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.

Thanks, Lachlan, and good morning, everyone. We delivered another strong quarter, with total company revenues growing 9% year over year, once again highlighted by revenue growth across all of our operating segments. Our total company affiliate revenues grew 11% against the prior year quarter, reflecting healthy increases at both the cable networks and television segments. The rate of subscriber declines held steady in the quarter with trailing 12-month industry sub losses continuing to run below 5%. Notwithstanding the tough comparison against our record political advertising revenues in the prior year quarter, our total company advertising revenues grew by 6%. As Lachlan mentioned, we benefited from the premium pricing our core brands were able to extract from a healthy marketplace. continued growth of Tubi and a full season of college football following the disruptions caused by COVID in the prior year. Taking a step back from the comparability challenges versus fiscal 21, Fox's total advertising revenues are now running a healthy 12% ahead of Q2 fiscal 20, which was pre-COVID and unaffected by political advertising revenues. This is before taking into account the contribution of Tubi to our current day advertising revenues. which take the reported growth rate up to 20%. Meanwhile, total company other revenues increased 20%, supported by a full college football season that drove higher sports sub-licensing revenues at the cable segment following the disruptions caused by COVID last year. Adjusted EBITDA increased 2% to $310 million as the revenue increases were partially offset by higher operating expenses associated with normalised sports and entertainment programming schedules, contractual sports rights escalators, and the digital investments we called out on previous calls at Fox News Media and Tubi. The net loss attributable to stockholders of $85 million, or 15 cents per share, varies from the net income attributable to stockholders of $224 million, or 37 cents per share, in the prior year quarter, primarily due to the change in fair value of the company's investment in Flutter, which we recognize in other nets. Excluding the impact of this and other non-core items, adjusted EPS of 13 cents in the current year quarter was down modestly when compared to the 16 cents reported in the prior year quarter, primarily due to the higher depreciation and amortization resulting from our new broadcast facility coming online late last fiscal year. Now let's turn to our business segment results, beginning with cable networks. Cable revenues increased 10% year over year, with 12% growth in cable affiliate revenues. As a reminder, the reported 12% growth includes the impact of distribution credits we accrued for last year as a result of cancelled college football games due to COVID. Excluding the impact of the distribution credits, underlying cable affiliate revenues increased low single digits in the December quarter, reflecting contractual pricing gains across our portfolio of networks, even without the benefit of any meaningful renewals this year. Cable advertising revenues grew 3%, primarily as a result of continued pricing strength across the portfolio, led by Fox News Media and additional MLB playoff games at the national sports networks. Despite the difficult comparison to last year's election cycle, Fox News Media actually expanded its linear advertising revenues in the quarter, a testament to the clear leadership position of the channel. Cable other revenues increased by $26 million, led by higher sports sub-licensing revenues, which were impacted by COVID last year, as well as continued subscription momentum at Fox Nation. Cable EBITDA increased 17% over the prior year, reflecting healthy revenue growth, partially offset by higher programming costs associated with contractual rights escalators and normalised schedules at the national sports networks. We also increased our digital investment at Fox News Media, including expanded programming and marketing at Fox Nation and the launch of Fox Weather. At television, we delivered 8% revenue growth in the quarter. This was led by a 10% increase in television affiliate revenues, reflecting double-digit rate increases for both our direct retransmission revenues at our owned and operated stations and programming fees from non-owned station affiliates. We also delivered advertising revenue growth of 6% despite the absence of the record political advertising revenues we generated in the prior year. This growth reflects continued pricing strength at the Fox network where our full sports lineup led by the NFL, college football and the World Series delivered record Q2 advertising revenues for our network sports business. We also continued to see strong momentum at Tubi with revenues up by over 40% in the quarter and a meaningful rebound in the base market at the Fox television stations. As Lachlan mentioned, supply chain constraints had no real observable impact on our portfolio, with softness in the local order demand more than offset by the growth in other categories, including sports betting. Television other revenues increased $31 million, primarily reflecting higher content revenues at Fox Entertainment as well as the acquisitions of Marvista and TMZ. EBITDA at our television segment was down $88 million against the prior year period, primarily as a result of higher programming costs associated with the normalized entertainment schedule and sports rights escalators at the Fox network and the planned ramp-up of digital investment at Tubi. Turning now to free cash flow, where we recorded a deficit in the quarter of $753 million. which reflects the normal working capital cycle of the business, with the concentration of payments for sports rights and the build-up of advertising-related receivables in the first half of our fiscal year. We continue to be active with respect to capital returns to our shareholders, with a further $300 million of additional buybacks since the start of the December quarter. We remain committed to utilizing our full buyback authorization of $4 billion of which we have now cumulatively repurchased $2.15 billion, representing over 10% of our total shares outstanding since the launch of the buyback program in November 2019. From a balance sheet perspective, we finished the quarter with $4.26 billion in cash and $7.95 billion in debt. Subsequent to quarter end, we used cash on hand to repay our $750 million January bond maturity. Our ability to deliver another successful quarter despite the continued uncertainty of COVID and difficult comparisons against the prior year political cycle gives us confidence in the remainder of our fiscal 22. As previously discussed, with only approximately 5% of our total company affiliate revenues up for renewal this fiscal year, we expect affiliate revenue growth will moderate in the back half of the year. However, the demonstrated strength of our focused portfolio positions us well for our next major renewal cycle, which begins in fiscal 23 and where we have approximately 70% of our total company affiliate revenues due for renewal across fiscal 23 and 24. We plan to continue to invest in our digital assets given our success to date. Now that we are at the midpoint of our fiscal year, we anticipate the year's total net EBITDA investment in our digital initiatives along with the expected impact of the inaugural season of the USFL, to land towards the lower end of the $200 million to $300 million range that we have previously outlined. As Lachlan mentioned, we anticipate a strong fiscal 23, with the financial tailwinds from Super Bowl 57, the early exit of Thursday night football, November's midterm elections, and the start of our next major distribution renewal cycle. And with that, I'll hand it back to Joe.

