- Starz reported a net loss of $189.4 million, or $11.27 per share, on revenue of $307.9 million.
- Excluding a $147 million restructuring charge tied to its exit from a Universal Pay-2 film deal, its net loss narrowed slightly year over year to $42.2 million, or $2.27 per share.
- The company remains on track to convert 70% of its adjusted operating income into free cash flow and raised its forecast for both metrics. It also continues to expect positive year over year streaming revenue growth for the year.
Starz raised its adjusted operating profit and free cash flow forecast as its streaming business stabilized, with over-the-top revenue climbing 0.1% to $221.3 million in the second quarter, a return to year-over-year growth for the first time since the fourth quarter of 2024.
But the continued erosion in the linear TV business and a $147 million charge from exiting its Pay-2 film deal with Universal weighed heavily on its results, widening its overall net loss to $189.4 million and causing total revenue to fall 4% to $307.9 million. Linear revenues dropped 12% to $87 million.
Excluding the charge, Starz would’ve lost $42.2 million, or $2.27 a share, narrower than its net loss of $42.5 million from a year ago. Analysts, on average, forecasted revenue of $306.76 million and a loss of $1.63 a share, according to Yahoo Finance.
Despite the charge, Starz President and CEO Jeff Hirsch argued that the titles from the Universal deal resulted in “almost zero viewership or engagement” and that the exit has allowed it to reinvest its savings in library content that would drive more engagement moving forward.
The second quarter marked its second-highest audience engagement quarter of all time and the fourth consecutive quarter of engagement growth since its separation from Lionsgate, driven by the finale of “Outlander,” the premiere of “Power Book III: Raising Kanan” Season 5 and “The Housemaid.” “Fightland,” a new boxing-driven drama series, also became its second-best-rated new IP launch of all time.
“We feel like we’re in a really good place,” Hirsch said. “It was the right decision based on the performance of the titles then when we had it in 2024 and 2025.”
Its content lineup also resulted in an increase in streaming subscribers, despite the impact of its April price increase. Starz no longer reports subscriber figures on a quarterly basis, following in the footsteps of major players Netflix, Disney and Warner Bros. Discovery, but last disclosed in February a total of 12.7 million over-the-top subscribers and 5 million linear TV subscribers.
As of the end of 2025, Starz’s Canada business transitioned from a distribution partnership with Bell Media to a content licensing model. When excluding a negative impact of $3 million related to its Canada operations in the prior-year-period, streaming revenue would’ve increased 1.4%.
In addition to “Fightland,” other upcoming content coming to Starz includes the return of “P-Valley,” “Outlander: Blood of my Blood” Season 2 and the “Michael” biopic. The “Untitled Black Rodeo Show” is also starting production this month and several other Starz-owned projects are in development.
Starz ups profit outlook
Looking ahead, Hirsch said that improved visibility into the second half of the year and the early performance of “Fightland” increase the company’s confidence that 2026 is shaping up to be a “more significant inflection year” than previously anticipated.
Starz raised its adjusted operating income outlook from low-single-digit to mid-single-digit growth and its free cash flow outlook from between $80 million and $120 million to the mid-to-upper end of the range.
It also reaffirmed its outlook for positive year over year streaming revenue growth and expects continued improvement in average revenue per user growth in the second half of the year as promotional subscribers convert to retail rates following its April price increase. Additionally, it maintained its forecast of an adjusted operating leverage ratio of approximately 2.7 times exiting 2026 and a 20% adjusted operating margin target for the second half of 2027.
Starz anticipates that adjusted operating income will fall to the mid $30 million range in its third quarter due to higher programming costs from the airing of “Raising Kanan” Season 5, “Fightland” Season 1 and “Blood of my Blood” Season 2, but forecasted it would finish the year in the mid-$60 million range. Adjusted operating income came in at $60 million for the second quarter.
“We continue to expect this to be the final content restructuring charge of this magnitude going forward, which sets the company up for meaningfully lower restructuring activity from here,” Starz Chief Financial Officer Scott MacDonald said. “The financial story for Starz is getting stronger and simpler every quarter: growing OTT revenue, expanding margins, growing free cash flow, and reducing leverage. We’re confident in our trajectory, and we look forward to continuing to demonstrate our progress.”
MacDonald added that 2029 is shaping up to be a significant year for free cash flow growth due to the timing of final cash payments to Universal in 2028.
Starz executives open to dealmaking
Despite exiting its Pay-2 deal with Universal, Starz executives remain open to any and all opportunities to partner across the industry.
During the quarter, the company launched a partnership with Peacock to be made available as an add-on on the platform, expanding its reach to the Comcast-owned streamer’s 48 million subscribers. It also launched a new bundle with Crunchyroll through Prime Video.
Lionsgate also struck an international content licensing deal with Netflix in July for four series from the “Power” franchise, with Starz retaining the U.S. rights. Executives teased that there would be more dealmaking similar to the Netflix partnership under a syndication model as its programming matures and it rebuilds its pipeline of owned content. Hirsch specifically noted that “Fightland,” which is currently co-commissioned by Sky in the U.K., will have more announcements in the rest of the world, which will bring down its per episode cost of $2.5 million.
At the same time, management remains open to pursuing M&A opportunities that accelerate the company’s strategy and creates value beyond what it can achieve organically.
“We do think there’s an opportunity with a lot of these marooned linear networks that fit our demo very well to give them a digital future through our technology and our customer acquisition and our ability to transition businesses from linear to digital. But the core business is on a really good path,” Hirsch said. “Unless we can grow the business more than we will organically, we just won’t do it because we don’t need to right now.”
Starz refinancing debt to boost free cash flow
Starz ended the quarter with $59.6 million in cash and cash equivalents, total debt of $625.1 million and negative unlevered free cash flow of $14.7 million. Cash content spend was $182 million during the quarter. After exiting its Universal deal, Starz expects to report cash content spend below $600 million for the year.
It also obtained commitments to increase its credit facilities by $100 million, including a $67 million increase to its term loan and $33 million increase to its revolver, which is expected to close in the third quarter.
“Importantly, this transaction is not being undertaken to fund operations or support liquidity needs. Rather, it allows us to replace the remaining balance of our programming notes, which are working capital facilities that carry significantly higher interest costs than our credit facilities,” Starz Chief Financial Officer Scott Macdonald said. “By refinancing these obligations into lower-cost corporate debt, we expect to improve annual free cash flow by approximately $4 million through lower cash interest expense while simplifying our capital structure.”
Shares of Starz climbed 2% during Friday’s trading session following the quarter’s results.
