Q3 2020 Earnings Call
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Maybe he's in gentlemen, thank you for your stating that I want to Fox Corporation third quarter of 2020 earnings Conference call.
This time, Oh participant phone lines hurtle listened only mode.
Later, we'll conduct a question and answer session.
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Thank you operator, Hello, and welcome to our third quarter fiscal 2020 earnings Conference call.
Joining me on the call today, or Laughlin, Murdoch Executive Chairman and Chief Executive Officer, John Allen, Chief Operating Officer, and Steve Tomsic, Archie Financial Officer.
First walk winning Steve will give some prepared remarks on the most recent quarter and then we'll take questions from investment community.
Please note that this call may include forward looking statements regarding Fox corporations financial performance and operating results.
These statements are based on management's current expectations and actual results could differ from what is stated as a result of certain factors identified on today's call and then the company's F.C.C. filings.
Additionally, this call will include certain I've got financial measures, including adjusted EBITDA or eat it as we referred to it on this call.
Reconciliations if not to get financial measures are included are in our earnings release, and R.S.C.C. filings, which are both available in the Investor Relations section of our website.
What's that I'm pleased to turn the call over to walk one.
Backs down a good afternoon, and thanks to everyone for joining us today.
Yeah.
We are living through extraordinary times.
Since we last also together who would have imagined our lives could have all been turned so upside down.
The impact of covert 19 has impacted our economy.
Our businesses.
Our colleagues and ourselves.
Well, you know deep gratitude to the nurses doctors cleese teachers' aides care workers volunteers.
Countless other frontline workers for their incredible.
And brave sacrifices.
At box, we think every one of them.
Their work humble Sars.
We have spent these last few months protecting the how's the bar employees, providing essential news information and entertainment to our communities.
Oh, my bolstering the strength of our company in order to best tackle that challenges ahead.
At the outset, let me say that if if there is anything you take away from my remarks today.
Shouldn't be that Fox is any strong position to deal with the impact of this pandemic.
Our strength was clearly demonstrated in the quarter, which is only partially impacted by the pandemic and is illustrative Oh. The outstanding result box delivered in unaffected cycle.
The strength of Cox has also been on display in the week since the end of the quarter as we navigate these unprecedented times to continue to provide our services to communities across the country.
Starting with a review of our third quarter, you will have seen that we delivered exceptional financial results achieving revenue and even dog growth of 25 per cent and 20%, respectively. Adjusted earnings per share growth of 22% and generating over $1.5 billion or free cash flow.
Our revenue growth was multi prong.
It feels like a lifetime Madame but is there a reminder, the quarter began with our record breaking broadcast of Super Bowl 54, where we generated around $600 million Oh gross revenue across the company.
But the strength in the quarter extended well beyond the superbowl local advertising at the Fox television stations grew by over 20 per cent and superbowl revenues were supplemented over 35 million aggressive political AD revenues in the quarter.
Fox News advertising revenues go back, 15% led by 45% increase in digital AD revenue yes.
And we had another strong affiliate quarter with total company affiliate revenues grown by 10% despite a touch over 5% reduction in pay T.V. subscribers.
Steve will cover the details of our financial results shortly.
Operationally quarters, or Fox news and Fox business deliver their largest audiences in each network history with Fox news ratings, approximately 40% year on year.
That's excessive Fox news Media's brands extended beyond the linear properties boxes digital achieved its highest quarter ever across all K.P.I.s, including over 11 billion digital page views.
Company wide digital leash, who's 42%, while digital engagement nearly doubled year on year.
Elsewhere on screen the quarter brought us another successful season of the mass singer and the number one new broadcast reality series that family friendly hit Lego Masters to show that'd be helpful shape, The Fox network lineup for years to calm.
While still early days are strategy to leverage the cross promotional power of our platform to support shows we have an ownership interest in is showing encouraging results.
Well, that's the hard what's the number one new comedy and adds another leg to our Sunday animation block or Prodigal son was the second highest rated new scripted drama on television.
Locally the Fox television stations continued the expansion of the news coverage, adding an additional five hours per week across Atlanta, and Los Angeles.
The stations unified programs strategy drove ratings growth and essentially everyday part, including a time and late news.
Corporately during the past quarter, we completed an important transactions to support the ongoing growth and momentum a fox.
Among them more the closing of our agreement with Nexstar in which we expand our local market footprint to the acquisition of T. stations in Seattle, and Milwaukee and the transfer of our Karlik stations to them.
The early renewal of our distribution agreement with one of our largest partners Comcast and our full portfolio channels.
And the announcement and subsequent closing our acquisition of to be which immediately expands our direct to consumer capabilities and provide your advertisers with even more opportunities to reach audiences a great scale.
Coupled with a combined power foxes existing networks to be provides a substantial base from which we will just drive long term growth and the direct to consumer market.
As an example of the scale in April to be generated total viewing time over 200 million hours, which is up more than 150 per cent versus prior year.
