0000929351-26-000031
SEC filingA challenging quarter marked by a sharp revenue decline and widening operating losses, driven by linear cord-cutting and OTT discounting, though cash flow improved on lower content spend.
Revenue decreased 63.2% to $306.9 million in Q1 2026 from $834.7 million in Q1 2025. This decline resulted from the continued decline in revenue from traditional linear services and a higher mix of discounting on OTT services, including multi-month payment plans. The shift reflects ongoing cord-cutting trends and competitive pressures in the streaming market.
Operating income swung to a loss of $152.8 million from a profit of $18.8 million in the prior year, a decrease of 912.8%. The operating margin fell to -49.8%. The decrease was primarily due to lower revenue and increased operating expenses. Programming cost amortization and advertising and marketing expenses generally increase in periods with increased original series and first-run theatrical movie premieres and decrease in periods with fewer such premieres. The decrease in operating income is also the result of lower content impairments and lower legal and other costs incurred related to transaction-related expenses as compared to the prior year quarter.
Net income was -$164.9 million, compared to -$59.4 million in Q1 2025, a decline of 177.6%. Diluted EPS was -$9.83 versus -$0.25 in the prior year.
Net cash provided by operating activities improved to $73.2 million from -$158.9 million in Q1 2025, driven by lower cash content spend. Capital expenditures were $4.5 million, down from $9.0 million, reflecting disciplined capital allocation. Free cash flow turned positive at $68.7 million, compared to -$167.9 million in the prior year.
No amounts were outstanding under the $150.0 million revolving credit facility. The company monitors its cash flow, liquidity, availability, capital base, content spending, capital expenditures, debt service, and leverage ratios with the long-term goal of maintaining credit worthiness. Our ability to obtain any additional financing will depend on, among other things, our business plans, operating performance, the condition of the capital markets at the time we seek financing, and debt ratings assigned by independent rating agencies.
The company continues to rationalize its content portfolio amid a strategic content review. Programming costs and impairments are expected to fluctuate based on the timing and mix of original series and theatrical releases. The ongoing shift from linear to OTT services, combined with discounting strategies, will continue to pressure revenue and profitability in the near term.