Q4 2022 Fox Corp Earnings Call
Okay.
Okay.
Ladies and gentlemen, thank you for standing by welcome to the Fox Corporation fourth quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session I would like to emphasize that functionality for the question and.
Answer queue will be given at that time.
If you should require assistance during the call. Please press Star then zero.
As a reminder, this conference is being recorded I'll now turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead Ms Brown.
Thank you operator, good morning, and welcome to our fiscal 2022 fourth quarter earnings call. Joining me on the call today are Lachlan Murdoch Executive Chair and Chief Executive Officer, John Nolan, Chief Operating Officer, and Steve Tomsic, Our Chief Financial Officer, first Lachlan and Steve will give some prepared.
Remarks on the most recent quarter and then we'll take questions from the investment community.
Please note that this call may include forward looking statements regarding Fox Corporation's 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 in the company's SEC filings.
Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA as we refer to it on this call reconciliations of non-GAAP financial measures are included in our earnings release, and our SEC filings, which are available in the Investor Relations section of our web.
Right.
With that I'm pleased to turn the call over to Lachlan.
Thanks, very much Gabby and welcome aboard.
Well, we have concluded another successful fiscal year, achieving both the financial and operational goals, we set ourselves with a relentless focus on strengthening our core brands, while investing in our high growth digital initiatives.
Over the year, we delivered 8% total company revenue growth, including 7% affiliate revenue growth, notably without the benefit of any meaningful renewals and 9% advertising revenue growth. Despite the record political revenues, we saw in the prior fiscal year.
Those of you on this call who were at our 2019 Investor Day will remember our commitment to you that we would achieve $1 billion of <unk>.
Incremental TV segment affiliate revenue by the end of calendar 'twenty two.
I am more than pleased to confirm that we have achieved that $1 billion target in this past quarter, a full six months ahead of schedule.
As anticipated our EBITDA was down modestly as we continued our investment in <unk> and the Fox News media digital properties, including Fox Nation, and Fox weather and with the launch of the Usfl This past spring.
Most importantly, Fox continues to stand apart in a crowded media ecosystem delivering a consistent operating performance and a robust free cash flow profile alongside an enviable balance sheet.
Our leadership position was again evident during the recent upfront advertising sales cycle in which we booked volume commitments approximately 15% above last year's upfront with nearly 25% of our current year commitments across our growing digital properties.
We achieved pricing increases in the high single to low double digits as compared to last year's upfront.
Sports led the upfront market illustrated by the fact that we sold more NFL Sunday advertising in the current upfront market than we did a cross Sunday and Thursday combined in the prior year's market.
This excludes advertising commitments for the upcoming Super Bowl, where we are pacing well ahead of schedule and seeing very robust demand at record pricing levels.
Our success in the upfront spanned our entire portfolio, we were able to achieve broadcast level pricing increases at Fox news boosted sell out at Fox Entertainment, and importantly drove significantly more incremental AD dollars into tubular.
We are of course aware of the chatter around advertising headwinds and of course, we will be prepared if the market turns downward.
But let me be clear we are currently not seeing an adverse average having impact on our business.
This speaks to the unique positioning and strength of our core platforms.
Over two thirds of our fiscal 'twenty two advertising revenue was generated by live content with sports and news delivering 40% and 30% respectively.
Locally based based market advertising sales have been stable. In fact, we are currently seeing a return to growth in the auto category for the first time in a couple of years.
This stability in the base market provides a good foundation for the upcoming political cycle, where the outlook is remarkably strong.
On a comparable basis, our June quarter political advertising revenues were roughly three times larger than those of the fiscal fourth quarter of the last presidential election, which turned out to be an all time record political cycle for the company.
With a combination of political races in ballot issues across our markets. We continue to expect this election to deliver another record midterm cycle.
In fact, excluding the impact of the Georgia Runoffs in the last cycle. This midterm cycle looks certain to surpass the 2020 presidential cycle at our local stations.
There are U S Senate races in 13 of our 18 markets, including what we expect to be heavy political spend in Arizona, Florida, and Georgia <unk>.
Additionally, there are gubernatorial races in 17 of our 18 markets, where we expect heavy spending in Arizona, Florida, Georgia, Michigan, Texas and Wisconsin.
Add to that the issue money in a few key markets and we're seeing an unprecedented wave of political spending which accelerates as we head towards November .
At the National level, we believe that we achieved our highest upfront pricing increases in cable news history at Fox news, which to a certain extent is to be expected as the Fox News channel again closed the year as cables most watched network in primetime in total day and continues to generate audiences on par with those.
Of the big four broadcast networks.
Fox News was the only cable news network to post viewership gains in the fiscal year in the key adult 25, 54 demo and total viewers, while extending its streak to 16 consecutive months, beating CNN and MSNBC combined and prime and total day for both the key demo and total viewers.
For over two decades Fox news has been the highest rated cable news channel in Primetime, notably Fox News just finished the month of July as the third most viewed network in weekday prime in all of television trailing only CBS and NBC.
I've spoken about the political diversity of the Fox news audience previously specifically about the fact that we have more independents and Democrats watching US then watch CNN or MSNBC.
But the diversity of our audience extent beyond political affiliation.
In July the Fox News channel was the most viewed cable network with Asian and Hispanic viewers in fact in that month viewing among Hispanics households was up 38% and among Asian households up 43%.
Elsewhere at news Fox Nation platform increased its subscriber base by approximately 80% over the past fiscal year supported by sustained and high conversion rates of trials to paid subscribers and retention rates well above industry averages.
At Fox Sports live event viewing was up 5% through the first half of calendar year led by our NASCAR schedule, which generated viewership up a solid 10% over 2021.
This spring was busy for Fox sports as we launched the inaugural season of the Usfl.
The U S have all average over 1 million viewers on Fox at least 20% higher than the EPL on NBC and regular season, NHL broadcast on ABC and more than and more than twice the viewership of MLS on Fox.
In its first season, the U S without clearly delivered on its most a central goal, which was to demonstrate that the league belongs alongside other long established spring sports properties.
And as you know we have an incredibly strong year ahead and sports which includes the FIFA Men's World Cup beginning this November and the Super Bowl next February .
At Fox Entertainment, our content strategy is focus on AD supported multiplatform televisions that can thrive, both creatively and financially well into the future.
We look to use our broadcast network to build and support businesses beyond our linear air.
An example of this approach is next level chef, which was the number one new broadcast Entertainment program. This past season, and Fox has first owned production inside our partnership with Gordon Ramsay.
Whereas we used only to license Gordon's product from third parties. We now license hits like next level to third parties and we have done so with the sale of the format to ITV in the U K.
Another example of how we extend and monetize our IP is the just launched Gordon Ramsay fast channel on <unk>.
And speaking of <unk>.
One year ago, one year into a focused investment cycle at <unk> the platform generated TVT growth of nearly 40% and revenue growth of 45% across the fiscal year with both metrics coming in better than planned and reinforcing our decision to invest in this strategic asset.
During the June quarter, 34% growth in TVT helped drive revenue growth in the low double digits. Despite a more difficult prior year comparison, when we began our ramped content and monetization strategy.
