Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Fox Corporation fourth quarter 2019 earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session instructions will be given at that time.
If you should require assistance during the call. Please press Star then zero as a reminder, this conference is being recorded.
I'll now turn the conference over to Chief Investor Relations Officer, and Executive Vice President of corporate initiatives Mr., Joe during the call. Please go ahead Sir.
Thank you very much operator.
Hello, everyone and welcome to our fourth quarter fiscal 2019 earnings conference call.
Joining me on the call today are Lachlan Murdoch executive Chairman and Chief Executive Officer.
John Neylan Chief operating officer.
And Steve Tomsic, our CFO .
First laclede and Steve will give some prepared remarks on the most recent quarter and fiscal year.
And then we'll be happy to take questions from the investment community.
Please note that this call may include forward looking statements regarding Fox.
Financial performance operating results strategy among other things.
These statements are based on management's current expectations and actual results.
Could differ materially from what is stated as a result of certain factors identified on today's call in the company's SEC filings.
Including the Companys registration statement on form 10, and subsequent quarterly reports on Form 10-Q .
Additionally, this call will include certain non-GAAP financial measures.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release, and our SEC filings, which are available in the Investor Relations section of our website.
With that I'll turn the call over to Laughlin.
Thanks, Joe Good afternoon, and thank you all for joining us today on Fox Corporation's year end earnings call.
While we are ending fiscal year. We're also just starting our growth trajectory and our hitting key milestones at a good pace specifically, we just reported strong financial results.
We recently concluded a very successful advertising upfront very successful, we're making good progress on our distribution renewals.
And we are having a compelling content lineup across our linear and digital channels, all of which positions us well as we can commence our first full fiscal year 2020 .
For fiscal 2019, we delivered exceptional financial results, achieving 12% revenue growth and 8% EBITDA growth.
Our revenue growth was led by double digit gains in both affiliate and advertising revenues.
As you all know about half of our annual revenue comes from affiliate revenue and despite continued subscriber declines we achieved 12% affiliate revenue growth in fiscal 2019.
Renewing distribution.
Range accounts with our partners is a normal course activity for us and we have a competencies renewals without much clamor over many cycles.
This past fiscal year was no exception, we were able to reset affiliate rates, particularly in the television segment successfully renewing numerous distribution agreements.
Today, the remainder of our annual revenue.
Principally comes from advertising.
In fiscal 2019, we achieved 10% growth led by the addition of Thursday night football and record gross political revenues of more than $185 million at the Fox stations group.
Surpassing by almost 50% the previous record set in fiscal 2013 during the Obama Romney election.
A particularly noteworthy facet of this year's growth was a 24% increase in digital advertising revenues.
Led by 46% growth at Fox News Dot Com alone.
Our advertising partners are clearly supportive of our ongoing programming strategy.
This year's advertising upfront was one of the strongest we have seen in many years, yielding higher pricing across entertainment sports and news.
Specifically for Fox. This strength reflects advertisers recognition of our unique capacity to deliver a highly engaged audiences at scale.
Across our concentrated portfolio, we were rewarded for our continuing content investments.
On the entertainment front, we were able to achieve top of market low teen CPM increases and mid to high single digit volume increases.
In addition, we were able to command mid to high single digit pricing increases in sports and news.
In addition, even at this early date, we're very encouraged by both the volume and pricing we are seeing for the Super Bowl.
We are in a strong television advertising market right now.
Which is due in part to an especially renewed interest by marketers in primetime and sports programming, which is clearly to our great advantage.
As you know a significant amount of the company's revenue is tied to the Fox broadcast network, which is supported by key sports and entertainment content as well as by local programming delivered everyday across America.
Our network commands premium advertising and retransmission revenue rates because it delivers a complete schedule of diverse content genres.
That engage wider audiences.
From the NFL to the Simpsons. The network is defined by its programming breadth and not by our vertical concentration that is the hallmark of cable channels.
And it is this breadth of programming that makes the Fox broadcast network one of the top four channels across the country weekend and week out as such a strategic asset for Fox.
While the power of sports is on an eyeball, we're not looking to turn Fox under a pure play sports channel we have a few of those already.
Rather keeping the Fox network vibrant and connected to our audiences is what we are constantly focused on.
