Q2 2025 Fox Corp Earnings Call
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I'll now turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.
Thank you, operator. Good morning and welcome to our fiscal 2025 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.
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.
Lachlan: And with that, I'm pleased to turn the call over to Lachlan.
Lachlan: Thank you, Gabby, and thank you all for joining us this morning.
Lachlan: Just to start, I want to comment on the devastating impact of the Los Angeles wildfires over the past few weeks.
Lachlan: At Fox, our top priority has been to support our staff who have been profoundly affected in many ways, including losing their homes and much, if not all, of their belongings.
We are one family and we are truly with you.
Lachlan: And to aid the broader community, Fox has donated and raised over five million dollars across our platforms.
Thanks to the generosity of our audiences and employees.
Lachlan: But, sadly, as we have learned from past fires, the impact on the community is measured not in days or weeks, but in years.
Lachlan: Our focus has now shifted to the longer-term recovery for those most affected and to the rebuilding of the community around them.
Lachlan: I want to thank our colleagues at KTTV and Fox News who kept viewers comprehensively informed with their coverage of the tragedy as it unfolded.
Lachlan: We are deeply grateful for their work and also for the efforts of firefighters and many other first responders.
Thank you.
Speaker Change: Now on to our earnings. As you will have seen in the release this morning, our fiscal second quarter results again demonstrates the continued operating momentum and strong financial performance of Fox.
Speaker Change: Financially, Fox EBITDA more than doubled year-over-year to a second quarter record of 781 million dollars, driven by revenue growth of 20% to just over 5 billion.
Speaker Change: These results are underpinned by industry-leading affiliate and advertising revenue growth and reflect strong on-screen delivery through our coverage of the presidential election both at Fox News and across our local stations.
Speaker Change: strong NFL, college football, and Major League Baseball postseason viewership and continued audience expansion at Tubi.
We are firing on all cylinders.
Speaker Change: Total affiliate revenue grew by 6% on the back of higher rates with subscriber decline improving for the second consecutive quarter.
Speaker Change: Notably, we have now successfully completed all affiliate renewals that will impact fiscal 2025.
Speaker Change: Total company advertising growth of 21% in a quarter was driven in part by record political revenue, led by our local stations.
Speaker Change: Looked at more holistically across this year's presidential cycle, our first half fiscal 2025 political revenue of over 400 million dollars was also a record.
Speaker Change: 2B was a strong contributor to advertising revenue growth in the quarter, achieving a 31% increase in ad revenues, showing acceleration even when excluding political revenue.
Sports remains remarkably robust.
Speaker Change: Our NFL postseason broadcast of the Wild Card Divisional and NFC Championship saw our highest ever unit pricing and demand for these matches.
Speaker Change: We are sold out with record pricing for this Sunday's Super Bowl 59. We can't wait for the big game.
Speaker Change: Advertising trends at Fox News are also strong across the direct response and national advertising categories where there is increased demand from existing blue-chip advertisers as well as new clients coming to the network due to its record share of audience.
and Tubi continues to monetize its hard-to-reach, differentiated audience.
Speaker Change: Now, everyone on this call will know that Tubi's audience is diverse.
and it's young.
Speaker Change: And it is over 65% cordless, made up of cord nevers and cord cutters, not currently in the traditional cable universe.
Speaker Change: While in past years, we have always unlocked the Super Bowl for viewers across our digital platform, this year, we will focus these cordless viewers on Tubi, with Tubi's first-ever Super Bowl livestream and related shoulder programming.
Speaker Change: This will provide viewers a great service, broaden the reach of the game, and deliver to the an opportunity to engage a large cohort of new users.
Speaker Change: After the game, Tubi viewers will have access to our library of over 275,000 movies and TV episodes, including the recently premiered The Z Suite, the hit original sidelined The QB and Me, and much more.
Speaker Change: The game, the content, and the experience on Tubi will further support its stellar growth.
Speaker Change: The mission for all of our platforms is delivering unique content to large audiences.
Speaker Change: Nowhere is that more evident than at Fox News, where four and a half billion hours of content was consumed across its platform during the second quarter's quarter.
Speaker Change: On election night, more viewers turned to Fox News Media than any other network, with over 13.5 million viewers tuning in during primetime.
