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. And as a reminder, this conference 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 Nallen, Chief Operating Officer; and Steve Tomsic, 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. Thank you for joining us on this call. I often find early mornings, after a coffee or two or three, to be a good time to reflect on the progress we are making and to plan the days or weeks ahead. Sitting here on the FOX lot with my colleagues, I recall when we saw many of you in person and kicked off the new FOX a few years ago. Some of you asked then, correctly, if the new streamlined FOX could aggressively grow its top-line revenues. What we committed to you then was that we would add $1 billion of television distribution revenue by the calendar year of 2022, and we all knew that proof would be in the pudding. So what's pleasing is that this quarter, we again delivered healthy distribution and advertising revenue growth across our brands, 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 ratings trends 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 events, including must-have events of the coming year such as the Super Bowl, the World Cup, and even the mid-term political cycle, puts us firmly in the lead with our advertising partners as upfront deals are made. 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 2022 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 of adults aged 25 to 54. FOX News now beats CNN and MSNBC combined in total day and both total viewers and the key demo for nine consecutive months with a total base 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 while Jesse Watters Primetime, which launched in late January, is averaging over 3 million viewers in the 7 PM 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 primetime. Meanwhile, our sustained and disciplined investment continues 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 average FOX News fan has clearly embraced the FOX Nation platform, as demonstrated by its consistently high conversion rate from trial 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, with games on FOX and NBC averaging 1.5 million viewers, which compares favorably to well-established spring sports properties like the NHL, Formula 1, the EPL, and MLS, all properties that either earned sizable rights increases or are expected to do so soon. We are establishing that the USFL belongs in this competitive set, which is our primary goal in its first season. At the NFL, we are pleased to announce that we have reached an 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 we are early, the low-teens 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. 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 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, which is 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 in the season, all during the busiest consumer shopping weekend of the year. This speaks to the power of our platforms and the prudence of our strategy. Our linear businesses are complemented by Tubi, where total view time increased 50%, propelled by record quarterly viewership. In fact, Tubi delivered 18 of its top-20 Tubi key days in its history this past quarter, a period where there is traditionally some softer seasonality in the AVOD market. Meanwhile, Tubi expanded its industry-leading library and now accounts for more than 42,000 titles in its portfolio. Importantly, Tubi also renewed key distribution deals, including its partnership with Amazon, and signed its first custom deal for Samsung’s smart TVs. In the third quarter, we continued 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. 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 is born. It's probably the hardest assignment we can give. I am, we all are, deeply grateful for the tremendous work and extraordinary journalism that Trey Yingst, 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. Our thoughts, and the thoughts of the whole FOX family, are with them and their families. With that, I’ll hand over to Steve.