It is why we are investing in entertainment originality at the network at a time when broadcast originality and the scarcity value of reaching large audiences attracts a market premium across our revenue streams as is as was demonstrated by advertisers in the recent upfront.
To that end, we are pursuing a strategy to expand our portfolio of owned content to generate long term asset value for Fox.
We're being strategic and judicious building smartly and deliberately around our strengths.
As part of this strategy, we are pursuing a new program co production model that gives us an equity interest in nearly all new shows aired on the network.
We are enhancing our internal content creation capabilities to the launch of sidecar, which is already providing third party platforms like quickly with content and also through the acquisition, we announced yesterday of Bento box. The animation company that produces Bob's burgers as well as two new Fox series Duncanville and the great North.
Bento box gives fox access to the next generation of animators and the ability to originate owned IP to drive long term value for the company.
You need only to look at our Sunday broadcast schedule, where we have launched more animated hits than anyone to know that animation has been the most stable network programming on Fox Barr Nunn, creating leverage loyalty and youthful audiences across linear and digital properties.
Beyond the network. We are also focused on our direct to consumer initiatives.
Fox News continues to build a significant multi platform presence well beyond the linear channel and has a strong position in direct to consumer news offerings.
The Fox news digital properties attract over 100 million unique users per month and leads news engagement with over 3 billion page views per month.
We are expanding our D to C news capabilities by offering a more immersive video on demand service in the former Fox nation.
Which was launched just this past November .
On the sports front, we launched pay per view boxing with dispense Garcia about in March we followed that with a per cow Thurman matched just a few weeks ago and we're encouraged by the results as total purchases increased by more than 30% and direct purchases on the Fox sports digital properties nearly doubled from the first pay per view event.
In aggregate the Fox portfolio of digital properties generates a monthly audience of over 200 million unique people and nearly 10 billion minutes of content consumption.
But our probe progress does not stop there.
During the past few months and consistent with the strategy, we outlined at our Investor Day, We've made key investments to expand the reach of our brands beyond their traditional linear business models and deliver new and innovative products to our most valuable asset are massive and massively engaged audience.
Most notably in May Fox and the stars group announced plans to launch Fox bet on National Media and sports Wagering partnership in the United States. We are on track to launch the Fox Pitt product in the upcoming football season, or I should say before the upcoming football season, and we see the opportunity and sports wagering as a long term value contributor to Fox.
Earlier this week, we announced the entry into a definitive agreement to the proposed acquisition acquisition of 67% of credible labs, a leading direct to consumer personal finance marketplace in the United States at a price that we believe is full fare and attractive on all relevant metrics, including our commitment to provide up to $75 million of growth capital over the next two years.
The merger resulted from extensive discussions and negotiations with a special committee of independent directors on credible sport, which has unanimously recommended that transaction.
Through this prudent and disciplined investment we will exit we will assess.
An adjacency to our normal national and local news audiences and tap into a high growth market.
Just like our investment in the stores group for our Fox bet offering through Fox sports the credible marketplaces comfort comfortably adjacent to enhances our core Fox digital properties, specifically those of Fox News media and our local television stations.
Upon the approval of the credible deal you will see us activate the credible marketplace across Fox business stock comp, which we will be refreshing later this year and across the fast growing digital footprint of our Fox TV stations.
Over time, we expect to activate the marketplace across our wider digital network.
We believe that given credible access to our highly engaged digital audience will accelerate the companys growth.
It's also important to note that we plan to ensure that credible can continue to operate under its founder Stephen dash, enabling it to continue to pursue the widest growth opportunity in the personal finance marketplace category.
From an operational standpoint, we're entering fiscal 2020 with great momentum the Fox News channel dominates the cable news landscape parking 17 consecutive years as the number one cable news network and maintaining its position as the number one cable network in both primetime and total debuting this past year.
Fox Sports led the industry in fiscal 2019, and the consumption of live sports events measured by minutes viewed.
Beating second best CBS by 10% SPM by 13% and beating the combined viewing of ABC and NBC.
With our Thursday night, and Sunday afternoon broadcasts of the NFL, we're football's most significant broadcast partner.
We have a great schedule for the upcoming season, and we're confident we can build on last year's solid ratings growth.
Our Fox television stations will continue their multiyear expansion of local news coverage and will collectively produced nearly 1000 hours a week of news.
