Fox Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation fourth 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 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 is being recorded. I'll now turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.

Thank you, Operator. Good morning, and welcome to our fiscal 2022 fourth quarter earnings call. Joining me on the call today are Laughlin Murdoch, Executive Chair and Chief Executive Officer, John Mallon, Chief Operating Officer, and Steve Tomsik, 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 very much, Gabby, and welcome aboard. We have concluded another successful fiscal year, achieving both the financial and operational goals we set ourselves, with a relentless focus on strengthening our core brands while investing in our high-growth digital initiatives. Over the year, we delivered 8% total company revenue growth, including 7% affiliate revenue growth, notably without the benefit of any meaningful renewals, and 9% advertising revenue growth. despite the record political revenues we saw in the prior fiscal. Those of you on this call who are at our 2019 Investor Day will remember our commitment to you that we would achieve $1 billion of incremental television segment affiliate revenue by the end of calendar 22. I am more than pleased to confirm that we have achieved that billion-dollar target in this past quarter a full six months ahead of schedule. As anticipated, our EBITDA was down modestly as we continued our investment in Tubi and the Fox News Media digital properties, including Fox Nation and Fox Weather, and with the launch of the USFL this past spring. Most importantly, Fox continues to stand apart in a crowded media ecosystem, delivering a consistent operating performance and a robust free cash flow profile alongside an enviable balance sheet. Our leadership position was again evident during the recent upfront advertising sales cycle in which we booked volume commitments approximately 15 percent above last year's upfront with nearly 25 percent of our current year commitments across our growing digital properties. We achieved pricing increases in the high single to low double digits as compared to last year's upfront. Sports led the upfront market, illustrated by the fact that we sold more NFL Sunday advertising in the current upfront market than we did across Sunday and Thursday combined in the prior year's market. This excludes advertising commitments for the upcoming Super Bowl, where we are pacing well ahead of schedule and seeing very robust demand at record pricing levels. Our success in the upfront spanned our entire portfolio. We were able to achieve broadcast-level pricing increases at Fox News, boosted sellout at Fox Entertainment, and, importantly, drove significantly more incremental ad dollars into Tubi. We are, of course, aware of the chatter around advertising headwinds, and, of course, we will be prepared if the market turns downward. But let me be clear, we are currently not seeing an adverse advertising impact on our business. This speaks to the unique positioning and strength of our core platforms. Over two-thirds of our fiscal 22 advertising revenue was generated by live content, with sports and news delivering 40 percent and 30 percent, respectively. Locally, base market advertising sales have been stable. In fact, we are currently seeing a return to growth in the auto category for the first time in a couple of years. This stability in the base market provides a good foundation for the upcoming political cycle where the outlook is remarkably strong. On a comparable basis, our June quarter political advertising revenues were roughly three times larger than those of the fiscal fourth quarter of the last presidential election, which turned out to be an all-time record political cycle for the company. With the combination of political races and ballot issues across our markets, we continue to expect this election to deliver another record midterm cycle. In fact, excluding the impact of the Georgia runoffs in the last cycle, this midterm cycle looks certain to surpass the 2020 presidential cycle at our local stations. There are U.S. Senate races in 13 of our 18 markets, including what we expect to be heavy political spend in Arizona, Florida, and Georgia. Additionally, there are gubernatorial races in 17 of our 18 markets, where we expect heavy spending in Arizona, Florida, Georgia, Michigan, Texas, and Wisconsin. Add to that the issue money in a few key markets, and we are seeing an unprecedented wave of political spending, which accelerates as we head towards November. At the national level, we believe that we achieved the highest upfront pricing increases in cable news history at Fox News, which to a certain extent is to be expected as the Fox News channel again closed the year as cable's most watched network in prime time and total day and continues to generate audiences on par with those of the big four broadcast networks. Fox News was the only cable news network to post viewership gains in the fiscal year in the key adult 25 to 54 demo and total viewers, while extending its streak to 16 consecutive months, beating CNN and MSNBC combined in prime and total day for both the key demo and total viewers. For over two decades, Fox News has been the highest rated cable news channel in prime time. Notably, Fox News just finished the month of July as the third most viewed network in weekday prime in all of television, trailing only CBS and NBC. You know, I've spoken about the political diversity of the Fox News audience previously, specifically about the fact that we have more independents and Democrats watching us than watch CNN or MSNBC. But the diversity of our audience extends beyond political affiliation. In July, the Fox News Channel was the most viewed cable network with Asian and Hispanic viewers. In fact, in that month, viewing among Hispanic households was up 38%, and among Asian households, up 43%. Elsewhere in news, the Fox Nation platform increased its subscriber base by approximately 80% over the past fiscal year, supported by its sustained and high conversion rates of trialists to paid subscribers and retention rates well above industry averages. At Fox Sports, live event viewing was up 5% through the first half of the calendar year, led by our NASCAR schedule, which generated viewership up a solid 10% over 2021. This spring was busy for Fox Sports as we launched the inaugural season of the USFL. The USFL averaged over 1 million viewers on Fox, at least 20% higher than the EPL on NBC and regular season NHL broadcasts on ABC, and more than twice the viewership of MLS on Fox. In its first season, the USFL clearly delivered on its most essential goal, which was to demonstrate that the league belongs alongside other long-established spring sports properties. And as you know, we have an incredibly strong year ahead in sports, which includes the FIFA Men's World Cup beginning this November and the Super Bowl next February. At Fox Entertainment, our content strategy is focused on ad-supported, multi-platform television that can thrive both creatively and financially well into the future. We look to use our broadcast network to build and support businesses beyond our linear air. An example of this approach is Next Level Chef, which was the number one new broadcast entertainment program this past season and Fox's first own production inside our partnership with Gordon Ramsay. Whereas we used only to license Gordon's product from third parties, we now license hits like Next Level Chef to third parties. And we have done so with the sale of the format to ITV in the UK. Another example of how we extend and monetize our IP is the just-launched Gordon Ramsay Fast Channel on Tubi. And speaking of Tubi, One year ago, one year into a focused investment cycle at Tubi, the platform generated TBT growth of nearly 40 percent and revenue growth of 45 percent across the fiscal year, with both metrics coming in better than planned and reinforcing our decision to invest in this strategic asset. During the June quarter, 34 percent growth in TBT helped drive revenue growth in the low double digits. despite a more difficult prior year comparison when we began our ramped content and monetization strategy. In the quarter, we launched 25 linear channels, grew our VOD library to over 45,000 titles, and premiered 13 efficient Tubi originals. We will continue to invest judiciously in Tubi with our sights set on achieving $1 billion in revenue run rate in the next couple of years. As you know, our affiliate renewal cycle begins in earnest this new fiscal year, and we are again looking forward to industry-leading gains from the superior value of our channels and services. With some early, meaningful station and affiliate deals already completed, including the recently closed Verizon deal, we go into this renewal cycle with confidence the market appreciates the value of our brands. In aggregate, these financial and operating achievements again highlight the fact that the Fox story is one of strength, one of focus, and one of stability. We will see how the macroeconomic environment evolves during the months ahead, but as we have demonstrated over the course of the last few years, Fox is well positioned to outperform. We remain encouraged by the Fox specific trends that I've highlighted and that we are observing in real time, underpinned by the best balance sheet in the business, the same a solid balance sheet that helped us thrive despite the challenges of COVID and that will continue to support our investments for long-term growth and shareholder returns. And with that, I will turn you over to Steve.