Q3 2026 Starz Entertainment Corp Earnings Call

October 29, 2026

Speaker 1: With desire, I take control. Oh, in the moment you'll find no one's as cold as me. At night you'll see a little more of me. With desire, I take control. Oh, in the moment you'll find no one's as cold as me. At night you'll see a little more of me.

Speaker #2: In the moment you're fine, no one is cold as me. And I just need a little more of me.

Speaker 0: Southpaw, lefty. I call this my night game. UK, blade work, run for your life, man. Gang shit, bang shit. This is just a different reel. 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. That might be who you kill with. Cash out, lash out. You gon' make niggas crash out. It's really not a problem. I'm in if it's a problem. Your man got them hands. He want box. My man got that blick. He want pop. He on his-

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, lame shit, same shit.

Speaker #1: 'Round hoes 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.

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 them hands; you want to box.

Speaker #1: My man got that blick, he want to pop. You on this.

Operator: Good day, and thank you for standing by. Welcome to the Starz Q3 2026 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, we'll open up for questions. To ask a question during the session, you will need to press star one one on your telephone. You'll 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 call is being recorded. I would now like to hand it over to our first speaker, Nilay Shah, Investor Relations. Please go ahead.

Operator: Good day, and thank you for standing by. Welcome to the Starz Q3 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, we'll open up for questions. To ask a question during the session, you will need to press star one one on your telephone. You'll 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 call is being recorded. I would now like to hand it over to our first speaker, Nilay Shah, Investor Relations. Please go ahead.

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

Speaker #3: After the speaker's presentation, we'll open up for questions. To ask a question during the session, you may need to press star one-one on your telephone.

Speaker #3: You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded, and I would like to hand it over to our first speaker, Nilay Shah, Investor Relations.

Speaker #3: Please go ahead.

Nilay Shah: Good afternoon. Thank you for joining us for Starz Entertainment's Q3 2026 earnings call. We'll 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'll 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: Good afternoon. Thank you for joining us for STARZ Entertainment's third 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.

Speaker #4: Also joining us on the call today is Allison 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 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: The matters discussed today will also include non-GAAP financial measures and key performance indicators. These non-GAAP measures include adjusted EBITDA, unlevered 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 U.S. GAAP measures and additional required information is available in the 8-K we filed this afternoon, 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 U.S. GAAP. I'll 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 afternoon, 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 US GAAP.

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

Speaker #5: Thank you, Nilay, and thank you all for joining us today. I am pleased to report that STARZ delivered another strong quarter. We are executing against our four key priorities of growing OTT revenue, adjusted OBIDA, and free cash flow, while reducing leverage.

Jeffrey Hirsch: Thank you, Nilay, and thank you all for joining us today. I am pleased to report that Starz delivered another strong quarter. We are executing against our four key priorities of growing OTT revenue, Adjusted OIBDA, and free cash flow while reducing leverage. The business is performing ahead of plan despite a tough operating environment for many in the industry. For the second consecutive quarter, OTT revenue grew year-over-year, and total revenue also returned to year-over-year growth, reflecting our improving financial performance. We generated meaningful free cash flow and accelerated our progress toward our leverage target. Over the last 4 months, we secured multiple new distribution agreements, including a new agreement with Verizon Fios, underscoring the value Starz provides to our distribution partners. Our content portfolio continues to drive strong performance.

Speaker #5: The business is performing ahead of plan, despite a tough operating environment for many in the industry. For the second consecutive quarter, OTT revenue grew year over year, and total revenue also returned to year-over-year growth, reflecting our improving financial performance.

Speaker #5: We generated meaningful free cash flow and accelerated our progress toward our leverage target. Over the last four months, we secured multiple new distribution agreements, including a new agreement with Verizon FIOS, underscoring the value of STARZ provides to our distribution partners.

Speaker #5: Our content portfolio continues to drive strong performance, raising gaining concluded its final season at an all-time audience high, while our first owned original fight land continued to build on its successful premiere.

Jeffrey Hirsch: Raising Kanan concluded its final season at an all-time audience high, while our first owned original, Fightland, continued to build on its successful premiere. Blood of My Blood reinforced the enduring appeal of the Outlander universe, while acquired series S.W.A.T. Exiles added proven franchise programming to our lineup. Most notably, Lionsgate's Michael became the best-performing pay-one title in Starz history. We programmed Starz deliberately using our portfolio approach to sustain engagement year-round while maintaining disciplined investment. A consistent offering of compelling titles builds deeper engagement, which supports retention and a more durable revenue base. We saw that connection again in Q3 as long-tenured subscribers on the app, those who have been with us for a year or more, reached all-time highs in both number and share. Now turning to our outlook. Last quarter, we raised our Adjusted OIBDA growth forecast and unlevered free cash flow guidance.

Speaker #5: Blood of my blood reinforced the enduring appeal of the Outlander universe, while acquired series S.W.A.T. Exiles added proven franchise programming to our lineup. Most notably, Lionsgate's Michael became the best-performing pay-one title in STARZ history.

Speaker #5: We programmed STARZ deliberately. Using our portfolio approach to sustain engagement year-round while maintaining disciplined investment. It consistent offering of compelling titles builds deeper engagement, which supports retention and a more durable revenue base.

Speaker #5: We saw that connection again in the third quarter, as long-tenured subscribers on the app—those who have been with us for a year or more—reached all-time highs in both number and share.

Speaker #5: Now turning to our outlook. Last quarter, we raised our adjusted OBIDA growth forecast and unleveraged free cash flow guidance. Based on our performance through the third quarter, we are reaffirming our full-year outlook for mid-single-digit adjusted OBIDA growth and our unleveraged free cash flow guidance.

Jeffrey Hirsch: Based on our performance through Q3, we are reaffirming our full-year outlook for mid-single-digit Adjusted OIBDA growth and our unlevered free cash flow guidance. Looking ahead, we remain confident in achieving a 20% Adjusted OIBDA margin and leverage of 2.5x or lower in the back half of 2027. Our upcoming slate reinforces that confidence. P-Valley returns in Q4, and its teaser was our best-performing teaser in more than 2.5 years, signaling strong audience interest ahead of the new season. We expect the series to drive both subscriber growth and engagement as we close out 2026 and enter 2027. Next year, we will debut several major titles, including the 18-episode first season of Power Origins, the fifth installment of the Power universe, and our second-owned original, the untitled Black Rodeo series, now in production.

Speaker #5: Looking ahead, we remain confident in achieving a 20% adjusted OBIDA margin and leverage of 2.5x or lower in the back half of 2027.

Speaker #5: Our upcoming slate reinforces that confidence. P-Valley returns in the fourth quarter, and its teaser was our best performing teaser in more than two and a half years, signaling strong audience interest ahead of the new season.

Speaker #5: We expect the series to drive both subscriber growth and engagement as we close out 2026 and enter 2027. Next year, we will debut several major titles, including the 18-episode first season of Power Origins, the fifth installment of the Power Universe, and our second owned original, The Untitled Black Rodeo series, now in production.

Speaker #5: We are just beginning to unlock the financial potential of these owned titles. Owning more of our own content gives us greater control over costs and allows us to retain more of the long-term value of successful IP.

Jeffrey Hirsch: We are just beginning to unlock the financial potential of these owned titles. Owning more of our own content gives us greater control over costs and allows us to retain more of the long-term value of successful IP. We are already seeing the benefits. Our Bell Canada licensing agreement established a new international revenue stream, while the Sky co-commission on Fightland generated international revenue and improved the economics of the series. As our own library grows, we expect to capture more of the economic value created by our content. We also believe Starz is well-positioned to benefit as the industry moves toward greater consolidation and bundling. We anticipated this shift years ago and built Starz as a complementary platform-agnostic service with focused programming for a distinct audience.

Speaker #5: We are already seeing the benefits. Our bell Canada licensing agreement established a new international revenue stream, while the Sky Co-commission on Fight Land generated international revenue and improved the economics of the series.

Speaker #5: As our own library grows, we expect to capture more of the economic value created by our content. We also believe STARZ is well-positioned to benefit as the industry moves toward greater consolidation and bundling.

Speaker #5: We anticipated this shift years ago and built STARZ as a complementary platform-agnostic service with focused programming for a distinct audience. That makes us a natural fit within aggregated offerings and allows us to complement larger entertainment services without competing for the same broad audiences.