This is also there first full quarter, reflecting the results of credible our digital loan marketplace business.
And while we are only just at the beginning.
Exploring the marketing synergies between Fox incredible.
The business has had a great quarter doubling as close loan volume and revenue year on year.
Overall, the financial and operate operating results for the first nine months of the year confirms just how sturdy our businesses and demonstrates the power and importance of our lives Sports News and then programming to our partners and our audiences.
Of course, our achievements have been Riley overshadowed by the outbreak of the covert 19 pandemic and by the challenges. It has <unk> presented to all the companies stakeholders.
Including our colleagues the communities, we serve our business partners and our shareholders.
We understand our responsibility to each stakeholder and I'm mindful of them in the balanced actions, we are taking to address the crisis.
As I mentioned earlier, our main priority remains the health safety and well being of are more than 8000 colleagues.
We continue to follow federal state and local guidelines when it comes to our workforce now locations across the U.S. [noise].
[noise], those whose job functions allow it had been working remotely since mid March and we have over 70% of our employees <unk> at the moment.
We are grateful to those essential employees, whose jobs remain require them to work on site, where their commitment and for their resolve.
We have taken actions to protect and a short the well being of these employees, particularly for those that are out in the community informing the country of every aspect of the pandemic at a national and local level.
While taking steps to keep our colleagues saved we also continued to provide our viewers with the information they see to better understand this pandemic on a national and local basis.
In this spirit, we swiftly launched grown a virus now dot com or free to use website preaching the latest news about that pet about the pandemic.
Drawn on our news gathering and digital capabilities across the country bolstered by third party content from government and health organizations, such as the center for disease control. We created this fight provide our employees viewers and communities with reliable up to date information about this public health issue.
Oh, well 1.3 million Americans have accessed these specific resources.
A wonderful example of the Brett the Fox coming together to provide a public service to our audiences at a critical time, and then a new and distinctive way.
Further working with our distribution partners to ensure that all Americans could receive the latest national and local news regarding thrown a virus, we offered free access to the Fox News channel and Fox television stations, starting in mid March continuing for over a month.
We are doing impact for work across all platforms to inform our viewers and to get back to our audiences.
Fox raised over $13 million for feeding America, and the first responders children's foundation to our broadcast of Fox present, the I heart living room concert for America, which pay tribute to the brave medical professionals and local heroes are working on so many aspects of the pandemic.
In early April Fox News, and Facebook co hosted a coroner virus town hall between medical and business experts, including members of the White House run a virus task Force Fox News and Facebook jointly donated $1 million, defeating America's covered 19 response fun.
In partnership with NASCAR, where the NFL Fox sports donated to feed the children, the American Red Cross and feeding America.
Fox Sports and Fox News talent have tape special service public service announcements encouraging viewers to stay home and a seek the latest guidance from the C.D.C. to date, we are broadcast nearly 30000 over 19 related P.S.S.
Are Fox television stations have spearheaded charitable initiatives twisted their local communities from benefiting food banks, you're presenting on air school lessons for students with limited access to technology.
And and initiative I am, particularly proud of their preparation and delivery of 2000 meals a day for the disabled community in Los Angeles Fire Fox Studios food services staff.
This gives us the dual benefit of keeping our amazing staff in work, while providing much needed support to the people of L.A.
We'll continue with many of these and other initiatives, where we can be helpful and I've asked each of our 8000 plus employees to look for ways. They can <unk> they can contribute to their community while working from home.
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At the same time, we're keeping a close high on the evolving impact of the crisis on our business adjusting the way we operate in the near term communicating with our partners and evaluating our longer term models to assure it that we maintain the strength of Fox for the future.
Mm.
Clearly, we are not immune to the impact of covert 19, and we acknowledge it and we acknowledge the continuing pandemic well influence our future financial results.
Yeah uncertain nature of the situation. However makes it challenging for us to estimate the future performance or a business, particularly over the near the medium term.
So what has been the impact on our business today.
Had a macro level sports events have been deferred and the production of certain entertainment content slated for the fall has been suspended.
However, our activities around news have grown and intensified.
Our local and National news ratings, having strong with Fox news ending a third quarter, we just largest audience in history.
We have seen this momentum accelerates into the current quarter, what's audience levels rise in further most notably and the younger <unk>, giving demos.
This quarter. So far has seen the networks adults 25 to 54 audience nearly doubled from prior year levels.
This growth has not gone unnoticed by advertisers with new business common to Fox news from clients looking to reach these younger demos or to transition dormant sports dollars to news or to present different marketing messages in light of the virus, thereby mitigating most of the pulled back in the categories that you would expect such an auto.
Entertainment and retail.
Categories that I've moved spending either Fox news to reach our expanded and engaged audiences include insurance.
Fast service restaurants telecom streaming and tech.
Where the impact of the pandemic as most apparent in our business is that our local stations across the country, where despite viewership games for our local news programming fiscal fourthquarter advertising revenues are pacing down around 50 per cent from year ago levels.
