continue to expect this to be the final content restructuring charge of this magnitude going forward, which sets the company up for meaningfully lower restructuring activity from here. Given the timing of our final cash payments to Universal in 2028, we believe 2029 is shaping up to be a significant year for free cash flow growth relative to the trajectory we see across 2026 to 2028.

Speaker #2: As a reminder, the agreement to exit the Universal Pay-Two was signed in April 2026. Thus, we recorded the associated restructuring charge of $147 million this quarter rather than in the March quarter.

Scott Macdonald: As a reminder, the agreement to exit the Universal Pay 2 was signed in April 2026. Thus, we recorded the associated restructuring charge of $147 million this quarter rather than in Q1. We continue to expect this to be the final content restructuring charge of this magnitude going forward, which sets the company up for meaningfully lower restructuring activity from here. Given the timing of our final cash payments to Universal in 2028, we believe 2029 is shaping up to be a significant year for free cash flow growth relative to the trajectory we see across 2026 to 2028. The financial story for Starz is getting stronger and simpler every quarter. Growing OTT revenue, expanding margins, growing free cash flow, and reducing leverage. We're confident in our trajectory, and we look forward to continuing to demonstrate our progress.

Speaker #2: We continue to expect this to be the final content restructuring charge of this magnitude going forward, which sets the company up for meaningfully lower restructuring activity from here.

Speaker #2: Given the timing of our final cash payments to universal in 2028, we believe 2029 is shaping up to be a significant year for free cash flow growth relative to the trajectory we see across 2026 through 2028.

Speaker #2: The financial story for STARZ is getting stronger and simpler every quarter: growing OTT revenue, expanding margins, growing free cash flow, and reducing leverage. We're confident in our trajectory, and we look forward to continuing to demonstrate our progress.

Scott Macdonald: The financial story for Starz is getting stronger and simpler every quarter. Growing OTT revenue, expanding margins, growing free cash flow, and reducing leverage. We're confident in our trajectory, and we look forward to continuing to demonstrate our progress. Now I'll turn the call back over to Nilay for Q&A.

Speaker #2: Now we'll turn the call back over to Nilay for Q&A.

Scott Macdonald: Now I'll turn the call back over to Nilay for Q&A.

Speaker #1: Thanks, Scott. Operator, could we open the call up for Q&A, please?

Jeffrey Hirsch: Thanks, Scott. Operator, could we open the call up for Q&A, please?

Nilay Shah: Thanks, Scott. Operator, could we open the call up for Q&A, please?

Speaker #3: Thank you. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment, please, for the Q&A roster to compile. Our first question comes from the line of Vikram Kesavabhotla with Baird. Your line is now open.

Speaker #3: To withdraw your question, please press star one again. One moment, please, for the Q&A roster to compile. Our first question comes from the line of Vikram Kesavapala with Baird.

Speaker #3: Your line is now open.

Speaker #4: Okay, great. Hey, thanks for taking the question, and good morning, everybody. My first one is on Flight Land. Could you talk more about what you observed from the launch, particularly around customer acquisition and engagement, and what else is standing out to you so far as you reflect on the feedback and observe some of the early patterns of your members?

Vikram Kesavabhotla: Okay, great. Hey, thanks for taking the question and good morning, everybody. Hey, my first one is on "Fightland." Could you talk more about what you observed from the launch, particularly around customer acquisition and engagement, and what else is standing out to you so far as you reflect on the feedback and observe some of the early patterns of your members?

Jeffrey Hirsch: Good morning, Vik. It's Jeff. I'll start, I think Ali will jump in. We're really excited. As I said in my prepared remarks, it's the second-best premiere of new IP in the history of Starz. The social sentiment has been great and improving. I think the fan base is absolutely loving it's doing exactly what we designed it to do, right, which is to serve the audience that we have, lower churn, extend engagement, extend lifetime value at a cost that is much more reasonable than what we've gotten from the prior parent. Just from a perspective, Fightland is about $2.5 million per episode cheaper, same amount of content, just much cheaper cost, it's doing exactly what we designed it to do. Ali, I don't know if you want to talk about the subscriber acquisition.

Speaker #5: Jeff, I'll start, and I think Ali will jump in. We're really excited, as I said in my prepared remarks. It's the second-best premiere of new IP in the history of STARZ.

Speaker #5: The social sentiment has been great in improving. I think the fan base is absolutely loving it. And it's doing exactly what we designed it to do, right, which is to serve the audience that we have, lower churn, extend engagement, extend lifetime value at a cost that is much more reasonable than we've gotten from the prior parent.

Speaker #5: I mean, just from a perspective, Flight Land is about $2.5 million per episode cheaper, so it's the same amount of content, just at a much lower cost.

Speaker #5: And so it's doing exactly what we designed it to do. Ali, I don't know if you want to talk about the subscriber acquisition.

Speaker #3: Yeah. I think the other thing about Flight Land that we're seeing is a really strong overlap with the power universe, with Canon, which was intentional.

Alison Hoffman: I think the other thing about Fightland that we're seeing is a really strong overlap with the Power Universe with Kanan, which was intentional. That should play out in great post-season churn from a Power Universe perspective, we'll see that through the business. I would also say from an acquisition perspective, really seeing an influx of win-backs or lapsed users coming back to the platform. That was really great to see. We just had a massive weekend last weekend with Fightland getting off to a great start, really buoyed by the Kanan penultimate episode.

Speaker #3: So, that should play out in great post-season churn from a power universe perspective, and we'll see that through the business. I would also say, from an acquisition perspective, we're really seeing an influx of win-backs, or lapsed users coming back to the platform.

Speaker #3: So that was really great to see. We just had a massive weekend last weekend with Flight Land getting off to a great start, really buoyed by the “Canon” penultimate episode.