In the quarter, we launched 25 linear channels grew our Vod library to over 45000 titles and premiered 13 efficient to be originals.
We will continue to invest judiciously in <unk> with our sight set on achieving $1 billion in revenue run rate in the next couple of years.
As you know our affiliate renewal cycle begins in earnest this new fiscal year and we are again looking forward to industry, leading gains from the superior value of our channels and services with some early meaningful station and affiliate deals are already completed.
<unk>. The recently closed Verizon deal we go into this renewal cycle with confidence the market appreciates the value of our brands.
In aggregate these financial and operation operating achievements again highlight the fact that the Fox story is one of strength.
Want to focus and one of stability.
We will see how the macroeconomic environment evolves during the months ahead, but as we have demonstrated over the course of the last few years Fox is well positioned to outperform.
We remain encouraged by the Fox specific trends that I've highlighted and that we're absorbing in real time underpinned by the best balance sheet in the business. The same a solid balance sheet that helped us drive despite the challenges of Covid and that will continue to support our investments for long term growth and shareholder return.
Terms.
And with that I will turn you over to Steve.
Thanks, Michael and good morning, everyone.
We ended the third full fiscal year with total company revenue growth of 8% and topline growth across all of our operating segments in every quarter of fiscal 'twenty two.
Even in a year that for US was LIFO major sports events and was an off cycle political year total company advertising revenues led this growth with a 9% increase over fiscal 'twenty one.
Title segment advertising revenues were up 9% and primarily benefited from higher pricing across our news and sports networks.
Television segment advertising revenues were up 8% on the back of increased engagement and <unk> as well as higher pricing and the normalization of live event programming at the Fox network following Covid related disruptions last year.
These gains were partially offset by the absence of the prior year's record political revenues and lower ratings at Fox Entertainment.
Total company affiliate revenues increased 7% led by 10% growth in the television segment and 5% at the cable segment.
To accompany other revenues increased 15% driven by high sports sub licensing revenues as compared to prior year pandemic related disruptions.
Growth in Fox nation subscription revenues and the consolidation of TMZ Vista and studio Ramsey Global.
This growth in other revenues was partially offset by the impact of the divestiture of the company's sports marketing businesses less last fiscal year.
We also delivered sustained momentum in our consolidated digital revenues with nearly 30% increase year over year.
This digital growth was supported by the organic investments across our digital portfolio that we articulated at the outset of the fiscal year.
These investments the establishment of Usfl and higher programming rights amortization associated with the normalized sports and entertainment schedules contributed to a modest decrease in our full year adjusted EBITDA, which came in at 296 billion.
Full year net income attributable to stockholders was $1 two 1 billion.
With $2 11 per share while adjusted EPS was $2 79 down modestly against the two eight.
The $2 88 reported last year, primarily due to the impacts on EBITDA I just mentioned.
Turning to the quarter, we delivered total company revenues of $3 3 billion.
Up 5% over the same period in 'twenty one.
This growth was led by a 7% increase in total company advertising revenues highlighted by the strength of Fox News.
Record June quarter political revenues at Fox television stations and continued growth in <unk>.
Total company affiliate revenues grew 4% with 7% growth at the television segment and 2% growth at the cable segment.
Once again this distribution revenue growth was driven by rate increases as the rate of subscriber declines increased modestly in the quarter with trailing 12 month industry sub losses running in the high 5% range.
Total company and other revenues increased 4% as the consolidation of our entertainment production companies and continued momentum in Fox nation, where partially offset by the timing of sports sub licensing revenues, which were impacted by COVID-19 in the prior year.
Quarterly adjusted EBITDA was $770 million of.
Of 7% over the comparative period in fiscal 'twenty, one as our revenue growth was partially offset by higher expenses, including the impact of the anticipated digital investments at Fox News media and <unk>.
And the first few deficit associated with the launch of the Usfl.
Net income attributable to stockholders of $306 million.
<unk> 55 per share was higher than the $253 million or <unk> 43 per share in the prior year quarter.
This variance reflects the EBITDA movement I, just described along with the Mark to market adjustments associated with the company's investments recognized in other net.
Excluding noncore items adjusted EPS in the June quarter was <unk> 74 was up <unk> was up 14% over last year's <unk> 65.
It is worth noting our effective income tax rate was higher for both the quarter and the full year, primarily due to a 30 million re measurement of our net deferred tax assets associated with changes in the mix of that jurisdictional earnings.
Had no impact on our cash taxes.
Now, let's turn to the performance of our operating segments for the quarter, starting with cable networks, which reported a 4% increase in revenues.
Led by a 14% increase in cable advertising revenues driven by strong gains in both pricing and audience at Fox news, notwithstanding slightly higher levels of pre emption associated without breaking news coverage.
Also contributing to the overall segment revenue growth was a 2% increase in affiliate revenues once again due to the healthy pricing gains across all of their networks.
Cable other revenues were unchanged compared to the prior year as we continued subscription momentum at Fox Nation, and the addition of the Usfl were offset by the impact of the timing of sports sub licensing revenues as a result of COVID-19 in the prior year.
EBITDA at our cable segment was down 7% against the prior year as these revenue increases were more than offset by increased expenses, including the planned digital investments and higher programming costs, including those associated with breaking news coverage of the Fox News media.
As well as the launch of the Usfl.
Television segment reported a 5% increase in quarterly revenues. This was led by a 7% increase in television affiliate revenues, reflecting increases for both direct retransmission revenues at our owned and operated stations and our programming fees from non owned station affiliates.
Television segment delivered 4% growth in advertising revenues driven by higher political advertising at the Fox television stations continued growth at <unk> and the introduction of the Usfl, partially offset by lower ratings at Fox Entertainment.
Other revenues at TV increased 3% in the quarter, primarily due to the impact of the acquisitions with TMZ and mobile entertainment and the consolidation of that stake and studio Ramsey Global.
Partially offset by the timing of deliveries at Vince notebooks.
EBITDA in our television segment increased over 50% as expenses were flat against the prior year quarter.
Here, we sort of accelerated digital investment to the and the consolidation of the entertainment production assets offset by the timing of programming costs at Fox Entertainment.
During the full year, we generated free cash flow, which we define as net cash provided by operating activities less capex of $1 $6 billion.
Over the course of fiscal 2022, we returned 1 billion of capital through the repurchase of $18 7 million class a shares and $8 7 million class B shares.
This was supplemented by the $270 million in dividend payments and underlining our continued commitment to shareholder returns today, we announced an increase in SME annual dividend to <unk> 25 per share.
With the payment of this dividend, we will have cumulatively returned over $3 seven $5 billion of capital to our shareholders since the formation of Fox.
This includes share repurchases totaling over $2 $65 billion.
Against our buyback authorization of $4 billion.
From a balance sheet perspective, we ended the quarter with $5 $2 billion in cash and approximately $7 2 billion in debt.
Our fiscal 2022 financial performance.
Along with the progress we have made on our strategic priorities provide a strong foundation for us to springboard into fiscal 'twenty, three where the setup is incredibly favorable.
We remain confident that collectively the financial tailwind from Super Bowl 57 yearly exit of Thursday night football the momentum heading into November midterm elections, and the start of our next major distribution cycle will deliver record revenues and EBITDA in fiscal 'twenty three.
