Starz (NASDAQ: STRZA, STRZB) today reported
second quarter 2015 results. Highlights include(1):
Financial Highlights:
- Reported consolidated revenue of $417.7
million; Adjusted OIBDA(2) of $123.4 million; operating income of
$110.5 million and fully diluted earnings per share of $0.59
- Starz Networks reported revenue of
$333.3 million up 2%; Adjusted OIBDA of $122.2 million and
operating income of $110.9 million were both consistent with prior
year results
Operating Highlights:
- Increased STARZ subscriptions by 1.5
million to 23.5 million since June 30, 2014
- STARZ Originals 2015 slate performing
well; pipeline fortified
- “Power” returned for second season to
record viewership performance(3)
- Most successful season premiere ever
for a STARZ Original series
- Weekly top 3 scripted series on cable
for African-Americans
- Season two average multiplatform
viewership currently most-ever watched for aSTARZ Original series
at 6.4 million viewers/episode
- Renewed for season 3
- “Outlander” concluded first season to
critical acclaim and popular appeal(4)
- Strength with female audiences
- Destination viewing choice on Saturday
nights
- “American Gods” greenlit
- Launched STARZ PLAY and ENCORE PLAY on
Amazon Fire TV and Fire TV Stick
Starz CEO Chris Albrecht said, “We were pleased with the
performance of our businesses in the quarter with revenue up 2% and
Adjusted OIBDA and operating income increases of 5%.
“In addition, we had a very successful quarter in terms of
original programming and remain on track this year to achieve our
goal of 75-80 episodes of new STARZ Original series. Both the
second season of ‘Power’ and the first season of ‘Outlander’
delivered strong viewership, as well as industry and fan accolades.
Looking ahead, the balance of the 2015 originals slate is strong
with ‘Blunt Talk,’ ‘Survivor’s Remorse,’ ‘Da Vinci’s Demons,’ ‘Ash
vs. Evil Dead,’ and ‘Flesh and Bone.’ Our original programming
pipeline was also fortified with a great, new addition thanks to
our green light of Neil Gaiman’s ‘American Gods.’ We are confident
that robust original programming in combination with our quality
movie offerings will further strengthen our distribution and
subscriber relationships.”
Consolidated
For the quarter, revenue increased 2% to $417.7 million,
Adjusted OIBDA increased 5% to $123.4 million and operating income
increased 5% to $110.5 million.
Starz Networks
Revenue increased 2% to $333.3 million primarily as a result of
rate increases from various distributors. Adjusted OIBDA was
consistent with the prior year at $122.2 million due to the
increase in revenue and lower programming costs, offset by an
increase in advertising and marketing related to original
programming. Operating income was consistent with the prior year at
$110.9 million. Cash paid for investment in films and television
programs increased $11.1 million to $71.2 million due to a greater
number of original series in production.
Starz Distribution
Revenue increased 4% to $78.4 million and Adjusted OIBDA
increased $5.8 million to $2.0 million primarily as a result of the
distribution of films for The Weinstein Company. Operating income
increased $6.3 million to $1.1 million. Cash paid for investment in
films and television programs increased $12.8 million to $53.7
million due to timing of payments for Weinstein titles.
Share Repurchases
From May 1, 2015 through July 31, 2015, 0.7 million shares of
common stock were purchased at an average cost per share of $42.25
for total cash consideration of $29.9 million. Since trading began
on January 14, 2013, Starz has repurchased 23.6 million shares at
an average cost per share of $28.06 for aggregate cash
consideration of $661.5 million. These repurchases represent 19.4%
of the shares outstanding as of January 14, 2013. Starz currently
has $138.5 million remaining under its share repurchase
authorization. Under its share repurchase program, Starz may
acquire its common stock from time to time, through open market
transactions and privately negotiated transactions. The share
repurchase program may be discontinued at any time.