The local auto local retail local travel and local entertainment categories are leading this decline for us.
And the rest of the T.V. market local T.V. market.
We will only see the pattern of how these categories I will return after states I mean, NIST holidays open backup for business.
On her last during this call I indicated that all signs pointed to a robust political ads cycle for our local markets.
As a result of the contraction the field and presidential candidate and postponement. Many state primaries do the pandemic, we have seen a slowdown in the active political advertising span that we saw in the third quarter.
However, traditionally the political campaigns significantly ramp up spending in our first fiscal quarter and we expect with election day still six months away. This category will intensify again as we approached November.
Turning to sports, which accounts for over 40% of our total annual advertising revenue very little of this revenue has been affected so far by the shut down.
Our sports revenue is concentrated in the fall when baseball post season, and the college and NFL football season's are most active.
Post contact with all of our sports partners and know that they are being thoughtful around their scheduling decisions by prioritizing the health and safety of all of the personnel associated with their sport their fans and their production partners like us.
Well look to them for their conclusions around when they will commence play.
<unk> whenever they are ready to start will be ready to <unk> to produce and it broadcast.
Like the rest of America, we can't wait for the first pitched throne.
The first of all Heights.
And the Roar abandons starting again.
On the entertainment side covert 19 has caused the temporary cessation of nearly all program production in the industry.
Regardless Fox will enter the next broadcast here with a great deal of stability.
This is partially because animation production has been less effective than live action and we expect to return in the fall with all new seasons of the Simpsons bless the Hearts Bob's burgers and family Guy.
Also slated for the fall we have already completed new seasons of our Gordon Ramsay franchises, Hell's kitchen, and Master Chef Junior and I've, All New series finished and I'm ready to go to air including the psychological thriller next and the southern Gothic soap opera Filthy rich.
And this time should the conditions allow for it we are planning for reduction in early August of season, four of the mass singer, which will target for phone w.
We have also began preparing new seasons of 911911 Lone Star Prodigal son, and Lego Masters for mid season launch States.
Given the uncertainty that our advertisers are facing in their own businesses, along with the potential variability in our programming schedule. You have noted the cancellation of our advertising upfront, which would otherwise have taken place next Monday.
Although we will not be hosting this traditional event this year.
We remain constant dialogue with their advertising partners to ensure that we provide them with the flexibility needed to navigate these unprecedented times.
Fox Executive have been front and center with our clients hosting videoconferences to speak about the marketplace and the impact on their businesses.
While the flexibility that we provide our partners well certainly be reflected in produced advertising revenues in the current quarter is our priority to preserve these long term relationships and do what we can transfer to health and sustainability of their businesses and brands.
Yeah.
Finally as for distribution.
We are pleased with increased you in that we're delivering for our partners video offerings and for our Fox affiliated affiliated stations across the country.
As it relates to pay T.V. subscribers, it's unclear so far the impact of covert 19, well materially alter recent trends, we know that a few major distributors have publicly expressed a bears outlook for their radio subs and there will no doubt be recessionary economic pressures across a significant number of pay T.B. households in the near term.
These factors alone would likely exacerbate the recent trends and subscriber declines.
We also know from Nielsen ratings that more people are consuming T.V. right now, particularly in the news category.
We know there is strong pent up demand for alive, and and and event programming that is the cornerstone of our portfolio brands. Beginning for example, with the return of NASCAR and just 11 days.
While the bias would have to lean toward near term pressure on subscriber levels.
How all of these factors interact and get reflected in subscriber numbers will become more clear as the year progressive.
I'll wrap up my comments, where I started.
Fox is in a strong position to whether this turmoil.
Or outsize exposure to news <unk>, there should be less impacted than others and the timing of the sports that we broadcast has curb the immediate impact on us so far.
We entered this crisis in a position of financial strength, and we remain well capitalized and highly liquid.
Are steadfastly conservative financial management, and our strong feet free cash flow profile underpinned the company's balance sheet.
Even with the uncertainty around the shape and paste the economic recovery in the United States.
As we emerge Fox focused collection of brands exclude heavily towards life, an event programming will be even more in demand by advertisers and audiences like.
I am confident they will come out of this crisis as a stronger.
More efficient and more agile company position for the future toward our continued goal of maximizing long term shareholder value.
And now alternate call over to Steve.
Thanks, Laughlin and good afternoon.
Let me start with a brief summary of the third quarter results before going on to discuss current <unk>.
There's lots of I mentioned earlier Q3 was a clear demonstration of folks with financial strength.
Company reported total revenues of $3.4 billion.
Up 25% over the comparative period in fiscal 2019, reflecting revenue growth across all operating segment.
I would accompany advertising revenues increased 44%.
By the broadcast the Super Bowl 50, full will total company affiliate revenues increased industry, Kansas and demonstrating the strength up right now focus portfolio of channels.