Speaker Change: Fox News Channel once again ended the quarter as the most-watched cable network in total day and primetime, growing total day audience by nearly 40% and primetime audience by 45% year-over-year.
Speaker Change: Fox News meaningfully outperformed its peers, more than doubling the viewing of its closest competitor, and posting its highest quarterly share of primetime cable news audience in its history at over 60%, which includes a 70% share in December.
Speaker Change: Momentum and Share in Ratings has continued through and after the inauguration.
on the day
Speaker Change: Fox News Media's coverage of the inauguration drew close to 12 million viewers, making it the most watched coverage in all of television.
Speaker Change: This viewership has contributed to Fox News 3rd quarter to date ratings up over 50%, primetime ratings up over 40%, delivering Fox News a commanding share of the primetime cable news audience at 69%.
Speaker Change: And Fox News' share of the audience was not limited to the cable network.
Speaker Change: For example, on YouTube, Fox News generated nearly 410 million views in the month of January, beating our closest competitor, NBC, by nearly two and a half times.
Speaker Change: The continued growth of Fox News Digital underscores that audiences are consuming their news in different ways.
Speaker Change: We clearly saw this during the past election cycle, where there was an uptick in consumers who either supplemented or solely accessed their news and information from non-traditional media sources.
Speaker Change: We view these new media markets opportunistically and as central to our growth strategy.
Speaker Change: Fox News outstanding achievements underscore our unwavering commitment to outstanding journalism, to our insightful coverage of politics and breaking news, and to our strong primetime lineup.
Of course, our content leadership also extends to sport.
Speaker Change: Autumn is traditionally the strongest time of year for Fox Sports, and 2024 was no exception.
Speaker Change: With a thrilling Major League Baseball World Series, college football expanding to Friday nights, and the NFL remaining the most watched content in all of television, Fox was the leader in consumption of live sports events in the second quarter.
Speaker Change: Our only disappointment in sports is that we will not be moving forward with Venue, our sports streaming joint venture with Warner Brothers Discovery and Disney.
Speaker Change: While the venue team has done a tremendous amount of truly genius work preparing the digital platform for launch, in the end the legal distractions around the business became increasingly difficult to bear.
Speaker Change: Venue was to be another distribution outlet for our brands to access consumers in the market wherever they are.
Speaker Change: And that is what we continue to be focused on, maximum distribution of our content, whether that be traditional, digital streaming, or our own D2C offering in the near future.
Encouragingly, the distribution market has made some major strides recently.
Speaker Change: In the 12 months since we announced the venue, we have seen key distributors announce the launch of smaller, lower-cost bundles of sports, news, and broadcast networks.
Speaker Change: Three distributors have announced new skinny packages in recent months, and we expect this trend to continue. We see this as a positive initiative by both our distribution partners and other content owners.
Speaker Change: The inclusion of our suite of channels, sports and news, in each of these offerings is a real economic benefit to us, even more so than the sports-specific venue, and so gives us greater confidence for Fox over the long term.
Speaker Change: We have had a very solid first half of our fiscal year, and we are excited for what is to come.
Speaker Change: Let me now turn it over to Steve for his comments on the quarter's financial results.
Thanks, Lachlan, and good morning, everyone.
Speaker Change: Underscoring the strong momentum we've seen since the start of the year, Fox delivered standout results in the second quarter.
Speaker Change: highlighted by a 20% increase in revenues and a 123% increase in EBITDA to 781 million dollars. A record fiscal second quarter for Fox.
Speaker Change: Our overall revenue growth was led by a 21% increase in advertising revenues with broad-based strength across our portfolio including significant political ad spend collected at our local stations
Speaker Change: Strong MLB ratings and robust pricing across our key sports properties, continued growth at Toobie and strong engagement at News.
Speaker Change: Total company affiliate fee revenues grew a healthy 6% over the prior year quarter. Once again demonstrating the strength of our brand and focused portfolio of channels.
Speaker Change: As Lachlan mentioned, we've now successfully completed all affiliate renewals that impact our fiscal 225.
Speaker Change: Other revenues grew 70% year-over-year, driven by higher sports sub-licensing revenues at our cable segment.
Speaker Change: Similar to last quarter, this growth in revenue was largely offset by a corresponding increase in rights costs, with no material impact on year-over-year overall EBITDA growth.