FOOTNOTES
(1) Starz CEO, Chris Albrecht, will discuss these
highlights and other matters during the Starz earnings conference
call, which will begin at 1:00 p.m. (ET) on July 29, 2015. For
information regarding how to access the call, please see “Important
Notice” later in this document. (2) For a definition of Adjusted
OIBDA and applicable reconciliations see Non-GAAP Financial
Measures and Reconciling Schedule below. (3)
Linear results based on Nielsen NPower P2+
and Black HOH P2+ average audience data. Multiplatform results
based on Starz internal estimates of linear and time shifted data
from Nielsen (NPower), Rentrak (On Demand Essentials) and internal
broadband data.
(4) Nielsen NPower P2+ and W18+ average audience ratings and
projections for premiere telecasts.
NOTES
- Unless otherwise noted, the foregoing
discussion compares financial information for the three months
ended June 30, 2015 to the same period in 2014.
SUPPLEMENTAL INFORMATION
As a supplement to Starz’s consolidated statements of
operations, included in its Form 10-Q, the following is a
presentation of quarterly financial information and operating
metrics for the periods indicated.
Please see the definition of Adjusted OIBDA below and a
discussion of why management believes the presentation of Adjusted
OIBDA provides useful information for investors. The Reconciling
Schedule below provides a reconciliation of Adjusted OIBDA to
operating income for the same periods, as determined under
GAAP.
QUARTERLY SUMMARY
(amounts in millions, except per share data) 2Q14
3Q14 4Q14 1Q15 2Q15 Starz Networks $
328.2 $ 327.2 $ 332.6 $ 334.0 $ 333.3
Starz Distribution (1) 75.1 73.5 85.6 109.7 78.4 Starz Animation
7.2 7.9 7.7 7.3 6.5 Eliminations (0.4 ) (0.4 )
(0.3 ) (0.3 ) (0.5 )
Revenue $ 410.1 $ 408.2 $ 425.6
$ 450.7 $ 417.7 Starz Networks $
121.8 $ 109.9 $ 150.7 $ 129.7 $ 122.2 Starz Distribution (3.8 ) 0.6
(2.0 ) 26.4 2.0 Starz Animation (0.8 ) (0.7 ) (0.6 ) (0.6 ) (0.7 )
Eliminations 0.2 -
0.2 - (0.1 ) Adjusted
OIBDA $ 117.4 $ 109.8 $ 148.3
$ 155.5 $ 123.4 Starz Networks $
111.2 $ 99.2 $ 140.1 $ 118.4 $ 110.9 Starz Distribution (5.2 ) (0.5
) (2.9 ) 25.4 1.1 Starz Animation (0.9 ) (0.8 ) (0.6 ) (0.7 ) (0.7
) Eliminations/Other (0.3 ) (0.6 )
(0.5 ) (0.6 ) (0.8 ) Operating
income $ 104.8 $ 97.3 $ 136.1
$ 142.5 $ 110.5 Net income $
69.0 $ 55.8 $ 77.4 $ 86.1 $ 63.0 Earnings per share (diluted) $
0.62 $ 0.51 $ 0.74 $ 0.79 $ 0.59 Starz Networks $ 60.1 $
57.5 $ 54.8 $ 69.1 $ 71.2 Starz Distribution 40.9
29.4 67.3
39.6 53.7 Total IFT (2) $ 101.0
$ 86.9 $ 122.1 $ 108.7
$ 124.9 Subscription units - STARZ 22.0 22.5
23.3 23.7 23.5 Subscription units - ENCORE 33.9
33.7 34.0
33.8 33.3 Total subscription units
55.9 56.2 57.3
57.5 56.8
(1) Includes the following home video net sales $ 38.1 $ 43.4 $
58.2 $ 34.9 $ 37.4 (2) Cash paid for investment in films and
television programs
CASH AND DEBT
The following presentation is provided to separately identify
cash and debt information.
