Q3 2023 Fox Corporation Earnings Call

May 9, 2023

Ladies and gentlemen, thank you for standing by welcome to the Fox Corporation third quarter fiscal year 2023 earnings conference call at.

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 Kelly good morning, and welcome to our fiscal 2023 third 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.

Literally 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 website.

That I'm pleased to turn the call over to Auckland.

Thank you Debbie and thanks to everyone for joining us this morning.

This is strong fiscal third quarter operating results once again demonstrate the power of our content and the brands it underpins and the repeated capability of our focused strategy to deliver solid financial results.

In the quarter, we grew top line revenue by 18% led by the remarkable 43% growth in advertising and a solid 3% growth in affiliate revenue.

Underpinning this performance with a record Super Bowl 57 on the Fox broadcast network, which generated approximately $650 million a gross advertising revenue across our businesses and what's the key driver of our 61% advertising revenue growth at our television segment.

This year's Super Bowl matchup between Kansas City, and Philadelphia delivered 115 million viewers across Fox platforms.

Super Bowl 57, the most watched program in the U S television history, and the pinnacle of an extraordinary year for Fox sports.

The strong lineup of programming and advertising demand for Fox Sports continues into our fourth quarter, which includes the return of NASCAR. The second season of the U S. F. L. The start of major League baseball as 2023 season. The finals of the UEFA Nations League and a first for Fox The Belmont Stakes.

<unk>.

Leveraging the reach of our Super Bowl, leading we launched the second season of next level sets, which promises to be the next big lifestyle franchise from our studio Ramsey partnership or.

Our entertainment business also found success with the number one new series, a new drama over the year and accused and the number one new unscripted series and special forces world's toughest test.

Fox is now debuted the top new unscripted series for five consecutive seasons.

In fact, the combined power of our sports and Entertainment programming Places Fox at number one amongst broadcast network season to date in the key 18 to 49 demo.

Okay.

Our strong sports calendar also had a halo effect at the Fox television stations, which so many local advertising verticals higher in the quarter and will continue to be mixed local advertising market conditions. We are encouraged by growth in categories, including auto restaurants, and entertainment, but are watchful across other categories, including bedding.

Retail and telecom.

Meanwhile, <unk> performance in the third quarter was nothing short of stellar.

With revenue growth of 31% supported by sustained gains in engagement, where total view time increased 38% year on year.

And while still early in the fourth quarter. The April results for TV show the momentum across the platform accelerating having recently marked the three year anniversary of our acquisition of <unk>. Our progress over this longer term timeframe is just as impressive haven't grown quarterly TVT.

By over 200% and revenue by 400%.

Just as importantly, the <unk> brand has asserted itself on the broader media landscape.

Our viral <unk> spot in the Super Bowl, which received massive press coverage had almost 7 billion impressions.

And our strong growth and engagement has now led to two b's inclusion and nielsen's the gauge marking the first time <unk> has reached 1% of total TV viewing minutes and making to be the most watched fast service in the United States.

And just last month, we announced the formation of <unk> Media group under Paul Cheeseburger, which brings together, our digital capabilities and a more formalized and coordinated way to help us better monetize our digital touch points across all our Fox properties.

We think farhat for his entrepreneurial leadership at <unk> over the last three years and of course before he leaves the business in terrific shape with an outstanding team to drive continued strong growth.

At Fox News media, we retained our leadership position amongst our peers. The Fox News channel ended the third quarter as the most watched cable network in total day and prime time, while maintaining its lead as the most watched cable news network, beating CNN and MSNBC combined.

Also notably the Fox business network ended the quarter at the most watch business cable network, beating CNBC and total viewers during the business day and market hours for the fourth consecutive quarter.

Let me briefly address the settlement of our dispute with Dominion voting systems, we made the business decision to resolve this dispute and avoid the acrimony of a device a trial and a multi year appeal process.

It is clearly in the best interest of the company and its shareholders.

The settlement in no way alters Fox his commitment to the highest journalistic standards across our company or our passion for unabashedly reporting the news of the day.