Speaker Change: Net income attributable to stockholders of $373 million or $0.81 per share was up versus the $109 million or $0.23 per share reported in the prior year period.
Speaker Change: excluding non-core items, adjusted net income was $442 million and adjusted EPS was $0.96.
Speaker Change: This represents a more than 180% increase over the $0.34 per share recorded in the prior year.
Speaker Change: Now let's turn to our operating segments, starting with the Cable Network Programming segment, which delivers 31% revenue growth and 16% EBITDA growth.
Speaker Change: Cable advertising revenues grew 32% over the prior year, driven by the strength in Fox News linear ratings and digital engagement, and supported by healthy pricing in both national and direct response.
Speaker Change: Additionally our sports advertising revenues benefited from higher MLB postseason ratings.
Speaker Change: Cable affiliate fee revenues grew 4% over the prior year quarter. As pricing gains from our affiliate renewals outpaced the impact from net subscriber declines of approximately 7%.
improving from just under 8% last quarter.
Speaker Change: Cable other revenues grew 350 million dollars due to the high sports sub-licensing revenues I mentioned earlier
Speaker Change: are primarily attributable to the increase in sports amortization that correspond to the incremental sports sub-licensing revenues along with modest increases in news and sports production costs.
Speaker Change: Now turning to our television segment, which delivered 16% revenue growth.
Speaker Change: Advertising revenues at our television segment grew 19% over the prior year, boosted by political advertising revenues, strong MLB ratings and pricing strength across our sports schedule and continued growth at Tubi.
Speaker Change: television other revenues were up 33% year-over-year primarily due to high content revenues tied to our entertainment production studios
Speaker Change: Partially offsetting the revenue growth at our television segment with a modest 3% increase in expenses which were driven by our continued investment at Tubi.
Speaker Change: All in, EBITDA at our television segment grew by $343 million year-over-year to reach $205 million.
Speaker Change: Turning to free cash flow, where we recorded a deficit of $436 million this quarter.
Speaker Change: This is entirely consistent with the seasonality of our working capital cycle, where the first half of our fiscal year reflects the concentration of payments for sports rights and build-up of advertising-related receivables, both of which reverse in the second half of our fiscal year.
Speaker Change: In terms of capital allocation, fiscal year to date, we have repurchased an additional $550 million through our shared buyback program.
Speaker Change: bringing the total cumulative amount repurchased 6.15 billion dollars for approximately 29% of our total shares outstanding since the launch of the buyback program in 2019.
Speaker Change: In addition, today we announced a 27 cent per share semi-annual dividend.
Speaker Change: With this dividend payout of approximately $120 million, our total cumulative cash return to shareholders in the form of both dividends and share buybacks will have reached approximately $7.9 billion since the establishment of Foxcore.
Speaker Change: These capital return measures are supported by the strength of our balance sheet where we ended the quarter with approximately 3.3 billion dollars in cash and 7.2 billion dollars in debt.
Speaker Change: And with that, I'll turn the call back over to Gabby. Thank you, Steve. And now we would be happy to take questions from the investment community.
Thank you.
Speaker Change: Ladies and gentlemen I would like to emphasize the new functionality for the question-and-answer queue.
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Speaker Change: Once again, if you have a question, please press star, then 1 at this time, and one moment please for the first question.
Unidentified: Okay, great. Thanks, guys. Lachlan, I got to follow up on the on the DTC comment that you talked about launching in the near future. Any additional details you could provide in terms of timing, what's included? And, you know, whether you need additional rights or any costs associated with launching the DTC service?
Unidentified: And then, on affiliate, you saw some nice acceleration there, and it sounds like you guys got all the renewals done. Any color in terms of pricing or what you're seeing in terms of volumes that have been driving that acceleration? Thanks.
Speaker Change: Thanks, John, and good morning. So on D2C, I should just start by sort of explaining the strategy and going back to make making it very clear that we see the traditional cable bundle.
Speaker Change: as still the most value for our consumers and frankly, the most value for the company. So we're huge supporters of the traditional cable bundle and we will always be. But having said that, we do want to reach consumers wherever they are.
Speaker Change: and there's a large population obviously that are now outside of the traditional cable bundle, either cord cutters or cord nevers. And we are designing, and we'll be able to say more about it.