Speaker #4: Okay, great. Thanks for the color there. And then, separate from that, I also wanted to ask about this recently announced licensing deal for the Power universe to join Netflix later this year.

Vikram Kesavabhotla: Okay, great. Thanks for the color there. Separate from that, I also wanted to ask about this recently announced licensing deal for the Power Universe to join Netflix later this year. Obviously, it sounds like the Power library will continue to be on Starz going forward as well. With that in mind, could you just talk about what the potential implications of that deal could be for Starz and some of the opportunities that could ultimately present for you?

Speaker #4: Obviously, it sounds like the Power library will continue to be on STARZ going forward as well. So, with that in mind, could you just talk about what the potential implications of that deal could be for STARZ, and some of the opportunities that could ultimately present for you?

Speaker #3: Yeah. I think we feel that when a mature show like Power: The Original Power, which has been essentially in syndication for many years and was on Hulu, now it's on Netflix, goes to a bigger platform like that, it creates an opportunity for us.

Jeffrey Hirsch: We feel that when a mature show like Power, the original Power, which has been essentially in syndication for many years, it was on Hulu, now it's on Netflix, goes to a bigger platform like that, it creates an opportunity for us. It's a way for us to introduce the franchise to new audiences, to new viewers, and really reinvigorate. As a reminder, though, we are the exclusive home of the Power Universe. We have exclusive rights to all of the sequels, prequels, spinoffs. It is the recent installments that are really driving the business, right, in terms of engagement, in terms of first title streams, subscriber acquisition. We think it's a good thing. It is part of our strategy as programming gets mature. We think that syndication model actually works for us.

Speaker #3: It's a way for us to introduce the franchise to new audiences and new viewers, and really reinvigorate—as a reminder, though—we are the exclusive home of the Power Universe.

Speaker #3: We have exclusive rights to all of the sequels, prequels, and spinoffs, and it is the recent installments that are really driving the business, right, in terms of engagement, in terms of first-title streams, and subscriber acquisition.

Speaker #3: So yeah, we think it's a good thing. It is part of our strategy as programming gets mature. We think that the syndication model actually works for us.

Speaker #4: Okay, great. Thanks, everyone. I appreciate it.

David Joyce: Okay, great. Thanks, everyone. I appreciate it.

Vikram Kesavabhotla: Okay, great. Thanks, everyone. I appreciate it.

Speaker #3: Thank you. Our next question comes from the line of Brent Penter with Raymond James and Associates. Your line is now open.

Operator: Thank you. Our next question comes from the line of Brent Penter with Raymond James & Associates. Your line is now open.

Brent Penter: Hey, good morning, everyone. First question, sort of a follow-up on that. As you move to owning your own series, you've talked about the cost savings and the international licensing piece. I don't want to get ahead of ourselves, but top of mind with the Netflix Power deal. As we look down the road, do you see opportunity to take advantage of those same kinds of deals for the library of owned titles that you're building?

Speaker #6: Hey, good morning, everyone. First question, sort of a follow-up on that. As you move to owning your own series you've talked about the cost savings and the international licensing piece.

Speaker #6: I don't want to get ahead of ourselves, but top of mind with the Netflix-Power deal, as we look down the road, do you see an opportunity to take advantage of those same kinds of deals for the library of owned titles that you're building?

Speaker #5: Hey, Brent. It's Jeff. Yeah, look, I think that's part of a big piece of our strategy of rebuilding our content library and getting ownership back on the network is building volume and scale with the franchises that we will then launch and sell internationally.

Jeffrey Hirsch: Hey, Brent. It's Jeff. Yeah, look, I think that's part of a big piece of our strategy of rebuilding our content library and getting ownership back on the network is building volume and scale with the franchises that we will then launch and sell internationally. As you know, Sky is the co-commission partner in the UK. I think we'll have some more announcements from the rest of the world around Fightland, which will bring that per episode cost down even further. I think as we build our slate back and get volume, it gives us opportunities to do output deals around the world that is much more of an MG type basis than a one-off. Ultimately in the second window, the ability to sell those as they get older and we see less value for them on the core business to monetize them in that second window.

Speaker #5: As you know, Sky is the co-commission partner in the UK. I think we'll have some more announcements on the rest of the world around Flight Land, which will bring that per-episode cost down even further.

Speaker #5: And I think as we build our slate back and get volume, it gives us opportunities to do output deals around the world that are much more of an MG-type basis than a one-off.

Jeffrey Hirsch: I think as we build our slate back and get volume, it gives us opportunities to do output deals around the world that is much more of an MG type basis than a one-off. Ultimately in the second window, the ability to sell those as they get older and we see less value for them on the core business to monetize them in that second window.

Speaker #5: And then ultimately, in the second window, the ability to sell those as they get older, and we see less value for them on the core business to monetize them in that second window.

Speaker #6: Yep, makes sense. And then, on the universal pay-two window exit, is there any way you can quantify what portion of viewership or engagement on STARZ came from those titles?

Brent Penter: Yep, makes sense. On the Universal Pay 2 window exit, any way you can quantify what portion of viewership or engagement on Starz came from those titles?

Speaker #5: Yeah. So we haven't aired those titles in almost a year and a half because we were working with the universal to sell them so we wanted to keep them fresh.

Jeffrey Hirsch: Yeah. We haven't aired those titles in almost a year and a half because we were working with Universal to sell them, so we wanted to keep them fresh. There is absolutely almost zero viewership or engagement tied to those titles. When we had it on the air, what we saw, like I said, on previous quarters that we were paying Pay 2 prices for library performance. We've been able to reinvest some of the savings into buying library to actually drive more engagement. As I said in my prepared remarks, this Q1 was our second highest engagement Q1 of all time. We had a great Q1. We're accelerating into the Q2 here on engagement.