We're proud of our Fox news team the exceptional quality of the journalism and their stewardship of the Fox News brand.

Whether it be our coverage of politics and elections world events, such as the war on Ukraine or domestic issues such as the crisis at the border or journalists bring compelling news home to our viewers every day.

The standards behind this reporting on not only what makes us the number one cable news network by the number one network in all of cable.

In fact in a recent poll, 41% of respondents chose Fox news as their most trusted network news provider.

So as we look ahead, we are confident in the strength of the Fox brands and the strength of our balance sheet and while we are not completely immune to the headwinds facing the broader industry and the general economy, we are well positioned given our areas of differentiation.

Nonetheless, you can expect us to be even more focus on our cost base as we look to reinforce our strategy for future growth.

We remain committed to driving long term shareholder value creation through the thoughtful management of our existing business, the pursuit of new and exciting adjacencies and returning capital to our shareholders.

With that I'll turn it over to Steve to take you through the details of the quarter.

Thanks, a lot and good morning, everyone.

<unk> again delivered strong underlying financials in our fiscal third quarter with 18% revenue growth and 3% EBITDA growth bolstered by a record breaking Super Bowl 57, alright.

Our advertising revenues increased 43% led by the Super Bowl, along with a high volume of NFL playoffs, windows and accelerating growth at <unk>.

Meanwhile, our affiliate revenues grew 3% on the back of the pricing benefits from recent renewals, partially offset by trailing 12 months subscriber losses, continuing to run in the 7% range.

Quarterly adjusted EBITDA was $833 million up $22 million over the prior year quarter. As these revenue increases were partially offset by higher expenses. This was primarily due to higher sports rights amortization and production costs associated with our NFL Super Bowl and playoff schedule.

The net loss attributable attributable to stockholders was $54 million or negative <unk> 10 per share compared to net income of $283 million or <unk> 50 per share reported in the prior year period.

The variance was primarily due to the net where we recognized charges associated with the Fox News media litigation.

Actually offset by the gain associated with the change in fair value of the company's investments.

Excluding these and other non core items earnings growth was strong with adjusted net income growing 8% to $494 million.

And adjusted EPS of <unk> 94 per share upsetting against last year's <unk> 81 per share.

Now turning to our segments, starting with TV, where revenue grew an impressive 36% in the quarter.

Television advertising revenues led this growth with a 61% increase fueled by Super Bowl 57, which as Lachlan mentioned generated over $650 million in gross revenue.

We also have benefited from two additional NFL playoff games, when divisional and one wildcard partially offset by the timing of one less regular season game.

Momentum in <unk> remains strong with advertising revenues up 31% to $170 million on the back of increased engagement and stable pricing.

These strong advertising tail winds in the TV segment were partially offset by lower primetime ratings at the Fox network and mixed based market conditions at our local stations when excluding the Super Bowl.

Television affiliate fee revenues were up 9% as healthy growth in pricing across Fox owned and operated an affiliated stations continued to outpace the impacts from subscriber declines.

Other revenues remained essentially unchanged from the prior year quarter.

EBITDA at our television segment was up $82 million to $117 million.

Expenses increased in the quarter driven by higher costs related to the Super Bowl and a higher volume of NFL games.

The increase in expenses was partially offset by lower costs at Fox entertainment, including the absence of a write down of certain scripted programming in the prior year quarter.

And net EBITDA investment in <unk> is approximately $60 million was broadly in line with the prior year quarter.

At cable we saw revenues generally in line with the prior year.

Cable advertising revenues were down 7% due to the impact of the subsidy direct response marketplace at Fox News media, while being partially offset by the benefit as the World Baseball classic at the National Sports networks.

Cable affiliate fee revenues were broadly flat coming in at $1 $1 billion with right growth broadly offset by subscriber declines.

Cable other revenues were up 10% in the quarter led by higher Fox nation subscription revenues.

EBITDA at our cable segment was $792 million.

