STRZ

Starz Entertainment Corp. 10-Q Summary

Business Context and Reporting Period

This filing covers the quarterly period ended September 30, 2025, and the six months ended on that date. Starz Entertainment Corp. (Starz) operates as a standalone public company following its separation from Lionsgate Studios Corp. (New Lionsgate) on May 6, 2025. The company distributes premium subscription video services via the Starz App (OTT) and through multichannel video programming distributors (MVPDs) in the U.S. and Canada. Effective April 1, 2025, Starz transferred its India and Southeast Asia operations to New Lionsgate. The company also changed its fiscal year-end from March 31 to December 31.

Key Financial Metrics

Note: Q3 2024 figures include discontinued international operations which were shut down or transferred in 2025.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 7.5% in Q3 and 7.8% over six months compared to the prior year. This was driven by a 14.5% drop in linear revenue and a 4.0% drop in OTT revenue, attributed to subscriber declines and increased discounting.
• Subscriber Trends: Total Starz Networks subscribers fell to 19.20 million (down from 20.15 million in Q3 2024). U.S. OTT subscribers grew to 12.29 million, while linear subscribers declined to 5.17 million.
• Expense Fluctuations: Programming amortization decreased 13.9% in Q3 due to fewer original series premieres compared to the prior year. However, General and Administrative (G&A) expenses increased 9.5% due to costs associated with operating as an independent public company (e.g., D&O insurance, legal, accounting).
• Debt Restructuring: Following the Separation, Starz assumed $325.1 million of 5.5% Senior Notes and entered a new credit agreement with a $300 million Term Loan A and a $150 million Revolving Credit Facility. The $389.9 million Exchange Notes were transferred to New Lionsgate.

Outlook, Risks, and Contingencies

• Liquidity: Management believes cash flow from operations, the undrawn $150 million revolving credit facility, and receivable monetization will be sufficient to meet obligations for the next 12 months.
• Legal Proceedings: Starz is defending against a lawsuit filed by holders of the 5.5% Senior Notes regarding the Exchange Transaction and Supplemental Indenture No. 10. Plaintiffs seek a declaration that the transaction is void. A ruling on Starz's motion to dismiss is pending as of September 2025. If successful, plaintiffs could seek accelerated payment of the notes.
• Content Strategy: The company continues a strategic review of its content library, having cancelled certain ordered programming and abandoned content with limited strategic purpose. Future content impairments are possible.
• Tax Legislation: The company recognized the impact of the "One Big Beautiful Bill Act" (OBBBA) in Q3 2025, which made 100% bonus depreciation and R&D expensing permanent and changed the business interest expense limitation to EBITDA-based.

Investor Verification Checklist

• Subscriber Churn: Verify the sustainability of the linear subscriber decline and the effectiveness of OTT discounting strategies on long-term profitability.
• Debt Covenant Compliance: Monitor the Net Total Leverage Ratio, which must remain below 4.50:1.00 through June 30, 2025, and tighten to 3.50:1.00 by March 31, 2028.
• Legal Risk Exposure: Track the status of the 5.5% Senior Notes litigation, as a loss could trigger immediate debt acceleration.
• Standalone Cost Structure: Assess the trajectory of G&A expenses as the company fully transitions from allocated costs to standalone operational costs.
• Content Pipeline: Evaluate the impact of the reduced number of original series premieres on future revenue growth and amortization schedules.