Exhibit 99.1
FOR IMMEDIATE RELEASE
STARZ REPORTS FIRST QUARTER 2015
FINANCIAL RESULTS
Englewood, Colo. - April 30, 2015 - Starz (NASDAQ: STRZA, STRZB) today reported first quarter 2015 results. Highlights include (1):
Financial Highlights:
| • | Reported consolidated revenue of $450.7 million; Adjusted OIBDA(2) of $155.5 million; operating income of $142.5 million and fully diluted earnings per share of $0.79 |
| • | Starz Networks reported revenue of $334.0 million, up 3%; Adjusted OIBDA of $129.7 million, up 14% and operating income of $118.4 million, up 15% |
| • | Extended $1 billion revolving credit facility to April 2020 |
Operating Highlights:
| • | Increased STARZ subscriptions by 400,000 since December 31, 2014 |
| ◦ | Increased STARZ subscriptions by 1.8 million since March 31, 2014 to a new high of 23.7 million |
| ◦ | STARZ now second most widely distributed flagship premium pay-TV network in the United States (3) |
| • | STARZ Originals 2015 slate at expected 75-80 episodes of scripted series |
| ◦ | “Outlander” returned from midseason hiatus to wide critical acclaim, strong social media buzz and is hitting new viewership highs among female audiences |
| ◦ | “Black Sails” completed its second season run with strong ratings, ranking as the second most watched premium scripted series in the first quarter of 2015 (4) |
| ◦ | “Flesh and Bone” limited series will premiere November 8 |
| • | Successfully launched STARZ PLAY Arabia direct-to-consumer service in 17 Middle East/North Africa countries |
| • | Struck new Starz Worldwide Distribution licensing agreements with A&E Networks UK for “Black Sails” in UK/Africa bringing total worldwide sales up to more than 175 countries/territories |
| • | Secured new Starz Worldwide Distribution licensing agreements with AXN Italy and AXN Germany for “Power” |
| • | Extended Anchor Bay/Starz Digital distribution agreement with AMC Networks including “The Walking Dead” and spin-off, “Fear of the Walking Dead” |
“We delivered strong year-over-year revenue and earnings growth in the first quarter,” said Starz CEO, Chris Albrecht. “Our solid financial profile highlights the success of our strategic growth plan to develop, produce, and monetize STARZ Original series globally.”
“Our programming slate is the most robust it’s ever been and we are on track to have an expected 75-80 episodes of new originals this year. The reception we are seeing for STARZ Original series bodes very well for our efforts to fortify distribution relationships, and to build Starz’s presence overseas, as underscored by the launch of the STARZ PLAY Arabia over-the-top service. We are excited about the prospects for our business in 2015 and beyond.”
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Consolidated
For the quarter, revenue increased 7% to $450.7 million, Adjusted OIBDA increased 23% to $155.5 million and operating income increased 26% to $142.5 million.
Starz Networks
Revenue increased 3% to $334.0 million and Adjusted OIBDA increased 14% to $129.7 million. Revenue increased primarily as a result of rate increases from various distributors. Adjusted OIBDA increased due to the increase in revenue and lower programming costs, partially offset by increased cooperative marketing efforts with our distributors. Operating income increased 15% to $118.4 million. Cash paid for investment in films and television programs increased $13.6 million to $69.1 million due to a greater number of original series in production.
Starz Distribution
Revenue increased $22.4 million to $109.7 million and Adjusted OIBDA increased $13.7 million to $26.4 million primarily due to licensing certain Starz Original titles to Netflix and Amazon. Operating income increased $13.8 million to $25.4 million. Cash paid for investment in films and television programs increased $15.6 million to $39.6 million due to timing of payments for Weinstein titles.
Share Repurchases
From February 1, 2015 through April 30, 2015, 0.2 million shares of common stock were purchased at an average cost per share of $33.72 for total cash consideration of $7.9 million. Since trading began on January 14, 2013, Starz has repurchased 22.9 million shares at an average cost per share of $27.63 for aggregate cash consideration of $631.6 million. These repurchases represent 18.8% of the shares outstanding as of January 14, 2013. Starz currently has $168.4 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 April 30, 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) | Source: 4Q 2014 Premium Network Census, SNL Kagan. Released 3/11/15 |
| (4) | Source: Nielsen NPower Live +7 HH ratings and P2+ (000s) for premiere episodes of premium original scripted series in 1Q15. |
NOTES
| • | Unless otherwise noted, the foregoing discussion compares financial information for the three months ended March 31, 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.