And so our, our, our
and we're going to price the service accordingly.
Speaker Change: And it's also important to note, with those modest expectations, we do not expect any exclusive rights costs or additional incremental rights costs. This service will be a package of our existing content on existing brands.
Speaker Change: targeted at consumers that are not currently in the bundle. So the incremental cost will be relatively low, certainly relative to what our peers have spent in this space.
Speaker Change: And we're excited to be able to talk about it more in the coming weeks and months. In terms of timing and launch, we're certainly targeting a launch by the end of this calendar year.
Speaker Change: see that trend continue. In terms of pricing, listen, I think it's reflective of strategy, it's reflective of the fact that we've got a very focused
Speaker Change: portfolio of channels that distributors really want and you're seeing them because of their inclusion in those skinny bundles.
Speaker Change: with, as we've said for the last five years, we think that that strategy of both content and distribution should lead us to take share of wallet, and I think we're starting to see that.
Operator, next question, please.
Speaker Change: We have a question from Michael Morris at Guggenheim. Please go ahead.
Michael Morris: Thank you. Good morning. I wanted to ask about the strength that you're seeing at Fox News Advertising.
Speaker Change: Maybe you can expand on that a bit. It sounds like you're seeing incremental and arguably sustainable demand from some of from advertising buyers and I'm curious if you think I'm interpreting that right and it's just sort of what the dynamic and what the sustainability is of the changes that you're seeing there.
Speaker Change: I also want to ask about the 2B Super Bowl livestream, seems like a big deal.
Streaming big live events can be complicated. Appreciate it.
Speaker Change: Thank you very much, Mike, and good morning as well. So on Fox News advertising, there's two elements here. You're 1,000% right.
We are seeing, um, uh...
Speaker Change: You know, really a tremendous amount of new advertisers, clients coming on to the platform.
Speaker Change: It's very pleasing to see that that strength and momentum continue post-election and post-inauguration.
Speaker Change: With that strength, we've seen over 100 new clients who have not been Fox News advertisers, major major national clients, come onto the platform.
Speaker Change: continuing. In fact, we see in the third quarter, you know, ratings and revenue accelerating off the second quarter. So the Ontotubi Super Bowl,
our digital platform for
for the Super Bowl.
Thank you.
Speaker Change: But this year, obviously it's a unique opportunity, and we're going to focus that audience.
Speaker Change: on Tubi. Obviously one of the great, there's some technology streaming costs obviously, but it's tiny compared to the...
the opportunity in front of us.
So, very low incremental costs.
Speaker Change: and I'm here to talk about the first party data. In terms of exposure and sort of marketing platform, but also critically, we hope to capture a lot of first party data. We'll be driving people to
Speaker Change: to register on Tubi, many of them for the first time.
Speaker Change: really critically important to our programmatic and other advertisers and partners and will help us drive our CPMs as we go into the future. So we're excited by the opportunity.
Speaker Change: necessarily a big change in strategy, but it's a huge opportunity for TUBI, and it's something we were very keen to focus very intensely on.
Speaker Change: And what was the third question? It was, um, I think I was it. I think it was it. Right. Okay. Thank you. Operator. Next question, please.
Speaker Change: We have a question from Ben Swinburne of Morgan Stanley. Please go ahead.
Speaker Change: Hi, this is Thomas Yee on for Ben. I just wanted to double-tap on the 2B growth. Can you dimensionalize
Speaker Change: The investment needs that you see ahead, should we think about the incremental investment as largely content related and when do we think the business can begin to benefit on an EBITDA front for Fox?
Speaker Change: And then as a follow-up, any update on the progress you've made on the various states requiring sports betting licensing? Just a timeline coming into shape and how you might get approval over time would be helpful. Thank you so much.
Speaker Change: Great. Thank you very much, Thomas, and say good day to Ben for us all. On Tubi profitability, our investment in Tubi has reduced.
Speaker Change: very positive advertising growth. We see that we'll continue to invest in Tubi throughout this year and next before it reaches profitability, but it's on track and on schedule to meet expectations.
Speaker Change: break-even of profitability as per our kind of business plans and expectations for the business. So we are
really excited about Tubi's future and its
Speaker Change: positive impact for our overall revenue base and an EBITDA going into the future.