Speaker #5: So there's absolutely almost zero viewership or engagement tied to those titles. When we had it on the air, what we saw, like I said, on previous quarters that we were paying pay-to prices for library performance.

Speaker #5: And so, we've been able to reinvest some of the savings into buying library to actually drive more engagement. And as I said in my prepared remarks, this quarter was our second-highest engagement quarter of all time.

Speaker #5: And so we had a great first quarter. We're accelerating into the second quarter here on engagement. And so we feel like we're in a really good place, and it was the right decision based on the performance of the titles that we had in '24 and '25.

Jeffrey Hirsch: We feel like we're in a really good place, and it was the right decision based on the performance of the titles than we had it in 2024 and 2025.

Speaker #6: Okay, great. And then, Jeff, you talked about the ability to be selective with strategic initiatives. In the past, you've talked about the value of the AVOD and SVOD platforms you've built on STARZ.

Brent Penter: Okay, great. Jeff, you talked about the ability to be selective with strategic initiatives. In the past, you've talked about the value of the AVOD and SVOD platform you've built on Starz. Can you update us on any conversations you all are having on that front on any of those strategic initiatives?

Speaker #6: Can you update us on any conversations you all are having on that front, or on any of those strategic initiatives?

Speaker #5: Yeah, look, I'm not going to get into any detail on any of those strategic conversations. I think what I will say, as I said in my prepared remarks, is we do think there's an opportunity with a lot of these maroon linear networks that fit our demo very well to give them a digital future through our technology, our customer acquisition, and our ability to transition businesses from linear to digital, like we've done with STARZ over the last 10 years.

Jeffrey Hirsch: Yeah, look, I'm not going to get into any detail on any of those strategic conversations. I think what I will say is, I said in my prepared remarks, we do think there's an opportunity with a lot of these moribund linear networks that fit our demo very well to give them a digital future through our technology and our customer acquisition and our ability to transition businesses from linear to digital like we've done with Starz over the last 10 years. The core business is operating so well. As Scott talked about, 2029 becomes a massive step up in free cash flow to equity. The core business is on a really good path.

Speaker #5: But again, we will only—the core business is operating so well. As Scott talked about, '29 becomes a massive step up on equity-free cash flow.

Speaker #5: And so the core business is on a really good path. And so unless these conversations lead to any kind of putting together of content that gives us additive to the revenue base within the leverage kind of calculus that we feel comfortable with on a company our size and we can grow the business more than we will organically, we just won't do it because we don't need to right now.

Jeffrey Hirsch: Unless these conversations lead to any kind of putting together of content that gives us additive to the revenue base within the leverage kind of calculus that we feel comfortable with on a company our size, and we can grow the business more than we will organically, we just won't do it because we don't need to right now.

Speaker #6: Great. Thank you very much.

Brent Penter: Great. Thank you very much.

Speaker #3: Thank you. Our next question comes from the line of David Joyce with Seaport Research Partners. Your line is now open.

Operator: Thank you. Our next question comes from the line of David Joyce with Seaport Research Partners. Your line is now open.

Speaker #5: Thank you. Could you please help us understand what the subscriber trends have been like? I know it's not something that you've been publishing regularly, but how is it looking year over year and into this new quarter?

David Joyce: Thank you. Could you please help us understand what the subscriber trends have been like? I know it's not something that you've been publishing regularly, but how is it looking year-over-year and into this new quarter? Also, if you could drill down some more on the cash content spend versus amortization as it pertains to the free cash flow cadence, especially as we get into that 2029 inflection point you mentioned. Thank you.

Speaker #5: And then also, if you could drill down some more on the cash content spend versus amortization as it pertains to the free cash flow cadence, especially as we get into that 2029 inflection point you mentioned.

Speaker #5: Thank you.

Speaker #2: Hey, David, thanks for the question. As we said, we're not really reporting subscribers, but what I would say is the business continues to grow.

Jeffrey Hirsch: Hey, David. Thanks for the question. Look, as we said, we're not really reporting subscribers, but what I would say is the business continues to grow. I think Scott said it pretty well in his prepared remarks that you can't just grow the business on rate. We're really excited about the Peacock deal because that gives us access to 48 million subscribers that we haven't had access to in a very simple and easy and consumer frictionless way to grow our business. If you look at our other mature Distribution partners were anywhere between 14% and 22% penetrated. Think about what that could mean on a base of 48 million as we grow that over time. I think we could grow the business just on Peacock alone over the next couple of years from a subscriber basis.

Speaker #2: I think Scott said it pretty well in his prepared remarks that you can't just grow the business on rate. We're really excited about the Peacock deal because that gives us access to 48 million subscribers that we haven't had access to in a very simple and easy and consumer frictionless way to grow our business.

Speaker #2: If you look at our other mature distribution partners, we're anywhere between 14 to 22 percent penetrated. So think about what that could mean on a base of 48 million as we grow that over time.

Speaker #2: And so, I think we could grow the business just on Peacock alone over the next couple of years from a subscriber basis. But what I would say is, total subscribers in the quarter were up even in the face of a rate increase, which is very rare.

Jeffrey Hirsch: What I would say is, total subscribers in the quarter were up, even in the face of a rate increase, which is very rare. There's real strength in the business on both sides of the revenue equation.

Speaker #2: So, there's real strength to the business on both sides of the revenue equation.

Speaker #4: David, this is Scott. We are really comfortable in coming in below 600 million on overall content spend for this year. And we kind of see below 600 million is the trend going forward.

Scott Macdonald: David, this is Scott. We are really comfortable in coming in below $600 million on overall content spend for this year. We kind of see below $600 million as the trend going forward. Kind of a combination of the Universal deal, the Pay 2 exit, as well as Jeff mentioned, getting the ownership economics on our originals, where you see $2 to 2.5 million lower cost per episode, which is meaningful when you look at the number of episodes we do a year. We're very comfortable with that. What will happen as we move forward, we're comfortable hitting the mid to upper end of our Adjusted OIBDA target of $80 to 120 million. As I mentioned earlier, content payments were really light Q1. We caught that up in Q2 and we see positive for the rest of the year there growing into 2027, 2028.