We'd shape double digit affiliate revenue growth. Despite the right of net subscribe declined to just Uh huh.
Quickly to go with $920 billion and notwithstanding the comparison to combat financial in the price you hear it still represented growth of 20% live by increases at the television and cable network programming segment.
Actually upset by the impact of corporate expenses at the other segment.
Increasing these expenses reflects the costs of Fox operating Angela public company in the current you. This is the presentation of Copout financial statement in the price quota.
From the bottom line suspected net income attributable to stockholders $78 million <unk> shit.
Low and then the $529 million.
<unk> in the <unk> cool.
This decline was primarily due to the changing face value of the company's investments recognized you know the net.
Most notably the book Lusting could following the style of out of state <unk> in much.
From an economic perspective, rocchi style, which are quite it to nine times, our initial investment that leave it opposed to text gain relative to initial cash invested approximately $300 million.
And strategically allowed us to convert a minority shareholding into the full ownership of leading I'd play it.
Excluding the impact and other known core item adjusted D.P.S. of 93 thing is up significantly compared to last few 70, 676, instantiate, reflecting the growth you needed partially upset by high isn't it interesting thing.
Which as we have flags in the past primarily reflects interest on the Standalone did structure Fox. This is the combat presentation in the <unk> cool.
And now turning to the performance of our operating segments to the quota <unk> $792 million without 7% on revenue growth of 6%.
As expected weeks old growth in cable affiliate revenues accelerates the for the same as the impact of new distribution agreement and higher average right across essentially all about brain.
It was partially offset by the next decreasing pay television describe it.
Grifols that reflect the loans you folks you folks students on sleep late last year.
Cable advertising revenues increased <unk> led by results at Fox News media, including the impact of high ratings and continued string you know digital style.
Partially offset by high Preemptions associated with breaking news coverage.
Segment advertising growth with those are impacted by few alive NASCAR event Foxsports one due to the postponement early season races. As a result of code at 19.
Other cable revenues grew by $18 billion, driven by contractual sports of licensing revenue, primarily associated with college basketball content in the quota.
Either died out cable segment increased 7% over the <unk>, reflecting the higher revenues, partially offset by higher expenses.
Oh can use media costs were up in the quota you to coverage of the presidential primaries and can be continued digitally investment in Fox nation.
Which would possibly up in the segment by lower programming <unk> Foxsports, one from few alive NASCAR.
Quarter also include one time costs at Fox Sport, and Fox News media related to the production of shoulder programming, leading up to the broadcast the Super Bowl equal.
The television segment reported <unk> $224 million, an increase of $125 million over the <unk> quota on revenue growth 41%.
The revenue growth was led by 56% increase in television advertising revenue, including the impact across the network in stations from Super Bowl Sunday.
Excluding the impacted the superbowl any impact of one lives NFL divisional playoff games.
<unk> advertising revenues would've been up 1%, primarily primarily due to strong C.T.M. good books network and high political advertising revenues at the Fox television station.
These would possibly off that by the impact of coded 19 on a local stations during the closing weeks at the quota.
Television affiliate revenues increased 22% in that period, reflecting double digit increases the bugs out programming phase from known station affiliate.
Directory transmission revenues at owned and operated stations.
Even <unk> television segment increased $125 million over the pry you, reflecting these higher revenues, partially offset by higher expensive.
<unk> the increase in expenses was driven by programming rock Dematteis action in production costs.
Okay with the broadcast the Super Bowl <unk>.
Partially offset by the impact of that rotating N.F.L. divisional playoff game and pry programming right, though.
Similar to a second quarter, we continue to make investments in programming, which included a first year W.W.E. content.
Expansion of originally entertainment programming and Apple patient high production arrangements with that.
Finally from you know perspective and eat it that I Love you know at the segment amounted to $96 million, which reflects the little quarter of Standalone call.
As opposed to the car that basis of presentation in the corresponding quarter of the <unk>.
We still expect the Nikki with <unk>, you know the segments being the meter high 300 million dollar range to the full fiscal year.
Turning now the cash flow as expected a free cash flow generation in the quota of more than $1.5 billion with strong.
Supported by the collection of advertising revenues from a full programming and the fact that out sports right. The payments were concentrated in Prague quoted.
As a reminder, we calculate free cash flows net cash you you know operating activities plus cash invested in property plot equipment.
As part of that balanced approach to capital allocation.
Much we close on the previously in ethnic television stations transaction at a net purchase price of approximately $300 million.
We also generated net proceeds of approximately $340 million from the sale of has taken rocchi, which we email yeah acquisition of T.V. for approximately $445 million net cash consideration of clothing last month.
[noise] during the quarter, we purchased 3.9 million class say in 2.9 meeting classy shades for $173 million.
<unk> $2 billion, we have now cumulatively <unk> $600 million, representing nearly 3% about total she is outstanding seems to launch of the buyback program in November.
Given the current uncertain economic conditions, we have not bought back shades since the onset as across it.