Thank you, Steve. And now we'd be happy to take questions from the investment community.

Ladies and gentlemen, I'd like to emphasize the functionality for the question and answer queue. If you wish to ask a question, please press one then zero on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from queue at any time by once again pressing one then zero. If you're 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 1-0 at this time. And our first question comes from the line of Robert Fishman with Moffitt Nathanson. Please go ahead.

Hi, good morning. I have one or two quick ones on sports betting, if I can. As sports betting continues to be legalized across more states, can you just discuss how you're thinking about growing Fox Bet from here while balancing the Flutter and FanDuel relationship? And then maybe if you can just expand on your prepared comments about the local advertising benefits as these states continue to be legalized, including maybe any early data after the January launch in New York. That would be very helpful. Thank you.

Thanks, Robert. So, obviously, we're still engaged in sort of arbitration really based around the structure of our option into FanDuel. And we expect that arbitration to sort of conclude sort of the middle of the calendar year, sort of in the summer to late summer. And, you know, we can't really say much more about that. But, you know, overall, the operations of Fox Bet and, you know, starting with, as I talked a little bit about in my prepared comments, starting with Fox Bet Super 6, you know, we've been incredibly pleased with our ability to drive our engagement with our sports viewers in Fox Sports. into Fox Bet Super 6, then ultimately into, you know, Fox Bet where it's operational, you know, has been sort of proven as we continue to execute on that strategy. Our only frustration is that, you know, we've only been launched in four betting markets, so four states, and obviously we'd like to see that, you know, increase significantly as we roll out Fox Bet Having said that, on the other side of the ledger, in the traditional business in the local television stations, sports wagering revenue is our leading category of growth and really is significantly driving the revenue increases you know, across our station group where wagering is legal. I think, you know, we're pacing up, you know, over 100% in the sports wagering category to date. So, you know, we're very pleased both on the Fox Bet side where we have operating betting businesses, but also on the advertising revenue side.

Thank you. Operator, we can go to the next question.

We have a question from John Hedulic with the UBS. Please go ahead.

Great. Great. Thank you. Two quick ones. First, could you give us a sense of where we are in the $200 to $300 million in digital dilution for the year? I think you guys had said it would be more in the back end of the year. If you could give us a sense for where we are thus far, it would be great. And then any color you can give us on the recent licensing extension you guys did with Hulu, either Magnitude impact on the financials, or is there any more to come from that, from licensing? Thanks.

I'll let, we're at the lower end of the range, in the $200,000, but I'll let Steve.

Yeah, so John, so far this half, we're sort of approaching nine digits on that investment, so we'd expect sort of a little bit more back-weighted in the second half, but as I've sort of pointed out in the prepared remarks, I think likely to be closer to $200,000 than $300,000 for the full year from a pacing perspective on those digital investments. Probably the most sort of the focus of that investment in the back half of the year will generally be around 2B. So that's what you should expect to see that in the TV segment in the second half.