Speaker #4: It's kind of a combination of the universal deal, the pay-to exit, as well as, as Jeff mentioned, getting the ownership economics on our originals, where you see two to two and a half million lower cost per episode, which is meaningful when you look at the number of episodes we do a year.

Speaker #4: So we're very comfortable with that. And what will happen as we move forward, we're comfortable hitting the mid to upper end of our adjusted OIBDA target of 80 to 120 million.

Speaker #4: As I mentioned earlier, content payments were really like Q1. We caught that up in Q2. And we see positive for the rest of the year there, growing into '27, '28.

Scott Macdonald: As I mentioned earlier, content payments were really light Q1. We caught that up in Q2 and we see positive for the rest of the year there growing into 2027, 2028.

Speaker #4: But when you get to 2029, there'll really be a huge inflection point as the universal payments will be done then. So you should think of equity-free cash flow of over 70 percent and unlevered exceeding 90 percent to reminder, we have a very small capex, about less than 20 million a year, and we with our NOL position don't expect to be a taxpayer.

Scott Macdonald: When you get to 2029, there will really be a huge inflection point as the Universal payments will be done then. You should think of equity free cash flow of over 70% and unlevered exceeding 90%. As a reminder, we have very small CapEx, about less than $20 million a year, and we, with our NOL position, do not expect to be a taxpayer. We feel really good about how our free cash flow is going to go here over the next few years.

Speaker #4: So we feel really good about how our free cash flow is going to go here over the next few years.

Speaker #5: Great. Thank you very much.

David Joyce: Great. Thank you very much.

Speaker #3: Thank you. Our next question comes from the line of Drew Crumb with B. Riley Securities, Inc. Your line is now open.

Operator: Thank you. Our next question comes from the line of Drew Crum with B. Riley Securities, Inc. Your line is now open.

Speaker #6: Okay, thanks. Good morning, everyone. So with you reaffirming the positive revenue growth for OTT, it being down, I think, 3 percent year to date, how are you thinking about the shape or quarterly phasing in the second half?

Drew Crum: Okay, thanks. Good morning, everyone. With you reaffirming the positive revenue growth for OTT, it being down, I think 3% year to date, how are you thinking about the shape or quarterly phasing in H2? I know you gave some commentary around OIBDA in Q3 and Q4, but asking specifically about OTT revenue. Thanks.

Speaker #6: I know you gave some commentary around OIBDA in Q3 and Q4, but I'm asking specifically about OTT revenue. Thanks.

Jeffrey Hirsch: Look, I think we're going to continue to see OTT revenue grow sequentially through the back half of the year and into next year, and we feel very confident and very positive about that. The trends we're seeing, with Fightland off to a great start. We've got Michael coming on, as we said. We've got P-Valley, which is one of our biggest shows, coming back. I think one of the really great things about Fightland this past weekend is that we were acquiring subs at $6. Historically, when we were reporting subs and in that quarterly cadence of subs, we would've been probably acquiring at $2 to $3.

Speaker #2: Look, I think we're going to see continue to see OTT revenue grow sequentially. Through the back half of the year and into next year and we feel very confident and very positive about that.

Speaker #2: The trends we're seeing with Fightland are off to a great start. We've got Michael coming on, as we said. We've got P-Valley, which is one of our biggest shows, coming back.

Speaker #2: And I think one of the really great things about Fightland this past weekend is that we are acquiring subs at $6. Historically, when we were reporting subs and in that quarterly cadence of subs, we would have been probably acquiring at $2 to $3.

Speaker #2: And so we're seeing strong ARPU growth. We're seeing great sub growth. And the content is working, which is you put those three things together with the slate going forward, we feel very confident in the revenue trajectory for the rest of the year.

Jeffrey Hirsch: We're seeing strong ARPU growth, we're seeing great sub growth, and the content is working, which is, you put those two things together with the slate going forward, we feel very confident in the revenue trajectory for the rest of the year.

Speaker #6: Thanks for that, Jeff. And just can you remind us of the timing for Michael on the platform? That's Q3. And does that revenue flow in the third quarter, or is it more forward?

Drew Crum: Thanks for that, Jeff. Just can you remind us the timing of Michael on the platform? That's Q3. Is that revenue flow in Q3, or is it more Q4?

Jeffrey Hirsch: It will premiere on the platform on 10 August.

Speaker #2: It will premiere on the platform on August 10th.

Speaker #6: Okay. All right. Thanks, guys.

Drew Crum: Okay. All right. Thanks, guys.

Speaker #3: Thank you. Our next question comes from the line of David Karnoski with JP Morgan. Your line is now open.

Operator: Thank you. Our next question comes from the line of David Karnofsky with JPMorgan. Your line is now open.

Speaker #5: Hey, thanks. Jeff, maybe just one on distribution. We saw Peacock recently do a deal with YouTube Premium for the their platform to get adjusted into the bundle.

David Karnofsky: Hey, thanks. Jeff, maybe just one on distribution. We saw Peacock recently do a deal with YouTube Premium for their platform to get ingested into the bundle. I'm just curious what you make of that arrangement, whether you've ever thought of something similar for Starz. Thank you.

David Karnovsky: Hey, thanks. Jeff, maybe just one on distribution. We saw Peacock recently do a deal with YouTube Premium for their platform to get ingested into the bundle. I'm just curious what you make of that arrangement, whether you've ever thought of something similar for Starz. Thank you.

Speaker #5: I'm just curious what you make of that arrangement, whether you've ever thought of something similar for Starz. Thank you.