Jeffrey Hirsch: That makes us a natural fit within aggregated offerings and allows us to complement larger entertainment services without competing for the same broad audiences. Starz does not need to own the entire consumer ecosystem to grow. Traditional distribution, add-on subscriptions, strategic partnerships, and new bundles give us multiple ways to reach our audiences wherever they choose to watch. Our priority remains driving the success of the core business. We have set a high bar for any strategic transaction. It must accelerate our strategy and create greater value than we believe Starz can create on its own. We are delivering against our plan, creating new revenue streams through ownership and positioning Starz to benefit from the industry's continued evolution. Overall, we remain focused on creating long-term shareholder value. We entered 2026 expecting an inflection in the business. 9 months in, we are ahead of where we expected to be.

Speaker #5: STARZ does not need to own the entire consumer ecosystem to grow. Traditional distribution, add-on subscriptions, strategic partnerships, and new bundles give us multiple ways to reach our audiences wherever they choose to watch.

Speaker #5: Our priority remains driving the success of the core business. We have set a high bar for any strategic transaction—it must accelerate our strategy and create greater value than we believe STARZ can create on its own.

Speaker #5: We are delivering against our plan, creating new revenue streams through ownership and positioning STARZ to benefit from the industry's continued evolution. Overall, we remain focused on creating long-term shareholder value.

Speaker #5: We entered 2026 expecting an inflection in the business, nine months in, we are ahead of where we expected to be. With that, I'll turn it over to Scott to take you through the financial results and our outlook.

Jeffrey Hirsch: With that, I will turn it over to Scott to take you through the financial results and our outlook.

Speaker #3: Thank you, Jeff, and good afternoon, everyone. I'm pleased to report that the third quarter was another strong quarter, during which we delivered on or ahead of our expectations.

Scott Macdonald: Thank you, Jeff, and good afternoon, everyone. I am pleased to report that Q3 was another strong quarter during which we delivered on or ahead of our expectations. Our financial story remains the same, growing OTT revenue, expanding Adjusted OIBDA, generating meaningful free cash flow, and reducing leverage. Once again, based on our Q3 performance, the business remains on track to deliver on all of these key metrics in 2026. Total revenue for Q3 was $322 million, our strongest quarter of 2026, driven by strong OTT and distribution revenue growth. OTT revenue was $227 million, up 1.7% year over year and up 2.4% sequentially. On a pro forma basis, adjusting for the strategic change in our Canadian operations to a content licensing arrangement in Q4 2025, OTT revenue growth for the quarter would have been 3.2%.

Speaker #3: Our financial story remains the same, growing OTT revenue, expanding adjusted OBIDA, generating meaningful free cash flow, and reducing leverage. And once again, based on our third quarter performance, the business remains on track to deliver on all of these key metrics in 2026.

Speaker #3: Total revenue for the third quarter was $322 million, our strongest quarter of 2026, driven by strong OTT and distribution revenue growth. OTT revenue was $227 million, up 1.7% year over year and up 2.4% sequentially.

Speaker #3: On a pro forma basis, adjusting for the strategic change in our Canadian operations to a content licensing arrangement in Q4 2025, OTT revenue growth for the quarter would have been 3.2%.

Speaker #3: The strength in OTT revenue we are seeing is driven by annual subscribers renewing at higher promotional pricing as well as the continued impact of the April 2026 price hike.

Scott Macdonald: The strength in OTT revenue we are seeing is driven by annual subscribers renewing at higher promotional pricing, as well as the continued impact of the April 2026 price hike. Linear and other revenue was $96 million for the quarter, as continued secular pressure on traditional video households was partially offset by increased distribution revenue from the beginning of our strategy to own more of our own content, including Fightland. Specifically, distribution revenue will continue to grow as we own more of our content in 2027 and beyond. Adjusted OIBDA was $44 million for the quarter, ahead of our expectations and up significantly year over year. Our Q3 performance exceeded our guidance from our last call, allowing us to shift a portion of our marketing investment into Q4 to further support the return of P-Valley, which we believe will enhance the show's subscriber acquisition and engagement.

Speaker #3: Linear and other revenue was $96 million for the quarter, as continued secular pressure on traditional video households was partially offset by increased distribution revenue from the beginning of our strategy to own more of our own content, including Fight Land.

Speaker #3: Specifically, distribution revenue will continue to grow as we own more of our content in 2027 and beyond. Adjusted OBIDA was $44 million for the quarter, ahead of our expectations and up significantly year over year.

Speaker #3: Our Q3 performance exceeded our guidance from our last call, allowing us to shift a portion of our marketing investment into the fourth quarter to further support the return of P-value, which we believe will enhance the show's subscriber acquisition and engagement.

Scott Macdonald: Accordingly, we are reiterating our 2026 Adjusted OIBDA growth to be in the mid-single-digits range, and we remain confident in achieving our 20% Adjusted OIBDA margin target during the back half of 2027. Unlevered Free Cash Flow was +$19 million in Q3 and is +$85 million year to date. Equity Free Cash Flow was +$13 million in the quarter and is +$48 million year to date. We remain confident in achieving our 2026 Unlevered Free Cash Flow target of $100 million to $120 million. Cash content spend was $174 million for the quarter. We continue to expect full-year 2026 cash content spend to be below $600 million and see continued improvement in the convergence of cash content spend and programming amortization this year.

Speaker #3: Accordingly, we are reiterating our 2026 adjusted OBIDA growth to be in the mid-single-digits range and we remain confident in achieving our 20% adjusted OBIDA margin target during the back half of 2027.

Speaker #3: Unleveraged free cash flow was positive $19 million in the third quarter and is positive $85 million year to date. Equity free cash flow was positive $13 million in the quarter and is positive $48 million year to date.

Speaker #3: We remain confident in achieving our 2026 unleveraged free cash flow target of $100 million to $120 million. Cash content spend was $174 million for the quarter.

Speaker #3: We continue to expect full-year 2026 cash content spend to be below $600 million and see continued improvement in the convergence of cash content spend and programming amortization this year.

Scott Macdonald: Additionally, as we discussed last quarter, we continue to expect to materially increase annual free cash flow in 2029 as our Universal termination payments end in 2028. Net debt was $601 million as of 30 September 2026, and our Adjusted EBITDA leverage ratio was 2.8 times. Our revolver remains undrawn, and we continue to maintain significant liquidity and financial flexibility. As discussed last quarter, we closed on a $100 million increase to our credit facilities, comprised of a $67 million increase to our Term Loan A and a $33 million increase to our revolver. We utilized the $67 million increase in the Term Loan A to fully repay the remaining balance of our programming notes, which were working capital facilities that carried significantly higher interest rates than our credit facilities.

Speaker #3: Additionally, as we discussed last quarter, we continue to expect to materially increase annual free cash flow in 2029 as our universal termination payments end in 2028.

Speaker #3: Net debt was $601 million as of September 30, 2026, and our adjusted OBIDA leverage ratio was 2.8 times. Our revolver remains undrawn and we continue to maintain significant liquidity and financial flexibility.

Speaker #3: As discussed last quarter, we closed on a $100 million increase to our credit facilities, comprised of a $67 million increase to our term loan A and a $33 million increase to our revolver.

Speaker #3: We utilized the $67 million increase in Term Loan A to fully repay the remaining balance of our programming notes, which were working capital facilities that carried significantly higher interest rates than our credit facilities.

Speaker #3: As noted on our last call, 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 also simplifying our capital structure.

Scott Macdonald: As noted on our last call, 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 also simplifying our capital structure. Even after incorporating this additional $67 million of term debt, we achieved 2.8 times leverage at the end of Q3, and we still expect to end 2026 with leverage of approximately 2.7 times. Importantly, we expect to achieve our leverage target of 2.5 times or lower during the back half of 2027. Our financial story is simple: growing OTT revenue, expanding margins, growing free cash flow, and reducing leverage. We are confident in our trajectory, and we look forward to continuing to demonstrate our progress. Now I will turn the call back over to Nilay for Q&A.

Speaker #3: Even after incorporating this additional $67 million of term debt, we achieved 2.8x leverage at the end of the third quarter, and we still expect to end 2026 with leverage of approximately 2.7x.

Speaker #3: Importantly, we expect to achieve our leverage target of 2.5x or lower during the back half of 2027. Our financial story is simple: growing OTT revenue, expanding margins, growing free cash flow, and reducing leverage.

Speaker #3: 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 #1: Thanks, Scott. Operator, could we open the call up for analyst Q&A?

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

Operator: Thank you. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for a name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Vikram Kesavabhotla from Baird. Your line is open.

