Starz reported total revenue of $319.7 million in the second quarter, slightly below Wall Street’s expectations thanks to declines in subscriber levels on linear TV and streaming.
Amid the top-line challenges, the newly independent company spun off from Lionsgate earlier this year is projecting growth in both subscribers and revenue over the next two quarters. One bright spot in the second quarter was the fact that adjusted operating income before depreciation and amortization [OIBDA] hit Street forecasts at $33.4 million.
The premium programmer now has more than two-thirds of its subscriber base in streaming. It ended the quarter on June 30 with 12.2 million streaming customers in the U.S., a decline of 120,000 from the prior quarter. Linear and streaming combined in the U.S. totaled 17.6 million, down 410,000. In its earnings release, the company offered a straightforward explanation, saying the declines were “primarily driven by continued pressure on linear subscriber and lower OTT subscriber additions.”
The North American subscriber tally came in at 19.1 million, a quarter-to-quarter decline of 520,000.
Net losses reached $42.5 million, or a loss of $2.54 per share.
The main new series released during the second quarter was Power Book III: Raising with this. The current July-to-September quarter is already seeing a highlight, with Outlander spinoff Blood of My Blood generating the third-most subscriber starts of any title in company history. The show’s performance in its debut this month is a key reason for execs’ optimism. The earnings release said they expect growth in both subscribers and revenue in the third and fourth quarters, but no specific projections were provided.
“In the three months since becoming a standalone public company, we have made significant progress toward achieving our key financial and operating objectives,” Starz CEO Jeffrey Hirsch said. “Looking ahead, our highly compelling slate, coupled with an improved cost structure puts us on a clear path to achieving our key objectives: returning to revenue growth, improving our margins, and increasing our conversion of adjusted OIBDA to free cash flow.”
Starz has lower debt than many media companies. At the end of the quarter, it had total net debt of $573.5 million, giving it a leverage ration of 3.2 times trailing 12-month adjusted OIBDA.
Starz shares have nearly doubled since the company’s May IPO, though after hitting a high of $21, they have drifted down closer to $15 in recent trading sessions.
