Q2 2024 Fox Corp Earnings Call

February 7, 2024

Yeah.

Okay.

Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the Fox Corporation second quarter fiscal year 2024 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 the functionality for the question and answer session.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation second quarter fiscal year 2024 earnings conference call. At this time, all participants are in a listen only mode.

Operator: Later, we will conduct a question and answer session. I would like to emphasize the functionality of the question and answer session. Questions will be given at that time. If you should require assistance during the call, please press star, then zero.

Speaker Change: In Q 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 would now like to turn the conference over to Chief Investor Relations Officer Ms. Gabrielle Brown. Please go ahead Ms Brown.

Operator: As a reminder, this conference is being recorded. I would now like to turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.

Gabrielle Brown: Thank you, operator. Good morning, and welcome to our fiscal 2024 second quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer.

Gabrielle Brown: Thank you operator, good morning, and welcome to our fiscal 2024 second 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.

Gabrielle Brown: 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 filing. 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 website. And with that, I'm pleased to turn the call over to Lachlan.

Gabrielle Brown: We will give some prepared remarks on the most recent quarter and then we'll take questions from the investment community.

Gabrielle Brown: 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.

Gabrielle Brown: We refer to it on this call reconciliations of non-GAAP financial measures are included in our earnings release, and our S. E SEC filings, which are available in the Investor Relations section of our website.

Gabrielle Brown: And with that I'm pleased to turn the call over to Lachlan.

Lachlan Keith Murdoch: Thank you Debbie and thank you all for joining us this morning.

Lachlan Keith Murdoch: Thank you, Gabby, and thank you all for joining us this morning. Against the backdrop of an active news cycle and another robust fall sports schedule, our fiscal second quarter again illustrated the strength of Fox. The growth we delivered in affiliate fee revenues was the standout this quarter, with the television segment growing by 10% and the cable segment returning to growth, once again demonstrating the power of our brands and our programming. We have now largely completed our fiscal 24 affiliate renewal cycle, having achieved our commercial goals without disruption and setting a solid foundation for renewals in fiscal 2025 and beyond. As expected, advertising revenues in the quarter were down, primarily due to comparisons to last year's major cyclical events, including the midterm elections at the TV stations and the broadcast of the Men's World Cup in the cable and television segments.

Lachlan Keith Murdoch: Against the backdrop of an active new cycle and another robust fall sports schedule, our fiscal second quarter again illustrated the strength of Fox.

Lachlan Keith Murdoch: The growth we delivered in affiliate fee revenues was the standout this quarter with the TV segment growing by 10% and the cable segment returning to growth once again, demonstrating the power of our brands and our programming.

Lachlan Keith Murdoch: We have now largely completed our fiscal 'twenty four affiliate renewal cycle, having achieved our commercial goals without disruption and setting a solid foundation for renewals in fiscal 2025 and.

Lachlan Keith Murdoch: And beyond.

Lachlan Keith Murdoch: As expected advertising revenues in the quarter were down primarily due to comparisons to last year's major cyclical events, including the mid term elections at the television stations and the broadcast of the men's World Cup and the cable and television segments.

Lachlan Keith Murdoch: Parsing through the cyclical comparisons our concentration in news and sports coupled with the outstanding performance of <unk> is clearly an advantage and a mixed advertising environment.

Lachlan Keith Murdoch: More specifically sports advertising was very healthy during the quarter and we saw particularly strong demand for the NFL and college football, which continued into the NFL playoffs.

Lachlan Keith Murdoch: At news the second quarter was more nuanced while preemption in the direct response market adversely impacted quarterly growth, we sequentially narrowed the gap between the current and prior year and ratings and in pricing.

Lachlan Keith Murdoch: While preemptions and the direct response market adversely impacted quarterly growth, we sequentially narrowed the gap between the current and prior year in ratings and prices. We were also able to increase our viewing share over the previous quarter, and the positive trends in share, ratings, and prices have carried over into the current quarter. Last week, I visited our bureau in Jerusalem, met with our talented and dedicated staff there, and saw firsthand the devastation wrought by Hamas on October 7.

Lachlan Keith Murdoch: We were also able to increase our viewing share over the previous quarter and the positive trends in share ratings and pricing have carried over into the current quarter.

Lachlan Keith Murdoch: Last week I visited our Bureau in Jerusalem met with our talented and dedicated staff there and saw firsthand the devastation wrought by Hamas on October seven.

Lachlan Keith Murdoch: Our hearts, our thoughts and our prayers go out to the victims of that day, the innocents killed in Israel and in Gaza and.

Lachlan Keith Murdoch: The hostages still denied the embrace of their families and loved ones.

Lachlan Keith Murdoch: The work our correspondents are camera people and our producers do reporting on these events is important outstanding and deeply appreciate it.

Lachlan Keith Murdoch: Our hearts, our thoughts, and our prayers go out to the victims of that day, the innocents killed in Israel and in Gaza, and the hostages still denied the embrace of their families and loved ones. The work our correspondents, our camera people, and our producers do reporting on these events is important, outstanding, and deeply appreciated. Now, on to sports. In calendar 2023, 96 of the year's 100 most watched telecasts were live sports. Fox is responsible for 29 of the year's 100 most watched shows, more than any other network. This marks the fifth straight year that Fox has topped the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves. The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games, with America's Game of the Week averaging 25 million viewers and an eight-year high, and Fox NFL Sunday logged its 30th straight year as the number one NFL pre-game show.

Lachlan Keith Murdoch: Now onto sports.

Lachlan Keith Murdoch: In calendar 2023, 96 of the year is 100, most watched telecast or live sports.

Fox was responsible for 29 of the year is 100, most watched shows more than any other network.

Lachlan Keith Murdoch: This marks the fifth straight year that Fox is top of the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves.

Lachlan Keith Murdoch: The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games with Americas game of the week, averaging 25 million viewers, an eight year high.

Lachlan Keith Murdoch: And Fox NFL Sunday logged its 13th straight year as the number one NFL pregame show.

Lachlan Keith Murdoch: That strength continued into into the post season with Fox has three postseason windows delivering a best ever play off average of almost 45 million viewers across the wildcard divisional and championship games.

Lachlan Keith Murdoch: In digital we saw strong engagement of <unk>, which finished with a very impressive 62% growth in total view time and 17% growth in revenue.

Lachlan Keith Murdoch: <unk> library of over 240000 movies, and TV episodes, coupled with ubiquitous distribution drove engagement, helping to be reached 78 million monthly active users logged almost $2 5 billion streaming hours in the quarter and set a new monthly record of $855 million in total.

Lachlan Keith Murdoch: That strength continued into the postseason, with Fox's three postseason windows delivering a best-ever playoff average of almost 45 million viewers across the wildcard, divisional, and championship games. In digital, we saw strong engagement on Tubi, which finished with a very impressive 62% growth in total view time and 17% growth in revenue. Tubi's library of over 240,000 movies and TV episodes, coupled with ubiquitous distribution, drove engagement, helping Tubi reach 78 million monthly active users, log almost 2.5 billion streaming hours in the quarter, and set a new monthly record of 855 million total viewing hours in December alone. Tubi has consolidated its position in the streaming landscape, ranking as the most watched free TV and movie streaming service in the United States, according to Nielsen, and surpassing Peacock, At Fox Entertainment, the second quarter saw programming strength, with Fox having the season's number one new broadcast entertainment series in Crapopolis. Hats off to Dan Harmon, the number one new game show debut in Snake Oil, and the number one cooking series in Hell's Kitchen.