As we've highlighted previously and plans for fiscal 'twenty three incorporate maintaining our current level of investment in our digital growth initiatives.
From an affiliate revenue perspective, as you would expect we make no predictions on the industry the industry subscriber volumes. However from a rate perspective, given the timing and nature of our affiliate renewals you should expect to see the financial benefit of these renewals skew to the second half of the fiscal year and concentrated toward antenna TV.
<unk>.
Our focused strategy and operational execution continue to distinguish us.
Together, they have delivered sustained financial outperformance since the establishment of books and will be showcased with a banner year of events in fiscal 'twenty three.
This momentum supported by the most robust balance sheet in the industry position us well to navigate the broader macroeconomic turbulence, while creating value for our shareholders and with that getting let's now open it up for Q&A.
Steve and <unk>.
Now we would be happy to take questions from the investment community.
Ladies and gentlemen, I would like to emphasize the functionality for the question and answer queue.
If you wish to ask a question. Please press one then zero on your Touchtone phone.
You will hear a tone, indicating that you have been placed in Q.
You may remove yourself from queue at any time by by once again pressing one then zero. If you are using a speaker phone. Please pick up the handset before pressing the numbers. It has been requested that you limit yourself to one question. Once again, if you have a question. Please press one zero at this time.
One moment please for the first question.
We have a question from John Hodulik with UBS. Please go ahead.
Okay, great. Thanks, guys.
Quick ones, if I could first of all on.
On the Verizon renewal anything you could tell us about about pricing you got with that deal and how that positions you for the sort of upcoming renewal cycle and then looking out into 'twenty three.
Given the cash balance.
Sort of all these sort of EBITDA drivers.
Should we think about about capital return and the buyback and do we have to wait for a resolution to the <unk> situation or.
How should we think of that just given all the cash on the books and what you'll generate this year. Thanks.
Hey, John Good morning, I'll start I'll answer the Verizon renewal question and I'll, let Steve answer the question about our cash.
Now on the books so.
And he is got the he is got the keys so pardon.
Part of the answer.
On the Horizon Monroe, I'm, obviously, not going to give you.
<unk> specific exact pricing, but it's.
Absolutely in line with what our forecasts and sort of long term plan.
Suggested we're very happy with our partnership with Verizon and.
I think it's fair to say that we achieved.
Our industry leading.
Pricing.
Increases for now really are the best brands.
In the business.
<unk>.
Our local stations and Retrans.
Retransmission renewals and.
The really incredible strength of Fox news and the loyalty and engagement of the Fox News audience now, we're able to drive these industry leading pricing increases.
One.
Added element to that which I think is important for US is we're also able to achieve distribution offer Fox weather, which will continue to include in our in our future upcoming renewals.
And also we expanded our relationship with Verizon to include a distribution of <unk>. So overall we are.
Very pleased with that renewal and we think it sets us up well for the next two years, where we have two thirds of our distribution coming up. So we're very pleased and we appreciate the partnership with Horizon, Steve, Yes, Hi, John .
Listen we've got a really strong balance sheet. We ended the ended the year with a little over $5 billion in cash in some way.
As the opening remarks indicated we're really bullish about going into fiscal 'twenty three from a revenue EBITDA and cash flow perspective.
Listen our story remains consistent we're going to continue to.
Two biggest use of cash since the inception of Fox from a capital perspective is to be is to actually return to shareholders.
In my opening remarks talked.
<unk> talked about the volume that we have returned to shareholders and we continue to remain committed to that we have will be the authorization.
Billion three five of headroom left in that.
But we're going to remain open to investing both organically and inorganically in the business, we can be balanced about that as we see opportunities on the horizon.
It's a remarkably consistent story on our capital allocation.
Operator, we can go to the next question.
And that is from Phil Cusick with JP Morgan. Please go ahead.
Thank you very much good morning.
One quick follow up on your comments on the AD market any sort of thing you are seeing.
Overall in the macro environment, whether it's your own your own deals.
Deals are not that.
That we should be aware of and then second I Wonder if you can talk about you mentioned I think it was high fives of industry declines I'm curious if fox affiliate in customer accounts.
Select that acceleration in the video industry decline or if maybe youre seeing a little bit less given your different customer base. Thank you.
So on the on the on the advertising market and good morning. Good morning, Phil I'll give you a little bit of.
Color.
I might jump around a little bit, but as I mentioned.
For us one of the most sort of pleasing.
Things that we're seeing is actually in the local stations.
Our base markets are ex political.
The.
Base market is very stable and as I mentioned in my in my remarks, particularly the return to growth for the auto category.
As you know, it's obviously something that does concern us over the last couple of years with Kogan.
So the softness in the auto category, the return of growth Youre autocad or categories.
Really strong indicator of things to come we are seeing locally.
Two.
Verticals are two categories that are soft one.
One is local to local.
Wagering sort of bedding.
Category soft, but that's really what we're seeing there.
Pretty interesting and perhaps predictable a shift of that business go international So where we're seeing softness in local for wagering, we're seeing strength in national.
The bedding market I think that's our.
The purpose of the reason for that is obviously, yes as more states become legalized a national platform.
Particularly national Sports is.
As a.
Inefficient and efficient in our goodbye for the betting bedding businesses and then we're seeing some softness in government spending that was really COVID-19 health spending over the last couple of years, which obviously is not there anymore, but that's being more than made up across our other strength in our other category. So so two areas. So we can hopefully embedding government, but it's more than made up.
By strength in other categories in terms of the scatter market.
We're seeing scatter for us.
Before we get into the.
The fall sports cycle.
As our has acquired the summer is a quiet period for us at or it has been so we actually don't have a lot of scatter avails, but scatter pricing is up in the low double digits.
Which is.
Which is good to see that that strength.
And then from a macro environment point of view again, we're seeing no impact in our advertising across our businesses with the exception of softness in which I think has been well reported in other areas some softness in programmatic advertising.
For us.
It's sort of 10% of our advertising business. So.
Not having it in.
A significant or meaningful impact on us at all in that 10% is really due to them.
Gramatica advertising into <unk> and into our Fox News media digital platforms.
Steve you want to answer the second part of the car.
Phil just on the on the rate of subscriber erosion.
Now channels amongst carry channels. So I think with we're best positioned to Buffett any.
Any sort of weakness in the subscriber universe, I think where people.
Find it challenging to reconcile between sort of how we report numbers and how we see numbers from the street. There's a couple of things. One is we're in a two months delay versus.
What's being reported by the distributors and the other Pcs.
There's a fair amount of opacity around some of the platforms that don't report. So you got that many of the virtual Mvpds don't break out the numbers.
And Directv now no longer breaks out its numbers.
That's probably why you're seeing sort of friction between the reported numbers.
Okay.
We can go to the next question please.
Good that's the line of Robert Fishman with Moffett Nathanson. Please go ahead.
Good morning, everyone. There's lots of chatter right now around the big 10 renewal in the marketplace. Just wondering if theres anything you can share specifically on those rights are maybe bigger picture, how Fox is positioned to renew key sports rights with your current portfolio of assets compared to either some of the pure digital companies or other media companies.