From a balance sheet perspective, we ended the quarter, we 3.2, beginning cash in $6.8 billion in debt.
Since then out of an abundance of course, we took the opportunity sweat well already strong liquidity position by raising $1.2 billion, a five year and 10, you know Tonight.
Which was significantly August subscribe.
Weighted average cost of these new issuance was approximately 3.3%.
Making it attractive from it cost me expect you to essentially Prefund F. 750 million dollar maturity Jews in January 22.
So we could combine benefits a strong free cash flow liquidity moderate leverage in the absence of any that maturity for almost two years, we face the challenges a covert 19 from a position of financial strength.
<unk> well, we have very proud of the operational financial results that we have that sheet.
We are acutely aware of the impact of covert 19, and the challenges it presents to old about businesses and all that stakeholders.
We know that they're a number of moving variables among them the outlook for the gradual reopening of the economy the timing into the retentive sporting event.
And the evolution of the up front advertising cycle that make it difficult to forecast allbusiness beyond the very short time.
It's such a common three today will focus only on M.T. school full quota and only on advertising revenues, which is where we are seeing them a significant impact about business.
The most immediate impact has been on advertising revenue at our local television station, where <unk> essentially on a small faces.
And many of our advertising pop operating sex is most displaced by 19.
You pacing continues at current levels, we would expect a local advertising to be down by approximately 50% again as again <unk>.
Meanwhile, and use an entertainment businesses are expected to be more insulated in the immediate.
News is being supported by strong ratings the growth of it's digital properties the category mix of its core advertises along with the new advertising clients. It is attracting it out possibly opposite decline from the legacy at the talking by.
At Entertainment, we already substantially through the broadcast season or advertising revenues well supported by using tree that was about hearing loss queues up front and until recently a strong forgot about that.
So before we get 12 sports business the collective coupon impact if week advertising demanded our local T.V. station National News and entertainment businesses is anticipated to be around $200 billion to $240 billion.
25% to 30% compared to pry yet.
Across these businesses, we do you know what to anticipate covered 19, having a meaningful impact on q. full color.
Yeah, Tony too about sports business, where uncertainty or interest schedule was makes it impossible to full cost helpline impact.
However, it is worth pointing out that we typically advertising associated right stays in production thing expenses on out you know when the games or event actually err on the on networks.
From a bottom line perspective.
On advertising revenues events being postponed is often offset by the you know expense benefit of not having the rocks call.
Although these uncertainties, making challenging for us to estimate the future performances that businesses as Luckily mentioned in his out financial results illustrate the company into this crisis in a position of operating in financial strength.
We will continue to manage of business and balance sheet, you know discipline and conservative manner. So that we emerge as well positioned as possible to take advantage of opportunities during the recovery.
And with that now like to 10, Nicole Buckey job.
Thank you Steve.
Now we'd be happy to take questions from the investment community.
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It looks like our first question.
Comes from the line of Jessica right.
Because America we're line is open.
Alright. Thank you on some like multiple part one question I've always W., the Super Bowl company right entrepreneurial.
And out of all of this you know maybe there's some opportunity I'm just wondering if you're thinking about longer term changes in your business, where you can find more efficiency is.
And then or immediately <unk>, what can you say about it in terms of sports.
Well I mean W.W. is still on can you talk about what what the ratings have been in but the advertisements, but I'm just wondering sports without than it does it seems that demands in advertising and it's all expressed in the darkness capital Tomorrow.
Do you think that'll I've talked to the advertising command. Thank you.
Hey, Thanks Jessica.
Let me answer both of those questions. Thank you there were two questions I think I don't think there were there variations in one, but but I'll answer them, both and and I appreciate them. Both so in terms of efficiency is I think you know well we have <unk> because we are in such a strong position you know we have an looked at.
How we drive efficiencies in terms of a specific coded 19 impact. Our employees are are are fully engaged in in running running each of their businesses. Our our businesses are all you know fully operational and and as you know when we when we separated from Disney We we we went through a across is that.
That time really creating you know what we felt was you know a a very efficient you know a platform from which to go afford having said that you know we've looked at how we produce sports how we produce news how we operate as a team M- you know many of our our corporate functions.
And we've we've learned their lessons from from our telecommuting working in more flexible and more innovative ways and we think I'm absolutely going forward. There are significant whereas we can be more efficient and more agile as a company as as I mentioned.
And my earlier comments. So there is a process were working through it's a process were working through before October 19, and we certainly see that there's opportunities there from a sports perspective look we're we're very pleased obviously with their return.
Of NASCAR on May 17th we've seen you know are very strong demand from our our our clients to be associated with and and and to to market within within that racism in in and within you know future future races. So we're we're very pleased with what with what we see from.
An advertiser demand.
We have worked I should say with.
Our clients over the last six weeks you know incredibly.
Closely engaged through physically closely but I don't.