This focus on local programming has led the station group to become number one in the locally programmed and highly profitable daytime daypart in our owned and operated markets.
We're also looking forward to the addition of 50 weeks of WWD Smackdown, starting on October four.
A reinvigorated entertainment schedule built around the return of two seasons of the mass singer.
Our own the fall sports lineup across the network and our sports channels and of course, the broadcast of Super Bowl 54 on Fox.
In support of our growth and as we noted during our Investor day.
We will continue to invest in our platforms in fiscal 2020, as we plan to deploy approximately 200 to 250 million of EBITDA to launch to the launch of the WWD The Fox Entertainment programming initiatives and to our digital properties, most notably at Fox News and Fox business.
We are confident that these investments will serve to drive future growth.
And value in the long term.
We are excited by the growth trajectory that we have set for our businesses and are pleased with the progress. We are making we believe the Fox is uniquely positioned to harness the opportunities created by this changing industry with our dynamic portfolio of leadership brands and compelling content that audiences are most passionate about.
But before I turn it over to Steve Let me comment on the legal claim that we along with the other broadcast networks filed against low caste last week.
Simply put.
Low cast is erode streaming service violating the copyright laws for commercial gain.
Nothing more.
Low caste claim to be a non profit that is not operating for any direct or indirect commercial advantage is absurd.
That operates with a clear commercial benefit of the corporations that supported.
I commented earlier on the importance to the company of our Fox network and our owned and affiliated station group.
We are confident in the merit of our claim against low caste.
The low caste theft. He is of course, a validation of the irreplaceable value of our brands.
And the content that they carry.
Now I will turn the call over to Steve to provide more detail on our financial results.
Thanks Lynn good afternoon.
We are pleased with our first full fiscal quarter as a Standalone company as Lynn mentioned, we delivered both healthy topline and EBITDA growth with his financial momentum setting us up very well for fiscal 2020.
Let me now take you through our financial results for the fiscal year as well as the fourth quarter, along with providing some financial markets for the future.
Our full year results. So total revenues grew 12% to $11.4 billion.
Our revenue growth was broad based with affiliate revenues, increasing 12% led by retransmission revenue growth at the television segment.
Advertising revenue was up 10% on the back of our inaugural season, the Thursday night football, which added five percentage points of advertising revenue growth coupled with the record year political advertising at our television stations.
Within this advertising revenue growth. We are also encouraged with our digital progress.
Digital advertising, representing close close to $500 million or 10% of total company advertising revenue.
Finally, we delivered strong growth in content revenue, which we recorded record as part of the other revenue line supported by the digital licensing of network Entertainment programming.
Total full year segment EBITDA was $2.7 billion, an increase of 8% from last year, reflecting 8% growth at the cable segment and 24% growth at the television segment.
At this point it is worth remembering that when looking at our full fifth full year fiscal 2018 numbers.
As well as the first three quarters of our fiscal 2019 results that these results have been prepared on a so called carve out basis.
As such they include allocations of 21st century, Fox overhead and shared service costs in accordance with FCC guidance, which as we've said in the past on this site the costs required to support folks as a standalone business.
We estimate that the total recurring costs beyond the amounts formulaically allocated to publish financial statements.
Should range between 225 and $250 million on an annual basis.
Illustratively, if we took 75% of these incremental costs into account that would have reduced our fiscal 2019, EBITDA by approximately $180 million.
Net income attributable to stockholders was $1.6 billion. This year, we'll see those 57 a share while adjusted EPS was $2 63. This is $2 50 last year again, both these absolute values in the year on year comparison are influenced by the differences in allocated shared services and overhead costs.
Turning to the fourth quarter total company reported revenues were $2.5 billion up 5% over last year, reflecting revenue growth across all operating segments.
Total total segment EBITDA was $709 million and 11% increase over the $640 million generated a year ago led by higher contributions from the television and cable segments.
This growth was partially offset by higher corporate expenses reported in the other segment, which now more properly reflect the full cost of operating as a standalone public company.
For them from a bottom line perspective, net income attributable to stockholders of $450 million or 73 cents a share was lower than the 76 cents per share in the prior year quarter, while adjusted EPS of 62 cents was down 7.7% over last year.
These reductions principally reflect increased interest and income tax expenses from our operating as a standalone public company.
Our effective tax rate for the quarter was a touch above the more normalized mid 20% range, we expect to have going forward.