(amounts in millions) 6/30/14
9/30/14 12/31/14 3/31/15
6/30/15 Cash $ 12.9 $ 45.6 $ 13.4 $ 10.1
$ 20.3 Debt: Revolving credit
facility $ 365.0 $ 442.0 $ 432.0 $ 447.0 $ 506.0 5% senior notes
677.8 677.6 677.5 677.3 677.2 Transponder capital lease 28.5 27.4
26.3 25.1 23.9 Building capital lease 44.0
43.9 43.7 43.6 43.5 Total
debt $ 1,115.3 $ 1,190.9 $ 1,179.5 $ 1,193.0
$ 1,250.6
NON-GAAP FINANCIAL MEASURES
This press release includes a presentation of Adjusted OIBDA,
which is a non-GAAP financial measure, together with a
reconciliation to operating income, as determined under GAAP. We
define Adjusted OIBDA as revenue less programming costs, production
and acquisition costs, home video cost of sales, operating expenses
and selling, general and administrative expenses, but excluding all
stock compensation expense. Our chief operating decision maker uses
this measure of performance in conjunction with other measures to
evaluate our operating segments’ performance and make decisions
about allocating resources among our operating segments. We believe
that Adjusted OIBDA is an important indicator of the operational
strength and performance of our operating segments, including each
operating segment’s ability to assist in servicing our debt and to
fund investments in films and television programs. In addition,
this measure allows management to view operating results and
perform analytical comparisons and benchmarking between operating
segments and identify strategies to improve performance. This
measure of performance excludes stock compensation and depreciation
and amortization that are included in the measurement of operating
income pursuant to GAAP. Accordingly, Adjusted OIBDA should be
considered in addition to, but not as a substitute for, operating
income, income before income taxes, net income, net cash provided
by (used in) operating activities and other measures of financial
performance prepared in accordance with GAAP. Please see the
Reconciling Schedule below for the applicable reconciliation.
RECONCILING SCHEDULE
The following table provides a reconciliation of Adjusted OIBDA
for Starz Consolidated, Starz Networks and Starz Distribution to
operating income calculated in accordance with GAAP for the three
months ended June 30, 2014, September 30, 2014, December 31, 2014,
March 31, 2015 and June 30, 2015, respectively.
Starz Consolidated
(amounts in millions) 2Q14 3Q14 4Q14
1Q15 2Q15 Adjusted OIBDA $ 117.4 $ 109.8 $ 148.3 $ 155.5 $
123.4 Stock compensation (7.5 ) (7.6 ) (7.7 ) (8.3 ) (8.1 )
Depreciation and amortization (5.1 ) (4.9 )
(4.5 ) (4.7 ) (4.8 )
Operating income $ 104.8 $ 97.3 $ 136.1
$ 142.5 $ 110.5
Starz Networks
(amounts in millions) 2Q14 3Q14 4Q14 1Q15
2Q15 Adjusted OIBDA $ 121.8 $ 109.9 $ 150.7 $ 129.7 $ 122.2
Stock compensation (6.8 ) (6.8 ) (6.9 ) (7.4 ) (7.3 ) Depreciation
and amortization (3.8 ) (3.9 )
(3.7 ) (3.9 ) (4.0 ) Operating income $
111.2 $ 99.2 $ 140.1 $
118.4 $ 110.9
Starz Distribution
(amounts in millions) 2Q14
3Q14 4Q14
1Q15 2Q15 Adjusted OIBDA $ (3.8 ) $ 0.6
$ (2.0 ) $ 26.4 $ 2.0 Stock compensation (0.5 ) (0.5 ) (0.5 ) (0.6
) (0.5 ) Depreciation and amortization (0.9 )
(0.6 ) (0.4 )
(0.4 ) (0.4 )
Operating income (loss) $ (5.2 ) $ (0.5 )
$ (2.9 ) $ 25.4
$ 1.1
StarzConsolidated Balance
Sheets(Amounts in millions, except share and per share
amounts)(Unaudited)
June 30,2015 December 31,2014 Assets Current assets: Cash
and cash equivalents $ 20.3 $ 13.4 Trade accounts receivable, net
of allowances of $27.0 and $41.9 269.4 249.1 Program rights, net
372.8 303.5 Deferred income taxes 0.9 0.9 Other current assets 55.1
70.1 Total current assets 718.5 637.0 Program rights
309.8 311.3 Investment in films and television programs, net 305.9
319.5 Property and equipment, net of accumulated depreciation of
$132.1 and $123.4 86.8 89.8 Deferred income taxes 17.5 — Goodwill
131.8 131.8 Other assets, net 112.4 83.8 Total assets
$ 1,682.7 $ 1,573.2 Liabilities and Equity
Current liabilities: Current portion of debt $ 5.4 $ 5.3 Trade
accounts payable 5.4 10.1 Accrued liabilities 225.1 327.4 Deferred
revenue 14.9 7.4 Total current liabilities 250.8
350.2 Debt 1,245.2 1,174.2 Deferred income taxes — 1.1 Other
liabilities 5.5 7.9 Total liabilities 1,501.5
1,533.4 Stockholders' equity: Preferred stock, $.01 par
value. Authorized 50,000,000 shares; no shares issued — —
Series A common stock, $.01 par value.