Lachlan Keith Murdoch: Fueling hours in December alone.

Lachlan Keith Murdoch: <unk> has consolidated its position in the streaming landscape ranking as the most watched free TV and movie streaming service in the United States. According to Nielsen and surpassing Peacock, Max Paramount plus and Pluto TV in view time for seven consecutive months.

Lachlan Keith Murdoch: At Fox Entertainment, the second quarter, so our programming strength with Fox, having the season's number one new broadcast entertainment series in crap uplifts hats.

Hats off to Dan Harmon.

Lachlan Keith Murdoch: The number one new game show debut in Snake oil and the number one cooking series in Hell's kitchen.

Lachlan Keith Murdoch: We're also pleased with a very strong start of our mid season lineup and the early success, we are family and the floor.

Speaker Change: Before I hand over to Steve I'll comment on the sports platform, We announced last night between Fox Disney and Warner Brothers Discovery.

Lachlan Keith Murdoch: This new and unique digital distribution platform is focused on sports fans outside of existing pay TV offerings.

Upon launch in the fall of 2020 for the platform will offer a broad suite of sports, including those from a combined 14 linear networks that broadcast sports today.

Lachlan Keith Murdoch: The inclusion of our networks in the platform is consistent with our strategy being proudly consumer first and distribution agnostic.

Lachlan Keith Murdoch: Across the distribution ecosystem, our traditional pay TV market will remain our dominant customer base for some time to come.

Lachlan Keith Murdoch: As such we remain committed to our existing distribution partners, where our strong portfolio of leadership Sports News and entertainment brands thrive in their bundled offerings.

Lachlan Keith Murdoch: This unique new platform opens up a new market for us one that we had talks have not excess before and they were excited to participate in.

Lachlan Keith Murdoch: As always we are focused on delivering value for our shareholders in a thoughtful and disciplined manner and we will continue to explore every opportunity to maximize that value over the long term.

Lachlan Keith Murdoch: We're also pleased with the very strong start of our mid-season lineup and the early success of We Are Family and The Floor. Before I hand over to Steve, I'll comment on the sports platform we announced last night between Fox, Disney, and Warner Bros.

Lachlan Keith Murdoch: Let me now turn it over to Steve for his comments on the quarter's financial results.

Steven Silvester Tomsic: Thanks, Lachlan and good morning, everyone.

Steven Silvester Tomsic: With the vast majority of our fiscal 2024 affiliate renewals now successfully completed flux delivered 4% growth in total company affiliate fee revenues led.

Steven Silvester Tomsic: Led by 10% growth of TV and a return to growth in cable. This growth reflects the must have nature of our content and the value that our distribution partners place on it.

Steven Silvester Tomsic: Consistent with our expectations regarding events cycles advertising revenues this quarter were impacted by the absence of the FIFA Men's World Cup at Fox Sports and midterm political revenues at the local television stations, along with lower advertising revenue at Fox News media collectively these factors contributed to a 20% decline in total company Advertiser.

Steven Silvester Tomsic: Revenues.

Steven Silvester Tomsic: Total company other revenues grew by 14% driven by higher sports sub licensing revenues.

Steven Silvester Tomsic: All in flux reported total company revenues of $4 $2 3 billion.

Steven Silvester Tomsic: Down 8% from the prior year.

Steven Silvester Tomsic: Total company expenses decreased 5% over the prior year, primarily due to the absence of the men's World Cup at Fox Sports and fewer hours of original scripted programming entertainment due to the strikes. However, this was partially offset by the <unk> step up under a new NFL rights agreements.

Lachlan Keith Murdoch: Across the distribution ecosystem, our traditional pay TV market will remain our dominant customer base for some time to come. As such, we remain committed to our existing distribution partners, where our strong portfolio of leading sports, news, and entertainment brands thrive in their bundled offerings. This unique new platform opens up a new market for us, one that we at Fox have not accessed before and that we're excited to participate in. As always, we are focused on delivering value for our shareholders in a thoughtful and disciplined manner. And we will continue to explore every opportunity to maximize that value over the long term. Let me now turn it over to Steve for his comments on the quarter's financial results. Thanks, Lachlan, and good morning, everyone.

Steven Silvester Tomsic: Quarterly adjusted EBITDA was $350 million as compared to the $531 million reported in the prior year quarter.

Steven Silvester Tomsic: Net income attributable to stockholders of $109 million or 23 per share compares to the $330 million or <unk> 58 per share reported in the prior year period.

Steven Silvester Tomsic: Largely due to the EBITDA impact I, just mentioned along with the net changes in the fair value of the company's investments recognized in other net.

Steven Silvester Tomsic: Our effective tax rate for the quarter came in at 12%, reflecting a one off re measurement of our deferred tax assets as a result of changes in state tax laws.

Steven Silvester Tomsic: Excluding this impact and other noncore items adjusted EPS was <unk> 34 per share versus last year's <unk> 48.

Steven Silvester Tomsic: Turning to our segments, starting with cable, which reported 2% growth in total quarterly revenues cable affiliate fee revenues increased by $5 million with.

Steven Silvester Tomsic: With growth in pricing from our distribution renewals outpacing the impact from industry subscriber declines running at approximately 8%.

Steven Silvester Tomsic: Cable other revenues increased $124 million, largely driven by high sports sub licensing revenues associated with our college sports and international soccer agreements.

Steven Silvester Tomsic: Is this growth in affiliate and other revenues was partially offset by a 23% decline in cable advertising revenues.

Steven Silvester Tomsic: At Fox News media advertising revenues were impacted by softer direct response marketplace low comparative writings and higher levels of preemption due to our breaking news coverage of global events.

Steven Silvester Tomsic: With the vast majority of our fiscal 2024 affiliate renewals now successfully completed, Fox delivered 4% growth in total company affiliate fee revenue, led by 10% growth at television and a return to growth at cable. This growth reflects the must-have nature of our content and the value that our distribution partners place on it. Consistent with our expectations regarding event cycles, advertising revenues this quarter were impacted by the absence of the FIFA Men's World Cup at Fox Sports and mid-term political revenues at the local television station, along with lower advertising revenue at Fox News Media. Collectively, these factors contributed to a 20% decline in total company advertising revenue.

Steven Silvester Tomsic: Meanwhile, at this national Sports networks, we measured against last year's broadcast of the men's World Cup.

Expenses at the cable segment were 14% lower than the prior year with savings mainly gained from the absence of the men's World Cup as well as lower legal programming and production costs at Fox News media.

Steven Silvester Tomsic: Taking all these factors into account quarterly adjusted EBITDA at the cable segment grew 60% over the prior year quarter.

Steven Silvester Tomsic: Moving to our television segment, which reported total quarterly revenues of $2 five 4 billion down.

Steven Silvester Tomsic: <unk> down 13% from the prior year.

Steven Silvester Tomsic: The television segment reported strong 10% growth in affiliate fee revenues as price increases across all Fox affiliated stations more than offset the impact from industry subscriber declines.

Steven Silvester Tomsic: Television advertising revenues were down 19% as solid growth at <unk> was more than offset by comparisons with last year's cycle of major events, including the FIFA Women's World Cup and midterm political revenues as well as the relative mix of World series match ups and gain counts.

Steven Silvester Tomsic: <unk> television revenues for marriage tenant production companies was impacted by the Sag in WGNA labor disputes.

Steven Silvester Tomsic: This contributed to a $64 million declining the other revenues most of them most of which was offset by a commensurate reduction in expenses.