Digitally or closely engage in literally hundreds of of Teleconferences work, taking them through you know the marketplace, having us understand the impact of Kobe 19 on their businesses and how we can help them as we come out of this this help crisis going forward that process is now evolving where we can now have.
Much more specific conversation with them, particularly about the fall. We're pleased with the the NFL will be releasing their schedule eight o'clock Tomorrow night Eastern time that obviously gives us a a a trigger to be much more specific in our conversations with our clients, but we are seeing a tremendous pent up.
Demand for for for sports programming and live event programming as for the W.W., Yeah have to give a a shot out to the W.W.D. They have done a tremendous job delivering asked life content weekend week out under very difficult circumstances, and there were were were.
Sorry, <unk> for it so thank you Jessica.
Yeah.
Operator, we can go to the next question.
Didn't q. easily have been Swinburn Morgan Stanley.
Open.
Thank you. Good afternoon, it's I think it was a year ago you had your invest your day, which shows like 10 years ago at this point, but I want him to ask you about a couple of things that you guys focused on that one was the outlook for retransmission revenues, which is obviously a key driver growth for the business and I was curious given how much the ecosystem has evolved.
Since then if you continue to be coughing and you can deliver on on those expectations are realizing that the world has changed quite a bit and then secondly, you know <unk> <unk> I can't really John how you phrased it but something to the effect of you know we're going to be cautious with by the accent.
Cervical their balance sheet, you know sort of for a rainy day or for a change in the cycle and be opportunistic and we certainly arrived at that point [laughter] I think you would agree and I'm. Just curious how you think about using your balance sheet, which is a strategic advantage in times like this you know to continue to sort of reinvent the companies you look out over time.
So then I'll, let me, let me to dress up the first part of questioning and John Steve can address.
The second question from every transmission perspective, we remain a 100 per cent confident that we can achieve our our goal, which we announcing the and the at the at the Investor today, but you're right does feel like 10 years ago I'm sure. We all have a few more gray hairs and to remind people.
I think everyone was there but that goal was to to even additional billion dollars in affiliate revenue by counter or 22, and we are we believe we are on track to achieve that that goal on John I'll pass it over to you for the second question.
<unk>, thanks, but the no you're right. We we've always viewed in have particularly viewed with the birth of Fox Corporation.
Or balance sheet to be true strategic got sort of the company, but the balance sheet is.
Really reflects.
The strike that balance sheet reflects the string to the operations of the company and I think fundamentally that's what you have to look at first was how strong the business or.
It does give us optionality as we look longer <unk>.
But I think you know all the comments Laughlin made and Steve made and and near term.
With the amount of uncertainty around we're really just focused on the strength.
The operating strike a little business.
As as Steve said, we pause to buy back once the the pandemic hit.
I think we'll we're just going to be cautious here for a little while and know that we have this strategic asset to continue to build the company.
Yeah.
Operator next question please [noise].
Functional and Michael Nathan's.
Since it he still had.
Thanks, I have all I have to so what is on T.V. I was just interested in in the rationale for you guys to do it and where do you think you add the most value you know it seems like a <unk> on there and you guys are mostly.
Yeah, producing company, so I love to hear about where you see you can create value for T.V.. Then secondly, I think lock on the last call. You mentioned that you guys. We're still talking to the NFL about <unk> newer <unk> next contracts I wonder if those discussions continue and if any of the data points you see about quarter counting maybe gives you some pause to her.
Hold on into doing the deal until you see maybe well at the end the tunnels or what Clinton's will emerge post cold it so thanks.
Thanks, Michael so.
To to to the questions and we talk about them for for hours, but.
On to be you know to to be given this tremendous reach I'm, we've talked before about our our our direct to consumer strategy. We we're very pleased with both are kinda authenticated strategy, but to Fox now <unk> syndicated platform for our product, but also with the the strengthen and the growth.
In in Fox Nation, I should say you know Fox Nation has had on the April was the second strongest month for Fox Nation, and it continues which is which is interesting as as it gets bigger to achieve you know and over 80 per cent conversion rate from free trial us in in the.
Independent subscriber so the consumers are pox nation are are are absolutely in drawing I'm paying paying for that that product cause it as it grows so and the way I'm, we've talked before about about <unk>, an incredible as as a part of direct to consumer <unk>, but as far as truly goes.
We feel that that we are not getting back into the entertainment production original production business through to be we see our our existing Slater brands as being very important to the growth through to be what we can do both through through the entertainment network.
And it's content you can see today the number one television show on T.V. is is the mass singer and as as driving a lot of important viewership and advertising impressions and what we can do with with sports and news and our local stations in the future. We think is is very exciting so to be.
As a great business, it's grown 150% a year on year in in terms of in terms of video hours are viewed well, we can make an an even greater business and and and then you know we're getting to know the team and we like them along with that we think they're they're going to do great things. So.
So, but it is important <unk>, it's our brands and two B.'s distribution I think it's going to really be very exciting on the N.F.L. You know obviously covert 19, we haven't been able to sit down across the table with with the N.F.L. to discuss their their their future plans and and and the the renewal of.