Services and then how do you think about the ROI of the sports rights investments going forward.
Hey.
Turning.
Robert So just overall I mean I'll talk overall, then I can come down to drill down big time.
We.
We're always going to look at sports rights as they are.
As they become available I think we've been very disciplined.
In terms of how we.
Analyze and how we think about acquiring any additional incremental.
Sports rights, we look at it both obviously from a.
Sure.
Any individual sport can achieve both in terms of an audience and advertising revenue, we can attach to that but we specifically also drill down into what we can see from our subscriber.
What we can attribute to AR.
<unk>.
Our affiliation agreement.
With the distributor in terms of subscription revenue so.
We do take a pretty scientific and I think very disciplined approach to how we view sports rights, but we do look at them.
All the sports across the marketplace and see what will what would fit within Fox sports I think.
If you look pass over the past years.
The story Hasnt been written is the sports rights that we pass on REIT that we decide or are too expensive or won't add any incremental revenue onto our business. So.
And that continues to be the way we look at it.
As regards to Big 10, Big 10 network is.
A key strategic partner of ours, we've had a great relationship with them.
And we look forward to renewing.
Knowing those rights are potentially with some new some new broadcast partners within the mix that'll be a announcement that <unk> will make we expect in the near term, but it's one that they will leave for them to make but we're looking forward to our continued long term and profitable relationship with them.
Operator can we go to the next question. Please.
Is the line of Ben Swinburne with Morgan Stanley . Please go ahead.
Hey, good morning, guys.
Two questions one.
I think theres been a lot of enthusiasm over the past couple of years about Fox has opportunity in sports betting.
I think it's gotten a little quieter on that front at least in terms of the market discussion can you guys update us on what you see ahead of the company there both directly with Fox bet and is there any timing on something with flutter and also just sort of the benefits to the broader business.
And then I just wanted to clarify Steve you said you expect to maintain our current investment level in fiscal 'twenty three versus 22 is that a comment on just the amount of capital you're deploying or is that sort of an EBITDA net impact on EBITDA. This will make sure we understood the comment there.
Yes.
Thanks, Dan.
So.
Look we continue to.
Have a.
<unk> believes that have a fundamentally strong belief in the sports betting business.
We we think it's a huge opportunity.
In the marketplace specifically.
And its association with the Fox Sports brand and we drive the largest sports audiences.
In this country.
And no other broadcaster can achieve kind of the reach and engagement.
That we deliver.
During the us.
Certainly during the autumn.
Paul on <unk>.
On a weekly basis.
And so we've proven this.
<unk>.
Last couple of years with Fox Sports Super six, which really taking our sports audiences.
We've talked about it before <unk> taken our sports audiences.
From TV into Fox about Superstars provides a tremendous.
Final.
Which which Fox bet.
As the ultimate on a beneficiary of that continues to be our strategy and it continues to be very successful as regards to flutter were still in arbitration.
The process with them, we look forward to the clarity of getting through that process, which we expect to be in the next couple of months certainly sort of bothered by the by the beginning.
Of the autumn, but once that some.
That situation has clarified I know you have and also in early September as you see the NFL season kickoff again, youll see a lot more activity around.
Fox bet on Fox Sports Super six.
He then just picking up on your question around organic investments so the way we defined.
We called out $2 million to $300 million of net EBITDA investment for fiscal 'twenty two so.
Put it another way fiscal 'twenty, two EBITDA would have been $2 million to $300 million high than what it was.
Had we not made those investments we don't anticipate we anticipate maintaining that level of investment meaning that when you can pay a 23% to 22, you will not have that drag on the results.
That explains that for you.
Operator, we have time for one more question.
Very good that's the line of Doug Mitchelson with Credit Suisse. Please go ahead.
Thanks, so much if I could get a clarification on the big 10.
You have digital rights for Big 10 games and Youll maintain those.
Any new deal that.
That you are looking at another clarification I'm wondering if you have a park volumes ex Super Bowl.
So I'm just trying to get an extra unusual how strong were you up for volumes and then.
Lastly for Steve any swing factors in that free cash flow outlook for fiscal 'twenty, three that we should be thinking about working capital or capex or anything like that.
And good morning, everybody. Thank you.
Hey, good morning, guys hope you're well.
So.
We have a big 10 digital our rights and we will keep those are in the new.
In the new deal.
So I hope that clarifies.
That again I don't want too much because it's really it's for the big 10 to announce there.
<unk>.
The new agreements.
In terms of.
Upfront volumes X I think your question was what are they ex Super Bowl obviously.
We look at everything ex ex Super Bowl because of it because obviously such a huge year for us where we.
We're looking forward to them.
Again getting record pricing for Super Bowl and where we.
We're well ahead of plan in terms of selling our Super Bowl.
Positions, but ex extra rollout on volumes were about 15% higher than.
Then the last upfront I think one of them.
And thats across across entertainment sports and news.
I think the important thing to note there though.
From volumes to some degree our R. R.
A.
<unk> that are that we control we chose.
Very very purposely and I think in a very disciplined and hopefully a judicious way to sell more volume into this into this upfront because we felt it was.
A period, where having.
Certainty around are the highest level certainly we can around.
Our sales and our inventory was important so for instance in years, where we would passengers we sell in the mid seventies a percent of our kind of available available.
AD impressions.
Now we sold in this upfront in the low to mid eighties, and I think that was a that was sort of a smart decision and one that we felt was appropriate.
Preet given.
Giving any uncertainty around the economy of the advertising market going forward.
Doug It's Dave just on the free cash flow.
Yes.
From a working capital perspective will be swing factors I think from an accounting version of working capital.
Ended up going into we're into a Super Bowl years. Therefore, we attended the NFL Super Bowl user has an impact on our working capital.
Our capex was down to a touch over 300 million this year, which.
Which was down from a touch north of 480 <unk> before we should expect the 300 to go up a touch.
But the rest of it is really pretty much stuffing trade in terms of cash flow swings, there's nothing particularly unique.
The timelines that we have going into it from an operating perspective.
Okay.
At this point, we are out of time, but if you have any further questions. Please give me or Dan Carey a call.
Thank you once again for joining today's call. Thanks, everyone.
Ladies and gentlemen that does conclude your conference for today. Thank you for using AT&T executive teleconference. You may now disconnect.
We're sorry your conferences ending now please hang up.
Yes.
Yes.
Okay.
Okay.
Okay.
<unk>.
Okay.
Yes.
Yes.
Okay.
Yes.
Yes.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Sure.
Okay.
Okay.
Thank you.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Sure.
Yes.
Sure.
Okay.
Yes.
[music].
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Thank you.
Okay.
Okay.
Okay.
Sure.
Okay.
Okay.
Sure.
Thanks.
Okay.
Okay.
Okay.
Yes.
Hum.
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Yes.
Yeah.
Yes.
Okay.
Yes.
Sure.
Okay.
We do.
Okay.
Please.
Okay.
Yes.
[music].
Yes.
Okay.
[music].
Okay.
Okay.
Okay.
Yes.
Okay.
Yes.
Sure.
Okay.
[music].
Yes.
Okay.
Okay.
<unk>.
Sure.