Speaker #2: Yeah, it's a great question. I think, as we've talked a lot over the last, I don't know, ten years, Starz has always been this premium add-on to broad-based distribution platforms.

Jeffrey Hirsch: Yeah, it's a great question. I think as we've talked a lot over the last, I don't know, 10 years, Starz has always been this premium add-on to broad-based distribution platforms. We were always sold on top of Comcast, we were sold on top of DirecTV. When we pivoted to digital in April 2016, we actually thought that the more things changed, the more they were going to stay the same, and the digital world would then start to rebundle itself. While it's taken a lot longer than we thought it would, we're starting to see that on scale. As you start to see three or four really big broad-based streamers out there. We're sold on top of Amazon, we're sold on top of Hulu. We're now sold on top of Peacock. I think you'll see that continue. We think that's why the Warner Bros.

Speaker #2: We were always sold on top of Comcast. We were sold on top of DirecTV. And when we pivoted to digital in April 2016, we actually thought that the more things change, the more they were going to stay the same.

Speaker #2: And the digital world would then start to rebundle itself. And while it's taken a lot longer than we thought it would, we're starting to see that at scale.

Speaker #2: And so as you start to see three or four really big broad-based streamers out there, we're sold on top of Amazon. We're sold on top of Hulu.

Speaker #2: We're now sold on top of Peacock. I think you'll see that continue. We think that's why the Warner Brothers and Paramount deal is such a good deal, not only for the consumer, but for independents like us, because it gives us, again, another platform to be sold on top of.

Jeffrey Hirsch: I think you'll see that continue. We think that's why the Warner Bros. Paramount deal is such a good deal for not only the consumer, but for independents like us, because it gives us, again, another platform to be sold on top of. We're supportive of that deal as well. I think the deal you saw with Peacock and YouTube is just the next step in that, as Ally likes to say, it's going from bundling to packaging and recreating what we used to have in the old linear business, and that is really good for the Starz business.

Jeffrey Hirsch: Paramount deal is such a good deal for not only the consumer, but for independents like us, because it gives us, again, another platform to be sold on top of. We're supportive of that deal as well. I think the deal you saw with Peacock and YouTube is just the next step in that, as Ally likes to say, it's going from bundling to packaging and recreating what we used to have in the old linear business, and that is really good for the Starz business.

Speaker #2: And so we're supportive of that deal as well. And so I think the deal you saw with Peacock and YouTube is just the next step in that as Ali likes to say, it's going from bundling to packaging and recreating what we used to have in the old linear business.

Speaker #2: And that is really good for the Starz business.

Speaker #5: Thank you.

David Karnofsky: Thank you.

David Karnovsky: Thank you.

Speaker #3: Thank you. Our next question comes from the line of Sean Difley with Morgan Stanley. Your line is now open.

Operator: Thank you. Our next question comes from the line of Sean Diffley with Morgan Stanley. Your line is now open.

Speaker #6: Great, thanks very much, team. I was hoping you could unpack how this compares to prior cycles. It sounds like it's going better, given the content slate success.

Sean Diffley: Great. Thanks very much, team. I was hoping you could unpack some of the details on how this price hike compares to prior cycles. It sounds like it's going better given the content slate success, but how you're thinking about your pricing power relative to other streaming services. Second question on capital allocation. As you've outlined, there's a clear path to more free cash flow generation. Seems like de-levering is still a focus, but is there a path to doing buybacks or are you saving cash to reinvest or potential M&A? How should we think about capital allocation from here? Thanks.

Speaker #6: But how you're thinking about your pricing power relative to other streaming services. And then second question on capitalization. As you've outlined, there's a clear path to more free cash flow generation.

Speaker #6: It seems like deleveraging is still a focus, but is there a path to doing buybacks, or are you saving cash to reinvest or for potential M&A?

Speaker #6: How should we think about capital allocation from here? Thanks.

Speaker #3: Yeah, thanks, Sean. I'll start with the rate increase. We're really proud of how the team has managed and defended the rate increase. As you noted, we're seeing disconnects are significantly lower than the last time we executed a rate increase.

Alison Hoffman: Thanks, Sean. I will start with the rate increase. We are really proud of how the team has managed and defended the rate increase. As you noted, we are seeing disconnects are significantly lower than the last time we executed a rate increase. You should know also it is pretty much flowed through at this point. On the streaming side, we have a little bit more to go on the linear affiliates who are participating, but we have really sort of managed and digested that rate increase at this point. And despite the increase, we are seeing record low churn in the business. And I think that does speak to the power of the slate, the engagement trends that we are seeing in the business. We do feel that we are at the right price in the ecosystem, and we feel really good about it.

Speaker #3: You should know also, it has pretty much flowed through at this point on the streaming side. We have a little bit more to go on the linear affiliates who are participating, but we've really sort of managed and digested that rate increase at this point.

Speaker #3: And despite the increase, we're seeing record low churn in the business. And I think that does speak to the power of the slate. The engagement trends that we're seeing in the business.

Alison Hoffman: And I think that does speak to the power of the slate, the engagement trends that we are seeing in the business. We do feel that we are at the right price in the ecosystem, and we feel really good about it.

Speaker #3: So we do feel that we have that. We're at the right price in the ecosystem, and we feel really good about it.

Speaker #5: Yeah, in terms of capital allocation, it's a great question. I think you saw in Scott's prepared remarks, we were able to upsize the revolver and the term loan and still we're still confident of getting to that 2.7, which means the underlying business is actually delevering faster than what we have.

Jeffrey Hirsch: In terms of capital allocation, it's a great question. I think you saw in Scott's prepared remarks, we were able to upsize the revolver and the Term Loan A and we are still confident of getting to that 2.7, which means the underlying business is actually delevering faster than what we have. And so we feel really good about that. And we think we get that path to 2.5% is going to come much sooner than we thought it would originally. When we get there, I think we will have a conversation and the board, I think, will have a pretty robust conversation about what we will do there. And that's a good problem for us to have, so we will have that conversation when we get there.