Speaker Change: On sports betting, we are talking to, I think, 27, 26, sorry, 26 states.
Relatively complicated one, but it's moving forward.
Speaker Change: and you know we expect there to be sort of no significant hurdles with that process but it will take time.
Speaker Change: Of course, we've given ourselves plenty of time because our option is not due for another end of 2030.
Speaker Change: So we've given ourselves another sort of five years to get through the process, but we would expect to be licensed, you know, very significantly before that.
Thank you.
Speaker Change: holding in Flutter, the parent company, is worth over 1.1 billion dollars. So our sports betting strategy has really been, you know, very positive for the company, for our register.
Speaker Change: We have a question from Michael and from Goldman Sachs. Please go ahead.
Michael Morris: Are you are you seeing any of the impact from the benefits of skinny bundle inclusion yet? Do you expect to outperform?
Michael Morris: the market on sub declines over time because of inclusion there.
And then, just a quick follow-up to Steve, you had...
Michael Morris: said that you expect digital losses to go from I think mid 300 million last year to high 200 million. Any updates there just given the comments around investing as well as the you know to be outperformance today? Thank you.
Thanks, Mike. So, I'll let Steve talk to the...
Steve: We see that as a very positive trend. I think it's too early, really, for...
Steve: Skinny Bundles. If you want to call them Skinny Bundles, I'll call them something a little bit different, but
Steve: It's too early to say that that's having a major impact, although I think there probably is some seasonality and subscriber trends with obviously being in the middle of an energized and exciting sports season. So there probably is some,
Steve: seasonally in that, but we are very heartened by the trends moving in the right direction.
Steve: With these skinny bundles, if you look at the bundles from a Fox perspective on DirecTV with MySports or on Comcast with Xfinity Sports and News TV,
Steve: Pretty much the entirety of our portfolio, our bouquet of channels, with a couple small exceptions, are in those bundles. So in both those I mentioned, the Fox Network, Fox News.
Fox Business.
Steve: Fox Sports 1, Fox Sports 2, and the Big Ten Network. And so, from a Fox perspective, this is not a skinny bundle, this is a lean and mean bundle.
We would hope that this bundle will be attractive.
Steve: to the cordless customers, to cord cutters and cord nevers, but to the extent that it does turn a traditional...
Steve: the marketing and user acquisition that comes with that. So you should expect them to step on the gas a little bit in terms of investing around that next in Q3. But no, we're spot on track in terms of bringing that digital investment down. But to the extent that we see more and more opportunities, then we'll...
Steve: will remain opportunistic, but at the moment we're staying on track.
Great. Operator, we have time for one more question.
Speaker Change: The final question is from Robert Fishman at Moffett-Nathanson, please go ahead.
Robert Fishman: Good morning everyone. Just following up on the sports strategy, after Netflix won the rights for Women's World Cup, can you just talk about how you feel Fox is positioned?
Speaker Change: continue to compete with Netflix and the other digital bidders for future sports rights? And then just to clarify on the DTC offering, coming back to that, will that plan include Fox News or Fox Nation content or is that just a sports-only offering? Thanks so much.
Thank you very much, Robert. So on the sports.
Strategy. Overall, if we continue...
Speaker Change: to believe that reach is, you know, the number one, two, and three priority for...
Speaker Change: for leagues and certainly for our business and what we will continue through and it actually ties into the direct-to-consumer strategy because to put our content in front of every consumer that wants it on any platform and every platform.
Speaker Change: And so by, you know, really driving our engagement with consumers, viewers, across traditional linear platforms, across...
Speaker Change: cable distribution across the digital MVPDs and across our own D2C services targeting these cord cutters and cord nevers. That will put us in absolutely the best position with the broadest reach.
Speaker Change: to continue to serve both our viewers but also sports fans.
Speaker Change: At that package, the D2C package, we'll announce more in the coming future, but we would see that package as a package that's holistic of all of our content of sports and news.
Great.
Speaker Change: At this point, we are out of time, but if you have any further questions, please give me or Charlie Costanzo a call. Thanks so much for joining our call today. Thank you. Thanks, everyone.
Speaker Change: Ladies and gentlemen, that does conclude the Fox Corporation second quarter fiscal year 2025 earnings conference call.