Compared to the $864 million reported last year largely due to these revenue impacts along with elevated legal costs at Fox News media and higher expenses associated with the second season of the Usfl and the World Baseball Classic and Fox Sports.

Now turning to cash flow, where we generated strong free cash flow of $1 4 billion in the quarter, reflecting our normal seasonal cycle of collecting advertising revenues from a full programming coupled with a major sports rights payments being concentrated in the first half of the fiscal year.

From a share repurchase perspective, as we foreshadowed on our last call. We continued with our normal course buyback activity of $250 million in the quarter and deployed $1 billion of additional capital to an accelerated share repurchase transaction.

We retired approximately 80% of the shares associated with the ISI in the March quarter, and expect the remainder to settle in the coming months.

We remain committed to fully utilizing our current 7 billion dollar authorization, where we now cumulatively repurchased approximately $4 4 billion.

Representing 20% of our total shares outstanding since the launch of the buyback program in November 2019.

These meaningful capital return measures are enabled by the strength of our financial position, where we closed the quarter with $4 $1 billion in cash and $7 2 billion in debt.

While this reported cash balance does not include the impact of the Dominion settlement, we continue to maintain a very robust balance sheet.

Our ongoing commitment to capital returns as well as flexibility to pursue value accretive investments and with that let me turn it back to Gary to open the Q&A. Thank you, Steve and now we would be happy to take questions from the investment community.

Thank you, ladies and gentlemen, I would like to emphasize the functionality for the question and answer queue. If he.

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One moment please for the first question.

We will go to the line of Robert Fishman with Moffett Nathanson.

Good morning, everyone I have a couple of related questions. If I can.

Lachlan after the Dominion settlement is there anything that you can share to better understand the future settlement risks and then related.

Can you discuss whether the departure of Taco Tucker Carlson will lead to changes in the Prime time programming strategy, and then potential opportunities for more national advertising and then for John and Steve.

If you can expand on the early confidence you have from recent MVP renewals and after seeing the acceleration in Retrans growth this quarter any more insight on whether you can get better pricing to outpace the elevated levels of cord cutting or just more economics from your affiliate partners. Thanks very much.

Thanks, Robert I don't know where to start.

Second question.

But.

Thank you very much and good to hear from you.

So let me start and I'll hand over to Steve to the <unk>.

Final final questions.

So.

I'm, obviously limited about what I can say about any ongoing.

Litigation, but I can make the following comments in regards to.

Dominion.

And I refer to some of this in my prepared remarks.

As we've stated many times.

We have always acted as a news organization reporting on the newsworthy events of the day. We're certainly included allegations being made by the sitting president of the United States and his lawyers and the aftermath of a hotly contested presidential election.

And we have been and remain confident in the merits of our position that the first amendment protects a news organizations reporting on allegations being made by a sitting president of the United States.

However, the Delaware Court severely limited our defenses of trial through pre trial rulings. One example, being not being able to point to the newsworthy nature of the allegations.

So we determined that the best course of action for the company and its shareholders, which could settle instead of proceeding with a six week trial and potentially two or even three years of appeals.

As you know we have a pending case with smart <unk>, which is a fundamentally different case and dominion and that all of our full complement of first amendment defenses remained and we will be ready to defend this case surrounding extremely newsworthy events. When it goes to trial likely not until the calendar year 2000.

25.

As regards to our programming strategy in Prime time, there is no change to our programming strategy.

At Fox News.

It's obviously a successful strategy.

And.

As always we are adjusting our programming and our lineup and that's that's what we continue.

To do we are pleased with the.

<unk>.

The strength of the advertising demand throughout our.

Scheduled but particularly.

Primetime.

Steve you want to talk to the Mvpds, yes sure on the affiliate.

Robert Yes, listen we were pleased with the way our affiliate negotiations are going you know that this year, we had roughly 34%.

The total affiliate book out for renewal.

We've been successful in generating and establishing new pricing benchmarks for the network and Fox Sports will retreads and Fox sports in those negotiations.