Speaker #5: And so we feel really good about that. And we think we get that path to 2.5% is going to come much sooner than we thought it would originally.

Speaker #5: And when we get there, I think we'll have a conversation and the board, I think we'll have a pretty robust conversation about what we'll do there and that's a good problem for us to have.

Speaker #5: And so we'll have that conversation when we get there.

Speaker #3: Thank you. Our next question comes from the line of Matthew Harrigan with Benchmark Stonex. Your line is now open.

Operator: Thank you. Our next question comes from the line of Matthew Harrigan with The Benchmark Company. Your line is now open.

Matthew Harrigan: Thank you. I guess try to turn this call into a little bit of a teach-in to Lionsgate, Fightland. You were actually running advertising on Bloomberg and CNBC, and I thought it was really appealing. And I know surprisingly, Bloomberg has actually had programming with the cast on some of their cultural segments. And it seems like something that could really have a lot of crossover appeal and clearly, law of small numbers or large numbers, depending how you look at it really would afford a lot of operating leverage. When you look at your subscribers, and I know you probably won't give out the exact percentages, but when you look at the urban and the diaspora side, is that really the great majority of the viewers?

Speaker #4: Oh, thank you. I guess try to turn this call into a little bit of a P&N to Lions or Lionsgate. Fightland. You were actually running advertising on Bloomberg and CNBC, and I thought it was really appealing.

Speaker #4: And I know, surprisingly, Bloomberg has actually had programming with the cast on some of their cultural segments. And it seems like something that could really have a lot of crossover appeal, and clearly, law of small numbers or large numbers depending on how you want to look at it.

Speaker #4: It really would afford a lot of operating leverage. When you look at your subscribers, and I know you probably won't give out the exact percentages, but when you look at the urban and the dis staff side, is that really the great majority of the viewers?

Speaker #4: And if you really do have a crossover hit where everybody working in Manhattan suddenly wants to watch Fightland, isn't that something that could be pretty transformative in terms of increasing the bundling appeal and even just getting as you commented, more standalone OTT acquisitions?

Matthew Harrigan: If you really do have a crossover hit where everybody working in Manhattan suddenly wants to watch Fightland, isn't that something that could be pretty transformative in terms of increasing the bundling appeal and even just getting, as you commented, more standalone OTT acquisitions? Thanks.

Speaker #4: Thanks.

Speaker #5: Yeah, I mean, look, I think we've always had a large portion of our customer base set in New York. I mean, the Power shows have been set in New York.

Jeffrey Hirsch: Yeah, look, I think we've always had a large portion of our customer base set in New York. The Power shows have been set in New York. We shoot them in New York. If you look at even DC, there's a huge following of the Power shows, whether it's through the CBC or Speaker Jeffries. There's a large portion of this country that really is obsessed with our franchises. We thought it would be really good to try to expand a little bit. Fightland's a little different than we've had because it brings the UK involved, it brings boxing involved, so I think we can expand the footprint and the subscriber base through that show. What we're seeing early on is just that, right?

Speaker #5: We shoot them in New York. We are, if you look at even D.C., there's a large, huge following of the Power shows, whether it's through the CBC or Speaker Jeffries.

Speaker #5: And so there's a large portion of this country that really is obsessed with our franchises. And so we thought it would be really good to try to expand a little bit at Fightlands, a little different than we've had because it brings the UK involved.

Speaker #5: It brings boxing involved. And so I think we can expand the footprint in the subscriber base through that show. And what we're seeing early on is just that, right?

Speaker #5: And as Ali said, we're seeing it with WinBack. We're re-engaging customers that have lapsed over a period of time because of either they left the power franchise or they just couldn't stomach the original OG ghost dying as you've seen a lot socially.

Jeffrey Hirsch: As Ali said, we're seeing it with win-back, where we're re-engaging customers that have lapsed over a period of time because of either they left their Power franchise or they just couldn't stomach the original OG Ghost dying, as you've seen a lot socially. We just thought that as you start to bring new content in that is designed for the audience, but feels a little different, that we'll start to actually market and put the shows in different places. I think you'll see that with the Black Rodeo show. It's similar to P-Valley in the sense that it's shot in the South, but it brings in a whole element of the Black rodeo, which is a real important thing in the South right now and that you see throughout Texas.

Speaker #5: And so we just thought that as you start to bring new content in that is designed for the audience, but feels a little different, that we'll start to actually market and put the shows in different places.

Speaker #5: I think you'll see that with the Black Rodeo show. It's similar to P-Valley in a sense, in that it's shot in the South, but it brings in a whole element of the Black Rodeo, which is a really important thing in the South right now that you see throughout Texas.

Speaker #5: And so I think there's more opportunity to expand the footprint and expand the subscriber base around shows that are designed for the core audience, but are different stories and different accesses to different aspects of the world that are real live today that people haven't seen.

Jeffrey Hirsch: I think there's more opportunity to expand the footprint and expand the subscriber base around shows that are designed for the core audience, but are different stories and different accesses to different aspects of the world that are real live today that people haven't seen. We saw that with P-Valley on scale.

Speaker #5: And we saw that with P-Valley on scale.

Matthew Harrigan: Great. Thank you.

Speaker #4: Great. Thank you.

Speaker #3: Thank you. Our next question is a follow-up from Vikram Kesavapallav with Baird. Your line is now open.

Operator: Thank you. Our next question is a follow-up from Vikram Kesavabhotla with Baird. Your line is now open.

