Fox Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Fox Corporation first quarter fiscal 2020 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 any assistance during the call, please press star then zero. As a reminder, this conference is being recorded. I would now I'd like to turn the conference over to our Chief Investor Relations Officer and Executive Vice President of Corporate Initiatives, Mr. Joe DiRego. Please go ahead, sir.

Thank you, Operator. Hello, everyone, and welcome to our first quarter fiscal 2020 earnings conference call. Joining me on the call today are Lachlan Murdoch, Executive Chairman and CEO, John Nalen, COO, and Steve Tomsik, our CFO. First, Blackburn and Steve will give some prepared remarks on the most recent quarter, and then we'll take questions from the investment community. Please note that this call may include forward-looking statements regarding Fox Corporation's financial performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings. 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 it over to Lachlan.

Thanks, Joe. Good afternoon, and thanks, everyone, for joining us today on Fox Corporation's 2020 First Quarter Earnings Call. Our first full fiscal year as a standalone public company is off to a solid start with good, positive momentum across all our businesses. We have just reported strong financial results, which Steve will comment further on shortly. But perhaps more importantly, we are making significant progress on the operational goals and strategic initiatives that we outlined to you at our investor day. Our strategy to build Fox around live sports, news, and event programming is producing results and delivering audience growth and engagement faster than we expected. For example, we are now six weeks into the fall season, and Fox has established itself as both the number one rated broadcast network and the only big four network to deliver year-on-year audience growth in the key 18 to 49 demographic and in total viewers. We are up 5% in 18 to 49 ratings and 10% in total viewers. This leadership position stems from the investments we are making across our network, beginning with Fox Sports, which has accounted for 22 of the 50 most watched telecasts in the country since the NFL kickoff. Our ratings are up 11% across our entire portfolio of college and pro football, led by Thursday night with viewership up 22%, and our Sunday broadcast, which is up 8%, to a three-year high. Another new addition to the Fox network was the debut of WWE's Friday Night SmackDown on October 4th to an average audience of nearly 4 million viewers. We are thrilled with our WWE partnership. as it completes our strategy to program live content from Thursday through Sunday in the fall. The momentum behind football and WWE continued into the second quarter with a solid Major League Baseball postseason, culminating with a historic seven-game World Series. Fox wins in adults 18 to 49 on four nights, Monday, Wednesday, Thursday, Thursday, and Friday, more nightly wins than any other network. The success of the network extends well beyond sport, with our entertainment slate off to a great start, led by two of the top three programs on television. We're pleased to be seeing such positive signs of momentum as we execute the strategy we laid out last May. Our mix of live and near-live tentpole content mixed with high quality entertainment is clearly paying dividends. The Masked Singer has returned for its second season as the number one entertainment show on broadcast. And 9-1-1 is the top program on Mondays and is the number two scripted program on all of television. And Prodigal Son is the highest rated new broadcast program on any network this season. In fact, in entertainment programming only, Fox ranks number one over the first six weeks of the season for the first time since 2011. Speaking of number ones, the Fox News Network is on track to finish the calendar year as the number one cable channel for the fourth straight year and is the number one news channel for 18 years running. And speaking of news, our station group has continued to expand the already extraordinary amount of local news we broadcast, which positions us well for the robust political ad market we expect next year. The real strength and value of these distinctive brands is evidenced by the momentum we've had on the distribution and affiliate renewal front, where we remain on pace to achieve the targets we have previously outlined. We have successfully renewed distribution agreements with Charter, Dish, and Cox, along with affiliate agreements with Nexstar, Gray, and Tegna. In each of these renewals, we were able to achieve value that reflects the strength of our core brands. Having said that, we have seen the rate of subscriber declines in the traditional MVPD universe escalate in recent months, with this quarter yielding industry declines of over 4%. But it is important to note that the subscriber losses reported by just one distributor, which accounts for approximately 25% of paid television subscribers, represent the majority of the net losses we experienced over the past 12 months. That distributor accounts for almost 80% of total losses over the last year. And without them, sub-losses would decrease to