With another sort of third is due for renewal in fiscal 'twenty, four and touch on the 30% June fiscal 'twenty five we feel pretty confident that we can continue to deliver pricing gains as subscribers. The subscriber rate of attrition stays at the same level, we expect to post ongoing affiliate revenue growth for the company.

Operator, we can take the next question.

And that will come from the line of Ben Swinburne with Morgan Stanley .

Thanks, Good morning.

I just wanted to ask about advertising as you guys look into the rest of the year and head into the upfront.

Just to give you guys an advantage as you go in to what is at least I would describe as a soft demand environment for advertising and trying to drive pricing kind of across your properties, particularly with the new <unk> media group, but just wondering if you think that's going to matter.

This year for us to maybe noticed as we head into the fall and then just on the direct response weakness at Fox News do you guys have any visibility on sort of whether that's improving here in Q4, what the drivers of that arent, even any relationship to sort of some of the broader volatility around Fox news just wanted to get your updated thoughts on that thanks. So thanks very much.

Hey, Thanks Ben.

<unk>.

I am glad Robert left you a question.

Uh huh.

But.

On advertising look we.

I think you alluded to softness in the market.

Really not seeing that across our major platforms.

Give you a bit of the detail.

The national National market sports.

Market for us.

It is very strong very robust obviously as we enter the summer.

Slower acquired are always is required or period for us.

Until the fall when when our key marquee sports programming is on air, but we are seeing pretty robust demand.

For for time and availability in the sports side in the sports market. So we're very confident with.

With sports.

In news.

Sure.

The direct response.

Issues.

Which is a market issue, it's not a Fox news issue.

Hi.

Has stabilized so we're not seeing any more deterioration in the indirect response, our pricing so we feel pretty.

Pretty confident in the.

The stabilization of that piece.

Piece of revenue again Thats really.

A product or a result of oversupply.

With our competitors with direct response is not so much a fox news issue, but it's something that certainly has affected our ability to achieve the premium pricing that we've been used to but again that that issue has stabilized and we think as offices.

Pretty good platform going forward.

The other thing I mentioned on a news, which is a small data point, we're seeing political revenue earlier than we've ever seen before.

It's still small, but it's our it's sort of unheard of to have at this early in the political cycle. So again, we think that bodes well for the.

For the fall.

As we enter.

Sure.

The more significant.

Second part of the political cycle.

And then coming onto <unk>.

The revenue is is accelerating there.

Revenue is while it's accelerating.

Pretty strongly Gaby doesn't want me to give you the number.

Most of your models, but.

It is not keeping pace with with TVT TVT continues to grow even faster, which is which is a great metric. So we have we have the <unk> we're looking forward.

To to be being a central part of our upfront negotiations.

It is clearly.

Not only strategic.

Driver for us, but it's been an important driver going forward.

Then when you get down to local.

Base markets, that's where we're seeing more mixed.

Mixed results from the different kind of.

Verticals revenue.

We're very pleased to see.

Auto again, continuing its rebound with a with strong growth in the auto category. The entertainment category. We're also seeing growth in <unk> and restaurant category, where we're seeing growth in but this is offset by weakness across our other categories, such as retail telecom and and obviously sports wagering and.

Bedding. So so the local market or does feel soft overall again, we are looking forward for our for our businesses, particularly in sports and news we're looking forward to.

Strong.

This summer and are strong.

The fall season.

I think thats all the questions. So thanks, Ben next question. Please.

We will go to the line of Phil Cusick with JP Morgan.

Hi, Thanks.

Questions and then a quick one.

<unk> it sounds like you are.

TVT, you're still outgrowing revenue, but are you starting to unleash the revenue and profit there a little bit.

And then on the legal side any any direction on legal expenses from here.

And then one standalone any thoughts on appropriate leverage and capital return from here. We appreciate the $1 billion, but but how should we think about this.

Are you still going to.

Sit on the cash until we get to the next sort of legal view or should something happen between now and then thank you.

Thanks.

Very much Phil.

On.

<unk>.

I mean, let me start with <unk>.

Also to Steve for the for the.

Some of the capital management.