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QUARTERLY SUMMARY
| (amounts in millions, except per share data) | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | ||||||||||
| Starz Networks | $ | 324.0 | $ | 328.2 | $ | 327.2 | $ | 332.6 | $ | 334.0 | |||||
| Starz Distribution (1) | 87.3 | 75.1 | 73.5 | 85.6 | 109.7 | ||||||||||
| Starz Animation | 8.9 | 7.2 | 7.9 | 7.7 | 7.3 | ||||||||||
| Eliminations | (0.2 | ) | (0.4 | ) | (0.4 | ) | (0.3 | ) | (0.3 | ) | |||||
| Revenue | $ | 420.0 | $ | 410.1 | $ | 408.2 | $ | 425.6 | $ | 450.7 | |||||
| Starz Networks | $ | 114.0 | $ | 121.8 | $ | 109.9 | $ | 150.7 | $ | 129.7 | |||||
| Starz Distribution | 12.7 | (3.8 | ) | 0.6 | (2.0 | ) | 26.4 | ||||||||
| Starz Animation | (0.6 | ) | (0.8 | ) | (0.7 | ) | (0.6 | ) | (0.6 | ) | |||||
| Eliminations | 0.1 | 0.2 | — | 0.2 | — | ||||||||||
| Adjusted OIBDA | $ | 126.2 | $ | 117.4 | $ | 109.8 | $ | 148.3 | $ | 155.5 | |||||
| Starz Networks | $ | 103.3 | $ | 111.2 | $ | 99.2 | $ | 140.1 | $ | 118.4 | |||||
| Starz Distribution | 11.6 | (5.2 | ) | (0.5 | ) | (2.9 | ) | 25.4 | |||||||
| Starz Animation | (0.7 | ) | (0.9 | ) | (0.8 | ) | (0.6 | ) | (0.7 | ) | |||||
| Eliminations/Other | (0.7 | ) | (0.3 | ) | (0.6 | ) | (0.5 | ) | (0.6 | ) | |||||
| Operating income | $ | 113.5 | $ | 104.8 | $ | 97.3 | $ | 136.1 | $ | 142.5 | |||||
| Net income | $ | 66.8 | $ | 69.0 | $ | 55.8 | $ | 77.4 | $ | 86.1 | |||||
| Earnings per share (diluted) | $ | 0.56 | $ | 0.62 | $ | 0.51 | $ | 0.74 | $ | 0.79 | |||||
| Starz Networks | $ | 55.5 | $ | 60.1 | $ | 57.5 | $ | 54.8 | $ | 69.1 | |||||
| Starz Distribution | 24.0 | 40.9 | 29.4 | 67.3 | 39.6 | ||||||||||
| Total IFT (2) | $ | 79.5 | $ | 101.0 | $ | 86.9 | $ | 122.1 | $ | 108.7 | |||||
| Subscription units - STARZ | 21.9 | 22.0 | 22.5 | 23.3 | 23.7 | ||||||||||
| Subscription units - ENCORE | 34.4 | 33.9 | 33.7 | 34.0 | 33.8 | ||||||||||
| Total subscription units | $ | 56.3 | $ | 55.9 | $ | 56.2 | $ | 57.3 | $ | 57.5 | |||||
| (1) Includes the following home video net sales | $ | 56.7 | $ | 38.1 | $ | 43.4 | $ | 58.2 | $ | 34.9 | |||||
| (2) Cash paid for investment in films and television programs | |||||||||||||||
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CASH AND DEBT
The following presentation is provided to separately identify cash and debt information.
| (amounts in millions) | 3/31/2014 | 6/30/2014 | 9/30/2014 | 12/31/2014 | 3/31/2015 | ||||||||||
| Cash | $ | 17.9 | $ | 12.9 | $ | 45.6 | $ | 13.4 | $ | 10.1 | |||||
| Debt: | |||||||||||||||
| Revolving credit facility | $ | 326.5 | $ | 365.0 | $ | 442.0 | $ | 432.0 | $ | 447.0 | |||||
| 5% senior notes | 677.9 | 677.8 | 677.6 | 677.5 | 677.3 | ||||||||||
| Transponder capital lease | 29.6 | 28.5 | 27.4 | 26.3 | 25.1 | ||||||||||
| Building capital lease | 44.1 | 44.0 | 43.9 | 43.7 | 43.6 | ||||||||||
| Total debt | $ | 1,078.1 | $ | 1,115.3 | $ | 1,190.9 | $ | 1,179.5 | $ | 1,193.0 | |||||
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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 March 31, 2014, June 30, 2014, September 30, 2014, December 31, 2014 and March 31, 2015, respectively.