Steven Silvester Tomsic: Total company other revenues grew by 14%, driven by higher sports sub-licensing revenue. All in, Fox reported total company revenues of $4.23 billion, down 8% from the price. Total company expenses decreased 5% over the prior year, primarily due to the absence of the Men's World Cup at Fox Sports and fewer hours of original scripted programming at Fox Entertainment due to the strike. However, this was partially offset by the first year step-up under our new NFL rights. Quarterly adjusted EBITDA was $350 million, as compared to the $531 million reported in the prior year. Net income attributable to stockholders of $109 million, or $0.23 per share, compared to the $313 million, or $0.58 per share reported in the prior year period, largely due to the EBITDA impact I just mentioned, along with the net changes in the fair value of the company's investments recognized in other networks. Our effective tax rate for the quarter came in at 12%, reflecting a one-off remeasurement of our deferred tax assets as a result of changes in state taxes.

Steven Silvester Tomsic: Overall expenses at the television segment remained flat as higher costs in the NFL agreement and a modest increase in investment in <unk> were offset by lower costs from the absence of the men's World Cup low College sports rights costs and fewer ounces original scripted content due to the strikes.

Steven Silvester Tomsic: Together these revenue and expense impacts led to a quarterly adjusted EBITDA loss of $138 million of that TV segment.

Steven Silvester Tomsic: Compared to an EBITDA contribution of $256 million reported in the prior year quarter.

Steven Silvester Tomsic: Turning to free cash flow, where we recorded a deficit of $615 million this quarter.

Steven Silvester Tomsic: This is consistent with the normal seasonality of our working capital cycle with the first half of our fiscal year reflects the concentration of payments for sports rights and the buildup of advertising related receivables.

Steven Silvester Tomsic: In terms of capital allocation fiscal year to date, we have repurchased an additional $550 million through our share buyback through a share buyback program, bringing.

Steven Silvester Tomsic: Bringing the total cumulative amount repurchased 515 billion.

Steven Silvester Tomsic: Or 25% of that total shares outstanding since the launch of the program in 2019.

Steven Silvester Tomsic: In addition, today, we announced a 26 cents per share semiannual dividend.

These capital return measures is supported by a robust balance sheet, where we ended the quarter with $4 1 billion in cash and $8 4 billion in debt.

Steven Silvester Tomsic: These balances are before taking into account the repayment of one of our $125 billion note in late January and with that I'll turn the call back over to Gary to open up the Q&A.

Gary: Steve and now we'll be happy to take questions from the investment community.

Gary: Ladies and gentlemen, I would like to emphasize the functionality for the question and answer queue.

Gary: If you wish to ask a question. Please press one then zero on your Touchtone phone you will hear a tone, indicating you have been placed in Q you may remove yourself from queue at any time by once again pressing one then zero. If you are using a speakerphone. Please pick up the handset before pressing the numbers at hand.

Gary: It's 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.

Steven Silvester Tomsic: Excluding this impact and other non-core items, adjusted EPS was $0.34 per share versus last year's $0.48. Turning to our segments, starting with Cable, which reported 2% growth in total quarterly revenue. Cable affiliate fee revenues increased by $5 million, with growth in pricing from our distribution renewals outpacing the impact from industry subscriber declines running at approximately $8 billion. Cable other revenues increased $124 million, largely driven by high sports sub-licensing revenues associated with our college sports and international soccer agreement. This growth in affiliate and other revenues is partially offset by a 23% decline in cable advertising. At Fox News Media, advertising revenues were impacted by a softer direct response marketplace, lower comparative ratings, and higher levels of preemptions due to our breaking news coverage of global events. Meanwhile, at the National Sports Network, we measured against last year's broadcast of the men's World Cup. Expenses at the cable segment were 14% lower than the prior year, with savings mainly gained from the absence of the Men's World Cup, as well as lower legal programming and production costs at Fox News Media.

Gary: We have a question from Ben Swinburne with Morgan Stanley. Please go ahead.

Benjamin Daniel Swinburne: Good morning.

Benjamin Daniel Swinburne: Lynn.

Benjamin Daniel Swinburne: Big news in the new sports joint venture, So I'd love to get your thoughts really around that product and opportunity in kind of two areas. First is what is the opportunity that you guys see in the United States for a product like that.

Benjamin Daniel Swinburne: Obviously, we're all full focus on the cord cutter.

Tam: Tam, but how many people do you think are interested in a product like this and.

Tam: And then do you see any risk to particularly Fox news. This is the first time you guys have offered a product with just Fox broadcast so how do you balance that when you thought about putting this business together. Thanks so much.

Speaker Change: Hey, Thank you very much Ben and good morning.

So the opportunity is huge and that's why because.

Speaker Change: This.

Speaker Change: Sports focused platform is focused entirely on.

Speaker Change: Cord noncore cutover cord Nevers. So if you look at the American market, roughly say 125 million households in America and roughly half of those are not within the traditional.

Speaker Change: Bundled cable ecosystem and so the target for this this product which is going to be.

Speaker Change: I think incredibly innovative when you see it rollout.

Speaker Change: It's really that that universe of call it <unk>.

Speaker Change: $60 million odd households that currently don't participate in the bundled.

Steven Silvester Tomsic: Taking all these factors into account, quarterly adjusted EBITDA at the cable segment grew 60% over the prior year quarter. Moving to our television segment, which reported total quarterly revenues of $2.54 billion, down 13% from the prior year. The TV segment reported strong 10% growth in affiliate fee revenue; price increases across all Fox-affiliated stations more than offset the impact from industry subscribers. TV advertising revenues were down 19%.

Speaker Change: Cable and pay TV ecosystem. So we think it is a tremendous opportunity we've been working on it for four I think it's been reported sworn in fairly accurately for for several months now.

Speaker Change: <unk>.

Speaker Change: B.

Speaker Change: <unk>.

Speaker Change: Lucky enough to have seen some of the prototypes for.

Speaker Change: For this service and again it will be unique.

Speaker Change: And I think a very innovative when your C&I when you see it rollout.

Speaker Change: In terms of the risks and particularly for Fox News I think the risks are very low and thats because of the focus of the sports product being on that.

Steven Silvester Tomsic: The solid growth of Tubi was more than offset by comparisons with last year's cycle of major events, including the FIFA Men's World Cup and mid-term political revenues, as well as the relative mix of World Series match-ups and games. Also at TV, revenue from our entertainment production companies was impacted by the SAG and WGA later decades. This contributed to a $64 million decline in TV other revenues, most of which was offset by a commensurate reduction in expenses. Overall, expenses of the TV segment remain flat.

Speaker Change: The cord the cord Nevers.

Speaker Change: Fox News continues to be operating on a cable network.

Speaker Change: And.

Speaker Change: Our distributors are partners really value.

Speaker Change: That channel and that brand as it.

Speaker Change: Really.

Drives tremendous viewership in audience and engagement for them and we think we'll continue to do so within the traditional.

Speaker Change: Cable and pay TV bundle.

Speaker Change: Thank you Ben Operator next question please.

Speaker Change: We go to Robert Fishman with Moffett Nathan. Please go ahead.

Robert S. Fishman: Good morning, everyone.

Robert S. Fishman: With the sports news. So we have long discussed with you the benefit of stock.

