Fox Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question and answer session. I would like to emphasize that that 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. As a reminder, this conference call is being recorded. I will now turn the conference over to our Chief Investor Relations Officer, Mr. Joe Dorrego. Please go ahead, sir.

Thank you, operator. Good morning and welcome to our fiscal 2022 third quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer, John Nowen, 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 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 referred 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.

Lachlan Williams Thanks, Joe, and good morning, everyone. Thank you for joining us on this call. I don't know about everyone else, but I often find early mornings after a coffee or two or three, to be a good time to reflect on the progress you're making and to plan the days or weeks ahead. Sitting here on the Fox lot with my colleagues, I can recall our investor day when we saw all of you, or most of you, in person and kicked off the new Fox, now already a few years ago. Some of you asked then, correctly, could the new streamlined Fox aggressively grow its top-line revenues? And while we committed to you then that we would add a billion dollars of television distribution revenue by calendar 22, we all knew the proof would be in the pudding. So it's pleasing that this quarter, we again delivered healthy distribution and advertising revenue growth across our brands and complemented by further stellar growth at Tubi. Overall, we delivered 7% revenue growth, led by 9% advertising growth and 5% growth in our distribution revenues. As a reminder, this 5% growth in distribution revenues does not include the benefit of any material renewals this fiscal year. Those renewals start next year. And our advertising growth was notably broad-based. Cable advertising grew by 20% in the quarter. This growth was driven by Fox News, as its pricing and rating strength more than offset the elevated level of preemptions due to the coverage of the war in Ukraine. Television advertising grew by 6% in the quarter. This increase was led by Tubi, which saw its advertising growth accelerate from approximately 40% in the December quarter to 50% on the back of increased engagement. In addition, continued strong demand for sports drove overall growth at the Fox network. And at the local level, advertising revenues increased despite continued supply chain and other economic headwinds. As we look to our upfront next Monday, we are encouraged by the early momentum in the market, and we believe that our focus on live, including the must-have events of the coming year, such as the Super Bowl, the World Cup, and even the midterm political cycle, puts us firmly in the lead with our advertising partners as upfront deals are made. And as we established last year, Tubi will continue to play a leading integrated role in our upfront efforts. We are in this enviable position due to the execution of our strategy by our core business units. It's hard work, but it pays off. Fox News Channel finished the first quarter of calendar 22 as cable's most watched network in prime time and total day viewers. In fact, Fox News was the only cable news network to post gains versus the prior year quarter in total viewers and the key demographic, adults 25 to 54. Fox News has now beat CNN and MSNBC combined in total day and with both total viewers and the key demo for nine consecutive months and with a total day share of 54% across both demos. These achievements reflect the growing breadth and depth of our programming slate. Notably, The Five was the most-watched program in cable news for the second consecutive quarter. Meanwhile, Gutfeld delivered its highest-rated quarter ever, while Jesse Walter's Primetime, which launched in late January, is averaging over 3 million viewers in the 7 p.m. time slot. Broadcasting 97 of the top 100 most-watched cable news telecasts this past quarter, Fox News continues to attract the most politically diverse audience in its peer group. watched by more Democrats and independents than MSNBC and CNN in total day and prime time. Meanwhile, our sustained and disciplined investment continue to drive subscriber growth and engagement at Fox Nation. The Fox Nation subscriber base has more than tripled in less than 18 months, driving engagement levels to new heights in each quarter. The avid Fox News fans have clearly embraced the Fox Nation platform as demonstrated by its consistently high conversion rate of trialists to paid subscribers and retention rates well above industry averages. Momentum also continued at Fox Weather, which benefited from expanded distribution on Roku, YouTube TV, and Amazon, resulting in sequential growth in total view time across each month of the quarter. At Fox Sports, the USFL is off to an encouraging start, Through its first three weeks, nearly 20 million people have watched the USFL on TV, and games on Fox and NBC are averaging 1.5 million viewers. That compares favorably to well-established spring sports properties like the NHL, Formula One, the EPL, and MLS, all properties which either recently earned sizable rights increases or are expected to do so soon. We are clearly establishing that the USFL belongs in this competitive set, which is our primary goal in this first season. At the NFL, we are pleased to announce that we have reached agreement to carry an incremental game this coming year on Christmas Day. As a reminder, last year's Christmas Day game on Fox delivered over 28 million viewers. We look forward to the release of the full NFL schedule expected later this week. Elsewhere, our NASCAR season is off to a strong start. Though early, the low team's gains we are seeing in viewership would represent one of the more meaningful single-season improvements across the 22-year history of NASCAR on Fox. And we couldn't be more excited about the upcoming 2022 FIFA World Cup on Fox Sports, with the qualifications of the U.S. men's team and its blockbuster match against England on Friday, November the 25th. This match will contribute to an unprecedented Thanksgiving weekend of sports on Fox, bookended by the Dallas Cowboys on Thanksgiving Day and the Michigan-Ohio State rivalry on Saturday. That's likely to add up to the most-watched NFL game of the regular season, the most-watched U.S. men's national soccer team match ever, and the most-watched college football game of the season, all during the busiest consumer shopping weekend of the year. This speaks to the power of our platforms and to the prudence of our strategy. Of course, Our linear businesses are complemented by Tubi, where total view time increased 50%, repelled by record quarterly viewership. In fact, Tubi delivered 18 of its top 20 TBT days in its history this past quarter, a period where there's traditionally some softer seasonality in the AVOD market. Meanwhile, Tubi expanded its industry-leading library and now counts more than 42,000 titles in its portfolio. Importantly, Tubi also renewed key distribution deals, including its Amazon partnership and signed its first custom deal for Samsung's smart TVs. In the third quarter, we continue to invest in the future of Tubi, which we believe will be a strong growth engine for the company for years to come. We have also invested in Fox Weather, which is now available ubiquitously in every broadband home across the country and provides our clients with a new, very broad advertising platform. And finally, Fox Nation goes from strength to strength as it builds upon the engagement between Fox News and our most ardent fans. These initiatives illustrate the entrepreneurial nature of Fox, endowed with America's strongest media brands and most enviable balance sheet. Before handing over to Steve, I'd just like to acknowledge the incredible bravery, sacrifice, and professionalism of the entire Fox News reporting team in covering the war in Ukraine. Journalism is rarely easy, and often it is very hard. Bearing light on the horrors of this war and the resulting refugee and humanitarian crisis it has borne is probably the hardest assignment we can give. I am, we all are, deeply grateful for the tremendous work and extraordinary journalism that Trey Yinkst, Jennifer Griffin, Steve Harrigan, Jeff Palcott, Ben Hall, and many more excellent reporters have provided our audience. Tragically, two of our journalists were killed in Kyiv, and Ben Hall remains in treatment for his serious injuries. and the thoughts of the whole Fox family are with them and their families. With that, I'll hand over to Steve.