Authorized 2,000,000,000 shares; issued and outstanding92,219,016
and 91,874,138 shares at June 30, 2015 and December 31, 2014,
respectively
0.9 0.9
Series B common stock, $.01 par value.
Authorized 75,000,000 shares; issued and outstanding9,867,524 and
9,872,524 shares at June 30, 2015 and December 31, 2014,
respectively
0.1 0.1 Additional paid-in capital 15.9 24.0 Accumulated other
comprehensive loss, net of taxes (1.8 ) (2.3 ) Retained earnings
173.8 25.8 Total stockholders' equity 188.9 48.5
Noncontrolling interest in subsidiary (7.7 ) (8.7 ) Total equity
181.2 39.8 Commitments and contingencies
Total liabilities and equity $ 1,682.7 $ 1,573.2
StarzConsolidated Statements of
Operations(Amounts in millions, except per share
amounts)(Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2015
2014 2015 2014 Revenue: Programming networks and
other services $ 380.3 $ 372.0 $ 796.1 $ 735.3 Home video net sales
37.4 38.1 72.3 94.8 Total revenue 417.7
410.1 868.4 830.1 Costs and expenses: Programming (including
amortization) 154.5 158.7 300.5 315.6 Production and acquisition
(including amortization) 50.0 49.9 106.6 90.8 Home video cost of
sales 10.0 9.7 20.4 22.7 Operating 12.4 12.6 25.7 26.7 Selling,
general and administrative 75.5 69.3 152.7 146.0 Depreciation and
amortization 4.8 5.1 9.5 10.0 Total
costs and expenses 307.2 305.3 615.4 611.8
Operating income 110.5 104.8 253.0 218.3 Other
income (expense): Interest expense, net of amounts capitalized
(11.3 ) (11.8 ) (22.5 ) (23.3 ) Other income (expense), net (2.1 )
11.0 (4.3 ) 11.5 Income before income taxes 97.1
104.0 226.2 206.5 Income tax expense (34.1 ) (35.0 ) (77.1 )
(70.7 ) Net income 63.0 69.0 149.1 135.8 Net loss
(income) attributable to noncontrolling interest 0.4 1.1
(1.1 ) (0.8 ) Net income attributable to stockholders
$ 63.4 $ 70.1 $ 148.0 $ 135.0
Basic net income per common share $ 0.63 $ 0.66 $
1.46 $ 1.25 Diluted net income per common share $
0.59 $ 0.62 $ 1.38 $ 1.18 Weighted
average number of common shares outstanding: Basic 101.4
107.0 101.3 107.6 Diluted 107.3 113.5
106.9 114.2
StarzConsolidated Statements of
Cash Flows(Amounts in millions)(Unaudited)
Six Months Ended June 30, 2015 2014 Operating
activities: Net income $ 149.1 $ 135.8 Adjustments to reconcile net
income to net cash provided by (used in) operating activities:
Depreciation and amortization 9.5 10.0 Amortization of program
rights 281.1 293.6 Program rights payments (253.5 ) (237.8 )
Amortization of investment in films and television programs 80.1
75.6 Investment in films and television programs (233.6 ) (180.5 )
Stock compensation 16.4 15.3 Deferred income taxes (10.2 ) (6.5 )
Other non-operating and non-cash items (7.2 ) (12.4 ) Changes in
assets and liabilities: Current and other assets (23.3 ) 25.6
Payables and other liabilities (34.4 ) (58.7 ) Net cash provided by
(used in) operating activities (26.0 ) 60.0 Investing
activities: Purchases of property and equipment (5.8 ) (3.2 ) Cash
received from equity investee — 10.7 Net cash
provided by (used in) investing activities (5.8 ) 7.5
Financing activities: Borrowings of debt 734.0 208.5 Payments of
debt (662.6 ) (152.4 ) Debt issuance costs (5.0 ) — Exercise of
stock options 7.7 2.6 Minimum withholding of taxes related to stock
compensation (15.3 ) (8.6 ) Excess tax benefit from stock
compensation 12.7 6.2 Repurchases of common stock (32.8 ) (136.6 )
Net cash provided by (used in) financing activities 38.7
(80.3 ) Net increase (decrease) in cash and cash equivalents
6.9 (12.8 ) Cash and cash equivalents: Beginning of period 13.4
25.7 End of period $ 20.3 $ 12.9
IMPORTANT NOTICE
- Starz (NASDAQ: STRZA, STRZB) CEO, Chris
Albrecht, will discuss Starz’s financial performance, and may
discuss future opportunities in a conference call which will begin
at 1:00 p.m. (ET) on July 29, 2015. The call can be accessed by