And then in terms of the Hulu output deal, it's a good one, but it's relatively small. It's an output deal for Hulu to stream out-of-season episodes of a Fox unscripted and animated series. So it's things like I Can See Your Voice, The Masked Singer, The Masked Dancer, in case you missed that, and an animated comedy from Ben DeBox, House Broken. So I think it's something we're very happy with and have to continue our really positive relationship with Hulu.

Operator, we can go to the next question.

Thank you. Our next question comes from Doug Mitchelson with Credit Suisse. Please go ahead.

Thanks so much. Pretty healthy results this quarter. If I could ask a follow-up to the first question, it's going on two years since you started investing in sports wagering. And Lachlan, you mentioned optionality in sports betting in your prepared remarks. Under what circumstances would Fox increase it's investment in sports betting. I mean, with $4.3 billion of cash in the balance sheet, right? I'm talking about increasing your investment by a billion. So just as a follow-up to that first one, and then my question is regarding the upfront. Just curious on your thoughts going into the upfront. You know, I know you just said the ad market is strong, so I'm sure you're feeling good. I'm curious, like, how formally integrated into ad sales is Tubi, you know, relative to Fox. And on the NFL, you know, it was a good season for everybody. Others, I think, might have had a little bit better ratings growth than you had. Is that going to impact relative share when it comes to NFL advertising? So anything on the upfront would be helpful. Thanks so much.

Thank you very much, Doug. So on the first question, the way we look at sports betting is less about, well, it starts from a place and less about sort of investing in in sports betting and wagering and more about the value of our existing investment in sports broadcasting. When you have a business which is the leading sports broadcasting business in this country, when you look at our new 12-year agreement and deal with the NFL and the viewership that we have, We expect to be sort of guaranteed to engage with those fans for the next 12 years. We really think about what's the future monetization of that engagement with our viewers and sports fans. So that's where we begin. We already have a multi-billion dollar investment in engagement with sports fans. What will sports fans be doing with their time? What will they be doing with second screens? What will they be doing leading into a big sports weekend? Clearly, as states open up to sports wagering, wagering is going to be a major part of that journey. It's a part that we want to embark with them because we think it's a win-win. It'll make them more engaged with us, more engaged with their favorite teams, and ultimately watch more of Fox Sports. So we see it as a win-win. So when we think about that and we look at the sports, the wagering ecosystem, what we have already with our small ownership but valuable ownership stakes in Flutter, when we look at our option into FanDuel, and our joint venture in FoxBet, and also, you know, critically, you know, the top of the funnel, our, you know, very successful strategy with FoxBet Super 6. You know, we see ourselves continuing to improve and operate those, and when the right opportunities emerge and come up, you know, to continue to invest in the space. On the... Steve, do you want to add anything to that first part?

No, but I think in terms of deploying capital, the optionality we have with the option structures gives us time to see how the markets develop, how our relationship with Flutter develops before we actually need to deploy that capital.

Yeah. And we are limited in structure to some extent because of the licensing rules. And I think I said in the last call, we're actively exploring getting licensed. Not to operate... a book, but actually to, you know, potentially sort of maximize the value that we can capture in this space. So, it's something that we, you know, we continue to explore. In terms of the upfront, as sort of an overall comment, what you're seeing, I think, across the marketplace is a softness in entertainment and scripted entertainment ratings, not just for us, but for all of the broadcasters. And you're seeing, due to that softness, you're seeing major advertisers and marketers start to look at where they can capture their consumers in other places. And where they're flowing to and where their dollars and marketing focus is moving towards quite strongly is live news and live sport. And to a large extent, digital, which we're utilizing to be extraordinarily well So when we think about the upfront, when we think about the sort of selling season, it's early May we lead to the upfront, but between now and then we're having the majority of our conversations with our partners. We'll be selling, as I think others will, our entire portfolio of assets. So we'll be selling the entertainment network, news, sports, and Tubi in a very integrated fashion. They're really designed to capture our marketing partners' money and their advertising dollars in the most efficient way. And I think we are uniquely positioned because of our leadership across news, sports, and digital with Tubi.

Operator, we can go to the next question.

Our next question comes from Jessica Rice-Ehrlich with BFA Securities. Please go ahead.

Hi, everybody. I have two questions. First, on USFL, can you give us some color on your rollout, the cost, your partners? Like, what will it look like over the next couple of years? And the second question is, as great as the second quarter is or was, fiscal 23 looks even better. I mean, you've got Clearly strong advertising with the Super Bowl, political, Tubi's growing. You said you're going through a new affiliate cycle beginning next year. Sports betting is growing, and hopefully there will be more states coming on. So, you know, at the offset, like, does digital investment peak this year or does it peak next year? You know, are there other things we should be thinking about? Thanks.