| Starz Consolidated | |||||||||||||||
| (amounts in millions) | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | ||||||||||
| Adjusted OIBDA | $ | 126.2 | $ | 117.4 | $ | 109.8 | $ | 148.3 | $ | 155.5 | |||||
| Stock compensation | (7.8 | ) | (7.5 | ) | (7.6 | ) | (7.7 | ) | (8.3 | ) | |||||
| Depreciation and amortization | (4.9 | ) | (5.1 | ) | (4.9 | ) | (4.5 | ) | (4.7 | ) | |||||
| Operating income | $ | 113.5 | $ | 104.8 | $ | 97.3 | $ | 136.1 | $ | 142.5 | |||||
| Starz Networks | |||||||||||||||
| (amounts in millions) | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | ||||||||||
| Adjusted OIBDA | $ | 114.0 | $ | 121.8 | $ | 109.9 | $ | 150.7 | $ | 129.7 | |||||
| Stock compensation | (6.8 | ) | (6.8 | ) | (6.8 | ) | (6.9 | ) | (7.4 | ) | |||||
| Depreciation and amortization | (3.9 | ) | (3.8 | ) | (3.9 | ) | (3.7 | ) | (3.9 | ) | |||||
| Operating income | $ | 103.3 | $ | 111.2 | $ | 99.2 | $ | 140.1 | $ | 118.4 | |||||
| Starz Distribution | |||||||||||||||
| (amounts in millions) | 1Q14 | 2Q14 | 3Q14 | 4Q14 | 1Q15 | ||||||||||
| Adjusted OIBDA | $ | 12.7 | $ | (3.8 | ) | $ | 0.6 | $ | (2.0 | ) | $ | 26.4 | |||
| Stock compensation | (0.5 | ) | (0.5 | ) | (0.5 | ) | (0.5 | ) | (0.6 | ) | |||||
| Depreciation and amortization | (0.6 | ) | (0.9 | ) | (0.6 | ) | (0.4 | ) | (0.4 | ) | |||||
| Operating income (loss) | $ | 11.6 | $ | (5.2 | ) | $ | (0.5 | ) | $ | (2.9 | ) | $ | 25.4 | ||
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Starz
Consolidated Balance Sheets
(Amounts in millions, except share and per share amounts)
(Unaudited)
| March 31, 2015 | December 31, 2014 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 10.1 | $ | 13.4 | |||
| Trade accounts receivable, net of allowances of $26.6 and $41.9 | 262.4 | 249.1 | |||||
| Program rights, net | 363.1 | 303.5 | |||||
| Deferred income taxes | 0.9 | 0.9 | |||||
| Other current assets | 40.8 | 70.1 | |||||
| Total current assets | 677.3 | 637.0 | |||||
| Program rights | 322.2 | 311.3 | |||||
| Investment in films and television programs, net | 333.7 | 319.5 | |||||
| Property and equipment, net of accumulated depreciation of $127.8 and $123.4 | 87.6 | 89.8 | |||||
| Deferred income taxes | 14.1 | — | |||||
| Goodwill | 131.8 | 131.8 | |||||
| Other assets, net | 120.8 | 83.8 | |||||
| Total assets | $ | 1,687.5 | $ | 1,573.2 | |||
| Liabilities and Equity | |||||||
| Current liabilities: | |||||||
| Current portion of debt | $ | 5.3 | $ | 5.3 | |||
| Trade accounts payable | 6.0 | 10.1 | |||||
| Accrued liabilities | 345.2 | 327.4 | |||||
| Deferred revenue | 10.4 | 7.4 | |||||
| Total current liabilities | 366.9 | 350.2 | |||||
| Debt | 1,187.7 | 1,174.2 | |||||
| Deferred income taxes | — | 1.1 | |||||
| Other liabilities | 7.0 | 7.9 | |||||
| Total liabilities | 1,561.6 | 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 outstanding 92,095,133 and 91,874,138 shares at March 31, 2015 and December 31, 2014, respectively | 0.9 | 0.9 | |||||
| Series B common stock, $.01 par value. Authorized 75,000,000 shares; issued and outstanding 9,872,524 shares at March 31, 2015 and December 31, 2014 | 0.1 | 0.1 | |||||
| Additional paid-in capital | 23.5 | 24.0 | |||||
| Accumulated other comprehensive loss, net of taxes | (1.8 | ) | (2.3 | ) | |||
| Retained earnings | 110.4 | 25.8 | |||||
| Total stockholders' equity | 133.1 | 48.5 | |||||
| Noncontrolling interest in subsidiary | (7.2 | ) | (8.7 | ) | |||
| Total equity | 125.9 | 39.8 | |||||
| Commitments and contingencies | |||||||
| Total liabilities and equity | $ | 1,687.5 | $ | 1,573.2 | |||
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Starz
Consolidated Statements of Operations
(Amounts in millions, except per share amounts)
(Unaudited)
| Three Months Ended March 31, | |||||||
| 2015 | 2014 | ||||||
| Revenue: | |||||||
| Programming networks and other services | $ | 415.8 | $ | 363.3 | |||
| Home video net sales | 34.9 | 56.7 | |||||
| Total revenue | 450.7 | 420.0 | |||||