Speaker #4: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. And wait for a name to be announced to withdraw your question.

Speaker #4: Please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Akram Kesavolta from Baird.

Speaker #4: Your line is open.

John Regadian: Hi, thanks for the question. This is John Regadian for Vik. I guess my first question on Fightland, the season finale of that show was about a month ago. Can you just speak to how that series performed versus your expectations and what you observed with respect to the impact on customer acquisition and engagement on the platform? Then maybe also how Fightland impacted your perspective just on the value of fully owned programming and the approach that you take to these shows down the road. My second question is on bundling. You have announced a handful of these bundles over the last several months, I think Peacock and Crunchyroll being the two most recent. I would love to hear what you have observed in the first few months of these relationships.

John Lanza: Hi, thanks for the question. This is John R. Lanza for Vik. I guess my first question on Fightland, the season finale of that show was about a month ago. Can you just speak to how that series performed versus your expectations and what you observed with respect to the impact on customer acquisition and engagement on the platform? Then maybe also how Fightland impacted your perspective just on the value of fully owned programming and the approach that you take to these shows down the road. My second question is on bundling. You have announced a handful of these bundles over the last several months, I think Peacock and Crunchyroll being the two most recent. I would love to hear what you have observed in the first few months of these relationships.

Speaker #5: Hi. Thanks for the question. This is John Rigati on for Vic. I guess my first question on Fight Land—the season finale of that show was about a month ago.

Speaker #5: Can you just speak to how that series performed versus your expectations and what you observed with respect to the impact on customer acquisition and engagement on the platform?

Speaker #5: And then maybe also how Fight Land impacted your perspective just on the value of fully owned programming and the approach that you take to these shows down the road?

Speaker #5: And then my second question is on bundling. You've announced a handful of these bundles over the last several months. I think Peacock and Crunchyroll being the two most recent.

Speaker #5: I'd love to hear what you've observed in the first few months of these relationships, and then, just from a higher level, it seems like obviously there's more bundling and add-on activity happening across the industry.

John Regadian: Then just from a higher level, it seems like obviously there is more bundling and add-on activity happening across the industry. How are you evaluating which of these relationships you plan to participate in? Thanks.

John Lanza: Then just from a higher level, it seems like obviously there is more bundling and add-on activity happening across the industry. How are you evaluating which of these relationships you plan to participate in? Thanks.

Speaker #5: How are you evaluating which of these relationships you plan to participate in? Thanks.

Jeffrey Hirsch: Hi, I will take the first question, and Ali will take the bundling question. Fightland was off to a great start. We feel very good about the arc of the show and the path of the show. It had a lot of long-term connectivity into our core cohorts. We feel great about how the season ended, and we are currently in development on a season 2 right now. I think the performance of that show, not only the cost of the show, how it looked on the air in terms of quality, how it was received by our consumers, and the revenue that we have generated in the quarter in terms of the linear and other line item from international sales with our partner, Sky, as a co-commission partner, has made us even more bullish in terms of owning our own content and bringing it to the network.

Speaker #6: Hi. I'll take the first question and Ali will take the bundling question. Fight Land was off to a great start. We feel very good about the arc of the show and the path of the show.

Speaker #6: I had a lot of long-term connectivity into our core cohorts. And we feel great about how the season ended and we're currently in development on a season two right now.

Speaker #6: I think the performance of that show, not only the cost of the show, how it looked on the air in terms of quality, how it was received by our consumers, and the revenue that we've generated in the quarter in terms of the linear and other line item from international sales, with our partner Sky as a co-commission partner, has made us even more bullish in terms of owning our own content and bringing it to the network.

Jeffrey Hirsch: We're excited about the Black Rodeo show that's in production right now, and we think we're just really scratching the surface as we've got one original that we own as we get into the 2027 slate, and we own half of the slate, and then the 2028, where we own half more. We have really rebuilt our library, and we can monetize those around the world. We think it brings another line of revenue to the business that we don't have today. If you think about $6 to 9 million per season and per show on four, five, six shows, it's really meaningful to a business that's doing $200 to 250 million of EBITDA every year. We feel really good about it, and we're excited about its performance, and we're excited about Rodeo coming on the network in the next year as well.

Speaker #6: We're excited about the Black Rodeo show that's in production right now. And we think we're just really scratching the surface as we've got one original that we own.

Speaker #6: As we get into the 27th slate, we own half of the slate and then the 28th where we own more and we have really rebuilt our library and we can monetize those around the world.

Speaker #6: We think it brings another line of revenue to the business that we don't have today. And if you think about six to nine million per season and per show on four, five, six shows, it's really meaningful to a business that's doing 200 to 250 million of EBITDA every year.

Speaker #6: So we feel really good about it and we're excited about its performance and we're excited about Rodeo coming on the network in the next year as well.

Alison Hoffman: Hey, John, this is Alison. Thanks for the question about bundling. Bundles continue to perform really well for Starz. With the consolidation that we're seeing across the industry, we really expect a new wave of distribution and bundling partners to continue into 2027. In regards to Peacock, I think it's early days, but we are launching a number of operational and tactical initiatives this quarter that we think will really improve our visibility on that platform. We're excited for that. Crunchyroll is off to a really good start. Also, we launched the first bundle. We were a part of the first super bundle on Amazon Prime Video, which launched just a few weeks ago. The early results of that are very encouraging. In general, we are built to be bundled. We are a complimentary service.

Speaker #2: And hey John, this is Allison. Thanks for the question about bundling. Bundles continue to perform really well for STARZ and with the consolidation that we're seeing across the industry.

Speaker #2: We really expect a new wave of distribution and bundling partners to continue into 2027. In regards to Peacock, I think it's early days, but we are launching a number of operational and tactical initiatives this quarter that we think will really improve our visibility on that platform.

Speaker #2: So we're excited for that. Crunchyroll is off to a really good start. Also, we launched the first Trundle. We were a part of the first Super Bundle on Amazon Prime Video, which launched just a few weeks ago.

Speaker #2: And the early results of that are very encouraging. So in general, we are built to be bundled. We are complementary service. We will be in the bundling and ultimately the repackaging, we think, of the industry.

Alison Hoffman: We will be in the bundling and ultimately the repackaging, we think, of the industry. We see improved retention north of 20% with a lot of these bundles. Most importantly, bundling is accretive to revenue when compared to à la carte sales. That means for us that this is something we need to continue to lean in on and is good for our business.

Speaker #2: We see improved retention—north of 20%—with a lot of these bundles. And most importantly, bundling is a creative-to-revenue compared to à la carte sales.

Speaker #2: So that means for us that this is something we need to continue to lean in on. And it's good for our business.

John Regadian: Thanks for the color. I'll hop back in the queue.

John Lanza: Thanks for the color. I'll hop back in the queue.

Speaker #5: Thanks for the call. I'll have back in the queue.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Drew Crum from B. Riley Securities. Your line is open.

Speaker #4: Thank you. One moment for our next question. Our next question will come from the line of Drew Crumb from BRI Securities. Your line is open.

Drew Crum: Okay. Thanks. Good afternoon, everyone. You are launching the third and final season of P-Valley later this quarter. You mentioned it in the preamble. Just address your outlook for the series and expected impact on the service. A separate question. Scott, just want to understand or reconcile the Adjusted OIBDA guidance for the year versus Q4. I guess it would assume or imply that you are looking kind of flattish to down year-on-year. Is that a function of the shift in marketing spend or is there something else that is impacting that number? Thanks.

Speaker #3: Okay. Thanks. Good afternoon, everyone. So you're launching the third and final season of P-Valley later this quarter. You mentioned that in the preamble, just to address your outlook for the series and expected impact on the service.

Speaker #3: And then a separate question, Scott, just want to understand or reconcile the adjusted EBITDA guidance for the year versus 4Q. I guess it would assume or imply that you're looking kind of flattish to down.

Speaker #3: Year on year, is that a function of the shift in marketing spend or is there something else that's impacting that number? Thanks.

Alison Hoffman: It is Alison again. I will start with P-Valley. We are so excited to have P-Valley back on the network. It has been a little bit of a gap, but the fan base is very excited. It is coming back 4 December. It is a rare show in the TV landscape that is both critically acclaimed and commercially so successful. Just taking you back to the second season, it was generating north of 11 million multi-platform viewers per episode, which is massive for us, but I think really holds a lot of weight across the industry in terms of just how big that show is. As Jeff mentioned in his remarks, the teaser is the best-performing teaser that we have had in the past couple of years. We see momentum happening for that show. Yes, anticipate strong subscriber acquisition, strong engagement.

