Key Points:
- Starz posted a Q2 net loss of $42.5 million on revenue of $319.7 million, down 8 percent year over year, as subscriber declines weighed on results.
- Total subscribers dropped to 19.1 million from 23.9 million a year earlier, including declines across its streaming and cable networks services.
- Adjusted OIBDA fell to $33.4 million from $56.3 million as higher programming costs from new originals offset lower marketing spend.
Starz saw its streaming and cable subscriber counts fall during the company’s first financial quarter since separating from Lionsgate, according to a filing made with federal regulators this week.
During the second quarter (Q2) of the year, Starz saw a financial loss of $42.5 million off revenue of $319.7 million, largely brought on by lower income from its streaming platform and cable distribution agreements. Its overall revenue was down 8 percent compared to the $347.6 million attributed to Starz as a business unit of Lionsgate last year.
Total Starz subscribers fell to 19.1 million from 23.9 million a year ago, with domestic streaming subscribers falling slightly to 12.2 million. Linear subscribers clocked in at 5.4 million, down from 6.5 million reported last year. The counts are based on U.S. customers, with Canadian subscribers reported separately.
In Canada, total subscribers fell to 1.5 million from 2.4 million. Starz no longer reports international streaming subscribers after transferring operations in India and Southeast Asia to Lionsgate Studios in April.
The company posted an operating loss of $26.9 million, compared with a $10.1 million profit in the year-ago period. Adjusted OIBDA, which excludes certain non-cash and one-time items, fell to $33.4 million from $56.3 million. Programming amortization costs rose 10 percent to $162.5 million, reflecting the premieres of “Black Mafia Family” Season 4 and “Power Book III: Raising Kanan” Season 4. Marketing expenses fell 23 percent to $63.4 million as the company sought efficiencies in promotional spending.
General and administrative expenses rose 9 percent to $29.1 million, in part due to additional costs tied to Starz’s status as a standalone public company following its separation from Lionsgate in May. Depreciation and amortization increased 17 percent to $48.7 million, driven by changes to the estimated life of affiliate-related intangible assets. Restructuring and other charges were $6.4 million, compared to a credit of $0.6 million in the prior-year period.
Starz ended the quarter with $51.6 million in cash, up from $17.8 million at the start of the period, and reduced its total debt to $611.7 million from $699.9 million in March. The company also transferred $389.9 million to Lionsgate as part of the separation. Cash flow from operations improved significantly, with continuing operations generating $65.4 million, compared to a $26.8 million outflow in the same quarter last year.
The company continues to carry long-term programming obligations, including exclusive output deals with Lionsgate and Universal, and reported $1.09 billion in programming content assets at the end of the quarter.
Starz executives reassured investors that the company expects to meet its funding needs through operating cash flow, programming-related borrowing and its $150 million revolving credit facility. The company’s fiscal year-end has been shifted to December 31, with a transition report covering the nine-month period ending this year.
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