Yes.
[music].
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
[music].
Sure.
Thanks.
Okay.
Okay.
Okay.
Okay.
Sure.
Okay.
Yes.
Yes.
Yes.
Okay.
Sure.
[music].
Yes.
[music].
Sure.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Yeah.
[music].
Sure.
Yes.
[music].
Thanks.
Okay.
Paul.
[music].
Yes.
Okay.
Yes.
<unk>.
Okay.
Yes.
Yes.
Please.
Yes.
Sure.
Yes.
Yes.
Yes.
Yes.
Okay.
Yes.
Okay.
Yes.
[music].
Yes.
Okay.
Yes.
Yes.
Please.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Yes.
Yes.
Yeah.
Okay.
Yes.
Okay.
Ladies and gentlemen, thank you for standing by welcome to the Fox Corporation fourth quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session I would like to emphasize that functionality for the question and answer queue will be given at that time.
You should require assistance during the call. Please press Star then zero as a reminder, this conference is being recorded I will now.
Now I'll turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead Ms Brown.
Thank you operator, good morning, and welcome to our fiscal 2020, Q4th quarter earnings call. Joining me on the call today are Lachlan Murdoch Executive Chair and Chief Executive Officer, John Nolan, Chief Operating Officer, and Steve Tomsic, Our Chief Financial Officer, first Lachlan and Steve will give some prepay.
Remarks on the most recent quarter and then we'll take questions from the investment community. Please note that this call may include forward looking statements regarding Fox Corporation's financial performance and operating results.
Statements are based on management's current expectation and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings.
Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA as we refer to it on this call.
Conciliation of non-GAAP financial measures are included in our earnings release, and our SEC filings, which are available in the Investor Relations section of our website and with that I'm pleased to turn the call over to Laughlin.
Thanks, very much Gabby and welcome aboard.
Well, we have concluded another successful fiscal year, achieving both the financial and operational goals, we set ourselves with a relentless focus on strengthening our core brands, while investing in our high growth digital initiatives.
Over the year, we delivered 8% total company revenue growth, including 7% affiliate revenue growth, notably without the benefit of any meaningful renewals and 9% advertising revenue growth. Despite the record political revenues, we saw in the prior fiscal year.
Those of you on this call who were at our 2019 Investor Day will remember our commitment to you that we would achieve $1 billion of incremental TV segment affiliate revenue by the end of calendar 'twenty two.
I am more than pleased to confirm that we have achieved that $1 billion target in this past quarter, a full six months ahead of schedule.
As anticipated our EBITDA was down modestly as we continued our investment in <unk> and the Fox News media digital properties, including Fox Nation, and Fox weather and with the launch of the Usfl This past spring.
Most importantly, Fox continues to stand apart in a crowded media ecosystem delivering a consistent operating performance and a robust free cash flow profile alongside an enviable balance sheet.
Our leadership position was again evident during the recent upfront advertising sales cycle in which we booked volume commitments of approximately 15% above last year's upfront with nearly 25% of our current year commitments across our growing digital properties.
We achieved pricing increases in the high single to low double digits as compared to last year's upfront.
Sports led the upfront market illustrated by the fact that we sold more NFL Sunday advertising in the current upfront market than we did across Sunday and Thursday combined in the prior year's market.
This excludes advertising commitments for the upcoming Super Bowl, where we are pacing well ahead of schedule and seeing very robust demand at record pricing levels.
Our success in the upfront spanned our entire portfolio, we were able to achieve broadcast level of pricing increases at Fox news boosted sell out at Fox Entertainment, and importantly drove significantly more incremental AD dollars institution.
We are of course aware of the chatter around advertising headwinds and of course, we will be prepared if the market turns downward.
But let me be clear we are currently not seeing an adverse average having impact on our business.
This speaks to the unique positioning and strength of our core platforms.
Over two thirds of our fiscal 'twenty two advertising revenue was generated by live content with sports and news delivering 40% and 30% respectively.
Locally.
Base market advertising sales have been stable. In fact, we are currently seeing a return to growth in the auto category for the first time in a couple of years.
This stability in the base market provides a good foundation for the upcoming political cycle, where the outlook is remarkably strong.
On a comparable basis, our June quarter political advertising revenues were roughly three times larger than those of the fiscal fourth quarter of the last presidential election, which turned out to be an all time record political cycle for the company.
With a combination of political races in ballot issues across our markets. We continue to expect this election to deliver another record midterm cycle.
In fact, excluding the impact of the Georgia Runoffs in the last cycle. This midterm cycle look certain to surpass the 2020 presidential cycle at our local stations.
There are U S Senate races in 13 of our 18 markets, including what we expect to be heavy political spend in Arizona, Florida and Georgia.
Additionally, there are gubernatorial races in 17 of our 18 markets, where we expect heavy spending in Arizona, Florida, Georgia, Michigan, Texas and Wisconsin.
Add to that the issue money in a few key markets and we're seeing an unprecedented wave of political spending which accelerates as we head towards November .
At the National level, we believe that we achieved the highest upfront pricing increases in cable news history at Fox news, which to a certain extent is to be expected as the Fox News channel again closed the year as cables most watched network in primetime in total day and continues to generate audiences on par with those of the.
Big four broadcast networks.
Fox News was the only cable news network to post viewership gains in the fiscal year in the key adult 25, 54 demo and total viewers, while extending its streak to 16 consecutive months, beating CNN and MSNBC combined and prime and total day for both the key demo and total viewers.
For over two decades Fox news has been the highest rated cable news channel in Primetime, notably Fox News just finished the month of July as the third most viewed network in weekday prime in all of television trailing only CBS and NBC.
I've spoken about the political diversity of the Fox news audience previously specifically about the fact that we have more independents and Democrats watching us and watch CNN or MSNBC.
But the diversity of our audience extends beyond political affiliation.
In July the Fox News channel was the most viewed cable network with Asian and Hispanic viewers in fact in that month viewing among Hispanics households was up 38% and among Asian households up 43%.
Elsewhere at news Fox Nation platform increased its subscriber base by approximately 80% over the past fiscal year supported by the sustained and high conversion rates of trials to paid subscribers and retention rates well above industry averages.
At Fox Sports live event viewing was up 5% through the first half of calendar year led by our NASCAR schedule, which generated viewership up a solid 10% over 2021.
This spring was busy for Fox sports as we launch the inaugural season of the Usfl.
The U S have all average over 1 million viewers on Fox at least 20% higher than the EPL on NBC and regular season, NHL broadcast on ABC and more and more than twice the viewership of MLS on Fox.
In its first season, the use of <unk> clearly delivered on its most a central goal, which was to demonstrate that the league belongs alongside other long established spring sports properties.
And as you know we have an incredibly strong year ahead and sports which includes the FIFA Men's World Cup at beginning this November and the Super Bowl next February .
At Fox Entertainment, our content strategy is focused on AD supported multiplatform calibrations that can thrive, both creatively and financially well into the future.
We look to use our broadcast network to build and support businesses beyond our linear air.
An example of this approach is next level chef, which was the number one new broadcast Entertainment program. This past season, and Fox has first owned production inside our partnership with Gordon Ramsay.