Speaker #2: It's Allison again. I'll start with P-Valley. We are so excited to have P-Valley back on the network. It has been a little bit of a gap, but the fan base is very excited.

Speaker #2: It's coming back December 4th. It is a rare show in the TV landscape that is both critically acclaimed and commercially so successful. Just taking you back to the second season, it was generating north of 11 million multi-platform viewers per episode, which is massive for us, but I think really holds a lot of weight across the industry in terms of just how big that show is.

Speaker #2: As Jeff mentioned in his remarks, the teaser is the best performing teaser that we've had in the past couple of years. So we see momentum happening for that show.

Speaker #2: And yes, anticipate strong subscriber acquisition, strong engagement. And the way that it's scheduled, it's going to finish out our year and then sort of wrap into the top part of 2027.

Alison Hoffman: The way that it is scheduled, it is going to finish out our year and then sort of wrap into the top part of 2027. That is going to be really key to setting up 2027 successfully. We are really bullish, we are really excited, and we know the fan base is too.

Speaker #2: So that is going to be really key to setting up 2027 successfully. We're really bullish. We're really excited. And we know the fan base is too.

Scott Macdonald: With respect to Adjusted OIBDA, our Q3 actually came in better than we had anticipated, really across the entire P&L. It was a real strong outperformance. That is going to allow us to invest some additional money in the marketing of the P-Valley series to kind of build on what Ali just said, to help that show perform even better and give us a real strong start to 2027, as that show will also air in early 2027. We felt it important to utilize the outperformance to kind of help the performance overall of P-Valley. We still think Q4 will be a very strong quarter. At the end of the day, we are still very comfortable in the mid-single-digit Adjusted OIBDA growth for the year.

Speaker #3: So with respect to adjusted EBITDA, our Q3 actually came in better than we had anticipated, really across the entire P&L. So it was a real strong outperformance.

Speaker #3: That's going to allow us to invest some additional money in the marketing of the P-Valley series to kind of build on what Ali just said.

Speaker #3: To help that show perform even better and give us a real strong start to 2027. Is that show will also air in early 2027.

Speaker #3: So we felt it important to utilize the outperformance to kind of help the performance overall of P-Valley. We still think Q4 will be a very strong quarter.

Speaker #3: And at the end of the day, we're still a very comfortable in the mid-single digit adjusted EBITDA growth for the year. Got it. Okay.

Drew Crum: Got it. Okay. Thanks, guys.

Speaker #3: Thanks, guys.

Operator: Thank you. Our next question will come from the line of Brent Penter from Raymond James. Your line is open.

Speaker #4: Thank you. And our next question will come from the line of Brent Penter from Raymond James. Your line is open.

Brent Penter: Hey, good afternoon, everyone. Thanks for taking the questions. First one for me. Earlier this year, you all moved away from subscriber and ARPU reporting and shifted your strategy more toward revenue and OIBDA growth. Since that change, can you update us on how that has affected the business and any directional color in terms of subs versus ARPU versus retention versus quality of subscriber? Anything that you can give us on how that has affected you.

Speaker #5: Hey, good afternoon, everyone. Thanks for taking the questions. First one for me earlier this year, you all moved away from subscriber and ARPU reporting and shifted your strategy more toward revenue and EBITDA growth.

Speaker #5: So since that change, can you update us on how that's affected the business and any directional color in terms of subs versus ARPU versus retention versus quality of subscriber, anything that you can give us on how that's affected you?

Jeffrey Hirsch: Hey, Brent, it's Jeff. How are you? Yeah, great question. Look, I think the move away from the quarterly sub cadence to long-term revenue growth has been really healthy for the business, and I think you've seen that in the quarterly results in terms of our continued accelerated OTT revenue growth and return to year-over-year revenue growth. We have really tuned our long-term models to 24-month revenue growth, and we are looking at longer tenure customers, as I said in my prepared remarks. We are really focused on lifetime value and driving subs longer, staying longer, paying us more money, and you are seeing that in the numbers already. Subs that are one year or longer are really, in terms of number and share, at all-time high. Churn is at historic lows for the business. ARPU continues to climb.

Speaker #6: Hey Brent, it's Jeff. How are you? Yeah, great question. Look, I think the move away from the quarterly sub cadence to long-term revenue growth has been really healthy for the business.

Speaker #6: And I think you've seen that in the quarterly results in terms of our continued accelerated OTT revenue growth and return to year-over-year revenue growth.

Speaker #6: We have really tuned our long-term models at 24-month revenue growth, and we're looking at longer-tenure customers, as I said in my prepared remarks. We're really focused on lifetime value and driving subs to stay longer, paying us more money.

Speaker #6: And you're seeing that in the numbers already. Subs that are one year or longer are really in terms of number and share at all-time high.

Speaker #6: Churn is at historic lows for the business. ARPU continues to climb. And so we feel like we've got a really good balance between driving rate and subs to drive long-term revenue growth for the business.

Jeffrey Hirsch: We feel like we have got a really good balance between driving rate and subs to drive long-term revenue growth for the business. What it is really creating is slow and steady and durable growth on the revenue line, which we think is the right way to go in terms of driving our business.

Speaker #6: And it's really what it's really creating is slow and steady and durable growth on the revenue line, which we think is the right way to go in terms of driving our business.

Brent Penter: Great. Next question. One topic that is increasingly being talked about is Muse and agentic AI and the ability for AI agents to manage people's subscriptions. If that becomes a more prevalent trend, how do you all feel that Starz is positioned for that?

Speaker #5: Great. And then next question one topic that is increasingly being talked about is Mews and agentic AI and the ability for AI agents to manage people's subscriptions.

Speaker #5: If that becomes a more prevalent trend, how do you all feel that STARZ is positioned for that?

Jeffrey Hirsch: It's a great question, and I think it's a question that is on everybody's mind. I think first and foremost, the quickest way to keep that from becoming an issue is to continue to program the network with a portfolio approach of content on every week for our two core demos in a way that is accessible and people just have to tune in and watch. I think you are seeing that. You will see that with P-Valley. I think you saw that in the quarter with a mix of originals, S.W.A.T. Exiles coming on as a proven franchise, the Michael Biopic coming on.

Speaker #6: It's a great question. I think it's a question that's on everybody's mind. I think first and foremost, the quickest way to keep that from becoming an issue is to continue the program, the network with a portfolio approach of content on every week for our two core demos in a way that is accessible and people just have to tune in and watch.

Speaker #6: And I think you're seeing that. You'll see that with P-Valley. I think you saw that in the quarter with the mix of originals, SWOT exile coming on as a proven franchise, the microbiopic coming on.

Jeffrey Hirsch: The easiest way to get people not to disconnect, whether it is through a tool or it is on their own, either way, it is pretty simple in the digital world, unlike the cable world where I came from, is to have a great product that people are obsessed with and have to keep coming back for. So that is first and foremost. Second of all, remember, we are a wholesale-first business, so 70% of our business is wholesale. So we are sold on top of other subscriptions through other platforms, Amazon being the biggest. I believe the Muse bots are not actually have any kind of access into the Amazon platform. Even on our wholesale side, we have a very, very small portion that come through storefronts. So the folks that come through our STARZ.com, we also have tools in place to monitor that as well.

Speaker #6: And so the easiest way to get people not to disconnect, whether it's through a tool or it's on their own, either way, it's pretty simple in the digital world.

Speaker #6: Unlike the cable world where I came from, is to have a great product that people are obsessed with and have to keep coming back for.

Speaker #6: So that's first and foremost. Second of all, remember, we're a wholesale-first business. So 70% of our business is wholesale. So we're sold on top of other subscriptions through other platforms, Amazon being the biggest.

Speaker #6: I believe the Mews bots don't actually have any kind of access to the Amazon platform. And even on our wholesale side, we have a very, very small portion that comes through storefronts.

Speaker #6: And so, the folks that come through our STARZ.com, we also have tools in place to monitor that as well. But ultimately, in the digital world, it's a pretty easy way to click in and click out, whether you're using a tool or not.

Jeffrey Hirsch: But ultimately, in the digital world, it is a pretty easy way to click in and click out whether you are using a tool or not. So we believe we have built a great programming schedule and slate with great compelling content that is programmed year-round that will keep customers engaged. You are seeing that I just mentioned, you are seeing that with historic lows in churn. So as long as we continue to execute against our content strategy and continue to drive pricing in the right place, we think that it will not be an issue for us.