Speaker #6: Yeah, hey, thanks for letting me ask a couple more questions here. I wanted to follow up, Roll. What did you find appealing about that deal, and how should we expect your broader approach to bundling to evolve going forward?

Vikram Kesavabhotla: Yeah. Hey, thanks for letting me ask a couple more questions here. I wanted to follow up on the partnership agreement with Crunchyroll. What did you find appealing about that deal, and how should we expect your broader approach to bundling to evolve going forward? Separate from that, it sounds like you're optimistic about the opportunities from this recent Peacock agreement as well. I'm curious if you see other opportunities to further expand your distribution with deals like that one, and if there's anything else on the horizon that we should be looking for.

Speaker #6: And then, separate from that, it sounds like you're optimistic about the opportunities from this recent Peacock agreement as well. I'm curious if you see other opportunities to further expand your distribution with deals like that one, and if there's anything else on the horizon that we should be looking for.

Speaker #3: Yeah, I think Country Roll is really interesting to us because we have we both have powerful engaged fan bases and they're differentiated. So it's an opportunity to really mine a new audience.

Alison Hoffman: Yeah. I think Crunchyroll is really interesting to us because we both have powerful, engaged fan bases, and they're differentiated. It's an opportunity to really mine a new audience, I think, for both partners. We have been really aggressive in the bundling space, and we will continue to be. You will see more partnerships coming online. Like others, we're seeing that bundling is really good for the reduction of churn, but also it provides opportunities to basically increase your slate, have marketing optionality across the year because you have that many more tent poles or programming opportunities to introduce customers to your programming. We're really excited about that. With Peacock, that is a big deal for us. That is pairing a premium with a broad-based streamer, as Jeff mentioned, with 48 million customers.

Speaker #3: I think for both partners, we have been really aggressive in the bundling space, and we will continue to be. So you will see more partnerships coming online.

Speaker #3: Like others, we're seeing that bundling is really good for the reduction of churn. But also it provides opportunities to basically increase your slate have marketing optionality across the year.

Speaker #3: Because you have that many more tent poles or programming opportunities to introduce customers to your programming. So we're really excited about that. And then with Peacock, I mean, that is a big deal for us.

Speaker #3: I mean, that is pairing a premium with a with 48 million customers. And that I think you'll see that our integration is going to continue to get deeper on the Peacock platform.

Alison Hoffman: I think you'll see that our integration is going to continue to get deeper on the Peacock platform. It is a multi-phase rollout, so you'll see discoverability improve, the buy flow improve. We do think that's a great model for others. We are built to be bundled. We are built to be a channel. We are highly complementary to a broad-based streamer. There are others out there that I think we have that opportunity to do this with.

Speaker #3: It is a multi-phased rollout. So you'll see discoverability improve. The buy flow improve. And we do think that's a great model for others. We are built to be bundled.

Speaker #3: We are built to be a channel. We are highly complementary to a broad-based streamer, and there are others out there where I think we have that opportunity to do this with.

Speaker #6: Okay, thanks for the color. And then separately, I also wanted to follow up on the Michael Biotech joining the platform in the next few days.

Vikram Kesavabhotla: Okay. Thanks for the color. Separately, I also wanted to follow up on the Michael biopic joining the platform in the next few days. Can you talk about how meaningful that could be for the business and perhaps what you've observed historically on the platform when you add a film of that magnitude, in terms of the impact to customer acquisition or engagement or anything else?

Speaker #6: Can you talk about how meaningful that could be for the business and perhaps what you've observed historically on the platform when you add a film of that magnitude in terms of the impact to customer acquisition or engagement or anything else?

Speaker #3: Yeah, we manage the business in terms of—we think in terms of tent poles and we think in terms of supporting content. We fully expect 'Michael' to be a tent pole for the service.

Alison Hoffman: Yeah. We manage the business in terms of tentpoles, we think in terms of supporting content. We fully expect Michael to be a tentpole for the service. If you think about what we have going on right now, you've got Kanan having a massive finale this weekend, Fightland off to a great start. We have Michael coming, which we expect to be a tentpole, generate both subscriber acquisition and high engagement. If it does anything like what The Housemaid did, that propagated for a very long time and continues to drive for the network. There's a tail on these movies that are big four-quadrant blockbusters that really resonate through the business. We're excited. We do have expectations against that we think are reasonable, but we could also see that outperform our expectations.

Speaker #3: So if you think about what we have going on right now, you've got Canaan having a massive finale this weekend, Fightland off to a great start.

Speaker #3: We have Michael coming, which we expect to be a tent pole. And generate both subscriber acquisition and high engagement. And if it does anything like what the house made did, that propagated for a very long time and continues to drive for the network.

Speaker #3: So there's a tail on these movies that are big for quadrant blockbusters. That really resonate through the business. So we're excited. We do have expectations against that that we think are reasonable, but we could also see that outperform our expectations.

Speaker #6: Okay, great. And then just the last question for me. You mentioned that raising Canaan grew his audience in season five. Relative to season one, what do you think worked well about that show that enabled that dynamic?

Vikram Kesavabhotla: Okay, great. Just the last question from me. You mentioned that Raising Kanan grew its audience in season 5 relative to season 1. What do you think worked well about that show that enabled that dynamic, what do you think that suggests about the potential outlook for the upcoming Power spin-off, given that you have a few others coming up here soon?

Speaker #6: And what do you think that suggests about the potential outlook for the upcoming power spinoffs, given that you have a few others coming up here soon?

Speaker #5: Yeah, look, I think we've demonstrated over the last 10 years the ability to do spinoff sequels prequels. I think our average spinoff sequel prequel brings anywhere from 70 to 75 to 100% of the prior IP audience to the new spinoff.