Steven Silvester Tomsic: The tied costs under the NFL agreement and a modest increase in investment at Tubi were offset by lower costs from the absence of the Men's World Cup, lower college sports rights costs, and a higher cost for the NFL team, and fewer hours of the original scripted content due to the strike. Together, these revenue and expense impacts led to a quarterly adjusted EBITDA loss of $138 million at our TVC, compared to an EBITDA contribution of $256 million reported in the prior year. Turning to free cash flow, where we recorded a deficit of $615 million this quarter. This is consistent with the normal seasonality of our working capital cycle, where the first half of our fiscal year reflects the concentration of payments for sports rights and the build-up of advertising-related receivables.

Robert S. Fishman: Sports led skinny bundles. So I'm just wondering any additional background you can share on what pushed the steel forward now, including maybe any flexibility you you've built into your recent affiliate renewals.

Robert S. Fishman: And then on.

Robert S. Fishman: On a related note should we expect to see any changes in your approach to negotiate future sports rights and any comments you want to share about the Netflix WWE deal that might impact. These negotiations going forward. Thank you.

Speaker Change: Well, let me.

Start back.

Speaker Change: Baxter front are Robert so.

Speaker Change: There is no impact on the Netflix Ww deal at also I don't think that that plays a factor in this and in fact in how we.

Speaker Change: Approach.

Speaker Change: <unk>.

Speaker Change: <unk> portfolio of sports rights.

Speaker Change: We will be aggressively competing in the sports market.

For for sports rights that nothing has changed there.

Speaker Change: The primary.

Speaker Change:

Speaker Change: Business.

Speaker Change: And valuations and Fox sports is competing both from every subscriber in the direct traditional tape.

Speaker Change: Cable pay TV bundle and advertiser viewer and ultimately advertisers so sports remains a competitive business.

Steven Silvester Tomsic: In terms of capital allocation, fiscal year to date, we have repurchased an additional $550 million through our share buyback program, bringing the total cumulative amount repurchased to $5.15 billion, or 25% of our total shares outstanding since the launch of the program in 2009. In addition, today, we announced a 26 cents per share semi-annual dividend. These capital return measures are supported by our robust balance sheet, where we ended the quarter with $4.1 billion in cash and $8.4 billion in debt. These balances are before taking into account the repayment of our $1.25 billion note in late January.

Speaker Change: Which we frankly, we thrive in and we don't see any any difference.

Speaker Change: To that.

Speaker Change: Led to this now I think we've.

Speaker Change: We've answered many questions on these quarterly calls over over many years.

Speaker Change: About that when we are ready to launch <unk>.

Speaker Change: Streaming service such as this and we will do it and we've been monitoring the space obviously for for years on past few years in particular.

Speaker Change: And as we developed.

Speaker Change: With our partners.

Speaker Change: <unk> around a very unique and innovative product.

Speaker Change: We felt now was the right time to launch a product really into a new market, it's a new market.

Speaker Change: Where there is no product serving the sports fans that are not within the cable.

Gabrielle Brown: And with that, I'll turn the call back over to Gabby to open up the... Thank you, Steve. And now, we would be happy to take questions from the investment community. Ladies and gentlemen, I'd like to emphasize the functionality of the question and answer queue. If you wish to ask a question, please press 1, then 0 on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from the queue at any time by once again pressing 1, then 0.

Speaker Change: Cable TV bundle. So if access is for us at access as a whole new market and really drives.

Speaker Change: Tremendous amount of new reach that we werent.

Speaker Change: We werent.

Speaker Change: Servicing before.

Speaker Change: Operator next question please.

Speaker Change: <unk> John Hodulik with UBS. Please go ahead.

John C. Hodulik: Great. Thank you.

John C. Hodulik: First just quickly on the on the sports JV, just any cash contribution or can you size any cash contributions required for a box and then.

John C. Hodulik: Turning to advertising.

John C. Hodulik: Obviously, a number of things impacting the numbers. This quarter you guys had some some positive color as we look into next quarter, just any color one I'd say on the TV side, what youre seeing at this point in terms of political and then.

John C. Hodulik: With the improvement in ratings in the year over year.

John C. Hodulik: Youre seeing closing can we assume that the 22% on the cable outside of sort of the worst number and any color on the sort of slope of the improvement we should see as we head through the year. Thanks, I've lost I've lost track.

John C. Hodulik: Okay.

Operator: 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 1, 0 at this time. One moment, please, for the first question: www.foxcorp.com. We have a question from Ben Swinburne with Morgan Stanley. Please go ahead.

Speaker Change: Advertising and cable.

Speaker Change: Cable advertising.

Speaker Change: We got after this we won't need any more questions.

Speaker Change: Sure.

Speaker Change: Thanks, John.

Speaker Change: Cash I'll, let I'll, let Steve fill in but it's obviously this business has both of you.

Speaker Change: Ah.

Steven Silvester Tomsic: There's marketing and other costs associated with running the business in the partnership but there's also the revenue that we garner through affiliate fees for our networks.

Steven Silvester Tomsic: That come out.

Steven Silvester Tomsic: As the business grows, but I'll, let Steve yes on the detail side, John I think it's a touch of early for us to be giving.

Lachlan Keith Murdoch: Good morning, Lachlan. Obviously, there is big news in the new sports joint ventures. I'd love to get your thoughts really around that product and opportunity in kind of two areas. First, what is the opportunity that you guys see in the United States for a product like that? Obviously, we're all focused on the cord cutter, sort of TAM, but how many people do you think are interested in a product like this? And then do you see any risk to, you know, particularly Fox News? This is the first time you guys have offered a product with just Fox Broadcasting. So how'd you balance that when you thought about putting this business together? Thanks so much.

Steven Silvester Tomsic: Some forecast around sort of the contribution of deficit from the JV, but sort of as we look at it it will be accretive to us from a net perspective when you take into account the affiliate fees that we will collect as revenue versus what is the funding we need to make to the JV. We think from a net net to Fox perspective, it'll be accretive pretty quickly.

Steven Silvester Tomsic: And then on <unk>.

Steven Silvester Tomsic: Advertising.

Steven Silvester Tomsic: I think the advertising outlook is as I mentioned with our with news, but you could you could you could apply this terminal.

Steven Silvester Tomsic: The overall market is a nuanced as we look at it if I start with sports we had a very solid regular NFL season from an advertising perspective.

Steven Silvester Tomsic: And I think a stronger.

Steven Silvester Tomsic: NFL post season.

Steven Silvester Tomsic: We were very pleased by but also that was on.

Steven Silvester Tomsic: It's a smaller revenue line, but but we had a fantastic college football season are really I think the story of this past.

Steven Silvester Tomsic: Awesome.

Steven Silvester Tomsic: It was really the strength.

Steven Silvester Tomsic: College football and particularly as advertisers.

Steven Silvester Tomsic: No.

Steven Silvester Tomsic: You sort of.

Lachlan Keith Murdoch: Hey, thank you very much, Ben, and good morning. So, the opportunity is huge, and that's really because this, you know, sports-focused platform is focused entirely on, you know, cord-cutters, but cord nevers. If you look at the American market, there are roughly, say, 125 million households in America, and roughly half of those are not within the traditional, you know, bundled cable ecosystem. And so, the target for this product, which is going to be, I think, incredibly innovative when you see it roll out, is really that universe of, you know, call it 60 million-odd households that currently don't participate in the bundled cable and pay television So we think it's a tremendous opportunity. We've been working on it for, I think it was reported this morning fairly accurately, several months now.

Steven Silvester Tomsic: Founded in appreciate it.

Steven Silvester Tomsic: The quality of the audience, Washington College football.

Steven Silvester Tomsic: Coming up we look forward, obviously, we have the Daytona 500, and then the start of the regular.