The element of the question so.

So on <unk>, we're going to continue to invest in <unk> is it the same.

Levels.

We've been investing over the last.

Year or so we just think it's a tremendous opportunity.

For us as I mentioned in my comments. The fact that we're now Nielsen's gauge now has us over 1% of the U S. TV viewing is a tremendous sum.

Sort of benchmark.

<unk> hit and I see continued growth there so from a consumer aspect and from our marketers aspect to be becoming more and more a central part of.

Usage in sort of an opportunity.

And this is really because.

The focus <unk> had over none of them, we think of it over the last three years with our involvement but obviously the team there has done a tremendous job not only of last three years, but before that and it really sort of driving sort of best in class personalized <unk> experience building an incredible.

Our library with nearly 55000 titles in the U S alone and again to put that in context, that's five times the size of the Netflix library and now really.

Being able to monetize that viewing in a more efficient.

Better.

Better way so so we're incredibly.

Optimistic and I would say.

The results are in we are embedded incredibly pleased with the performance to be going forward and we think it's appropriate area for us to to continue to invest in our omni I'll turn it over to Steve on the.

Until the capital management, but just.

And I'll just start by saying look we.

We'll have a $7 billion buyback authorization I think we've spent about $4 four.

Billion of that so we have.

I've met some incorrect this time in the morning to $6 billion remaining.

The authorization, we fully expect to deploy all of that capital back to shareholders through our buyback.

And any litigation has no impact on that at all yes, Steve. Thanks, Austin. So if you'll just to go back on legal costs legal costs over the last two or three quarters would be the elevated obviously with being.

David in the depositions and pre trial preparation for <unk>.

Dominion, So I'd expect that to subside.

The next couple of quarters.

And then so just.

Pick up on <unk> point with the law.

Our leverage is the debt we have $7 $2 billion, we've got a maturity in January which will make a call on as to whether to repay or refinance the delivery feels about right, where we are at the moment.

And our cash position is strong and so we would anticipate.

What are the whatever happens with future litigation, we can continue to.

Continue to go with have buyback pacing it as it has been over the last couple of years now a few years now as well as leaving us flexibility to invest in the business, who will take advantage of any inorganic opportunities, but we'll be balanced about it as we've been saying since the formation of the company.

Operator next question please.

And that will come from the line of John Hodulik with UBS.

Great. Thanks, guys, maybe getting back to the sports theme.

Viewership remained strong across the board I mean first of all how would you gauge the successful Usfl.

Second.

Anything you can tell us about your appetite for additional sports rights, especially to fill in the summer months and then how does the sort of relative weighting on sports versus entertainment program programming physician do guys, given what could be a protracted writers strike.

Thanks, Sean.

Usfl it's stu.

It's just the start of the second.

<unk> season.

Sure.

We're very pleased with it we're pleased with focus on its ratings the quality of the games.

Its performance on television the ratings and also frankly its performance.

On the ground with ticket sales in.

And engagement with football fans. So early days, but we couldnt be more happy with how it's how it's tracking to date.

In terms of additional sports rights.

Look across our.

Portfolio of sports rights.

We're constantly managing them well.

Look at sports rights as they come up and we also look at them as they as they get renewed just to make sure that they are efficient for us and that we are.

We're paying.

Responsible and appropriate.

Mt for those rights. So we're constantly adjusting but we do it with them I think.

Real commitment to discipline in terms of what rights, we would've acquire or dispose of so.

So it's it's.

Moving.

It's always a moving feast, but I wouldn't expect anything dramatic at all.

In that.

In that area.

<unk>.

What was the latter Alaska other.

The writers strike so thank you.

On the writer's strike look I think for US we are well positioned for the writers strike and we think that.

With our.

Strategic priorities and sort of strength in sports, but also in news. These are two areas that are not affected by the writers strike and the audience we'll pivot.

When the Washington, TV to those to those categories and entertainment you have to remember as well we only program two hours of entertainment a night, that's a mixture of both scripted and unscripted content. So we feel very.

