Premium TV company Starz on Wednesday reported slightly lower third-quarter earnings, but improvements in other key financial metrics. The company also recorded a subscriber increase, including a milestone for its Starz-branded services.
In the third quarter, Starz subscriptions increased by about 1 percent, for the first time hitting the 22 million subscriber milestone, while subscriptions for the firm’s Encore services declined minimally. That left total overall subscriptions at 57.0 million as of the end of September, compared with 56.9 million as of the end of June.
Quarterly earnings at Starz came in at $52.2 million, compared with $56.4 million in the year-ago period. Wall Street had on average projected $53.3 million.
The company, led by CEO Chris Albrecht, also posted adjusted operating income before depreciation and amortization — another metric of profitability that analysts focus on — that rose 5 percent over the year-ago period to $113.7 million. Operating profit increased 1 percent to $100.8 million. Revenue of $446.1 million was up 11 percent and handily beat the average Wall Street forecast of $406.6 million.
At the company’s Starz Networks unit, revenue increased amid higher effective subscriber rates. The Starz Distribution arm also brought in higher revenue, mainly due to the distribution of The Weinstein Co. titles, Starz original series and AMC’s The Walking Dead. Starz Animation reported lower revenue, though, “due to fewer projects in production at the company’s Film Roman studio,” the firm said.
The increase in adjusted operating income before depreciation and amortization was driven by the revenue increase at Starz Distribution, “partially offset by Starz Networks due to an increase in cooperative marketing efforts with our distributors,” the company said.
Stifel, Nicolaus & Co. analyst Benjamin Mogil said in a first reaction: “The variance in revenue was entirely attributed to Starz Distribution as the company distributed the third season of The Walking Dead on DVD in the quarter.” But the boost didn’t affect the bottom line as much since “DVD distribution is a relatively low-margin business,” he explained.
“Our financial results in the third quarter show that our business is performing well, and Starz subscribers grew for the eighth consecutive quarter,” said Albrecht. “We are in the early stages of executing on our strategy to create compelling original programming that when combined with exclusive first-run movies offers a significant value proposition for our distributors and consumers.”
He added: “On the original programming front, The White Queen delivered strong viewership and proved a true hit with women, who comprised approximately 60 percent of viewership. Black Sails from Michael Bay is set for a worldwide January premiere, which will kick off a powerful 2014 Starz original programming slate with approximately 50 hours planned.”