Steven Silvester Tomsic: Major League Basin baseball season in March.

Steven Silvester Tomsic: There is a lot of them.

Steven Silvester Tomsic: Our positive momentum with advertisers with those.

Steven Silvester Tomsic: Fox News.

Steven Silvester Tomsic: You have.

Steven Silvester Tomsic: A positive trends with Dr pricing.

Steven Silvester Tomsic: Direct response pricing is still down but as you start to lap the comparisons from last year.

Steven Silvester Tomsic: It is.

Steven Silvester Tomsic: Certainly improving.

Steven Silvester Tomsic: Quite a lot.

Steven Silvester Tomsic: Have an impact from preemption.

Steven Silvester Tomsic: With.

Steven Silvester Tomsic: With the election and unfortunate with our war coverage. So the redemptions are affecting and ratings are continuing to improve so we're.

Steven Silvester Tomsic: We're happy with where we are at Fox News has all of those trends.

Steven Silvester Tomsic: Our improving steadily our local stations is probably the most mixed but you have a bad comparison, particularly in the in the in the current pacings.

Steven Silvester Tomsic: With Super Bowl comps this time last year, it's probably about $50 million.

Steven Silvester Tomsic: In.

Steven Silvester Tomsic: Super Bowl revenue just just in the station group.

Steven Silvester Tomsic: Time last year. So the comparisons are quite tough as we go forward, but we remain confident that we will see a record.

Lachlan Keith Murdoch: You know, I've been lucky enough to have seen some of the prototypes for this service, and again, it will be unique and, I think, you know, very innovative when you see it roll out. In terms of the risks, and particularly for Fox News, I think the risks are very low, and that's because of the focus of this sports product being on, you know, the cord nevers.

Steven Silvester Tomsic: Political cycle.

Steven Silvester Tomsic: This is slightly.

Steven Silvester Tomsic: Ameliorated I think in the current quarter.

Steven Silvester Tomsic: With the <unk>.

Steven Silvester Tomsic: Lack of AR.

Steven Silvester Tomsic: So our competitive our primary.

Steven Silvester Tomsic: Competition.

But we're already seeing business in the first half of next year start to flow in from a from a political perspective, and it's obviously, it's sort of Nashville, because our stations.

Steven Silvester Tomsic: Large conversations in AR.

Lachlan Keith Murdoch: You know, Fox News continues to be, you know, the top-rated cable network, and our distributors, our partners really value that channel and that brand as it really drives tremendous viewership, audience, and engagement for them, and we think we'll continue to do so within the traditional cable and pay television bundle. Thank you, Ben. Operator, next question please. We go to Robert Fishman with Moffett-Nathanson, please go ahead. Good morning everyone.

Steven Silvester Tomsic: Key political markets like.

Steven Silvester Tomsic: Georgia, and Michigan, Pennsylvania, Arizona, and Wisconsin, So we're very confident in a very strong political.

Steven Silvester Tomsic: Political cycle once that starts to flow and then and then finally.

Steven Silvester Tomsic: With <unk> continuing to grow I think at 62, 63%.

Steven Silvester Tomsic: And obviously.

Steven Silvester Tomsic: Obviously with the PBT growth.

Steven Silvester Tomsic: The revenue is.

Steven Silvester Tomsic: Following the revenue growth is slightly less or somewhat less than it was.

Steven Silvester Tomsic: Last year, but in the.

Steven Silvester Tomsic: In the.

Steven Silvester Tomsic: In the streaming environment.

Steven Silvester Tomsic: We're very happy with it with its growth so.

Lachlan Keith Murdoch: Sticking with sports news, so we have long discussed with you the benefits of Fox to a sports-led skinny bundle. So I'm just wondering, any additional background you can share on what pushed this deal forward now, including maybe any flexibility you built into your recent affiliate fee renewals? And then, on a related note, should we expect to see any changes in your approach to negotiating future sports rights? And any comments you want to share about the Netflix-WWE deal that might impact these negotiations going forward? Thank you. Uh, well, let me... Start back to front, Robert.

Steven Silvester Tomsic: So that's an advertising scatter pricing is all up above above upfront pricing. So that's positive and then finally on the on the.

Steven Silvester Tomsic: Cable.

Steven Silvester Tomsic: Affiliate.

Steven Silvester Tomsic: Subscribers.

Steven Silvester Tomsic: And fees, we are in an environment, where I think we've called out of rigs roughly 8%.

Steven Silvester Tomsic: Our cable erosion and yet our cable affiliate fees have grown in this quarter. So I think that really shows the strength of our brands and our programming.

Steven Silvester Tomsic: In the cable universe. So we are very pleased with them.

Speaker Change: Thanks, John next.

Speaker Change: Next question please operator.

Speaker Change: It is from Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.

Speaker Change: Thank you back to the sports platform.

Speaker Change: Welcome you seem really confident that it won't affect the pay TV bundle.

Speaker Change: Just wanted to get some color on that given that sports has been really to conclude that kept it together.

Lachlan Keith Murdoch: So there's no impact on the Netflix WWE deal at all. So I don't think that plays a factor in this. And in fact, in how we approach our portfolio of sports rights, you know, we will be aggressively competing in the sports market for sports rights, but nothing has changed there. The primary uh uh, business, and value of Fox Sports is competing, you know, both for every subscriber in the traditional pay TV bundle and advertiser, viewer, and ultimately, advertiser. So sports remains a competitive business, which we, frankly, thrive in, and we don't see any difference to that. What led to this now?

Speaker Change: So why do you feel so confident that it will not impact that and then.

Speaker Change: What is the openness to add partners.

Speaker Change: We will then have a separate advertising organization, how will that add to work in your content.

Jessica Reif Cohen: So hi, Jessica Fye.

Jessica Fye: So.

First on <unk>.

Jessica Reif Cohen: And how it affects the overall pay TV bundle.

Jessica Reif Cohen: Again, the key market the market that we will be driving towards is the.

Jessica Reif Cohen: Is the market that sits outside the sports fan who sits currently outside of them.

Jessica Reif Cohen: Traditional pay TV bundle today, and there is tens of millions of them. So we are very confident that this is a large market and a large opportunity that we can address without.

Jessica Reif Cohen: Without undermining the traditional.

Jessica Reif Cohen: The traditional bundle.

Lachlan Keith Murdoch: You know, I think we've answered many questions on these quarterly calls over, you know, many years about when we are ready to launch a streaming service such as this, and we will do it. And we've been monitoring the space, obviously, for years, the past few years in particular. And as we developed with our partners a concept around a very unique and innovative product, we felt now was the right time to launch such a product into a new market, right? It's a new market where there's no product serving sports fans that are not within the cable TV bundle. So it accesses, for us, a whole new market and really drives a tremendous amount of new reach that we weren't, we weren't servicing before. Operator, next question, please. Next is John Hodulik with UBS.

Jessica Reif Cohen: We.

Jessica Reif Cohen: We are obviously, we've been working on this for several months and we've done lots of.

Jessica Reif Cohen: Sensitivity analysis, and we would not be.

Jessica Reif Cohen: Launching this product if we thought it was going to significantly.

Jessica Reif Cohen: Effect.

Jessica Reif Cohen: <unk>.

Jessica Reif Cohen: Our pay TV.

Jessica Reif Cohen: Affiliate partners and Thats very important to us we remain.

Jessica Reif Cohen: I think the biggest supporters of the traditional pay TV bundle, we think has tremendous value.