Well position there would not be affected by the writers strike.

Really at all there'll be some scheduling changes with some of these descriptor content, but it's not something that will have a significant financial impact on us.

Operator, we have time for one more question.

And that last question will come from the line of Jessica Reif Ehrlich with Bank of America.

Oh, Thanks, just wanted to maybe follow up on loved ones at this point that youre not overly dependent on.

<unk>.

Live and in the script I mean, given your life in unscripted, you're not overly dependent on providers.

For entertainment so given that like can you talk about your outlook for the upfront.

Also given the macro.

I mean, you seem to be in a very different position than most people, but the market is most people say choppy and then also given the decline in the pay TV universe can.

Can you just talk about how you see Fox news and sports transitioning over time.

Great Hi, Jessica Thank you very much.

So.

Look Europe .

Agree with you on the writer's strike I think for US our focus on sort of live live news live sports.

And frankly the network healthy.

Balance of scripted and unscripted.

Our content on the network puts us puts us in a tremendous position I think what is the timing of the strike obviously with the Upfronts next week.

Creates some.

What's the word.

It's hard to present, an exact schedule right.

Youre only in entertainment is not if youre in news and sports. So I think it positions us very well in the upfront and that's of course as I mentioned before.

Not including the strength to be going into this upfront as well and to be we'll certainly be front and center in all of our upfront presence.

Presentations, but also in our negotiations are going forward. So we feel.

We're very well positioned.

Positioned.

It's early it's early with the upfront. These negotiations will take time, but I think we're in a.

Best position as we could possibly.

Hope for in terms of.

So the.

Cable universe, and with what we plan to do with news and sports.

Yeah.

Going forward in terms of any sort of our direct to consumer or alternative kind of distribution.

Strategy.

I think we've said before we are ready to go we have the technology in place I think we have the.

The teams and the people in place to go DTC, when we deem that necessary or prudent.

But for the moment, we continue to drive industry, leading pricing out of the.

Mvpds and D Embry PD universes.

As Steve mentioned this before.

Our pricing has been it's not it's not theoretical our pricing has not been set.

In contracts.

Going forward so for the <unk>.

Third of our distribution.

Deals by sort of volume this year this fiscal year and another third the next fiscal year and we're very pleased with where we sit and where we've established.

Market price for our brands.

<unk>.

And when you just speaking of the brands when you have.

When you have the best sports business brand and your best News business and brand. These are products that ultimately Brian will be part of any scaled platform, regardless of what technology is used to deliver that content on our platform and.

So we see D C in the future.

It will come eventually.

As just one component of a broader distribution strategy, but its certainly across any of those.

Platforms or technologies, it's hard to see not having our sports and our news.

On those on those platforms, so we feel pretty well positioned Jessica.

But at this point, we are out of time, but if you have any further questions. Please give.

EMEA, Dan Carey a call. Thank you once again for joining today's call.

And ladies and gentlemen that does conclude your conference call for today. Thank you for your participation for using AT&T executive teleconference. You may now disconnect.

We're sorry your conferences ending now please hang up.

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Ladies and gentlemen, thank you for standing by welcome to the Fox Corporation third quarter fiscal year 2023 earnings Conference call.

Thank you Kelly good morning, and welcome to our fiscal 2023 third quarter earnings call. Joining me on the call today are Lachlan Murdoch Executive Chair and Chief Executive Officer, John Allen, Chief Operating Officer, and Steve Campbell, Our Chief Financial Officer.

First Lachlan and Steve will give some prepared remarks on the most recent quarter and then we will 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.

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 Lachlan.

Thank you Gabby and thanks to everyone for joining us this morning.

Fox is strong fiscal third quarter operating results once again demonstrate the power of our content and the brands it underpins and the repeated capability of our focused strategy to deliver solid financial results.

In the quarter, we grew top line revenue by 18% led by the remarkable 43% growth in advertising and a solid 3% growth in affiliate revenue.

