Fox Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Fox Corporation second quarter 2022 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 that the functionality for the question and answer queue will be given at that time. If you should require assistance during the call, please press star then zero. And as a reminder, this conference is being recorded. I would now like to turn the conference over to Chief Investor Relations Officer, Mr. Joe Dorrego. Please go ahead, sir.

Thank you, operator. Good morning and welcome to our fiscal 2022 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 Tomczyk, 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 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 the call over to Lachlan.

Thanks, Joe, and good morning, everyone. We are pleased to be with you today to discuss another a really truly remarkable quarter for Fox Corporation. In our fiscal second quarter, we delivered 9% revenue growth and 2% EBITDA growth, even while continuing to invest in our digital initiatives. These results demonstrate our ability to expand our emerging digital businesses while focusing on delivering overall growth for our shareholders. This strategy has been unwavering and disciplined and we have not been convinced to deviate into areas where we cannot be a leader. Our financial results in the quarter benefited from healthy affiliate revenue growth and what continues to be, at least for Fox, a robust advertising marketplace. Our advertising revenue grew 6% versus the prior year quarter, which is notable when you consider that last year included a record net political advertising revenue of nearly $250 million. From a national advertising sales perspective, we have seen robust CPM growth and broad-based demand across most advertiser categories. This is clear evidence that our portfolio of leadership brands, which over index in sports and news, continues to deliver the live audiences at scale that our advertising partners seek. To understand the scale of our reach across the U.S., you only need to look to our NFC Championship game a week ago, where, at peak, we had 55 million viewers tune into the game. The overall market trends in local advertising also remain positive for us, as we achieved double-digit base advertising revenue growth in the quarter, when excluding political revenue. Perhaps even more important to note, our local advertising revenues have now fully recovered from the impact of COVID, and are up over pre-pandemic levels. While we continue to see softness in the local automotive category caused by the ongoing supply chain delays, this is being more than offset by growth in nearly all other categories led by sports betting. We have already written over 50% more local sports betting revenue at this point of the fiscal year than we did across all of fiscal 21. we have seen these same local trends continuing thus far into the third quarter. Overall, our operating businesses are performing well, underscoring our unique strategy and differentiated positioning. Let me touch on some of the highlights. The Fox News Channel celebrated its 25th anniversary this past October by reinforcing its exceptional ratings leadership. On the same call last year, We were fielding questions about whether Fox News had peaked. Yet for the 20th consecutive year, Fox News is the leader in cable news across the board in total viewers and the 25 to 54 demographic for both total day and prime time. Calendar 21 also marked the sixth consecutive year Fox News led all of basic cable in total day and prime time viewership. Fox News leads by a wide margin. commanding a 55% share of total day cable news viewership this past quarter. Fox News' share of the younger demographic was even higher at 57%, marking its second highest quarterly share of the younger demo on record. Fox News' audience was also the most politically diverse, with more independents and Democrats tuning into the network than to our competitors. Our unmatched programming lineup continues to drive these great ratings results and bring a blue chip roster of advertisers to the channel and its digital extensions. For example, in the aggregate, across all of cable news this past quarter, Fox News delivered 14 of the top 15 programs. We simply could not be better placed as we look forward to the midterm election cycle later this year. Meanwhile, the momentum continued at Fox Nation. which increased its net subscribers in the quarter by over 30% versus the September quarter, supported by strong, fresh content that helped drive higher subscriber numbers and very low churn. Additionally, Fox Weather, which is breaking through a crowded field of established incumbents, is off to a great start. And its growth will continue in the current quarter as we expand the distribution of the Fox Weather live video streams across multiple platforms, including YouTube TV, Amazon News, Roku, and Fubo. At Fox Sports, we also had a strong quarter, led by our NFL and college football coverage. Over the last 12 months, Fox Sports had more telecasts across the top 100 programs than any other network, let alone any other network sports division. And of the total minutes of NFL and college football that Americans watched during the 2021 regular season, about a third were viewed on Fox. I commented on the postseason a moment ago, and by any measure, it was a great series of games for us and for the NFL. Audiences and advertisers embraced the postseason, which capped a record-setting revenue full season for us at Fox in a non-Super Bowl year. Demonstrating that growth and the demand for we had 21 advertisers placed in this year's NFC Championship game that were not present a year ago. The results from this season underscore the value and importance of our long-term partnership with the NFL that will continue for at least the next 12 years. College football had equally impressive results. Fox's big noon Saturday window grew by 15% over its inaugural 2019 season, and with an average viewership of over 5.8 million, has become the number one window in all of college football. To put the success of our college football strategy in a proper context, in 2016, Fox's last season prior to adding the Big Ten rights, our share of college football viewership was just 7%. Today, we have grown this threefold to a 22% share. We continue to leverage our leading sports franchises into adjacent opportunities and are pleased with progress at Fox Sports Super 6, which ended the year with more than 6 million users, up more than 20% over the prior year. In addition, this coming April, we will launch the USFL, a new innovative spring football league which Fox will control. And again, our strategy to invest in our flagship brands and serve our loyal audiences has enabled us to realize new and exciting digital growth opportunities. And nowhere is this more apparent than at Tubi. While some companies are focused on multi-billion dollar content investments in search of streaming subscription growth, Tubi continues its unrelenting focus on advertising video on demand with a strategic and measured investment approach. This approach has yielded solid momentum across all key revenue and performance indicators. Q2 represented Tubi's best performing quarter ever, and December its best performing month. In the quarter alone, Tubi achieved 54 of its top 100 revenue days, 55 of its top 100 viewer days, and 50 of its top 100 total view time or TBT days. To be exceeded 3.6 billion hours streamed in calendar 2021, marking a 40% increase in TBT over the prior year, due in large part to the breadth of its library, now at more than 41,000 titles. A quickly expanding linear news and sports offering with more than 100 channels, its high return on investment in licensed content and original releases, and its world-class technology. We chose to acquire and now operate Tubi with the singular goal of winning in AVOD. There are no competing priorities internally and no revenue transfer from other assets in our portfolio. That is to say, Tubi revenue is truly incremental to us. As Steve will discuss in a moment, our focused portfolio of leadership assets and emerging digital businesses is delivering consistent growth in a thoughtful and disciplined manner. Taken as a whole, we have the most valuable news franchise in the country, if not the world, the leading live sports franchise, and a top broadcast network reinforced by a strategic portfolio of local stations, all of which have digital extensions to their businesses. And in the three years since we formed Fox Corporation, we have used this collective platform to develop a rapidly growing ABOT streaming business and create optionality within the sports betting ecosystem. We feel we are in a strong position and could not be more excited for the months ahead as we prepare for what should be an active and exceptional fiscal 2023 for Fox. With that, I will turn it over to Steve to take you through the quarter in more detail.