Jessica Reif Cohen: In the pay TV bundle for the consumer who wants to get it all at an affordable price the.

Jessica Reif Cohen: The big bundle is still the best way.

Jessica Reif Cohen: Get that programming in those brands. So so we are confident that.

Jessica Reif Cohen: This product will be additive and will give us incremental subscribers and not not.

Jessica Reif Cohen: Not.

Jessica Reif Cohen: Affect significantly the traditional bundle.

Jessica Reif Cohen: The openness to add partners.

Jessica Reif Cohen: <unk>.

Jessica Reif Cohen: Something that we're considering at this stage, we think that the the 14 linear networks.

Jessica Reif Cohen: This.

Jessica Reif Cohen: Service offers gives people a tremendous.

Lachlan Keith Murdoch: Please go ahead. Great, thank you. First, just quickly on sports TV, just any cash contribution or can you size any cash contribution required from Fox? And then, on advertising, you know, obviously a number of things affecting the numbers this quarter. You guys have some positive color as we look into next quarter. Just any color, one, I'd say on the TV side what you're seeing at this point in terms of politics.

Jessica Reif Cohen: The amount of.

Jessica Reif Cohen: Content between.

Jessica Reif Cohen: ABC.

Jessica Reif Cohen: Our affiliates Fox affiliates ESPN ESPN to ESB news the FTC network.

Jessica Reif Cohen: <unk>.

Jessica Reif Cohen: Fox affiliates Fox sports, one and two the Big 10 network TNT TBS.

Jessica Reif Cohen: In others, it's a tremendous offering that covers.

Jessica Reif Cohen: The majority of the key sports in this country NFL NBA WNBA Major League baseball and in Charlotte Center College, obviously NASCAR.

Jessica Reif Cohen: And so on so.

Jessica Reif Cohen: We think it's incredibly.

Jessica Reif Cohen: Strong offering and at this stage, we're not contemplating adding partners to it I think your third question Jessica was on advertising revenues.

Lachlan Keith Murdoch: And then, you know, with the improvement in the ratings and the year-over-year, you know, the gap you're seeing closing, can we assume that the 23% on the cable app side is sort of the worst number and any color on the sort of slope of the improvement we should see as we head through the year? Thanks. I've lost track. Sorry.

Jessica Reif Cohen: And so advertising revenues will flow through this so the advertising that we have on our <unk>.

Jessica Reif Cohen: On our linear networks will flow into the service and we will just give us increased reach.

Jessica Reif Cohen: To market that Hasnt seen those that advertiser engage with those clients before us. So we think it's a net positive.

Speaker Change: Thank you Jessica operator, we have time for one more question sorry, good that will come from Michael Morris with Guggenheim. Please go ahead.

Michael Morris: Hi, Good morning. Thank you guys. So I wanted to ask about two areas of strength in the quarter. The first one on the sports sub licensing can you share a little more detail on what that was how it impacted profitability and how to think about whether or not that's a recurring revenue and profit source.

Lachlan Keith Murdoch: Okay, so hat competition, advertising, and cable advertising. After this, we won't need any more questions. We'll cover the whole gamut. Thanks, John. On the cash side, I'll let Steve fill in the details, but obviously, this business has both a marketing and other costs associated with running the business in the partnership. But there's also the revenue that we garner through affiliate fees for our networks that come out as the business grows. So, John, I think it's a touch early for us to be giving.

Michael Morris: And then my second question is on the affiliate acceleration which is.

Michael Morris: Great to see.

Michael Morris: We know that the rate of cord cutting is going to be impactful on that number its very hard to predict but on pricing alone and the precedent that you. Just said should we look at this is the first quarter of a sustained stronger pricing dynamic and how long do you think we should anticipate that you can continue to see this type of of growth being fuel.

Steven Silvester Tomsic: Some forecasts around sort of the contributional deficit from the JV, but sort of as we look at it, it'll be accretive to us from a net-net perspective when you take into account the affiliate fees that we'll collect as revenue versus whatever funding we need to make to the JV. From a NetNet perspective, it'll be a creative. And then on advertising, I think, you know, the advertising outlook is, as I mentioned, with news, but you could apply this term to the overall market; it's sort of nuanced as we look at it. If I start with sports, you know, we had a very solid regular NFL season from an advertising perspective, and I think a stronger NFL postseason, which we were very pleased by.

Speaker Change: By those new contractual relationships. Thank you.

Speaker Change: I thought it was unfair that Steve will get the easy question.

Speaker Change: Then you asked the second question so.

Speaker Change: Hey, Mike Good morning, Michael I'll, let I'll, let Steve address the sports licensing first Hey, Mike.

Steven Silvester Tomsic: As sports sub licensing revenue, we have in the cable segment. So we have.

Mike: We own sports sub licensing income in relation to various sort of college sports properties with international Soccer rights.

Steven Silvester Tomsic: Some of these rights come with some variable based economics to them, which we saw in the quarter.

Speaker Change: I think you should see this as somewhat of a one off it's not going to repeat like this in future quarters future years.

Speaker Change: And if you want to try and Dimensionalize. It then.

Speaker Change: The increase in cable other revenues between this quarter and previous quarter last year is a pretty good guide to the net benefit to us from those sub licensing arrangements.

Steven Silvester Tomsic: But also, that was, it's a smaller revenue line, but we had a fantastic college football season. Really, I think the story of this past Autumn was really the strength of college football and, particularly as advertisers, you know, we've sort of found it and appreciated the quality of the audience watching college football. Coming up, if we look forward, obviously, we have the Daytona 500 and then the start of the regular Major League Baseball season in March, and there's a lot of positive momentum with advertisers for those. Fox News, you have positive trends with DR pricing. Direct response pricing is still down, but as you start to look at the comparisons from last year, it's certainly improving quite a lot. We have an impact from preemptions with election coverage and, unfortunately, with war coverage, so the preemptions are affecting ratings, and ratings are continuing to improve. So we're happy with where we are with Fox News, as all those trends are improving steadily. Local stations are probably the most mixed, but you have a bad comparison, particularly in the current pacings with Super Bowl comps this time last year.

Speaker Change: So.

Speaker Change: On the affiliate.

Speaker Change: Revenue acceleration.

Speaker Change: I think the if you look at it to Amgen can we sustain sustain that.

Speaker Change: We've now completed all of our.

Speaker Change: Distributions of renewals.

Speaker Change: In this cycle that will affect the remainder of this fiscal year. So.

Speaker Change: There is no more renewals are negotiated that will affect this fiscal year and obviously then we're rolling into renewals that will.

Speaker Change: We will take effect.

Speaker Change: After this fiscal.

Speaker Change: If you look at the underlying.

Speaker Change: The rate of decline around 8% and this goes back to.

Speaker Change: John's question.

Speaker Change: If we look at that 8% actually in.

Speaker Change: September and October.

Speaker Change: It was better than 8% it was a little bit better.

Speaker Change: Then and this we believe it was.

Speaker Change: The impact of football and.

Speaker Change: And sports sports viewing in the fall, but then after October sort of and as you get into November and December.

Speaker Change: The rate returned decline returned to.

Speaker Change: Towards.

Speaker Change: So thats sort of baseline at 8% so so.

Speaker Change: For the immediate future, we don't see that changing there is some cyclicality.

Speaker Change: Within that but I think the 8% yes.

Speaker Change: Number that we're sort of baking into it and into our assumptions.

Speaker Change: With that we believe.

Speaker Change: As we've achieved in over the last year will be renewed.