Speaker #6: And so we believe we've built a great programming schedule and slate with great compelling content that is programmed year-round that will keep customers engaged through seeing that I just mentioned, you're seeing that with historic lows and churn.

Speaker #6: And so, as long as we continue to execute against our content strategy and continue to drive pricing in the right place, we think that it won't be an issue for us.

Brent Penter: Great. Then Jeff, you mentioned S.W.A.T. Exiles. Can you talk a little more about that show and what made that show attractive to you as an acquisition in terms of cost, the franchise, and are there other opportunities similar to that out there?

Speaker #5: Great. And then Jeff, you mentioned SWOT exiles. Can you talk a little more about that show and what that made what made that show attractive to you as an acquisition in terms of cost, the franchise, and are there other opportunities similar to that out there?

Speaker #3: Yeah, Brent, I'm going to let Ali take that one.

Jeffrey Hirsch: Yeah, Brent, I am going to let Ali take that one.

Alison Hoffman: Yeah, I think you called it in terms of franchise and just the audience. Having a show available to us that has been relevant to customers for over a decade was a really unique opportunity. We are really pleased with how it is performing. It also has great diversity on screen, great diversity as we are discovering in the audience base, and that becomes a really good fit for Starz. We are excited about that. I think it made a lot of sense to us, and we are seeing that move really play out in how it is performing in terms of engagement. I think the other thing that we are seeing with S.W.A.T. Exiles that is exciting is it is bringing a net new customer base to Starz, people that we have not seen before. That is the case with a lot of our acquisitions, but S.W.A.T. Exiles is doing that really, really well.

Speaker #2: Yeah, I think you called it in terms of franchise and just the audience. Having a show available to us that has been relevant to customers for over a decade was a really unique opportunity.

Alison Hoffman: You called it in terms of franchise and just the audience. Having a show available to us that has been relevant to customers for over a decade was a really unique opportunity. We are really pleased with how it is performing. It also has great diversity on screen, great diversity as we are discovering in the audience base, and that becomes a really good fit for Starz. We are excited about that. It made a lot of sense to us, and we are seeing that move really play out in how it is performing in terms of engagement. The other thing that we are seeing with S.W.A.T. Exiles that is exciting is it is bringing a net new customer base to Starz, people that we have not seen before. That is the case with a lot of our acquisitions, but S.W.A.T. Exiles is doing that really well.

Speaker #2: We are really pleased with how it's performing. It also has great diversity on screen. Great diversity as we're discovering in the audience space. And that becomes a really good fit for STARZ.

Speaker #2: So we're excited about that. I think it made a lot of sense to us and we're seeing that move really play out in how it's performing in terms of engagement.

Speaker #2: I think the other thing that we're seeing with SWOT exiles that's exciting is it's bringing a new, net new customer base to STARZ.

Speaker #2: People that we haven't seen before. And that's the case with a lot of our acquisitions, but SWOT exiles is doing that. Really, really well.

Speaker #2: So yes, we will be on the lookout for more opportunities like SWOT exiles and you'll also see again, as we build out our portfolio, you're going to see really big tent pole originals that feed our key cohorts.

Alison Hoffman: Yes, we will be on the lookout for more opportunities like S.W.A.T. Exiles, and you will also see, again, as we build out our portfolio, you are going to see really big tentpole originals that feed our key cohorts. Then you are going to see these interesting, efficient acquisitions, co-commissions, co-productions come on to really extend the lifetime value of our audience base. That really is part of our strategy, of course, along with our movie library and our pay-one strategy.

Speaker #2: And then you're going to see these interesting efficient acquisitions co-commissions, co-productions come on to really extend the lifetime value of our audience base. And that really is part of our strategy.

Speaker #2: Of course, along with our movie library and our pay one strategy.

Brent Penter: Okay, great. Thanks, everyone.

Speaker #5: Okay, great. Thanks, everyone.

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

Speaker #1: Thank you. And our next question will come from line of David Joyce from Seaport Research Partners. Your line is open.

Speaker #7: Thank you. First, a question on the other distribution revenue. Was that a one-timer for episodic delivery for Fightland? Were there more territories, I guess, on the horizon for that particular asset that will be contributing to that line in the near future?

David Joyce: Thank you. First, a question on the other distribution revenue. Was that a one-timer for episodic delivery for Fightland? Or there are more territories, I guess, on the horizon for that particular asset that will be contributing to that line in the near future? Secondly, in the past, you've talked about Starz being a platform that's ready to be a consolidator. But we saw recently the ALLBLK streaming service recently traded. It used to be owned by AMC Networks. Is that an asset that you may have considered? If so, is there anything that you liked about it or something that wouldn't have fit? Just trying to think of what sort of structurally could be additive to your platform. Thanks.

Speaker #7: And then secondly, in the past, you've talked about STARZ being a platform that's ready to be a consolidator, but we saw recently the All Black streaming service recently traded that was used to be owned by AMC Networks.

Speaker #7: Is that an asset that you may have considered? And if so, is there anything that you liked about it or something that wouldn't have fit?

Speaker #7: Just trying to think of what sort of structurally could be additive to your platform. Thanks.

Speaker #3: Yeah, this is Scott. So on the distribution revenue, associated with Fightland, yes, we recognize the revenue associated with the Sky deal in the quarter.

Scott Macdonald: Yeah, this is Scott. On the distribution revenue associated with Fightland, yes, we recognized the revenue associated with the Sky deal in the quarter, as well as the Canadian revenue. So that revenue is recognized upon its delivery and the windows open. So though we expect to see distribution revenue be somewhat lumpy as we start to build our portfolio of own shows, as Jeff mentioned. Again, Fightland being the first. We'll have Black Rodeo in 2027, and by the time we get to 2028, we should have multiple shows on the air that we own the distribution rights to, that will start to make that line item more meaningful.

Speaker #3: And as well as the Canadian revenue. So that revenue is recognized upon its delivery in the windows open. And so we expect to see distribution revenue be somewhat lumpy as we start to build our portfolio of own shows as Jeff mentioned.

Speaker #3: Again, Fightland being the first will have rodeo in '27. And by the time we get to '28, we should have multiple shows on the air.

Speaker #3: That we own the distribution rights to that will start to make that line more line item more meaningful.

Jeffrey Hirsch: David, there is the rest of the world still to be sold for Fightland. So I do think there's more revenue coming in against Fightland as well. To your question about us being a consolidator, I think we continue to believe, based on the tech stack and our ability to transition from linear to digital profitably over the last number of years, that there are opportunities for us to continue to grow our business. We look at the real opportunity for us is to kind of diversify revenue into an AVOD, kind of AVOD with a shelf against our SVOD business. So, the ALLBLK business obviously as an SVOD business is very similar to us. So, while we didn't look at it's not something that we had our eyes on in the first place. It's a great business.

Speaker #5: And David, there is still the rest of the world to be sold for Fightland. So I do think there's more revenue coming in against Fightland as well.

Speaker #5: To your question about us being a consolidator, I think we continue to believe based on the tech stack and our ability to transition from linear to digital profitably over the last number of years that there are opportunities for us to continue to grow our business.

Speaker #5: We look at the real opportunity for us as to kind of diversify revenue into an AVOD, kind of AVOD with a shelf against our SVOD business.

Speaker #5: And so the All Black business obviously was an SVOD business that is very similar to us. So while we didn't look at it, it's not something that we had our eyes on in the first place.

Speaker #5: It's a great business. I think it fits really well with macro and what they're trying to do. And I think the AMC folks and Kristen have done a really phenomenal job of building that business.

Jeffrey Hirsch: I think it fits really well with MACRO and what they're trying to do, and I think the AMC folks and Kristin have done a really phenomenal job of building that business. But, for us to really meaningfully grow shareholder value, we're looking at diversifying the revenue base from just SVOD into AVOD.

Speaker #5: But for us, to really meaningfully grow shareholder value, we're looking at diversifying the revenue base from just SVOD into AVOD.

David Joyce: Appreciate it. Thanks.

Speaker #7: Appreciate it. Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matt Condon from Citizens Bank. Your line is open.

Speaker #1: Thank you. One moment for our next question. Our next question comes from line of Mac Condon from Citizens Bank. Your line is open.

Matt Condon: Great. Thank you so much for taking my question. This is Jeff. My first one, just following the recently announced Verizon renewal, can you help us understand how the economics of that agreement compare with the prior arrangement? More broadly, as you navigate renewals with traditional distributors, just how are you balancing rate increases against maintaining distribution?