I've ordeals, we have been in contact with the NFL every day about a whole range of other things. We you know so we remain very close to them. There's nothing that we see in the marketplace today that makes us feel any differently about the value of our partnership.
With the N.F.L. demeanor tremendous partners of ours for over 25 years, and you know we've built our business as as they've built there and we look forward to that continuing for for many years to come.
Yeah.
Operator blind.
Next we had the lamp Alexia quit driving of J.P. Morgan.
Open.
Oh, Thank you very much so I just want to follow up on your comments about the laptop mark yet I understand the process yeah.
<unk>.
Flexibility I'm picky, there will be cannot stop market that will that car, meaning that advertising.
Maintenance or you know sort of falling for next year and I guess when you look at Fox is quite well, yeah 14, such a big comparing a bad Q.T. on a date on the sidelines until you do get better visibility I'm not funny, you mentioned, you know having that Oklahoma games I'm coming out soon body help mark.
<unk>.
Thanks Flex yeah, So I know as I as I mentioned before I think with a with Jessica's question, we being you know fully engaged <unk> with our clients and agencies over the last six weeks, we don't see that changing we don't see a.
A virtual single singular upfront as the right thing to do today, because all of our clients are affected by cobin 19 in different ways and they will all emerge from big they're Coke Cobra 19.
Packs in in different ways. So for example, our retail clients or auto clients will emerge from covert 19 in a in a very different way from say, our financial services or insurance clients.
You know entertainment will be very different from from telecom or professional services and so it's important for us as as we've engaged with them to understand what their needs are and the Taylor you know our our partnership with them in very unique and specific ways and and that will continue obviously there are triggers too.
Yeah, those conversations such as the the NFL schedule being released such as a NASCAR being back on on on air and on the track and those are exciting milestones well, we'll continue to work closely with each of our clients and work to their specific needs.
To to work them into our schedule I think one of the the key things to remember Alexia is.
Aside from the sports schedule, which is starting to to take shape. Our entertainment a schedule in the fall looks you know incredibly stable you know really thanks to a a large amount of our programming already being being filmed and edited and and you know.
Mmm phrase in in in the can.
The the only open question you know in our fallen in payment schedule is whether we get amassing or back kind of reduction in time for fall schedule or four seasons schedule. The rest of our schedule Oh by the way I should mention I think I didn't my early comments. The fact that animation is virtually the production schedule by enemy.
<unk>, Berkeley untouched I would buy bye bye covert 19 as being a great great Boon to us. So we are very Compton pleased that we have a a strong entertainment schedule in the fall now this of course the elephant in the room is a tremendous ratings of news our our news writings.
Or the strongest they've they've ever been the demographics within those ratings it within the the those <unk> viewership is is <unk> younger and and and and.
As attractive as it as it's ever been and when we're very pleased with that so yeah. It's not just about sports sports coming back, but it's about news and entertainment that that where we are very competent and we'll have a strong autumn.
Yeah.
Operator, we can go to the next question.
Thank you next we have a question for the life doesn't Mitchelson credit Suisse. Please go ahead.
Oh, so much I guess of of the first question to jump. All you know has this environment impacted making any new investments in entertainment programming and how does the you know a calling work for the programs that you are bringing back I believe you hooked amount of cash basis last year. When you made the investments.
Now that they were trained for a second seasons and they've been successful does that have any implications for downstream Robin is that you start to book or or cash you start receiving the second question Laughlin.
It seems like you have an idiosyncratic mix of acquisitions, a date and what should we expect next in terms of a day and it's interesting because you're strong three together as you know part of a direct to consumer strategy. So either way, whether it's an idiosyncratic makes or whether you know, it's it's actually targeted to a specific strategy any thoughts on what's next for them and they would be helpful. Thank you.
A dog when I start with.
First half your first question on them and I can go to your second question.
The let's see the answer to the the the accounting of but the impact of any new investments in the entertainment in terms of how we look at as I mentioned that the production. Today is is is in fact was shut down globally, how we plan.
For a new seasons, and new shows I <unk>, which we are excited about whether for a really for the fall I started off of the fall for for for mid season or or for next year. There there'd be no sort of just reduction in how in our development cycle in terms of in terms of new shows and a new I.P. and one thing.
That's being.
Occurring behind the scenes all the time is you know virtual a riders rooms, and and and virtual development, where people don't have to be on.
You know expensive movie studio lot. For example, all that work is continuing behind the scenes, which which has been impossible to see yeah, and just just picking up on the accounting and just.
<unk> just going back to your best today again, we code at $2 million to $250 million of programming investments from way.
I used to be in that range for the full use fucking what's been placed as $170 million of that sort of in the first three quarter. The so <unk> Heisman's Luffman mentioned.
Do you need to look at how we invested in that going forward. The accounting one change for us in terms of yeah mode of entertainment programming, which we which we generally.
