Detailed narrative
Content Strategy & Performance Highlights
STARZ's owned original, Fightland, premiered as the second best-rated new IP launch in the company's history, demonstrating significant audience overlap with the Power Universe and contributing to reduced subscriber churn. Raising Kanan season 5 notably grew its audience from its first season five years ago, a rare achievement.
The content portfolio in Q2 FY26 generated the second-highest audience engagement quarter of all time, marking the fourth consecutive quarter of engagement growth since separation. The upcoming content slate includes the return of P-Valley, the expansion of the Outlander universe with Blood of My Blood season 2, and the Michael biopic, further strengthening the owned content pipeline.
Distribution Expansion & Partnerships
The company secured a long-term renewal with one of its largest distribution partners and expanded its fully distributed portfolio through new partnerships. A new partnership with Peacock makes STARZ available as an add-on subscription, providing access to an additional 48 million potential subscribers for customer acquisition and revenue growth.
Additionally, a new bundle with Crunchyroll on Prime Video was announced, targeting highly engaged audiences. These relationships expand STARZ's distribution footprint and brand awareness without requiring incremental platform investments.
Financial Outperformance & Outlook
STARZ reported strong Q2 FY26 results, with OTT revenue growing year-over-year for the first time since Q4 2024, reaching $221 million. Adjusted OIBDA was $60 million, ahead of expectations. The company raised its full-year 2026 adjusted OIBDA growth guidance from low-single digits to mid-single digits and increased its unlevered free cash flow outlook to the mid- to upper-end of the $80 million to $120 million range.
Management remains confident in achieving a 20% adjusted OIBDA margin target by the second half of 2027.
Capital Structure & Free Cash Flow Generation
Net debt stood at $566 million as of June 30, 2026, with an adjusted OIBDA leverage ratio of 2.9x. The company obtained firm commitments to increase its credit facilities by $100 million ($67 million term loan A, $33 million revolver) to refinance programming notes, which is expected to improve annual free cash flow by approximately $4 million through lower interest expense.
Despite this additional debt, STARZ still expects to end 2026 with leverage around 2.7x, underscoring strong underlying deleveraging and confidence in reaching 2.5x leverage and below sooner than anticipated. 2029 is projected to be a significant year for free cash flow growth as Universal payments conclude.
Impact of Universal Pay 2 Exit
The exit from the Universal Pay 2 agreement resulted in a $147 million restructuring charge recorded in Q2 FY26. Management expects this to be the final charge of this magnitude, leading to meaningfully lower restructuring activity going forward⏳. The savings from this exit, combined with the ownership economics of original content (e.g., Fightland being $2.5 million cheaper per episode), are allowing for reinvestment into library content and are contributing to the company's record engagement levels and expected full-year cash content spend below $600 million.
Strategic Initiatives & M&A Stance
STARZ maintains a selective approach to strategic initiatives and M&A, only pursuing opportunities that accelerate its strategy and create value beyond organic growth. The company sees potential in providing a digital future for 'marooned linear networks' that align with its demographic.
However, given the strong performance and clear path for the core business, management emphasizes that M&A is not a necessity but an option for additive growth within comfortable leverage parameters.