Speaker Change: A third of our distribution.

Speaker Change: We've been able to achieve.

Speaker Change: <unk>.

Speaker Change: Rate increases that have made up for those for those declines and that is because of the strength of our brands the strength of our programming and really where they sit having sort of a focused strategy on a key number a very core brands that are essential.

Lachlan Keith Murdoch: It's probably about $50 million in Super Bowl revenue just in the station group this time last year. So comparisons are quite tough as we go forward, but we remain confident that we'll see a record political cycle. This is slightly ameliorated, I think, in the current quarter with the lack of a, So we're a competitive primary competition, but we're already seeing business in the first half of next year start to flow in from a political perspective. And it's obviously, it's sort of natural because our stations, we have a large number of stations in key political markets like Georgia and Michigan, Pennsylvania, Arizona, and Wisconsin. So we're very confident in a very strong political cycle once that really starts to flow. And then finally, with Tubi, Tubi's TBTs continue to grow, I think at 62%, 63%.

Speaker Change: Further.

Speaker Change: Distributors and for their customers.

Speaker Change: We'll be able to maintain.

Speaker Change: Similar rates of change going forward.

Speaker Change: Thanks, Mike.

Speaker Change: 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 again for joining today's call. Thank you. Thanks, everyone have a good day.

Speaker Change: Ladies and gentlemen that does conclude your conference call for today. Thank you for using AT&T executive teleconference. You may now disconnect.

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

Lachlan Keith Murdoch: And obviously, with the TBT growth, the revenue is following. The revenue growth is slightly less or somewhat less than it was last year. But in the streaming environment, we're very happy with it. So that's on advertising. Scatter pricing is all up above upfront pricing.

Lachlan Keith Murdoch: So that's positive. And then finally, on cable, and and and and fees. You know, we are in an environment where uh... we call out a route roughly eight percent uh... uh... cable erosion, and yet our cable affiliate fees have grown in this quarter. So I think that really shows the strength of our brands and our programming in the cable universe. So we're very pleased with that. Next question, please, off-order. It is from Jessica Reeve Ehrlich with Bank of America Securities. Please go ahead.

Lachlan Keith Murdoch: Back to the sports, that it won't affect, and Bill Whiting. Thank you. I just want to give some color on that given that sports have been really the glue that's kept it together. So why do you feel so confident that it, that, and then?

Lachlan Keith Murdoch: You know, what is the openness to add partners? Will they have a separate advertising organization? How will the ads work? Um, Uh.

Lachlan Keith Murdoch: Hi Jessica, by the way. First on how it affects the overall pay TV bundle, again the key market, the market that we will be driving towards, is the market that sits outside the sports fan who currently sits outside of the traditional pay TV bundle today, and there are tens of millions of them. So we are very confident that this is a large market and a large opportunity that we can address without undermining the traditional bundle. Obviously, we've been working on this for several months. We've done lots of sensitivity analysis, and we would not be launching this product if we thought it was going to significantly affect our pay-to-be affiliate partners, and that's very important to us. We remain...

Lachlan Keith Murdoch: I think the biggest supporters of the traditional pay TV bundle think there's tremendous value in the pay TV bundle. For the consumer who wants to get it all at an affordable price, the big bundle is still the best way to get that programming and those brands. So we are confident that this product will be additive and will give us incremental subscribers but will not significantly affect the traditional bundle. And the openness to add partners, that's not something that we're considering at this stage. We think that the 14 linear networks that this service offers give people a tremendous amount of content between ABC affiliates, Fox affiliates, ESPN, ESPN2, ESPNews, the SEC network, Fox affiliates, Fox Sports 1 and 2, the Big 10 network, TNT, TBS, and others.

Lachlan Keith Murdoch: It's a tremendous offering that covers the majority of the key sports in this country, NFL, NBA, WNBA, Major League Baseball, NHL, etc., college, obviously NASCAR, and so on. We think it's an incredibly strong offering, and at this stage, we're not contemplating adding partners to it. I think the third question, Jessica, was about advertising revenues. Advertising revenues will flow through this, so the advertising that we have on our linear networks will flow into this service and will just give us increased reach to markets that haven't seen that advertiser engaged with those clients before. So we think it's a net benefit.

Speaker Change: [music].

Lachlan Keith Murdoch: Thank you. Operator, we have time for one more question. Very good. That will come from Michael Morris with Guggenheim. Please go ahead.

Operator: Hi, good morning. Thank you, guys. So I wanted to ask about two areas of strength in the quarter. The first one is sports sub-licensing. Can you share a little more detail on what that was, how it impacted profitability, and how to think about whether or not that's a recurring revenue and profit source? And then my second question is about affiliate acceleration, which is great to see. We know that the rate of cord cutting is going to be impactful on that number, but it's very hard to predict.

Lachlan Keith Murdoch: But on pricing alone and the precedent that you just set, should we look at this as the first quarter of a sustained stronger pricing dynamic? And how long do you think we should anticipate that we can continue to see this type of growth being fueled by those new contractual relationships? Thank you. I thought it was unfair that Steve got the easy question, and then you asked the second question.

Lachlan Keith Murdoch: So anyway, good morning, Michael. I'll let Steve address the sports sub-licensing first. Hey, Mike.

Steven Silvester Tomsic: So our sports sub-licensing revenue we have in the cable segment, so we have... We own sports sub-licensing revenue in relation to various sorts of college sports properties and international soccer rights. Some of these rights come with some variable-based economics to them, which we saw in the quarter. I think you should see this as somewhat of a one-off; it's not going to repeat like this in future quarters, future years. And if you want to try and dimensionalize it, then the size of the increase in cable other revenues between this quarter and the previous quarter last year is a pretty good guide to the net benefit to us from those sub-licensing arrangements. So, on the affiliate... revenue acceleration, I think if you look at it in two years, and can we sustain that?

Steven Silvester Tomsic: We've now completed all of our distributions of renewals in this cycle that will affect the remainder of this fiscal year. So there are no more renewals negotiated that will affect this fiscal year, and obviously, we're rolling into renewals that will take effect after this fiscal year. If you look at the underlying rate of decline around 8 percent, and this goes back to a little bit of John's question, if we look at that 8 percent, actually, in September and October, it was better than 8 percent; it was a little bit better, and this we believe was the impact of football and sports viewing in the fall. But then after October, as you get into November and December, the rate declined and returned to its baseline at 8 percent

Lachlan Keith Murdoch: So for the immediate future, we don't see that changing. There's some cyclicality within that, but I think the 8 percent is a number that we're baking into our assumptions. With that, we believe, as we've achieved over the last year, where we've renewed over a third of our distribution, we've been able to achieve rate increases that have made up for those declines. And that is because of the strength of our brands, the strength of our programming, and really where they sit, having sort of a focus. Strategy on a key number of very core brands that are essential for distributors and for their customers that will be able to maintain similar rates of change. Thanks, Mike. At this point, we are out of time, but if you have any further questions, please give me or Dan Carey a call.

Gabrielle Brown: Thank you again for joining today's call. Thank you. Thanks, everyone. Have a good day.

Operator: Ladies and gentlemen, that does conclude your conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect. We're sorry, your conference is ending now. Please hang up.

Speaker Change: [music].

Operator: ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation second quarter fiscal year 2024 earnings conference call. At this time, all participants are in a listen only mode.

Gabrielle Brown: As a reminder, this conference is being recorded. I would now like to turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.

Gabrielle Brown: Thank you, Operator. Good morning, and welcome to our fiscal 2024 second quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer.