Jeffrey Hirsch: Yeah. Look, okay, I think we've demonstrated over the last 10 years the ability to do spinoffs, sequels, prequels. I think our average spinoff, sequel, prequel brings anywhere from 75% to 100% of the prior IP audience to the new spinoff. I think it's part of the reason why we launched Fightland on the back of Kanan. When we look at IP, we're looking to franchise shows. We know that based on the data that seasons two, three, four, and five is where we see massive subscriber growth. Whenever we're looking at a piece of content, it's really to be a recurring series that comes back. Everything that we do in terms of how we schedule it, how we launch it, what we launch it behind, how we market, when we drop a trailer.

Speaker #5: I think it's part of the reason why we launched Fightland on the back of Canaan. And so when we look at IP, we're looking to franchise shows.

Speaker #5: We know that based on the data that seasons two, three, four, and five is where we see massive subscriber growth. And so whenever we're looking at a piece of content, it's really to be a recurring series that comes back.

Speaker #5: And everything that we do in terms of how we schedule it, how we launch it, what we launch it behind, how we market, when we drop a trailer, if you watch, if you look at what we did this past weekend, Fightland had an overlap of two episodes with Canaan.

Jeffrey Hirsch: If you look at what we did this past weekend, Fightland had an overlap of two episodes with Kanan. We dropped a teaser trailer for Origins, which is the next spinoff right around that. You see a lot of social conversation of people going back to the OG Power to look at Kanan and Ghost and their interaction there. As you know, Sascha Penn, I think, did a phenomenal job, who's the writer, of dropping kernels into the end of Kanan, which will lead us into Origins, which then leads back to the original OG. There's all this intertwining that allows us to move the fan base from one show to the next, to the next. We've been successful at doing that because we've had that season two, three, four, five kind of mentality on everything we do.

Speaker #5: We dropped a teaser trailer for Origins, which is the next spinoff right around that. You see a lot of social conversation of people going back to the OG power to look at Canaan and Ghost and their interaction there.

Speaker #5: As Sasha Penn, I think, did a phenomenal job. It was the writer of Dropping Colonels into the end of Canaan, which will lead us into Origins, which then leads back to the original OG.

Speaker #5: And so there's all this intertwining that allows us to move the fan base from one show to the next to the next. And we've been successful at doing that because we've had that season two, three, four, five kind of mentality on everything we do.

Speaker #5: And we are very purposely built around premiering teasing, dropping, and moving audience across. And you saw that with BMF with the original, the first season of Canaan.

Jeffrey Hirsch: We are very purposefully built around premiering, teasing, dropping, and moving audience across. You saw that with BMF, with the first season of Kanan. You just saw what we did with Fightland. You're going to see with Origins, an 18-episode, that gives us an even more opportunity to layer in other things around that. We are purposely built to get to seasons two, three, four, and five, because that's where you see the streaming business really grow.

Speaker #5: You just saw what we did with Fightland. You're going to see with Origins and 18 episodes that gives us an even more opportunity to layer in other things around that.

Speaker #5: And so, we are purposefully built to get to seasons two, three, four, and five, because that's where you see the streaming business really grow.

Speaker #6: Okay, great. Thanks, everyone. Appreciate all the color.

Vikram Kesavabhotla: Okay, great. Thanks, everyone. Appreciate all the color.

Speaker #3: Thank you. Oh, and I'll turn the call back over to Nilay Shah for closing remarks.

Operator: Thank you. I would now like to turn the call back over to Nilay Shah for closing remarks.

Speaker #1: Thank you, operator. And thank you, everyone. Please refer to the news and events tab under the investor relations section of our website for a discussion of certain non-GAAP forward-looking measures discussed on this call.

Nilay Shah: Thank you, operator, and thank you everyone. Please refer to the News and Events tab under the Investor Relations section of our website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thanks.

Speaker #1: Thanks.

Speaker #3: This concludes today's conference. Thank you for your participation. You may now disconnect.

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.

[Company Representative] (Starz): With desire, I take control, oh. In the moment, you'll find no one as cold as me. I just need a little more me. Southpaw, lefty. I call this my night game. UK, play work, run for your life, babe. Gang shit, bang shit. This is just a different rhythm. Lame shit, same shit. My hogs had to get you killed. Real shit, kill switch. Up the pole, you won't feel shit. Careful who you chill with. Might be who you kill with. Cash out, lash out. You won't make niggas crash out. It's really not a problem. I mean, it's just a problem. Your man got them hands. He want box. My man got that blick. He want pop. He on his third body. He won't stop. You niggas fuck around, we'll make it hot. With desire, I take control, oh.

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Speaker #2: With desire, I take control. Oh, in the moment you'll find there's no one as cold as me. And I just see you a little more me.

[Company Representative] (Starz): In the moment, you'll find no one as cold as me, I just need a little more me. With desire, I take control, oh. In the moment, you'll find no one as cold as me, I just need a little more me. Southpaw, lefty. I call this my night game. UK, play work, run for your life, babe. Gang shit, bang shit. This is just a different rhythm. Lame shit, same shit. My hogs had to get you killed. Real shit, kill switch. Up the pole, you won't feel shit. Deal with, that might be who you kill with. Cash out, lash out, you gon' make niggas crash out. It's really not a problem, I mean if it's a problem. Your man got them hands, he want box. My man got that blick, he want pop. He on his third body, he won't stop.

Speaker #7: Self forth, lefty. I call this my night game. UK, play work, run for your life and gang shit, gang shit. This is just a different drill.

Speaker #7: Lame shit, damn shit. Round hoes said they get you killed. Real shit, kill switch, up the pole, you won't feel shit. Careful who you chill with.

Speaker #7: That might be who you kill with. Cash out, lash out, you gonna make niggas crash out. It's really not a problem. I mean, if it's a problem, your man got some hands you won't box.

[Company Representative] (Starz): You niggas fuck around, we'll make it hot.

Q2 2026 Starz Entertainment Corp Earnings Call

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