Whereas we used only to license Gordon's product from third parties. We now license hits like next level to third parties and we have done so with the sale of the format to ITV in the U K.
Another example of how we extend and monetize our IP is the just launched Gordon Ramsay fast channel on <unk>.
And speaking of CB one.
One year ago, one year into a focused investment cycle at <unk> the platform generated TVT growth of nearly 40% and revenue growth of 45% across the fiscal year with both metrics coming in better than planned and reinforcing our decision to invest in this strategic asset.
During the June quarter, 34% growth in TVT helped drive revenue growth in the low double digits. Despite a more difficult prior year comparison, when we began our ramped content and monetization strategy.
In the quarter, we launched 25 linear channels grew our Vod library to over 45000 titles and premiered 13 efficient to be original.
We will continue to invest judiciously in <unk> with our sight set on achieving $1 billion in.
In revenue run rate in the next couple of years.
As you know our affiliate renewal cycle begins in earnest this new fiscal year and we are again looking forward to industry, leading gains from the superior value of our channels and services with some early meaningful station and affiliate deals already completed including the recently closed Verizon deal. We go into this renewal cycle.
With confidence the market appreciates the value of our brands.
In aggregate these financial and operation operating achievements again highlight the fact that the Fox story is one of strength.
Want to focus and one of stability.
We will see how the macroeconomic environment evolves during the months ahead, but as we have demonstrated over the course of the last few years Fox is well positioned to outperform.
We remain encouraged by the Fox specific trends that I've highlighted and that we are observing in real time underpinned by the best balance sheet in the business the same as <unk>.
Solid balance sheet that helped us drive despite the challenges of Covid and that will continue to support our investments for long term growth and shareholder returns.
And with that I will turn you over to Steve.
Thanks, Lachlan and good morning, everyone.
We ended the third full fiscal year with total company revenue growth of 8% and top line growth across all of our operating segments in every quarter of fiscal 'twenty two.
Even in a year that for US was life on major sports events and was an off cycle political year total company advertising revenues led this growth with a 9% increase over fiscal 'twenty one.
Title segment advertising revenues were up 9% and primarily benefited from higher pricing across our news and sports networks.
<unk> segment advertising revenues were up 8% on the back of increased engagement and <unk> as well as higher pricing and the normalization of live event programming at the Fox network following Covid related disruptions last year.
These gains were partially offset by the absence of the prior year's record political revenues and lower ratings at Fox Entertainment.
Total company affiliate revenues increased 7% led by 10% growth at the television segment and 5% at the cable segment.
Total company other revenues increased 15% driven by high sports sub licensing revenues as compared to prior year pandemic related disruptions.
And Fox nation subscription revenues and the consolidation of TMZ, My Vista and <unk> global.
This growth in other revenues was partially offset by the impact of the divestiture of the company's sports marketing businesses less last fiscal year.
We also delivered sustained momentum in our consolidated digital revenues with nearly 30% increase year over year.
This digital growth was supported by the organic investments across our digital portfolio that we articulated at the outset of the fiscal year.
These investments the establishment of Usfl and higher programming rights amortization associated with the normalized sports and entertainment schedules contributed to a modest decrease in our full year adjusted EBITDA, which came in at $2 $96 billion.
Full year net income attributable to stockholders was $1 two 1 billion with.
With $2 11 per share while adjusted EPS was $2 79 down modestly against the $2 8 billion to $2 88 reported last year, primarily due to the impacts on EBITDA I just mentioned.
Turning to the quarter, we delivered total company revenues of $3 83 billion.
Up 5% over the same period in 'twenty one.
This growth was led by a 7% increase in total company advertising revenues highlighted by the strength of Fox News.
Record June quarter political revenues at Fox television stations and continued growth at <unk>.
Total company affiliate revenues grew 4% with 7% growth at the television segment and 2% growth at the cable segment.
Once again this distribution revenue growth was driven by rate increases as the rate of subscriber declines increased modestly in the quarter with trailing 12 month industry sub losses running in the high 5% range.
Total company other revenues increased 4% as the consolidation of our entertainment production companies and continued momentum in Fox nation, where partially offset by the timing of sports sub licensing revenues, which were impacted by COVID-19 in the prior year.
Quarterly adjusted EBITDA was $770 million up 7% over the comparative period in fiscal 'twenty, one as our revenue growth was partially offset by higher expenses, including the impact of the anticipated digital investments at Fox News media and <unk>.
In the first year deficit associated with the launch of the Usfl.
Net income attributable to stockholders of $306 million.
Or <unk> 55 per share was higher than the $253 million or <unk> 43 per share in the prior year quarter.
This variance reflects the EBITDA movement I, just described along with the Mark to market adjustments associated with the company's investments recognized in other net.
Excluding noncore items adjusted EPS in the June quarter at <unk> 74 was up <unk> was up 14% over last year's <unk> 65.
It is worth noting our effective income tax rate was higher for both the quarter and the full year, primarily due to a $30 million re measurement of our net deferred tax assets.
Associated with changes in the mix of that jurisdictional earnings.
Had no impact on our cash taxes.
Now, let's turn to the performance of our operating segments for the quarter, starting with cable networks, which reported a 4% increase in revenues.
It was led by a 14% increase in cable advertising revenues driven by strong gains in both pricing and audience at Fox news, notwithstanding slightly higher levels of preemption associated with breaking news coverage.
Also contributing to the overall segment revenue growth was a 2% increase in affiliate revenues once again due to the healthy pricing gains across all of our networks.
Cable other revenues were unchanged compared to the prior year as we continued subscription momentum Fox nation and the addition of the Usfl were offset by the impact of the timing of sports sub licensing revenues as a result of COVID-19 in the prior year.
EBITDA at our cable segment was down 7% against the prior year as these revenue increases were more than offset by increased expenses, including the planned digitally investment and higher programming costs, including those associated with breaking news coverage at Fox News media as.
As well as the launch of the USA.
Our television segment reported a 5% increase in quarterly revenues. This was led by a 7% increase in television affiliate revenues, reflecting increases for both direct retransmission revenues at our owned and operated stations and our programming fees from non owned station affiliates.
Television segment delivered 4% growth in advertising revenues driven by higher political advertising at the Fox television stations.
<unk> growth in <unk> and the introduction of the Usfl, partially offset by lower ratings at Fox Entertainment.
Other revenues at TV increased 3% in the quarter, primarily due to the impact of the acquisitions with TMZ and August or entertainment and the consolidation of that stake and studio Ramsey Global.
Partially offset by the timing of deliveries at Bento box.
EBITDA at our television segment increased over 50% as expenses were flat against the prior year quarter.
Here, we saw accelerated digital investment at <unk> and the consolidation of the entertainment production assets offset by the timing of programming costs at Fox Entertainment.
During the full year, we generated free cash flow, which we define as net cash provided by operating activities less capex of $1 $6 billion.
Over the course of fiscal 2022, we returned 1 billion of capital through the repurchase of $18 7 million class a shares and $8 7 million class B shares.
This was supplemented by the $270 million in dividend payments and <unk>.
Underlining our continued commitment to shareholder returns today, we announced an increase in SME annual dividend to <unk> 25 per share.