Underpinning this performance with a record Super Bowl 57 on the Fox broadcast network, which generated approximately $650 million of gross advertising revenue across our businesses and what's the key driver of our 61% advertising revenue growth at our television segment.

This year's Super Bowl matchup between Kansas City, and Philadelphia delivered 115 million viewers across Fox platforms, making Super Bowl 57, the most watched program in the U S television history, and the pinnacle of an extraordinary year for Fox sports.

The strong lineup of programming and advertising demand for Fox Sports continues into our fourth quarter, which includes the return of NASCAR. The second season of the Usfl The startup Major League baseball as 2023 season, the finals of the right Foundations League and a first for Fox The Belmont Stakes.

Leveraging the reach of our Super Bowl lead and we launched the second season of next level set which promises to be the next big lifestyle franchise from our studio Ramsey partnership.

Our entertainment business also found success with the number one new series and new drama over the year and accused and the number one new unscripted series and special forces world's toughest test.

Fox is now debuted the top new unscripted series for five consecutive seasons.

In fact, the combined power of our sports and Entertainment programming Places Fox at number one amongst broadcast network season to date in the key 18 to 49 demo.

Our strong sports calendar also had a halo effect at the Fox television stations, which saw many local advertising verticals higher in the quarter and will continue to be mixed local advertising market conditions. We are encouraged by growth in categories, including auto restaurants, and entertainment, but are watchful across other categories.

Including bedding retail and telecom.

Meanwhile, <unk> performance in the third quarter was nothing short of stellar.

With revenue growth of 31% supported by sustained gains in engagement, where total view time increased 38% year on year.

By over 200% and revenue by 400%.

Just as importantly, the <unk> brand has asserted itself on the broader media landscape.

Our viral <unk> spot in the Super Bowl, which received massive press coverage had almost 7 billion impressions.

And our strong growth and engagement has now led to <unk> inclusion and Nielsen's the gauge Martin to first time <unk> has reached 1% of total TV viewing minutes and making to be the most watched fast service in the United States.

And just last month, we announced the formation of <unk> Media group under Paul <unk>, which brings together, our digital capabilities and a more formalized and coordinated way to help us better monetize our digital touch points across all our Fox properties.

We think farhat for his entrepreneurial leadership with <unk> over the last three years and of course before he leaves the business in terrific shape with an outstanding team to drive continued strong growth.

At Fox News media, we retained our leadership position amongst our peers.

The Fox News channel ended the third quarter as the most watched cable network in total day and prime time, while maintaining its lead as the most watched cable news network, beating CNN and MSNBC combined.

Also notably the Fox business network ended the quarter at the most water business cable network, beating CNBC and total viewers during the business day and market hours for the fourth consecutive quarter.

Let me briefly address the settlement of our dispute with Dominion voting systems, we made the business decision to resolve this dispute and avoid the acrimony of a divisive trial and a multi year appeal process.

Clearly in the best interest of the company and its shareholders.

The settlement in no way alters Fox his commitment to the highest journalistic standards across our company or our passion for unabashedly reporting the news of the day.

We're proud of our Fox news team the exceptional quality of the journalism and their stewardship of the Fox News brand.

The standards behind this reporting on not only what makes us the number one cable news network by the number one network in all of cable.

In fact in a recent poll, 41% of respondents truss Fox news as their most trusted network news provider.

Nonetheless, you can expect us to be even more focus on our cost base as we look to reinforce our strategy for future growth.

With that I'll turn it over to Steve to take you through the details of the quarter.

Thanks, a lot and good morning, everyone.

<unk> again delivered strong underlying financials in our fiscal third quarter with 18% revenue growth and 3% EBITDA growth bolstered by a record breaking Super Bowl 57, alright.

Our advertising revenues increased 43% led by the Super Bowl, along with a higher volume of NFL playoff windows and accelerating growth in television.

Meanwhile, our affiliate revenues grew 3% on the back of the pricing benefits from recent renewals, partially offset by trailing 12 months subscriber losses, continuing to run in the 7% range.