Speaker #5: Great. Thank you so much for taking my questions. Jeff, my first one, just following the recently announced Verizon renewal, can you help us understand how the economics of that agreement compare with the prior arrangements?

Speaker #5: And more broadly, is you navigate renewals with traditional distributors? Just how are you balancing rate increases against maintaining distribution?

Jeffrey Hirsch: Great question. Look, it's unfortunate that the way that negotiation went down, that our mutually shared customer had to lose service. Ultimately, we think we got to a good place. As Scott and I have said in our prepared remarks, we are reaffirming the year, and reaffirming our guides for 2027, so there really is not any material impact on the deal that we did there. What I would say is it was a unique deal in a sense that most of our deals today are a la carte or rev share deals where we are aligned in terms of sharing the economics for customers with our partners, and this was kind of one of the last bastions of the legacy days, and we are through that now. I want to thank the Verizon team.

Speaker #6: Great question. Look, it's an unfortunate that the way that that negotiation went down, that our costs are shared customer, mutually shared customer, had to lose service.

Speaker #6: But ultimately, we think we got to a good place as Scott and I have said and are prepared remarks are reaffirming the year. And reaffirming our guides for '27.

Speaker #6: So there really isn't any material impact on the deal that we did there. What I would say is it was a unique deal in a sense that most of our deals today are à la carte or rev share deals where we are aligned in terms of sharing the economics for customers with our partners and this was kind of one of the last bastions of the legacy days and we're through that now.

Speaker #6: I want to thank the Verizon team. I think we got to a really good place, and luckily, we got the service back for our consumers.

Jeffrey Hirsch: I think we got to a really good place and luckily, we got the service back for our consumers. But again, it really has no material impact on the business this year in terms of our guide or next year as well.

Speaker #6: But again, it really has no material impact on the business this year in terms of our guide, or next year as well.

Matt Condon: Got it. Okay. That's helpful. Then maybe just a follow-up. You've highlighted the stronger engagement trends, improving churn trends, despite recent price increases. Much of that, there's a lot of different factors, whether it be a stronger content slate, the improving of the underlying subscriber base, just higher LTV consumers, or greater adoption of bundling and third-party distribution, just all those different things that are coming into play. Can you maybe just look under the covers and what are the most stronger attributes that you see across maybe all those different categories that are really returning that OTT business back to growth?

Speaker #5: Got it. Okay. That's helpful. And then maybe just a follow-up. You've highlighted a stronger engagement trends, improving churn trends, despite recent price increases. Much of that, there's a lot of different factors whether it be a stronger content you need improving of the underlying subscriber base, just higher LTV consumers, or greater adoption of bundling and third-party distribution.

Speaker #5: Just all those different things that are coming into play, just can you maybe just look under the covers and what are the most stronger attributes that you see across maybe all those different categories that are really returning that OTT business back to growth?

Jeffrey Hirsch: Look, I think first and foremost, it's the content slate, right? We have gotten into places in the legacy ownership where we had large gaps of content for our audiences. When you have shows on the air every week for the Power audience or the Outlander audience, churn is really low. When you have a show that comes on for 10 weeks and there's a three or six-month gap between a piece of content for that audience, you see people churn out and churn back on, and you end up just spinning your wheels on the business, either going back into the market to get low-calorie subs, to get to that sub number for the quarter. That was a piece of it. But you're starting to see the slate come back in earnest where there aren't a lot of gaps.

Speaker #6: Look, I think first and foremost, it's the content slate, right? We have gotten into places in the legacy ownership where we had large gaps of content for our audiences.

Speaker #6: And so when you have shows on the air every week for the power audience or the Outlander audience, churn is really low. When you have a show that comes on for 10 weeks and there's a three or six-month gap between a piece of content for that audience, you see people churn out and turn back on.

Speaker #6: And you end up just spinning your wheels on the business, either going back into the market to get low-calorie subs to get to that sub number for the quarter.

Speaker #6: And so that was a piece of it. But you're starting to see the slate come back in earnest where there aren't a lot of gaps.

Jeffrey Hirsch: This past quarter, we had a ton of content on the air that we haven't had before. I think we had, Kanan ended the quarter. We had Fightland, we had Blood of My Blood, and we had Michael, and S.W.A.T. Exiles, and Tip Toe. So you had a really massive quarter of content for folks. P-Valley, again, coming back will probably be one of our biggest shows. It's always been one of our biggest shows. Then we bring on Origins, which is the Power prequel story, and it's an 18-episode arc, and we haven't done a super-sized season yet on the Power side. We used to do it on Outlander with 16 episodes. So that really brings us from 18, you can probably schedule that 18 episodes over 20 to 24 weeks. So you have a long, consistent run of content for folks.

Speaker #6: This quarter, this past quarter, we had a ton of content on the air that we haven't had before. I think we had Canaan end of the quarter, we had Fightland, we had Blood of My Blood, and we had Michael.

Speaker #6: And so, SWAT Exile, and Tiptoe. So you had a really massive quarter of content for folks. P-Valley, again, coming back will probably be one of our biggest shows.

Speaker #6: It's always been one of our biggest shows. And then we bring on Origins which is the power prequel story. And it's an 18-episode arc.

Speaker #6: And we haven't done a super sized season yet. On the power side, we used to do it on Outlander with 16 episodes. And so that really brings us from you can probably schedule that 18 episodes over 20 to 24 weeks.

Speaker #6: And so you have a long consistent run of content for folks. We are going into production on legacy. There's an opportunity to potentially bring that into the year, which is another power show, which is really exciting.

Jeffrey Hirsch: We are going into production on Legacy. There is an opportunity to potentially bring that into the year, which is another Power show, which is really exciting. We have a bunch of co-commissions and acquisitions that filter in there. As you continue to have a consistent content slate, we are going to have the new Hunger Games movie next year as well. That seems, from all reviews from London last night, congratulations to our folks across the street. That seems to be an outside hit, and everybody is saying it is one of the best in the series, so we are excited about getting that on the air. All of that really helps drive long-term lifetime value of customers, which means you have longer customers paying you more money. ARPU comes up, churn comes down, and the business starts to really accelerate.

Speaker #6: And we have a bunch of co-commissions and acquisitions that filter in there. And so as you continue to have a consistent content slate, we're going to have the new Hunger Games movie next year as well.

Speaker #6: And that seems, from all reviews, from one then last night—congratulations to our folks across the street. That seems to be going to be an outsized hit.

Speaker #6: And everybody's saying it's one of the best in the series. So we're excited about getting that on the air. And so all of that really helps drive long-term lifetime value of customers, which means you have longer customers paying you more money.

Speaker #6: And so ARPU comes up, churn comes down, and the business starts to really accelerate. And I think you're starting to see that in the stability of the revenue base and you're starting to see growth.

Jeffrey Hirsch: I think you are starting to see that in the stability of the revenue base, and you are starting to see growth. Moving away from the short-term sub chase, focusing on 24-month revenue growth and having a consistent great slate throughout the year and programming it opportunistically that way is really what you are seeing on the top side of the business.

Speaker #6: So moving away from the short-term sub chase focusing on 24-month revenue growth and having a consistent great slate throughout the year and programming it opportunistically that way is really what you're seeing on the top side of the business.

Matt Condon: Great. Very helpful. Thank you.

Speaker #5: Great. Very helpful. Thank you.

Operator: Thank you. Our next question will come from the line of David Karnovsky from JPMorgan. Your line is open.

Speaker #1: Thank you. Our next question will come from line of David Karnovsky from JPM. Your line is open.

David Karnovsky: Hey, thanks. Jeff, we have seen Prime Video go with a five-service bundle recently. Just curious how you think about offerings like that from a Starz perspective in terms of reaching new subs or the impact to ARPU. Then just separately, you talked a little bit about the performance of Fightland in the US. I do not know if you could talk about any metrics specifically for how the show has performed in the UK. Then, as you look at this international opportunity, how do you think about the need to, or opportunity to adjust your programming for more of an audience abroad? Thank you.

Speaker #7: Hey, thanks. Jeff, we've seen Prime Video go with a five-service bundle recently. Just curious how you think about offerings like that from a STARZ perspective, in terms of reaching new subs or the impact to ARPU.

Speaker #7: And then, just separately, you talked a little bit about the performance of Fightland in the US. I don't know if you could talk about any metrics specifically for how the show has performed in the UK.

Speaker #7: And then, as you look at this international opportunity, how do you think about the need or the opportunity to adjust your programming for a broader audience?