With the payment of this dividend, we will have cumulatively returned over $3 seven $5 billion of capital to our shareholders since the formation of Fox.
This includes share repurchases totaling over $2 65 billion.
Against our buyback authorization of $4 billion.
From a balance sheet perspective, we ended the quarter with $5 2 billion in cash and approximately $7 2 billion in debt.
Our fiscal 2022 financial performance.
Along with the progress we have made on our strategic priorities provide a strong foundation for us to springboard into fiscal 'twenty, three where the setup is incredibly favorable.
We remain confident that collectively the financial tailwind from Super Bowl 57 yearly exit of Thursday night football the momentum heading into November as mid term elections and the start of our next major distribution cycle will deliver record revenues and EBITDA in fiscal 'twenty three.
As we've highlighted previously and plans for fiscal 'twenty three incorporate maintaining our current level of investment in our digital growth initiatives.
From an affiliate revenue perspective, as you would expect we make no predictions on indiscreet industry subscriber volumes. However from a rate perspective, given the timing and nature of our affiliate renewals you should expect to see the financial benefit of these renewals skewed to the second half of the fiscal year and concentrated towards TV.
<unk>.
Our focused strategy and operational execution continue to distinguish us.
Together, they have delivered sustained financial outperformance since the establishment of books and will be showcased with a banner year of events in fiscal 'twenty three.
This momentum supported by the most robust balance sheet in the industry position us well to navigate the broader macroeconomic turbulence, while creating value for our shareholders and with that getting let's now open it up for Q&A.
Thank you Steve.
Now we would be happy to take questions from the investment community.
Ladies and gentlemen, I would like to emphasize the functionality for the question and answer queue.
If you wish to ask a question. Please press one then zero on your Touchtone phone.
You will hear a tone, indicating that you have been placed in Q.
You may remove yourself from queue at any time by by once again pressing one then zero. If you are using a speakerphone. Please pick up the handset before pressing the numbers. It has been requested that you limit yourself to one question. Once again, if you have a question. Please press one zero at this time.
Jim.
One moment please for the first question.
Okay.
We have a question from John <unk> with UBS. Please go ahead.
Okay, great. Thanks, guys.
Two quick ones, if I could first of all.
On the Verizon renewal anything you could tell us about about pricing you got with that deal and how that positions you for this sort of upcoming renewal cycle and then looking out into 'twenty three.
Given the cash balance.
Sort of all the sort of EBITDA drivers, how should we think about about capital return and the buyback and do we have to wait for a resolution to the tangible situation or.
How should we think of that just given all the cash on the books and what you'll generate this year.
Hey, John Good morning, I'll start I'll answer the Verizon renewal question and I'll, let Steve answer the question about our cash.
On the book so.
And he is got the he's got the keys.
Pardon me answer.
Look on the horizon, I'm, obviously not going to be.
This specific.
<unk> pricing, but it is.
Absolutely in line with what our forecast and sort of long term plan.
Suggested we're very happy with our partnership with Horizon.
I think.
It's fair to say that we achieved.
Our industry leading.
Our pricing.
Pricing.
Increases for now really are the best brands.
In the business.
Between.
Our local stations and non run rate retransmission renewals and.
The really incredible strength of Fox news and the loyalty and engagement of the Fox News audience now we're able to drive these industry, leading pricing increases I'd just one.
Added element to that which I think is important for US is we are also able to achieve in our distributions offer Fox weather, which will continue to include in our in our future upcoming renewals.
And also we expanded our relationship with Verizon to include a distribution of <unk>. So overall we are.
Very pleased with that renewal and we think it sets us up well for the next two years, where we have two thirds of our our distribution coming up. So we are we're very pleased and we appreciate the partnership with Horizon, Steve, Yes, Hi, John .
Listen we've got a really strong balance sheet. We ended the ended the year with a little over 5 billion in cash and some with.
As the opening remarks indicate we're really bullish about going into fiscal 'twenty three from a revenue EBITDA and cash flow perspective.
But listen our story remains consistent and we're going to continue to.
Our biggest use of cash since the inception of Fox from a capital perspective is to be is to actually return to shareholders.
In my opening remarks talked about the volume that we have returned to shareholders. When we continue to remain committed to that we have $4 billion authorization.
<unk> three five and headroom left in that.
But we're going to remain open to investing both organically and inorganically in the business, we're going to be balanced about that as we see opportunities on the horizon.
It's a remarkably consistent story on our capital allocation.
Operator, we can go to the next question.
And that is from Phil Cusick with J P. Morgan. Please go ahead.
Thank you very much good morning.
One quick follow up on your comments on the AD market any sort of thing you are seeing.
Overall in the macro environment, whether it's your own your own.
Deals or not.
That we should be aware of and then second I Wonder if you could talk about you mentioned I think it was high fives of industry declines I am curious if fox affiliate customer accounts.
Collect that acceleration in the video industry decline or if maybe youre seeing a little bit less given your different customer base. Thank you.
So on the on the on the advertising market and good morning. Good morning, Phil I'll give you a little bit of.
Color.
I might jump around a little bit, but as I mentioned.
For us one of the most sort of pleasing.
Things that we're seeing is actually in the local stations.
Our base markets are ex political.
The.
Base market is very stable and as I mentioned in my in my remarks, particularly the return to growth for the auto category.
As you know, it's obviously something that does concern us over the last couple of years with Covid and the softness in the auto category the return of growth Youre autocad or categories.
A really strong indicator of our things.
Things to come we are seeing locally.
Two <unk>.
The verticals are two categories that are soft.
One is local to local wagering sort of bedding.
Category soft, but that's really what we're seeing there.
Pretty interesting and perhaps predictable a shift of that business go international So where we're seeing softness in local for wagering, we're seeing strength in national for their for the.
For the bedding market I think that's our.
Sure.
The purpose of the reason for that is obviously as more states become legalized a national platform.
As our particular national sports is.
As a.
Inefficient and efficient on a goodbye for the betting betting businesses and then we're seeing some softness in government spending that was really COVID-19 health spending over the last couple of years, which obviously is not there anymore, but that's being more than made up across our other strength in our other categories. So so two areas. So we can stop we're embedding government, but it's more than made up.
By strength in other categories in terms of the scatter market.
Actually seeing scatter for us.
Before we get into the.
Fall sports cycle.
As our has acquired the summer is a quiet period for us at <unk> has been so we actually don't have a lot of scatter avails, but scatter pricing is up in the low double digits.
Which is.
Which is good to see that that strength.
And then from a macro environment point of view again, we're seeing no impact in our advertising across our businesses with the exception of softness in which I think has been well reported in other areas some softness in programmatic advertising.
For us.
It's sort of 10% of our advertising business. So it's not having an <unk>.
A significant or meaningful impact on us at all in that 10% is really due to <unk>.
Gramatica advertising into <unk> and into our Fox News media digital platforms.
Steve do you want to answer the second protocol.
Phil just on the on the rate of subscriber erosion with.
<unk> now channels amongst carry channels. So I think when we're best positioned to Buffett any.
Any sort of weakness in the subscriber universe, I think where people.
