Starz Entertainment Corp. 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2025. 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
| Metric | Q1 2025 (Three Months Ended June 30) | Q1 2024 (Three Months Ended June 30) |
|---|---|---|
| Total Revenue | $319.7 million | $347.6 million |
| Operating Income (Loss) | $(26.9) million | $10.1 million |
| Net Income (Loss) | $(42.5) million | $4.2 million |
| Adjusted OIBDA | $33.4 million | $56.3 million |
| Cash and Cash Equivalents | $51.6 million | $17.8 million |
| Total Debt (Net) | $611.7 million | $699.9 million |
| Operating Cash Flow | $65.4 million | $(26.8) million |
Subscriber Data: Total Starz Networks subscribers declined to 19.08 million (down from 21.30 million in Q1 2024), with OTT subscribers at 12.86 million and Linear subscribers at 6.22 million.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 8.0% year-over-year, driven by a 5.7% drop in OTT revenue and a 12.9% drop in Linear revenue due to subscriber losses.
- Operating Loss: The company reported an operating loss of $26.9 million compared to operating income of $10.1 million in the prior year. This shift was primarily due to higher programming amortization ($162.5 million vs. $147.9 million) linked to new series premieres, partially offset by a 23.3% reduction in advertising and marketing expenses.
- Restructuring Costs: Restructuring and other expenses increased to $6.4 million from a benefit of $0.6 million, largely due to transaction costs associated with the Separation.
- Debt Restructuring: Upon Separation, Starz was released from $389.9 million in Exchange Notes (assumed by New Lionsgate). Starz entered a new credit agreement providing a $300 million Term Loan A and a $150 million revolving credit facility.
Outlook, Risks, and Contingencies
- Liquidity: Management believes cash flow from operations, cash on hand, and available credit facilities (including the undrawn $150 million revolver) are adequate to meet operational and debt service requirements for the next 12 months.
- Legal Proceedings: Starz is defending against a lawsuit filed by holders of former 5.5% Notes regarding a 2024 exchange transaction. Plaintiffs seek a declaration that the exchange is null and void. If successful, this could trigger a default and accelerated payments on the remaining 5.5% Senior Notes. Oral argument on Starz's motion to dismiss is scheduled for September 22, 2025.
- Restructuring: The company has incurred $456.7 million in impairment charges since the inception of its restructuring plan. Future content impairment charges may occur as the company continues to evaluate its content library.
- Tax Legislation: The "One Big Beautiful Bill Act" signed in July 2025 may impact deferred tax balances, with effects to be evaluated in the Q3 2025 filing.
Investor Verification Checklist
- Verify the status of the pending litigation regarding the 5.5% Senior Notes and the potential for accelerated debt repayment.
- Monitor subscriber churn rates and the effectiveness of cost-cutting measures in marketing to stabilize revenue.
- Review the impact of the new standalone corporate structure on General and Administrative expenses, which are expected to be higher than historical allocations.
- Assess the company's ability to maintain compliance with financial covenants (Net Total Leverage Ratio) under the new Starz Credit Agreement.
- Confirm the timeline and financial impact of the fiscal year-end change to December 31, 2025.