So now turning to the performance of our operating segments for the quarter with cable networks EBITDA of $602 million was up 4% on revenue growth of 2%.
The revenue increase was led by affiliate fee growth of 3% supported by higher average rates across all our brands, partially offset by a net decrease in pay TV subscribers.
AD revenues decreased slightly by 1%, reflecting lower contributions from the women's FIFA World Cup in the current year as compared to the men's tournament in the prior year.
The AD revenue decrease at the National Sports networks was partially offset by the continued strength of Fox news led by digital and advertising growth.
EBITDA at our cable segment increased 4% over the prior year, reflecting the higher revenues in a stable cost base as digital investments at Fox News were offset by lower sports rights expenses related to the FIFA World Cup and the absence of U.S.C. programming in the current year quarter.
At the television segment EBITDA was $214 million, an increase of $103 million from the prior year quarter, reflecting revenue growth of 5% and expense declines of 4%.
The revenue growth was led by an 18% increase in affiliate revenue growth, which in turn was driven by programming fee growth from non owned.
Non and station affiliates.
This growth is consistent with the overall TV affiliate revenue trajectory, we laid out at our Investor day in May.
We expect to deliver revenues of approximately $2.65 billion by calendar year 2022.
In line with our expectations advertising revenues in the quarter were down by 8%, reflecting difficult comparisons to the quarter a year ago, which included political revenues at the local stations related to the 2018 midterm elections and more FIFA World Cup matches.
When viewing the segment as a whole the advertising revenue decline was substantially offset by increased digital content licensing revenues.
The decrease in expenses reflects lower sports rights, resulting from fewer FIFA World Cup matches in NASCAR races in the quarter as well as lower entertainment programming costs due to fewer hours of original programming in the current quarter.
These strong overall PNM results generated free cash flow, which we calculate as net cash provided by operating activities.
Lift cash invested in property plant and equipment of over $800 million in this quarter and $2.3 billion for the year, representing a 115% and 85% conversion of EBITDA to free cash flow respectively.
And finally from an overall balance sheet perspective, we ended the quarter with 3.3 point $2 billion in cash and $6.8 billion in debt.
Looking ahead into fiscal 2020, there are few key items I would draw your attention to many of which we had previously outlined at our Investor day.
Firstly Lakeland has already outlined the targeted set of initiatives that will impact EBITDA in fiscal 2020.
In addition, it is also worth remembering the changes in our major broadcast events that will effect year on year comparability.
The single largest being at broadcast of Super Bowl 54 in February which from a year over year EBITDA perspective will largely be neutralized by the combined effects of other cyclical events, such as an off cycle political year.
One less NFC divisional playoff game and the absence of the FIFA World Cup.
As we look at the cadence of fiscal 2020, we would note that our Q2 PNM results. This coming year will be impacted by high sports expenses and network, reflecting the contractual annual escalators on the NFL and college football contracts and the addition of WWD rights as well as lower political at a political advertising revenue at our local television stations when compared to the prior year.
Looking across our group wide other revenue category, we expect to post solid revenue growth in cable and other segments supported by the increasing focus nation subscription revenues.
The expansion of our pay per view boxing business growth in content revenues and a full year of revenues associated with operating our Ela.
Meanwhile, these gains will be at least partially offset by reductions in other revenue in our television segment.
As we have previously disclosed we expect shared services in corporate expenses reported in the other exit other segment to increase significantly as we will be operating as a standalone public company for the full year as compared to only one quarter in fiscal 2019.
On a full fiscal year basis, we expect the other segment to be a net EBITDA cost in the mid to high $300 million range.
This includes a little over $50 million of stock based compensation expense associated with the initial shareholder alignment plan award, which will temporarily impact at PNM in fiscal 2020 and 2021.
From a cash flow standpoint, we expect very robust conversion of EBITDA to free cash flow.
Here, we expect very low working capital usage and cash tax savings of approximately $370 million.
Resulting from the tax basis step up obtained as a result of the folks cope speed.
While our capital expenditure will increase to fund the build of our new broadcast center in Phoenix.
Before concluding I would like to reiterate that we remain committed to a balanced capital allocation strategy balancing between organic investment strategic M&A and shareholder returns of capital.