Find it challenging to reconcile between sort of how we report numbers and how we see numbers from the street. There's a couple of things. One is we're in a two months delay versus what what's.
What's being reported by the distributors and the other Pcs is.
There is a fair amount of opacity around some of the platforms that don't report. So you got that many of the virtual Mvpds don't break out the numbers.
And Directv now no longer breaks out it's known business.
And that's probably why you're seeing sort of friction between the reported numbers.
Okay.
Operator, we can go to the next question. Please.
Good that's the line of Robert Fishman with Moffett Nathanson. Please go ahead.
Good morning, everyone and there's lots of chatter right now around the big 10 renewal in the marketplace. Just wondering if theres anything you can share specifically on those riots or maybe bigger picture, how Fox is positioned to renew key sports rights with your current portfolio of assets compared to either some of the pure digital companies or other media companies.
Outside services and then how do you think about the ROI of the sports rights investments going forward.
Okay.
Hey.
Turning.
Robert So just a lot of overall and Matt will talk overall, then I can come down to drill down to <unk> 10.
We.
We're always going to look at sports rights as they.
As they become available I think we've been very disciplined.
In terms of how we.
Analyze and how we think about acquiring any additional incremental.
Sports rights, we look at it both obviously from a.
Sure.
Any individual sport can achieve both in terms of an audience and advertising revenue, we can attach to that.
We specifically also drill down into what we can see from our subscriber.
What we can attribute to AR.
<unk>.
Our affiliation agreement.
With the distributor in terms of subscription revenue so.
We do take a pretty scientific and I think very disciplined approach to how we view sports rights, but we do look at them.
All the sports across the marketplace and see what will what would fit within Fox sports I think.
If you look past over past years there.
The story isn't that Hasnt been written as you know the sports rights that we pass on REIT that we decide or are too expensive or won't add any incremental revenue onto our business. So.
And that continues to be the way we look at it.
As regards to Big 10, Big 10 network is.
A key strategic partner of ours, we've had a great relationship with them.
We look forward to renewing.
Knowing those rights are potentially with some new some new broadcast partners within the mix that will be a announcement that <unk> will make we expect in the near term, but it's one that won't that will that will leave offer them to make up but we are looking forward to our continued long term and profitable relationship with them.
Operator can we go to the next question. Please.
That is the line of Ben Swinburne with Morgan Stanley . Please go ahead.
Hey, good morning, guys.
Two questions one.
I think theres been a lot of enthusiasm over the past couple of years about Fox has opportunity in sports betting.
I think it has gotten a little quieter on that front at least in terms of the market discussion can you guys update us on what you see ahead of the company Theyre, both directly with Fox bet and is there any timing on something with flutter and also just sort of the benefits to the broader business.
And then I just wanted to clarify Steve you said you expect to maintain the current investment level in fiscal 'twenty three versus 22 is that a comment on just the amount of capital you're deploying or is that sort of an EBITDA net impact on EBITDA. This will make sure that we understood the.
Comment there thanks.
Yes.
Thanks, Dan.
So.
We continue to.
Have a.
Believes that fundamentally.
Strong belief in the sports betting business.
We we think it's a huge opportunity.
In the marketplace specifically.
And its association with the Fox Sports brand and we drive the largest sports audiences.
In this country.
And no other broadcaster can can achieve kind of the reach and engagement.
That we deliver.
The.
Certainly during the autumn on the fall on a weekly basis.
And so we've proven this.
<unk>.
Last couple of years with Fox Sports Super six, which really taking our sports audiences.
We've talked about it before <unk> taken our sports audiences.
From TV into Fox about Superstars provides a tremendous.
Funnel.
Which which Fox bet.
As the ultimate beneficiary.
That continues to be our strategy and it continues to.
And be very successful as regards to flutter were still in arbitration.
With them, we look forward to the clarity of getting through that process, which we expect to be in the next couple of months certainly sort of either by the by the beginning of the year of the autumn, but once that some.
That situation has clarified I know you have and also in early September as you see the NFL season kick off again, Youll see a lot more activity around <unk>.
Fox bet on Fox Sports Super six.
Hey, Ben just picking up on your question around organic investments. So the way we define we had we called out $2 million to $300 million of net EBITDA investment for fiscal 'twenty two.
So I put it another way fiscal 'twenty, two EBITDA would have been $2 million to $300 million higher than what it was.
Had we not made those investments we don't anticipate we anticipate maintaining that level of investment meaning that when you compare 23 to 22, you will not have that drag on our results.
That explains that for you.
Operator, we have time for one more question.
Very good that's the line of Doug Mitchelson with Credit Suisse. Please go ahead.
Thanks, so much if I could get a clarification on the big 10.
You have digital rights for Big 10 games and Youll maintain those.
Any new deal that.
That youre looking at another clarification I was wondering if you have a park volumes ex Super Bowl.
I'm just trying to get an extra unusual how strong were you up for volumes and then.
Lastly for Steve any swing factors in that free cash flow outlook for fiscal 'twenty, three that we should be thinking about working capital or capex or anything like that.
And good morning, everybody. Thank you.
Hey, good morning, guys how are you.
Well.
So.
We have a big 10 digital our rights and we will keep those are in the new.
In the new deal.
So I hope that clarifies.
That again, I don't want to say too much because it's really a it's for the big 10 to announce their new home.
The new agreements.
In terms of.
Upfront volumes X I think your question was what are they ex Super Bowl and obviously.
We look at everything ex ex Super Bowl because of that because it's obviously such a huge year for us remember, we're looking forward to them.
Again getting record pricing for Super Bowl and.
We're well ahead of plan in terms of selling our Super Bowl.
Sure.
Positions, but ex extra rollout on volumes were about 15% higher than them.
Sure.
Then the last.
I think one of the.
And thats across across entertainment sports and news.
I think the important thing to note there, though is that upfront volumes to some degree our R. R.
A metric that our that we control we chose.
Very very purposely and I think in a very disciplined and hopefully a judicious way.
Sell more volume into this into this upfront because we felt it was.
A period, where having certainty around are the highest level started we can around.
Our our sales in our inventory.
As important so for instance in years, where we were in past years, we would sell in the mid seventies a percent of our kind of available available.
Adam Prescience, we announced we sold in this upfront.
The low to mid eighties, and I think that was a that was sort of a smart decision and one that we felt was appropriate given.
Giving any uncertainty around the economy of the advertising market going forward.
Okay.
Doug It's Dave just on the free cash flow.
Yes.
I think from an from a working capital perspective, the big swing factors I think from an accounting version of working capital.
Remember that going into we're into a Super Bowl years. Therefore, we attended the NFL Super Bowl user has an impact on our working capital.
Our capex was down to a touch over 300 million this year, which was down from a touch north of 480, a year before we should expect the 300 to go up a touch.
But the rest of it is I think really pretty much stuffing trade in terms of cash flow swings, there's nothing particularly unique.
Apart from the tailwind that we have going into it from an operating perspective.
Right.
At this point, we are out of time, but if you have any further questions. Please give me or Dan Carey a call.
Thank you once again for joining today's call. Thanks, everyone.
Okay.
Ladies and gentlemen that does conclude your conference for today. Thank you for using AT&T executive teleconference. You may now disconnect.