Guys, who so that's from a there'll be no changes.
And then then asked to the.
Idiosyncratic a investment R.M. and M.A. The I look I think you can put in into two different categories, one is expanding or existing <unk>. So so for example, if if if I look.
To be and I think of the the digital video impressions that they they garner US you know, we can both strength and to be front content point of view and and and we <unk> and we can strengthen that from an AD sales point of view you know they they benefit tremendously from from the.
Association with US we think it's a you know it's a a it's a tremendous acquisition.
And they're really plays to Fox rents, what it's doing what we do today, it's putting with in it with new technologies and advertising video on demand a basis puts our content in front of new markets I with greater reach and gives more opportunity for for our advertisers. So it's a it's a you know it's.
Perhaps a simple strategy, but we can one that's <unk> really very very exciting for us so.
So one bucket is is the businesses that are in our wheel house, they're they're expanding what what we already do in in in in an exciting way. The other what you the book credible on Fox about into those categories is how do we look at businesses that where we can monetize our existing audiences in different ways. So not so when you look at our.
Or a revenue if they are revenue is equally split roughly between advertising and affiliate revenue.
To grow new revenue streams <unk> on those two is an important goal of ours no credible were incredibly excited doubled in size last year doubled it's it's loan volumes and doubled his revenue and and Fox Bad had a incredible Super Bowl.
Since October 19, there's less sports being played but I should say that part of that acquisition was it was an equity stake in N.T.S.G., which has done rather well with the with the merger with flutter, which actually I congratulate Peter Jackson for which closed on on Monday. So those businesses are real about getting those.
<unk> go about getting a new businesses based upon our existing audiences and serving our existing audiences in new ways.
Operator, we have time for one more question.
Last question Oh come from the line of Judge you need it some more research. Please go ahead.
It should you need issue line is open here for us.
Think we can go to the next question.
I'm from Rolling and Stephen Call Wells Fargo. Your line is open Sir.
[laughter].
Q. So maybe just first you talked about the T.V. station pacing around down 50, as we've come through the correct corridor have you seen any sequential improvement. It makes you think that that down 50 isn't going to repeat again in the next quarter and I know that's a bit of a call on how reopening works, but just wondering if you're seeing that down.
50 start to improve as part of the economy start to reopen at this point and then just a quick follow up on political.
So.
On the <unk> broadly over local and and national <unk> complaints to cause they're.
There are obviously different but you know clearly when we talk about our our projections for.
50% reduction in in a in local advertising that that's a mix of of of all sorts of different categories right. The categories that you would expect are being affected.
Significantly <unk>.
Worse by by Cobra, 19, or their their their pacing below or ownership yep worse than 50% below so travel entertainment Ah restaurants are all pacing worse than 50%, but that's you know ameliorated by yeah. Many categories that are.
Are down.
Significantly less than that professional services insurance and some categories frankly that better up like like pharmaceutical. So you know it it's a real mix you know again as we said before we can't really say half from a local perspective, how local markets are going to recover.
It will be state by state as as <unk> municipalities, a lift their sheltered home orders, but we are.
We we are beginning to see a what's the word a yeah positive times in the patient in the patients going forward over the last two weeks now they're not talking as <unk>, including national over the over the last couple of weeks you know we have seen a severe.
Lessening request for flexibility with advertising I think people advertising marketers are starting to look forward into the the first quarter of next fiscal year and and end to end to be are beginning to think about how they they market and get their products number.
<unk> in in front of consumers again, so we're just big it's early days, but we're just beginning to see that that positive or shift as as to political advertising. Despite the impact of covert 19 in the last you know a couple of weeks of of the third.
Third quarter, the third quarter still with a record political a year for us sorry quarter <unk> in the third quarter for US fourth quarter always is a is a is a trough as the advertising start to <unk> political advertising starts to pick up again in the first.
Ah fiscal a quarter of of the next fiscal year. So so we expect that that trend to continue Oh, we expect the the political advertising to ramp up in the first quarter of the next fiscal year and we believe we are still on track for a record.
Political season, if the reason we say that is if you look at our markets. Obviously, it's a it's it's going to be a a hard fought election, we have nine of our 18 markets how about half our markets are battleground states, putting Arizona, Florida, Pennsylvania.
Wisconsin, <unk> and also Georgia, Michigan in Minnesota.
10 of our markets have a U.S. Senate races, I won't list of them all and two of our markets have gubernatorial races of course, the the the house has contest in every market. So we think our our markets are.
Wouldn't say fortuitously, but are are certainly positioned well to to capture a you know a lion's share of of the political revenue really in the first quarter of the next fiscal year.
Thank you.
At this point, we're out of time, but if you have any further questions. Please give me or Dan carry a call.
Thank you once again for joining today's call.
[noise] [noise], ladies and gentlemen that does conclude your conference call for today. Thank you for using 18 T. Executive teleconference. You may now just connect.