As part of the strategy you will have seen that we just declared a second semi annual dividend of 23 cents a share and continue to expect to have a share buyback authorization in place in advance of our annual shareholder meeting in November .
And with that I'll turn that I will turn the call back to John .
Thanks, Steve.
And now operator, we'd be happy to take questions from the investment community.
Thank you, Sir ladies and gentlemen, if youd like to ask a question. Please press Star then one on your Touchtone phone, you'll hear a tone, indicating you have been placed in Q you may remove yourself from Q at anytime by pressing the pound key 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 star one at this time.
And one moment please for the first question.
We first turn to the line of Michael Nathanson with Moffett Nathanson. Please go ahead. Your line is open.
Thank you all sworn to John or Steve.
Hello.
[laughter] well take all fuel awful all Mega Mega hard Okay. I'll give you two that I was trying to time. So all the first question. When you look at the cadence of affiliate fee growth achievable.
The deceleration from 13 to 11 to 43.
And of course people have new company is what drove the deceleration when we look ahead into new fiscal year, what's the cadence with 38% of the new deals coming due to maybe reaccelerate that growth and that's more on and we'll all continue is.
I get the Bentall box acquisition why is why is callable goods did for you in like what expertise you bring to it.
That that perhaps we were missing from the outside right you can answer I'll start with a with Steve on the yen similar time, Michael on on titles I think as we mentioned at the Investor Day. The way, we see affiliate we see it in the round so the split between cable and television the.
Is less relevant to us because we negotiate older contracts in one both group and so we would we finished Q4 versus Q4 was a plus 7% growth rate across the whole state and so we would anticipate that sort of growth rate at that level or above into fiscal 2020.
The reason why cable as as sort of reduced sequentially over the quarters through the through the fiscal years, just comps to just lapping deal.
Maturities and so as we go into new deals the focus obviously, we'll be engaging.
Fifth grade to share fair value on every trend. So you will see a disproportionate level of the forward growth still being weak in the television segment as opposed to the cable segment.
Great and then on credible and happy to talk about it.
We have as man management team our.
Very excited extraordinarily excited about the opportunity that credible.
Affords us.
We look at it and I think we've talked about this at the Investor day and since our our key asset.
He is not.
Our skill set necessarily in selling advertising are selling.
Affiliate revenue, although our teams are extraordinarily good at that and those are businesses that as you've seen in these results are performing extraordinarily well, but really our key asset our key resource is the deep engagement that we have in news and in sport and entertainment with our audiences and as we grow our digital platforms out we are seeing that that engagement really importantly, and.
And critically extend from a linear analog environment to a direct a digital environment, which affords us the ability to monetize that engagement are in new.
Models.
So that really led us.
Earlier this year.
To the stores group, where we've decided with sports obviously entering.
The sports our gaming market was a tremendous we see is a huge long term opportunity for us and the correlation between obviously the sports audience. I'm. This is should be obvious to most people between the sports audience on the sports betting audience.
Is there is a extraordinary high correlation.
And so you can say getting into the sports.
Bedding Arena is a no brainer, while as equally a no brainer with credible in the in the news our category. If you look and we've done a huge amount of them.
Our research and due diligence on us over the last couple of months. If you look at our news audience and I'm not just talking on our cable news, but but importantly, the nearly 1000 hours of local news that we produce each week. If you look at that audience. It correlates are incredibly highly with credible target audience for their financial.
Marketplace.
Our audience and news, which is which is which is natural our skews are slightly older.
It skews towards our homeowners Anand skews towards them.
An educated audience and these are all factors that item.
People are searching for mortgages are in particular on refinancing loans.
Skewering skewed heavily towards and so when we when we when we saw credible and we can see that by combining their service with our audience and our digital platforms first without with Fox business and then later through our other news platforms, we see a tremendous opportunity for us going forward.
Next question.
Our next question comes from the line of finished Swinburn with Morgan Stanley . Please go ahead.
Thank you Hello.
Listen I wanted to come back to the comment you made around digital advertising at $500 million growing healthily can you give us a little more color on what what is that business. How much of it may be video versus display how sustainable you see that growth rate being especially as you head into what will be a political and elevated political year next year.
Because obviously that that helps sort of insulate the overall AD business to grow.
Across the company and I just wanted to ask if you had any update for us on the process and evaluating the buyback plan since as you know that's a big focus for investors, particularly on the back of some of the acquisitions you've announced.