dialing (877) 795-3648 or (719) 325-4789 with the passcode 3836888#
at least 10 minutes prior to the start time. Replays of the
conference call can be accessed through 4:00 p.m. (ET) on August 5,
2015, by dialing (888) 203-1112 or (719) 457-0820 plus the passcode
3836888#. The call will also be broadcast live via the Internet and
archived on our website. To access the webcast go to
http://ir.starz.com/events.cfm. Links to this press release will
also be available on the Starz website.
- This press release includes certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements
about business strategies, market potential, future financial
prospects, new service and product launches including anticipated
episodes of our original content programming, new distribution
platforms for our programming, the continuation of our stock
repurchase plans and other matters that are not historical facts.
These forward-looking statements involve many risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by such statements, including,
without limitation, market acceptance of new products or services,
the timely launch of our original programming, ongoing
relationships with our distributors, competitive issues, regulatory
matters affecting our businesses, continued access to capital on
terms acceptable to Starz, changes in law, market conditions
conducive to stock repurchases and the ability to enter into
transactions for international expansion. These forward-looking
statements speak only as of the date of this press release, and
Starz expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in Starz’s
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
Please refer to the publicly filed documents of Starz, including
the most recent Forms 10-K and 10-Q, for additional information
about Starz and about the risks and uncertainties related to
Starz’s business which may affect the statements made in this press
release.
About Starz
Starz (NASDAQ: STRZA, STRZB) is a leading integrated global
media and entertainment company with operating units that provide
premium subscription video programming on domestic U.S. pay
television channels (Starz Networks), global content distribution
(Starz Distribution) and animated television and movie production
(Starz Animation), www.starz.com.
Starz Networks is a leading provider of premium subscription
video programming through the flagship STARZ® and ENCORE® pay TV
networks which showcase premium original programming and movies to
U.S. multichannel video distributors, including cable operators,
satellite television providers, and telecommunications companies.
As of June 30, 2015, STARZ and ENCORE serve a combined 56.8 million
subscribers, including 23.5 million at STARZ, and 33.3 million at
ENCORE, making them the largest pair of premium flagship channels
in the U.S. STARZ® and ENCORE®, along with Starz Networks’ third
network MOVIEPLEX®, air more than 1,000 movies monthly across 17
linear networks, complemented by On Demand and authenticated online
offerings through STARZ PLAY, ENCORE PLAY, and MOVIEPLEX PLAY.
Starz Distribution develops, produces and acquires entertainment
content, distributing it to consumers globally on DVD, digital
formats and traditional television. Starz Distribution’s home
video, digital media and worldwide distribution business units
distribute original programming content produced by Starz, as well
as entertainment content for itself and third parties. Starz
Animation produces animated TV and movie content for studios,
networks, distributors and audiences worldwide.
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version on businesswire.com: http://www.businesswire.com/news/home/20150729005373/en/
StarzCourtnee Ulrich, 720-875-5420Investor
Relationscourtnee.ulrich@starz.comorTheano Apostolou,
424-204-4052Corporate Communicationstheano@starz.com
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