| Costs and expenses: | |||||||
| Programming (including amortization) | 146.0 | 156.9 | |||||
| Production and acquisition (including amortization) | 56.6 | 40.9 | |||||
| Home video cost of sales | 10.4 | 13.0 | |||||
| Operating | 13.3 | 14.1 | |||||
| Selling, general and administrative | 77.2 | 76.7 | |||||
| Depreciation and amortization | 4.7 | 4.9 | |||||
| Total costs and expenses | 308.2 | 306.5 | |||||
| Operating income | 142.5 | 113.5 | |||||
| Other income (expense): | |||||||
| Interest expense, net of amounts capitalized | (11.2 | ) | (11.5 | ) | |||
| Other income (expense), net | (2.2 | ) | 0.5 | ||||
| Income before income taxes | 129.1 | 102.5 | |||||
| Income tax expense | (43.0 | ) | (35.7 | ) | |||
| Net income | 86.1 | 66.8 | |||||
| Net income attributable to noncontrolling interest | (1.5 | ) | (1.9 | ) | |||
| Net income attributable to stockholders | $ | 84.6 | $ | 64.9 | |||
| Basic net income per common share | $ | 0.84 | $ | 0.60 | |||
| Diluted net income per common share | $ | 0.79 | $ | 0.56 | |||
| Weighted average number of common shares outstanding: | |||||||
| Basic | 101.1 | 108.2 | |||||
| Diluted | 106.6 | 115.0 | |||||
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Starz
Consolidated Statements of Cash Flows
(Amounts in millions)
(Unaudited)
| Three Months Ended March 31, | |||||||
| 2015 | 2014 | ||||||
| Operating activities: | |||||||
| Net income | $ | 86.1 | $ | 66.8 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
| Depreciation and amortization | 4.7 | 4.9 | |||||
| Amortization of program rights | 136.9 | 146.3 | |||||
| Program rights payments | (136.0 | ) | (112.6 | ) | |||
| Amortization of investment in films and television programs | 36.9 | 36.2 | |||||
| Investment in films and television programs | (108.7 | ) | (79.5 | ) | |||
| Stock compensation | 8.3 | 7.8 | |||||
| Deferred income taxes | (6.8 | ) | (2.1 | ) | |||
| Other non-operating and non-cash items | (13.5 | ) | 0.9 | ||||
| Changes in assets and liabilities: | |||||||
| Current and other assets | (8.7 | ) | (1.5 | ) | |||
| Payables and other liabilities | (5.0 | ) | (25.9 | ) | |||
| Net cash provided by (used in) operating activities | (5.8 | ) | 41.3 | ||||
| Investing activities - purchases of property and equipment | (2.2 | ) | (1.3 | ) | |||
| Financing activities: | |||||||
| Borrowings of debt | 95.0 | 84.0 | |||||
| Payments of debt | (81.3 | ) | (65.2 | ) | |||
| Exercise of stock options | 4.6 | 0.7 | |||||
| Minimum withholding of taxes related to stock compensation | (5.2 | ) | (5.7 | ) | |||
| Excess tax benefit from stock compensation | 4.6 | 4.4 | |||||
| Repurchases of common stock | (13.0 | ) | (66.0 | ) | |||
| Net cash provided by (used in) financing activities | 4.7 | (47.8 | ) | ||||
| Net decrease in cash and cash equivalents | (3.3 | ) | (7.8 | ) | |||
| Cash and cash equivalents: | |||||||
| Beginning of period | 13.4 | 25.7 | |||||
| End of period | $ | 10.1 | $ | 17.9 | |||
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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 April 30, 2015. The call can be accessed by dialing (877) 440-5788 or (719) 325-4891 with the passcode 2635330# at least 10 minutes prior to the start time. Replays of the conference call can be accessed through 4:00 p.m. (ET) on May 7, 2015, by dialing (888) 203-1112 or (719) 457-0820 plus the passcode 2635330#. 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, international expansion opportunities 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 March 31, 2015, STARZ and ENCORE serve a combined 57.5 million subscribers, including 23.7 million at STARZ, and 33.8 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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| Contacts: | |
| Courtnee Ulrich | Theano Apostolou |
| Investor Relations | Corporate Communications |
| (720) 875-5420 | (424) 204-4052 |
| courtnee.ulrich@starz.com | theano@starz.com |
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