On the on the our digital advertising front.
We're very pleased with its growth are we think we can.
Aggressively per ship.
Even further if you look at.
The extra over 200 million.
Unique users.
Of our digital.
Our products and as I mentioned sort of 10 10.
Billion.
Views.
If I take for instance, just from a Fox news Dot com.
We are now often doing over a 100 and 100 million.
Page views per day, Ivan yesterday, while we did 90 million page views in a day, which was a slow day for US then.
But but we certainly think we can we can monetize those page views, we built out the.
The sites and the content.
More wrestling faster than we've been we've built out our monetization of those years. So we expect a person further and Ben just to pick up on that it's a pretty good spread where we get our digital advertising revenue from across Fox News on the entertainment side of things, both directly and via Hill, who Lou digital video views as well as if his guys. So its a.
It's a good spread from where we get it from but we think the.
Sort of the the front of the tip of the spear in terms of growth can you to continue to be Fox news going forward.
And then as John on the question on the buyback the.
As we said at the Investor day, the independents are spending time with their advisors. We expect as we did then.
That there will be a conclusion and an announcement around the buyback framework just around the time of our annual General meeting has been no change to that time period.
Operator can we go to the next question.
The next return to line of Jessica Reif Ehrlich with Bank of America. Please go ahead.
Yeah.
Advertising.
Very helpful to get that color on how you did in the upfront.
So strong.
What are the drivers besides lack of ratings and the industry in general.
And can you talk a little bit about how you're selling differently with everything on to John's umbrella is everything cross platform now.
And then on the gaming can you give us some color.
Factors to consider on how this will ramp is it all dependent on state by state legislation what else.
Will drive it how quickly can you.
Thank you.
Hi, Thank you Jessica.
So on advertising levels. We estimate this is the strongest.
Advertising upfront in 17 years. So it's it's a extraordinarily robust our result, we've had certainly in both in both pricing and in volume.
Pleasingly the scatter.
Our market since the upfront.
It's been even stronger and we are we are in scatter are doing double digits.
Pricing premiums to what we sold in the upfront so.
Which means if you do the math were in the low twentys pricing in scatter over last year.
So and this is driven really.
Across categories. So, it's not one category thats driving driving it.
We're seeing obviously the streaming platforms, where it starts to take their AD advertising digital platforms.
Pharmaceutical are continues to be strong they had a a short pause as they worked out some some regulatory.
Demands around either brand advertising so that there weren't initially.
There were slow in the upfront and then and then came back and strong and there have been particularly strong and scatter now pharmaceutical finance has been strong.
And even now.
A locally and this goes.
Partially to your second question on a state by state basis in a couple of our.
Our local stations on notably New York and Philadelphia, We are seeing some of this on our gaming our revenue begin to begin to appear in a fairly significant way. So we we think from our from a gaming point of view.
As more states legalized online gambling that we have a tremendous revenue stream to us outside of the TSG partnership, but just from a local advertising point of view.
Also obviously I'm on the Super Bowl, we started to sell the Super Bowl and we're very pleased with the Super Bowl both from a pricing point of view in terms of where we are versus our last Super Bowl are a few years ago.
Ben Your second question, Yes, there was on was on.
Gaming and the TSG partnership Steve Your line and I think that the ramp of it Jessica really is dependent on the state by state legislation and having that open Apple liberalized and so that really drives the actual sort of overlay operationalization of that within the joint venture in terms of any of that state access.
But in the meantime, we obviously have a partnership with brand royalty and all the rest of it will have a modest positive impact on our pan out through the course of this year.
I should say one that one of things, where we're going to do is as mentioned before of the football season begins we'll be launching a national free to play.
On a game, which is which is legal across the country and in every state, but but certainly we'll hope to them to put the brand out there and to begin to establish the business.
Can we.
Go to the next question please.
Next return to line or Doug Mitchelson with credit Suisse. Please go ahead.
Oh, thanks, so much Steve you mentioned.
Very robust free cash flow and you also mentioned, 85% conversion for the full year last year should we take that 85% to be consistent with very robust and then.
Yeah, Waqar, John Fox Nation has come up a few times on this call and I think it was mentioned that.
