Fox Corp (FOX) (Q3 2024) Earnings Call Transcript Highlights: Navigating Challenges and Capitalizing on Growth Opportunities

Despite a dip in advertising revenues, Fox Corp reports robust growth in EBITDA, affiliate fees, and streaming service Tubi, alongside strategic financial maneuvers.

  • EBITDA Growth: 7% increase
  • Total Affiliate Revenue Fees: Grew 4%
  • Advertising Revenues: Down due to absence of Super Bowl and fewer NFL broadcasts
  • Tubi Revenue Growth: 22% increase
  • Monthly Active Users (MAUs): Grew to nearly 80 million
  • Net Income: $666 million
  • Earnings Per Share (EPS): $1.40
  • Adjusted EPS: $1.09, up 16% from previous year
  • Total Revenues: $3.45 billion
  • Free Cash Flow: $1.39 billion
  • Share Buyback: $300 million under the program during the quarter
  • Dividends: Nearly $125 million returned to shareholders
  • Cash and Debt: Ended the quarter with $3.8 billion in cash and $7.2 billion in gross debt
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Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Fox Corp reported a 7% growth in EBITDA, highlighting the strength of its brands and strategic advantages.
  • Total affiliate revenue fees grew by 4%, driven by pricing benefits from recent renewals.
  • Tubi, Fox Corp's streaming service, saw a 22% revenue growth and a 36% increase in Total View Time, solidifying its position in the streaming market.
  • FOX Sports delivered strong performance with significant viewership numbers, particularly in NFL and college sports.
  • Fox Corp maintains a robust balance sheet with $3.8 billion in cash and a low leverage, positioning it well for future investments and shareholder returns.

Negative Points

  • Headline advertising revenues were down due to the absence of the Super Bowl and fewer NFL broadcasts compared to the previous year.
  • Total company other revenues decreased by 22%, primarily due to the timing of sports licensing revenues.
  • Cable segment revenues were down by 6% from the previous year, although EBITDA grew slightly by 3%.
  • TV advertising revenues significantly dropped by 40% due to the absence of the Super Bowl and fewer NFL playoff games.
  • Concerns from existing distribution partners about the fairness of the new sports-only JV, which could potentially impact relationships and negotiations.

Q & A Highlights

Q: What's driving the growth in TVT at Tubi, and can you provide any color on CPMs given the weakness in connected TV CPMs reported by Disney?
A: (Lachlan Keith Murdoch - Executive Chairman & CEO) The growth in TVT at Tubi is driven by new viewers discovering the platform and the extensive content available, including over 250,000 movies and TV series. Despite the overall market impact on advertising, Tubi maintains efficient CPMs due to its proactive on-demand viewing, which is more valuable to advertisers. However, Tubi faces challenging comparisons next quarter with a 47% revenue increase year-over-year.

Q: Given the ongoing NBA negotiations, how do you view the value of FOX broadcast network in future sports rights negotiations, and do you feel at a disadvantage without an SVOD service?
A: (Lachlan Keith Murdoch - Executive Chairman & CEO) FOX is satisfied with its current sports portfolio and did not pursue NBA rights this round. The value of broadcast television remains high for sports leagues that require broad reach. FOX can partner with others for SVOD rights, maintaining the importance of broadcast distribution without needing its own SVOD service.

Q: Can you discuss the potential for monetizing non-core assets like the FanDuel option and the Studio Lot?
A: (Steven Silvester Tomsic - CFO) FOX sees long-term value in the sports betting market and plans to eventually exercise its option in FanDuel. The Studio Lot is viewed as a long-term asset with development plans, indicating no immediate intention for monetization.

Q: How do you differentiate the upcoming streaming JV product, and is there any delay in finalizing the definitive agreement?
A: (Lachlan Keith Murdoch - Executive Chairman & CEO) The streaming JV is focused on Cord-nevers and Cord-cutters, offering a digital-first product different from traditional live channel tiers. The product is on track for launch this fall, with no significant delays in finalizing the agreement.

: What are your expectations for political advertising in the upcoming election cycle, especially considering the current media landscape?
A: (Lachlan Keith Murdoch - Executive Chairman & CEO) FOX expects a strong political advertising season, particularly benefiting from tight Senate races in key markets where FOX has significant station presence. The focus is on local television, where political money tends to flow alongside local news coverage.

Q: How do you address concerns from existing distribution partners regarding the sports-only JV potentially being unfair?
A: (Lachlan Keith Murdoch - Executive Chairman & CEO) FOX remains committed to supporting the traditional cable bundle, which is a major revenue source. The sports JV targets non-traditional pay TV viewers to minimize cannibalization, with strategic marketing focused on this audience.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.