Speaker #7: Thank you.

Alison Hoffman: Yeah, I can speak first about the super bundle. We are really encouraged by the early results. It is early, but we are seeing customers take that super bundle, and again, even early on, we are seeing improved retention with that bundle. So that is really great to see. I think that as you add more and more services, it starts to almost look like packaging. It starts to look like a tier. It really starts to resemble sort of the old days of cable, and I think we think that there is great value for the customers there. They get a great price point, and it is just easier to navigate than having a slew of a la carte services. So I think we really are very encouraged by the results we see in the bundles universe.

Speaker #2: Yeah. I can speak first about the super bundle. We're really encouraged by the early results. It is early, but we are seeing we're seeing customers take that super bundle and again, even early on, we're seeing improved retention.

Speaker #2: With that bundle. So that's really great to see. I think that as you add more and more services, it starts to almost look like packaging.

Speaker #2: It starts to look like a tier. It really starts to resemble sort of the old days of cable. And I think we think that there's great value for the customers there.

Speaker #2: They get a great price point. And it's just easier to navigate than having a slew of à la carte services. So I think we really are very encouraged by the results we see in the bundle.

Speaker #2: In the bundled universe. But also as we're getting beyond the two service bundles into the threes and the fives, we expect to see even stronger results from those.

Alison Hoffman: But also as we are getting beyond the two-service bundles into the threes and the fives, we expect to see even stronger results from those. But again, early days.

Speaker #2: But again, early days.

Speaker #7: Yeah. Good question on ownership and international sales. I mean, look, I think ultimately the goal is to have enough own content where we can have output deals with partners throughout the world, much like we have in Canada, today.

Jeffrey Hirsch: Good question on ownership in international sales. I mean, look, I think ultimately the goal is to have enough owned content where we can have output deals with partners throughout the world, much like we have in Canada today. Having one show is hard to do an output deal, but as you get two, three, four, five shows into 2027 and 2028, we can probably go to the international market and create output deals. But ultimately, that means that we are partnering with folks. We have co-commissions today where we work with folks in terms of putting certain talent into the show that makes the show more impactful for them. As we are partnering with people around the world, we want to make sure that the content works for them.

Speaker #7: Having one show is hard to do an output deal. But as you get two, three, four, five shows into 27 and 28, we can probably go to the international market and create output deals.

Speaker #7: But ultimately that means that we are partnering with folks. We have co-commissions today where we work with folks in terms of putting certain talent into the show that makes the show more impactful for them.

Speaker #7: And as we're partnering with people around the world, we want to make sure that the content works for them. And so we will obviously invite our partners into the development process to make sure that these shows not only work great for us, but they work for our partners around the world.

Jeffrey Hirsch: We will obviously invite our partners into the development process to make sure that these shows not only work great for us, but they work for our partners around the world.

Operator: Thank you. One moment for our next question. Next question comes from the line of Sean Diffley from Morgan Stanley. Your line is open.

Speaker #1: Thank you. One moment for our next question. Next question will come from line of Sean Diffley from Morgan Stanley. Your line is open.

Sean Diffley: Great. Thanks very much, team. I was hoping you could elaborate on some of the learnings now that you have moved away from Lionsgate in terms of your production capabilities. Do you feel like you have more degrees of freedom? You referenced some of the cost efficiencies you are seeing in terms of cost per episode, but flesh that out a little further. Then, Jeff, I think you referenced diversifying beyond SVOD into AVOD over time. Maybe just elaborate on that, pull on that string a little bit. What could that look like? Why would you want to do that? Is there anything you need that you do not have in order to do it? Thanks very much.

Speaker #5: Great. Thanks very much, team. I was hoping you could elaborate on some of the learnings now that you've moved away from Lionsgate in terms of your production capabilities.

Speaker #5: Do you feel like you have more degrees of freedom? You referenced some of the cost efficiencies you're seeing in terms of cost per episode, but flesh that out a little further.

Speaker #5: And then Jeff, I think you referenced diversifying beyond SVOD into AVOD over time. Maybe just elaborate on that, pull on that string a little bit.

Speaker #5: What could that look like? Why would you want to do that? And is there anything you need that you don't have in order to do it?

Speaker #5: Thanks very much.

Jeffrey Hirsch: Yeah. Good question. Let me start with the second part. Look, I think we believe that there are opportunities to build an AVOD business around our two core demos on scale that allows us to obviously bring incremental revenue into the business in terms of a lower price tier with advertising. Also it gives us some pricing power between our ad tier and our SVOD tier. We have gone out and looked at the industry, and we know from our consumer what our consumers are watching on Starz, but leaving Starz and going to watch content in other places. We have a really good sense of overlap of consumer, both on an ad-supported basis, on an SVOD basis. That becomes kind of a list of content and a list of opportunity for us to build that way.

Speaker #6: Yeah. Good question. So let me start with the second part. Look, I think we believe that there are opportunities to build an AVOD business around our two core demos on scale that allows us to do obviously bring incremental revenue into the business in terms of a lower price tier with advertising.

Speaker #6: Also it gives us some pricing power between our ad tier and our SVOD tier. And so we've gone out and looked at the industry and we know from our consumer what our consumers are watching on STARZ.

Speaker #6: But leaving STARZ and going to watch content in other places. And so we have a really good sense of overlap of consumer, both on an ad-supported basis and on an SVOD basis.

Speaker #6: And so that becomes kind of a list of content and a list of opportunity for us to build that way. And so we know that one, the industrial logic around either building it or buying it is sound because we know the consumers will watch against both.

Jeffrey Hirsch: We know that, one, the industrial logic around either building it or buying it is sound because we know that consumers will watch against both. We know that the churn reduction of putting that content into the Starz app without ads is meaningful to the business there. We know that we can drive price across the two products. We think there is a real opportunity there, and we have been in some good conversations with folks, and we will continue to be in conversations. As I have said repeatedly on the call, the industrial logic has to A, work. We have to feel like there is an opportunity to really build a digital business on scale. Leverage has to be in the right place because we are not going to put ourselves in a position where we over-lever the business just to kind of build that business.

Speaker #6: We know that the churn reduction from putting that content into the STARZ app without ads is meaningful to the business there. We know that we can drive price across the two products.

Speaker #6: And so we think there's a real opportunity there. We've been in some good conversations with folks, and we'll continue to be in conversations.

Speaker #6: But as I've said repeatedly on the call, the industrial logic has to, A, work. We have to feel like there is an opportunity to really build a digital business at scale.

Speaker #6: And leverage has to be in the right place because we're not going to put ourselves in a position where we overlever the business just to kind of build that business.

Jeffrey Hirsch: The core business is operating so well right now, and we are on a really good path to having a real massive step-up into equity free cash flow in 2029. The current value versus what we and the board see in terms of the future value when you get into 2029, we are going to be really picky about what we do because the core business is operating so well, and we are really not going to actually risk that execution to do something just for the sake of doing something. On the production side, look, I think we have learned a lot, with Fightland. I think that went really, really well. I think we understand how to. Obviously, if you look at it on the air, I think it looks as good as anything that we have ever produced on television.

Speaker #6: The core business is operating so well right now, and we are on a really good path to having a real, massive step-up into equity-free cash flow in 2029.

Speaker #6: And so the current value versus what we in the board see in terms of the future value when you get into '29, we're going to be really picky about what we do because the core business is operating so well and we're really not going to actually risk that execution to do something just for the sake of doing something.

Speaker #6: So.

Speaker #7: And then on the production side, look, I think we've learned a lot with Fightland. I think that went really, really well. I think we understand how to obviously if you look at it on the air, I think it looks as good as anything that we've ever produced on television.

Jeffrey Hirsch: Remind everybody that before the Lionsgate acquisition, we were producing our own shows in the first place. P-Valley was originally a Starz show. Hightown was originally a Starz show. Power was originally a Starz show. We always had, even through the Lionsgate years, a 20-person development team doing production. What we have had to add is a production finance and production leader to overlook that, and we have done that. We feel good about that. With any first production, there is going to be always some start and stops. We have got to a really good place and I would say that the average cost per Fightland is probably net $3 million an hour better than what we have gotten our first year from the prior parent. Which is great on an eight to 10 episode. If you do that multiple times, that is really meaningful cost savings.

Speaker #7: Remind everybody that before the Lionsgate acquisition, we were producing our own shows in the first place. P-Valley was originally a STARZ show. Hightown was originally a STARZ show.