about 1.3%. helped by strong gains from the leading dMVPDs. This is important because it suggests that it is too early to draw firm conclusions from a market that is still clearly fluid, especially in light of surging results from our leading digital partners. It is though something we are clearly focused on. Another area of focus is growing the company's digital revenues and businesses. I should mention that we do not include DMV PD distribution revenue in our digital results. The reach of our direct platforms has grown to over 250 million users per month, with total engagement growing to over 11 billion minutes per month. Interestingly, We now see well above 10% of our streaming audience consuming the 4K stream with very positive feedback, and we are excited to be the first broadcaster ever to stream the Super Bowl in 4K. It will be a groundbreaking experience for fans. Our digital strategy, inclusive of businesses like Fox Bet and Credible, It's crucial to heighten engagement with our audiences, which is already driving meaningful growth. Year-over-year digital revenue has grown over 30% in the quarter, and we continue to work to optimize our digital platforms. For the first time ever, our Fox News, Fox Business, and Fox Television stations' digital properties are all now underpinned by the same tech platforms. and Fox Sports is being transitioned this quarter, enabling us to drive improved monetization across these businesses. Of course, driving that improvement also leads us to new business models and new revenue streams. In conjunction with the kickoff of the football season, we launched the free-to-play Fox Sports Super 6 app nationally, which has already achieved nearly one million registered users and almost 10 million plays. The Stars Group is now live with the digital sports wagering service Fox Bet in both New Jersey and Pennsylvania. The proposed merger between Flutter Entertainment, the owner of FanDuel, and our partner, the Stars Group, will create many opportunities for us. We're excited to develop the Fox Bet brand in partnership with FanDuel and are confident in the dual brand strategy to capitalize on the rapidly growing sports wagering market. Over a month ago, Fox Business debuted a brand refresh across its linear and digital platforms, including a new logo and tagline, Invested in You. As part of this initiative, foxbusiness.com and the Fox Business app were relaunched with new content and editorial tools to drive engagement. The initial performance of the relaunched digital properties has been encouraging, as we have seen substantial increases in page views and in unique users. A core part of our strategy for foxbusiness.com is our acquisition of Credible Labs, which closed a few weeks ago. We are now beginning the process of integrating its service with our core businesses, starting with Fox Business. While we have remained focused on executing against our operational plans, we also continue to make progress towards other strategic initiatives while maintaining a balanced approach to capital allocation. To further strengthen our portfolio of assets, yesterday we announced an agreement with Nexstar to acquire their local television stations in the Seattle and Milwaukee markets. In return, we have agreed to sell them our stations in the Charlotte market. which geographically aligns with Nexstar's existing operations in the Carolinas and in Virginia. It's a great deal for both companies and a rare win-win. This acquisition expands the reach of one of Fox's core assets, our television station's portfolio, and further strengthens what is already a highly profitable and cash-generative business. This transaction will expand our market presence to 14 of the top 15 DMAs and importantly adds two major markets with NFL, Major League Baseball, Pac-12, and Big Ten teams. Finally, consistent with the timing we laid out at our investor day, we have today announced that our Board of Directors has authorized a $2 billion stock repurchase program. We are pleased to have the buyback authorization formally in place as part of our capital toolkit. The company also announced its intent to complete $500 million of stock for purchases in the near term. In light of all the positive momentum I've just touched upon, in light of our success at the network, at sports, at news, and in our growing station group, In light of our market-leading investments in sports gaming and in the credible marketplace, and in light of the unique cash benefits of our tax structure, we believe we are undervalued in respect to our peers and to other investment opportunities available to us at this time. This buyback reflects both our confidence in the long-term strength of our business and our commitment to finding the most efficient use of our capital. We remain committed to deploying capital in a disciplined manner to maximize shareholder value through a balanced approach of organic investment, accretive AMA, and return of capital to our stockholders. We will not follow a prescribed formula of deployment. Instead, we will be opportunistic and invest capital where we feel the company can achieve the greatest return on investment. Now, Steve will provide more detail on our financial results. Thanks, Lachlan, and good afternoon.