Growth in subscriptions was a driver any context, you can give us around sort of size and scale that business, where you think you can get it to and its subscription subscribers is that the right metrics, we should be looking at.
Thanks, Doug Zone free cash flow was 19, 85% probably a bit copy from.
What we expect to convert this the current fiscal year wearing.
And the thing that will be a bit of a drag this is where we've been over the last quarter is being essentially the build out of the Phoenix.
Broadcast Sante, which I think I said at the Investor Day, we expect capex to be sort of low to mid single digits. The revenue and this will put us at that sort of the higher end of that.
On the on Fox Nation Fox station is performing.
Really very very well.
Yeah. It is still early days, having launched only this this past November but as a.
Subscription video on demand service certainly subscription of the first part of that name and and so it's clearly a metric.
Subscribers at the level that we are watching.
Closely we haven't really spent any.
External marketing dollars on it.
And the assumption that we will spend an appropriate amount of external marketing is within.
The EBITDA investment that Steve has spoken about our earlier and that will that will begin in the fall. The pleasing thing is is that the the conversion rate to trial us to paid subscribers is extraordinarily high and and if we can maintain that conversion rate.
While Bob widening our funnel of a of our trial us in the fall it will be extremely successful business.
Thank you can we go to the next line.
And next return to line of Marci Ryvicker with Wolfe Research. Please go ahead. Thanks I have two questions lock when you brought up low cash. So I just want to ask you can you walk us through the timeline now that filed like snacks, and then I understand a permanent injunction unless requested not a temporary one.
I'm just curious as to why that was and then second for Steve with your capital allocation policy is there a certain percent of free cash flow that you're sort of setting aside each year to specifically allocate to M&A or is what you're investing in truly just opportunistic as things come up next.
Thank you very much Marcy and I'll turn it over to Steve for the for your second question on low caste I am I.
Flushed out as much as I could what I could say in my prepared comments and.
I Hope I was punchy enough I tried I tried to be but ill on legal advice and seeing as the.
This case is now sort of before the courts.
Better off not to add anything to those comments, Steve and Marty just on capital allocation.
We're going to stay flexible we will be felt the we're not going to have a strict percentage of free cash flow thats dedicated to him and I will be looking at.
We'll assess opportunities across organic and M&A and also the best use of capital in terms of returning an amount to shareholders and sort of review that periodically but.
The notion that we would dedicate X percent of that free cash flow.
No not the way we operate.
Thank you operator, we have time for one more question.
Thank you Sir and our final question comes from the line of.
Alexia Quadrani with JP Morgan. Please go ahead.
Hi, Thank you so much lot Glenn if you could maybe talk generally about the soft ratings that we've seen and the news network business really the last couple of months not just obviously fox, but just across the industry. What you attribute it to is it news fatigue and I guess, how quickly do you think it can turn around and then on the subscriber side I sorry, if I missed it if you gave a sudden decline number and maybe a little color on how different. These negotiations are you know now these are not they are sand.
I'll answer the last part first which is they're they're easier.
But but dilemma that but starting from from from the beginning.
No new news ratings are softer and compare them year on year, historically, though I think they are still.
You know incredibly high.
We are in an extraordinary new cycle and so Fox news has lost.
On a less our ratings are less audience are relative to our competitors I'm. So.
We continue to be obviously, obviously number one and.
And expect to continue that that run for quite some time.
I do think though there probably is some news fatigue, but I also remember this time last year. We were also run an extraordinary new cycle.
We are.
We are incredibly pleased about the hard work of the of the people at Fox News has continued to keep them. There. They are not on their primetime lineup, but but but they're all day. Our ratings are in the position they are even despite.
Having some some talent our shake up so we are we are.
We're really pleased with the performance of Fox News in terms of a sub declines overall, we're seeing about a 1% a subject aggregate sub decline. So that includes are kind of growing sort of smaller networks, such as Fox sports two and btn. So we're down in aggregate numbers of subscribers just about 1%.
But if we if we look at the market and we have to sort of make.
Estimates if we.
Look at our subscriber universe inclusive of the growth of the digital Mbps, we think the market is down around closer to 3%.
At this point, we're out of time.
Thank everybody for joining todays call.
If you have any further questions. Please give Dan carrier me a call. Thank you.
Ladies and gentlemen that does conclude our conference for today. Thank you for using 18 to executive teleconference. You may now disconnect.
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