Speaker #7: Power was originally a STARZ show. And so we always had even through the Lionsgate year as a 20-person development team, doing production and what we've had to add is a production finance and production leader to overlook that.

Speaker #7: And we've done that. And so we feel good about that. With any first production, there's going to be always some start and stops and we've got to a really good place.

Speaker #7: And I would say that the average cost for Fightland is probably net $3 million an hour better than what we've gotten that first year from the prior parent.

Speaker #7: Which is really great on a 8 to 10 episode. If you do that multiple times, that's really meaningful cost savings. If you look at the cash content spend over the last from '25 to '26, it's come down meaningfully.

Jeffrey Hirsch: If you look at the cash content spend over the last, from 2025 to 2026, it has come down meaningfully. I think the team has done a great job there, and we expect that to come down even more. Right now we are kind of in the C block of the Untitled Black Rodeo show in Atlanta, and that is going incredibly well. Obviously we are learning, but we think we are doing a great job and the cost, the benefit of owning our own content and controlling cost is really starting to benefit the business. On the revenue side, you can see it in the quarter. We have got one original and you are starting to see that line item really come to fruition. As you get into 2027 and 2028, you should start to see meaningful revenue on the business.

Speaker #7: I think the team's done a great job there and we expect that to come down even more. So in right now, we're kind of in the C block of the untitled black rodeo show in Atlanta and that's going incredibly well.

Speaker #7: And so obviously we're learning, but we think we're doing a great job in the cost to benefit of owning our own content and controlling cost is really starting to benefit the business.

Speaker #7: And then on the revenue side, you can see it in the quarter. We've got one original and you're starting to see that line item really come to fruition.

Speaker #7: So as you get into '27 and '28, you should start to see meaningful revenue on the business.

Speaker #5: Thank you.

Sean Diffley: Thank you.

Operator: Thank you. Our next question will come from the line of Matthew Harrigan from Benchmark StoneX. Your line is open.

Speaker #1: Thank you. And our next question will come from line of Matthew Harrigan from Benchmark Stone X. Your line is open.

Matthew Harrigan: Thank you. Actually, most of my questions were answered, but you just spoke briefly about Muse and the gen AI and the repercussions on the subscription side. You did not talk that much about AI in terms of the development process and the trimming on the production cost side and just being able to expand your programming even more rapidly and efficiently. I think you have had some interesting comments on that. Jeff has had some interesting comments on that before, so I thought I would prod you to revisit that. Then of course, the bugbear last spring on the Chinese side, on the rights and everything.

Speaker #8: Thank you. Actually, most of my questions were answered, but you touched briefly on Muse and the Genic AI, and their repercussions on the subscription side.

Speaker #8: But you didn't talk that much about AI in terms of the development process and the trimming on the production cost side and just being able to expand your programming even more rapidly and efficiently.

Speaker #8: And I think you've had some interesting comments on that. Jeff has had some interesting comments on that before. So I thought I would prod you to revisit that.

Speaker #8: And then, of course, the bugbear last spring on the Chinese side regarding the rights and everything.

Jeffrey Hirsch: On AI, look, AI is obviously a very powerful tool on a bunch of different parts of the business. I think scheduling the network, acquiring content that we know works for our audience, scheduling it properly to drive long lifetime value, is really an important piece, and that is something that has been really helpful in terms of acquiring finished content efficiently, scheduling a network in a way where we can drive subs to a higher LTV is really important. We have got billions of datasets since we launched the app in April 2016, whether it is price points, channels, ads that people lit, retention offers, decay curves, all of the retail business side that is just billions of sets. The AI tools have really been helping us tune the business to long-term revenue growth.

Speaker #7: So on AI, look, AI is obviously a very powerful tool on a bunch of different parts of the business. I think scheduling the network, acquiring content that we know works for our audience, scheduling it properly to drive long lifetime value, is really an important piece.

Speaker #7: And that's something that's been really helpful in terms of acquiring finished content efficiently. Scheduling a network in a way where we can drive subs to a higher LTV is really important.

Speaker #7: We've got billions of data sets since we launched the app in April of 2016, whether it's price points, channels, ads that people see, retention offers, decay curves—all of the retail business side—that is just billions of sets.

Speaker #7: The AI tools have really been helping us tune the business to long-term revenue growth. In terms of production, obviously if you're going to do an overhead shot, you're not going to send up a camera and a crew anymore to shoot overhead of London to Fightland.

Jeffrey Hirsch: In terms of production, obviously, if you are going to do an overhead shot, you are not going to send up a camera and a crew anymore to shoot the overhead of London of Fightland. You can do that through AI. It shortens the ability to finish the show in terms of post. Then there is a bunch of other things that are happening. We will be a fast follower on those. But actually, as we have been really talking about AI, we actually think there is a real opportunity for a small company with budgets that are not as big as others to use AI to really kind of grow the business. I will let Ali talk about that.

Speaker #7: You can do that through AI. It shortens the ability to finish the show in terms of post, and then there's a bunch of other things that are happening.

Speaker #7: We'll be a fast follower on those. But actually as we've been really talking about AI, we actually think there's a real opportunity for a small company with budgets aren't as big as others to use AI to really kind of grow the business and I'll let Ali talk about that.

Alison Hoffman: Yeah. In addition to everything that Jeff laid out, I think we get excited about AI's capacity to help customers discover our content. I think we can see real gains on our retail app, but also our partners are really leaned in on that. Think about an Amazon, a Roku, really thinking about how AI can help customers discover content they would not normally have discovered, improve merchandising, and really uncover the breadth of the library that we have to offer. I think it is still early, but that gets really exciting. We see things happening in retail that we think have a lot of relevance, and are very analogous to our business and that we can really see gains from.

Speaker #3: Yeah. In addition to everything that Jeff laid out, I think we get excited about AI's capacity to help us help customers discover our content.

Speaker #3: I think we can see a real gains on our retail app, but also our partners are really leaned in on that. Think about an Amazon, a Roku, really thinking about how AI can help customers discover content they wouldn't normally have discovered, improve merchandising, and really uncover the breadth of the library that we have to offer.

Speaker #3: And so I think it's still early, but that gets really exciting. We see things happening in retail that we think have a lot of relevance and are very analogous to our business.

Speaker #3: And that we can really see gains from.

Matthew Harrigan: And then just revisiting the Seedance panic sell-off in February. Do you have any thoughts there in terms of the implications?

Speaker #8: And then just revisiting the C dance panic sell-off in February do you have any thoughts there in terms of the implications?

Jeffrey Hirsch: Yeah. So good question. Look, like I said earlier, we watch the business, we watch it daily. We really built the B2C business, and so we get reports every day on churn, gross adds, and look at the business across that. And churn continues to be at historic lows. So I do not think we really had a major impact from that. We have looked at it, we have watched it, we continue to watch. I think there were some other things going on in the stock at that point. It may have become available earlier today. But at the end of the day, I think because 70% of our business is wholesale and we are sold through other partners who are really looking at those as well, we are a little more insulated than others, but we continue to watch it.

Speaker #7: Yeah. So a good question. Look, I think we, like I said earlier, I don't think we've watched the business, we watch it daily. We really built the B2C business.

Speaker #7: And so we get reports every day on churn, gross adds, and look at the business across that. And so churn continues to be at a historic low.

Speaker #7: So I don't think we really had a major impact from that. When we've looked at it, we've watched it, we continue to watch. I think there were some other things going on in the stock at that point.

Speaker #7: It may have become available earlier today. But at the end of the day, I think because 70% of our business is wholesale and we're sold through other partners, who are really looking at those as well.

Speaker #7: We're a little more insulated than others, but we continue to watch it. We continue to build tools on our end. To look at tails and to track footprints of the bots coming in and around.

Jeffrey Hirsch: We continue to build tools on our end to look at tails and to track footprints of the bots coming in and around. That is the nice thing about having our own data team in Denver that really is on this every day. But I do not think we saw an impact. We have not seen a churn impact on that at all.

Speaker #7: And so that's the nice thing about having our own data team in Denver that really is on this every day. But I don't think we saw an impact; we haven't seen a churn impact on that at all.

Matthew Harrigan: Okay, great. Thank you.

Speaker #8: Okay. Great. Thank you.

Operator: Thank you. I am not showing any further questions in the queue. I would like to turn it back over to Nilay for any closing remarks.

Speaker #1: Thank you. I'm not showing any further questions in the queue. I'd like to turn it back over to Nilay for any closing remarks.

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. Thank you.

Speaker #2: 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.

Speaker #2: Thank you.

Speaker #1: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

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