Gabrielle Brown: 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 files. 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 website. And with that, I'm pleased to turn the call over to Lachlan.

Speaker Change: [noise] in 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 would now like to turn the conference over to Chief Investor Relations Officer Ms. Gabrielle Brown. Please go ahead Ms Brown.

Gabrielle Brown: Thank you operator, good morning, and welcome to our fiscal 'twenty 'twenty four second 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.

Speaker Change: <unk> will give some prepared remarks on the most recent quarter and then we'll take questions from the investment community.

Speaker Change: Please note that this call may include forward looking statements regarding Fox Corporation's financial performance and operating results.

Speaker Change: 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.

Lachlan Keith Murdoch: Our concentration in news and sports, coupled with the outstanding performance at TUBI, is clearly an advantage in a mixed advertising environment. More specifically, sports advertising was very healthy during the quarter, and we saw particularly strong demand for NFL and college football, which continued into the NFL playoffs. At news, the second quarter was more nuanced. While preemptions and the direct response market adversely impacted quarterly growth, we sequentially narrowed the gap between the current and prior year in ratings and prices. We were also able to increase our viewing share over the previous quarter, and the positive trends in share, ratings, and pricing have carried over into the current quarter. Last week, I visited our bureau in Jerusalem, met with our talented and dedicated staff there, and saw firsthand the devastation wrought by Hamas on October 7. Our hearts, our thoughts, and our prayers go out to the victims of that day, the innocents killed in Israel and in Gaza, and the hostages still denied the embrace of their families and loved ones.

Speaker Change: 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 website.

Speaker Change: With that I'm pleased to turn the call over to Lachlan.

Lachlan Keith Murdoch: Thank you Debbie and thank you all for joining us this morning.

Lachlan Keith Murdoch: Against the backdrop of an active new cycle and another robust fall sports schedule, our fiscal second quarter again illustrated the strength of Fox.

Lachlan Keith Murdoch: The work our correspondents, our camera people, and our producers do reporting on these events is important, outstanding, and deeply appreciated. Now, on to sports. In calendar 2023, 96 of the year's 100 most watched telecasts were live sports. Fox is responsible for 29 of the year's 100 most-watched shows, more than any other network. This marks the fifth straight year that Fox has topped the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves. The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games, with America's Game of the Week averaging 25 million viewers and an eight-year high, and Fox NFL Sunday logged its 30th straight year as the number one NFL pregame show.

Lachlan Keith Murdoch: At news the second quarter was more nuanced, while preemption and the direct response market adversely impacted quarterly growth, we sequentially narrowed the gap between the current and prior year and ratings and in pricing.

Lachlan Keith Murdoch: We were also able to increase our viewing share over the previous quarter and the positive trends and share ratings and pricing have carried over into the current quarter.

Lachlan Keith Murdoch: Last week I visited our Bureau in Jerusalem met with our talented and dedicated staff there and saw firsthand the devastation wrought by Hamas on October 7th.

Lachlan Keith Murdoch: Our hearts, our thoughts and our prayers go out to the victims of that day, the innocents killed in Israel and in Gaza.

Lachlan Keith Murdoch: And the hostages still denied the embrace of their families and loved ones.

Lachlan Keith Murdoch: The work our correspondents are camera people and our producers do reporting on these events is important outstanding and deeply appreciate it.

Lachlan Keith Murdoch: Now onto sports.

Lachlan Keith Murdoch: In calendar 2023, 96 of the year is 100, most watched telecast or live sports.

Lachlan Keith Murdoch: Fox was responsible for 29 of the year is 100, most watched shows.

Lachlan Keith Murdoch: More than any other network.

Lachlan Keith Murdoch: This marks the fifth straight year that Fox is top of the industry in live sports viewing and demonstrates the unparalleled reach and engagement our content achieves.

The 30th NFL regular season on Fox concluded with an average of 19 million viewers across all games with America's game of the week, averaging 25 million viewers, an eight year high.

Lachlan Keith Murdoch: And Fox NFL Sunday logged its 13th straight year as the number one NFL pregame show.

Lachlan Keith Murdoch: In digital we saw strong engagement of <unk>, which finished with a very impressive 62% growth in total view time and 17% growth in revenue.

Lachlan Keith Murdoch: <unk> hours in December alone.

Lachlan Keith Murdoch: At Fox Entertainment, the second quarter, so our programming strength with Fox, having the season's number one new broadcast entertainment series and crap uplifts.

Lachlan Keith Murdoch: Hats off to Dan Harmon.

Lachlan Keith Murdoch: The number one new game show debut and Snake oil and the number one cooking series in Hell's kitchen.

Lachlan Keith Murdoch: We're also pleased with a very strong start of our mid season lineup and the early success, we are family and the floor.

Speaker Change: Before I hand over to Steve I'll comment on the sports platform, We announced last night between Fox Disney and Warner Brothers Discovery.

Lachlan Keith Murdoch: This new and unique digital distribution platform is focused on sports fans outside of existing pay TV offerings. Upon launch in the fall of 2024, the platform will offer a broad suite of sports, including those from a combined 14 linear networks that broadcast sports today. The inclusion of our networks in the platform is consistent with our strategy of being proudly consumer-first and distribution agnostic. However, across the distribution ecosystem, our traditional pay TV market will remain our dominant customer base for some time to come. As such, we remain committed to our existing distribution partners, where our strong portfolio of leadership sports, news, and entertainment brands thrive in their bundled offerings. This unique new platform opens up a new market for us, one that we at Fox have not accessed before and that we're excited to participate in. As always, we are focused on delivering value for our shareholders in a thoughtful and disciplined manner, and we will continue to explore every opportunity to maximize that value over the long term. Let me now turn it over to Steve for his comments on the corridor's financial results. Thanks, Lachlan, and good morning, everyone.

Speaker Change: This new and unique digital distribution platform is focused on sports fans outside of existing pay TV offerings.

Speaker Change: Upon launch in the fall of 2020 for that platform will offer a broad suite of sports, including those from a combined 14 linear networks that broadcast sports today.

Speaker Change: The inclusion of our networks in the platform is consistent with our strategy being proudly consumer first and distribution agnostic.

Speaker Change: Across the distribution ecosystem, our traditional pay TV market will remain our dominant customer base for some time to come.

Speaker Change: As such we remain committed to our existing distribution partners, where our strong portfolio of leadership Sports News and entertainment brands thrive in their bundled offerings.

Speaker Change: This unique new platform opens up a new market for us one that we had talks have not excess before and they were excited to participate in.

Speaker Change: As always we are focused on delivering value for our shareholders in a thoughtful and disciplined manner.

Speaker Change: And we will continue to explore every opportunity to maximize that value over the long term.

Speaker Change: Let me now turn it over to Steve for his comments on the quarter's financial results.

Steven Silvester Tomsic: Thanks, Lachlan and good morning, everyone.

Steven Silvester Tomsic: With the vast majority of our fiscal 2024 affiliate renewals now successfully completed Fox delivered 4% growth in total company affiliate fee revenues led.

Steven Silvester Tomsic: <unk> revenues.

Steven Silvester Tomsic: Total company other revenues grew by 14% driven by high sports sub licensing revenues.

All in flux reported total company revenues of $4 $2 3 billion.

Steven Silvester Tomsic: Down 8% from the prior year.

Steven Silvester Tomsic: Total company expenses decreased 5% over the prior year, primarily due to the absence of the men's will covet.

Q2 2024 Fox Corp Earnings Call

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