Quarterly adjusted EBITDA was $833 million up $22 million over the prior year quarter. As these revenue increases were partially offset by higher expenses. This was primarily due to high sports rights amortization and production costs associated with our NFL Super Bowl and playoff schedule.

The net loss attributable attributable to stockholders was $54 million or negative <unk> 10 per share compared to net income of $283 million or <unk> 50 per share reported in the prior year period.

The variance was primarily due to the net where we recognized charges associated with the Fox News media litigation.

Actually offset by the gain associated with the change in fair value of the company's investments.

Excluding these and other non core items earnings growth was strong with adjusted net income growing 8% to $494 million and adjusted EPS of <unk> 94 per share upsetting against last year's <unk> 81 per share.

Now turning to our segments, starting with TV, where revenue grew an impressive 36% in the quarter.

Television advertising revenues led this growth with a 61% increase fueled by Super Bowl 57, which as Lachlan mentioned generated over $650 million in gross revenue.

We also benefited from two additional NFL playoff games, when divisional and one wildcard partially offset by the timing of one less regular season game.

Momentum at TV remains strong with advertising revenues up 31% to $170 million on the back of increased engagement and stable pricing.

A strong advertising Taiwanese in the TV segment were partially offset by lower primetime ratings at the Fox network and mixed based market conditions at our local stations when excluding the Super Bowl.

Television affiliate fee revenues were up 9% as healthy growth in pricing across Fox owned and operated and affiliated stations continued to outpace the impacts from subscriber declines.

Other revenues remained dissection essentially unchanged from the prior year quarter.

EBITDA at our television segment was up $82 million to a $117 million.

Expenses increased in the quarter driven by higher costs related to the Super Bowl and a higher volume of NFL games.

The increase in expenses was partially offset by lower costs at Fox entertainment, including the absence of the write downs in scripted programming in the prior year quarter.

And net EBITDA investment in <unk> is approximately $60 million was broadly in line with the prior year quarter.

At cable we saw revenues generally in line with the prior year.

Cable advertising revenues were down 7% due to the impact of the softer direct response marketplace at Fox News media, while being partially offset by the benefit of the World Baseball classic with the National Sports networks.

Cable affiliate fee revenues were broadly flat coming in at $1 1 billion with rate growth broadly offset by subscriber declines.

Cable other revenues were up 10% in the quarter led by higher Fox nation subscription revenues.

EBITDA at our cable segment was $792 million compared to the $864 million reported last year largely due to these revenue impacts along with elevated legal costs at Fox News media and higher expenses associated with the second season of the Usfl and the World Baseball Classic at Fox Sports.

Yeah.

Now turning to cash flow, where we generated strong free cash flow of $148 billion in the quarter, reflecting our normal seasonal cycle of collecting advertising revenues from a full programming coupled with a major sports rights payments being concentrated in the first half of the fiscal year.

We retired approximately 80% of the shares associated with the ISI in the March quarter, and expect the remainder to settle in the coming months.

We remain committed to fully utilizing our current 7 billion dollar authorization, where we now cumulatively repurchased approximately $4 $4 billion representing.

Representing 20% of our total shares outstanding since the launch of the buyback program in November 2019.

These meaningful capital return measures are enabled by the strength of our financial position, where we closed the quarter with $4 $1 billion in cash and $7 $2 billion in debt.

While this reported cash balance does not include the impact of the Dominion settlement. We continue to maintain a very robust balance sheet that supports our ongoing commitment to capital returns as well as flexibility to pursue value accretive investments and with that let me turn it back to Gary to open the Q&A. Thank you, Steve and now we would be.

Happy to take questions from the investment community.

Thank you, ladies and gentlemen, I would like to emphasize the functionality for the question and answer queue.

SaaS a question. Please press one then zero on your Touchtone phone.

You will hear tone, indicating that you've been placed in Q you may remove yourself from Q&A time by once again pressing one than Seattle, if youre using a speakerphone. Please pick up your 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'll go to the line of Robert Fishman with Moffett Nathanson.

Good morning, everyone.

Q3 2023 Fox Corporation Earnings Call

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