I don't know if I can – hi, Jessica. I don't know if I can – answer the second question as well as you did in the question. So let me start with that. You know, I think we are looking forward to fiscal 23. You know, we have, I think over the two years, we have two-thirds of our affiliate renewals up. Obviously, with the, you know, the lesser, not the lesser, the smaller renewals, renewals we've had this year are setting a tremendous benchmark for what we expect coming in the renewals over the next couple of years. So advertising revenue with the political cycle we expect to hit new records. I think four years ago we did $180 million worth of political advertising. I think we will easily – I don't want to put a number on it, but I think we can't – it would be a guess, but I think we'll easily exceed that and break new records in this midterm election. So we're well positioned, I think, for a tremendous 23. I can't remember if you also mentioned it in your question, but obviously Thursday night football was a – an investment, uh, for us. And, uh, and with, uh, uh, releasing Thursday night football, uh, for Amazon, I think they'll do a great job with it, but obviously there's a savings, a significant savings there for us not having a, not having Thursday night football. So, uh, so, so we are, we're, uh, we've had a great quarter, great year this year. I think next year will be, um, we'll, we'll be even, uh, even better, uh, uh, on, on the USFL. Um, you know, we, uh, uh, we're very much looking forward to the new league. I've got to actually compliment the NFL for being great partners and for helping us think through how we structure the USFL. The rules of the play is closer to NFL than the college football. Where we've changed, the rules slightly have really been for for television and to make the game as exciting and as close the matches as possible. So we're very excited for the launch of the USFL. It's obviously something of a league that we'll control. We control the digital rights. We control every part of the game. With us and NBC as the broadcasters, we think it has the best opportunity for a broad platform and the most viewers at launch. By bringing in outside investors into the league, we've effectively underwritten the investment in the USFL, I think, for the next two or three years at least. So from a risk perspective, I think we've done it in a – ambitious but disciplined way. So anything else?

Yeah, so Jessica, as I've mentioned in the remarks, within the $200 to $300 million that we called out for the year, USFL will be part of that, and it'll be a sort of low to mid-tens of millions of dollars EBITDA negative for us this year.

Thank you. Operator, we have time for one more question.

Thank you. That question will come from the line of Michael Morris with Guggenheim. Please go ahead.

Thank you. Good morning. Two questions for me. First, a bit more strategic, Lachlan. Do you see a path to perhaps a superfan streaming sports business that could complement the linear service that you have that features your marquee games? Maybe something similar to ESPN with ESPN+. Is that an approach that you would consider taking, or do you feel that it's already sort of an overdeveloped or another reason not to do something like that? And then my second question, a bit more tactical maybe, looking at the TV segment, I believe last spring you guys sized the EBITDA drag from Thursday Night Football in the range of sort of $350 to $400 million. I'm curious, any updated thoughts on that estimate, how that savings may be redeployed versus falling to the bottom line in the near term. And I guess maybe a bigger picture, you know, I know that that will go into the re-up Sunday contract going forward, but you also have the renewal cycle coming. So I guess maybe just thinking long-term, how do you expect that savings to impact the business? Thanks.

Thank you, Michael. So I'll let Steve answer the second question on the savings. But as regards to the first question, we are today, this morning, focused very much on broadcast television and how we monetize our investment in sports and our sports partnerships is really fundamentally through our partnerships with cable operators, satellite TV operators, and our local affiliates. And so, you know, from a live sports broadcasting perspective, and it's different with some, obviously, opinion and sort of shoulder programming, but from a live sports perspective, we see, we continue to see the best way to monetize, you know, our investment in sports is clearly through our partnerships with our affiliates and our distributors. So that's our focus today. Okay. I'll let Steve answer the savings question.

Yeah, Mike, so the $350,000 to $400,000 is still a good number for us for next year in terms of the net EBITDA impact of losing Thursday night football. That includes the reinvestment in the slot, so whatever we decide to put into that time slot in the schedule is in that $350,000 to $400,000. So it's a net to us, a net good guy to us next year. Obviously part of that gets absorbed the following year with the increased AMA orders, the new NFL contract, but... all other things being equal, you should see that 350 to 400 flow to the bottom line next year.

At this point, we're out of time, but if you have any further questions, please give me or Dan Carey a call. Thank you once again for joining today's call.

Thanks, everyone. Take care. Bye.

Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation and for using AT&T