Thank you, Lachlan, and good morning, everyone. Our third quarter results once again reflect the strength of our leading brands and the continued growth of our digital businesses. We achieved total company revenue growth of 7% year-over-year, delivering top-line growth across all of our segments for the fourth consecutive quarter. Total company affiliate revenues increased 5% despite the fact that only 5% of our total company distribution revenues have been up for renewal this fiscal year. Meanwhile, the rate of industry subscriber declines remained steady in the quarter, with trailing 12-month subscriber losses running below 5%. Total company advertising revenues grew 9% as our leading brands once again delivered premium pricing, coupled with continued strong momentum at Tubi. Quarterly adjusted EBITDA was $811 million, down 10% over the comparative period last year as the revenue growth was more than offset by higher expenses. As we’ve foreshadowed on prior calls, the increase in expenses was mainly driven by the anticipated increase in digital investments including FOX News Media and Tubi. Additionally, we saw high programming rights amortization and production costs at FOX Sports and were impacted by an approximately $30 million write-down of certain scripted programming at FOX Entertainment. Net income attributable to stockholders was $283 million, or $0.50 per share, compared to the $567 million, or $0.96 per share, we reported in the prior year quarter. As we have seen in recent quarters, this below-the-line variance was primarily due to the change in fair value of the company’s investment in Flutter, which we recognized in other net. Excluding this impact and other non-core items, adjusted EPS was $0.81 per share, compared to last year's $0.88, primarily reflecting the movement in EBITDA. Now let's turn to our business segment results starting with Cable Networks, which reported an 8% increase in revenues. The strong revenue delivery was underpinned by significant gains in cable advertising revenues, which grew 20% in the quarter. Notwithstanding slightly higher levels of preemptions associated with our breaking news coverage of the war in Ukraine, FOX News was the engine of this advertising revenue growth with strong gains in both audience and pricing. Cable affiliate revenues increased 3% over the prior year period, a result of healthy pricing gains across all of our networks. Cable other revenues increased 23%, led by the timing of sports sub-licensing revenues, which were impacted by COVID last year, as well as continued subscription momentum at FOX Nation. This growth was partially offset by the disposition of our sports marketing business, which was sold in March of last year. EBITDA at our Cable segment increased by $14 million over the prior year period as these revenue increases were partially offset by higher expenses related to the digital investments of FOX News Media and the timing of programming amortization and production costs at the Cable Sports Networks following the COVID-related disruptions of the prior year. Almost matching the strong revenue growth in cable, our Television segment delivered a 7% increase in revenue. This was led by an 8% increase in television affiliate revenues over the prior year quarter, reflecting increases for both our direct retransmission revenues at our owned and operated stations and for our programming fees from non-owned station affiliates. This run rate assures achievement of our target of $1 billion of incremental television affiliate revenue this calendar year that we announced at our Investor Day back in 2019. Our Television segment also delivered 6% advertising revenue growth, reflecting strong linear pricing at the FOX Network and continued growth at Tubi, partially offset by lower impressions of FOX Entertainment. At FOX Sports, the impact of the additional week to the NFL regular season was offset by the absence of the rotating NFL divisional playoff game this year. And at the FOX Television stations, notwithstanding the ongoing supply chain-related challenges to the auto category, we continued to grow advertising revenues supported by gains from our digital sales efforts and continued demand from the sports betting category. Other revenues at our Television segment increased 17%, primarily due to the impact of the acquisitions of MarVista Entertainment and TMZ and the consolidation of our stake in Studio Ramsay Global. Television EBITDA was lower by $100 million against the prior year period, as its healthy revenue growth was more than offset by the planned digital investment at Tubi, higher sports programming amortization and production costs at FOX Sports, and an approximately $30 million write-down of certain scripted programming at FOX Entertainment. Turning now to cash flow, we generated strong free cash flow of $1.54 billion in the quarter, reflecting our normal seasonal cycle of collecting advertising revenues from our library programming and the result of our sports rights payments being concentrated in the first half of our fiscal year. Our share repurchases since the commencement of the quarter have totaled $300 million and fiscal year-to-date, we have returned over $1 billion of capital to shareholders. This comprises approximately $275 million in the form of our semi-annual dividend payments and a further $800 million in share buybacks. We remain committed to utilizing our full buyback authorization of $4 billion and have now cumulatively repurchased approximately $2.4 billion, representing over 11% of our total shares outstanding since the launch of the buyback program in November 2019. We continue to maintain a very strong balance sheet, ending the quarter with $4.6 billion in cash and $7.2 billion in debt. As we look forward, the setup for fiscal 2023 remains incredibly strong with the financial tailwinds from Super Bowl 57, the early exit of Thursday Night Football, November's mid-term elections, and the start of our next major distribution renewal cycle. So with that, I'll now turn the call back to Lachlan.

Thank you very much, Steve. As you know, we usually, after Steve's comments, we go straight to Joe and start the questions. But we have breaking news, which I am announcing in the spirit of being always open and giving our investors and our shareholders the latest news in the company. I'm pleased to announce that immediately following his playing career, whenever that may be, seven-time Super Bowl winner Tom Brady will be joining us at FOX Sports as our lead analyst. Over the course of this long-term agreement, Tom will not only call our biggest NFL games with Kevin Burkhart, but will also serve as an ambassador for us, particularly with client and promotional initiatives. We are delighted that Tom has committed to joining the FOX team, and we wish him all the best during this upcoming season. I am sure everyone joins me in warmly welcoming Tom Brady on board. Thank you very much. And with that, I'll hand over to Joe.

Thanks, Lachlan. And now we'd be happy to take questions from the investment community.

We have a question from Ben Swinburne. Please go ahead.

I want to ask when Tom Brady is actually going to stop playing, but I'll save that for an offline conversation. Congrats on that deal. I wanted to ask you guys about Tubi heading into fiscal 2023. Could you talk a little bit, Lachlan, about how you plan to position that business in the upfront to the extent you can share any goals in terms of how much of that business may actually be sold in the upfront? And how are you guys thinking about investments relative to letting that business start to generate some profits next year as you continue to see a lot of top-line growth? Thanks.

Thank you very much, Ben. Look, I can tell you on the first part of your question that, like I said, we're incredibly excited to have Tom joining us. It's entirely up to him for when he chooses to retire and move into his exciting future in television, but that's up to him to make that choice when he sees fit. Regarding Tubi and the upfronts and how we position the Tubi business going forward and when it returns to profitability, it's important to note that on Monday, during our upfront presentations, we’ve already spent several weeks engaging with clients and advertisers on upfront negotiations, and Tubi has been at the forefront of all of those conversations. I think our clients can see both the shift to AVOD and the streaming advertising. At the same time, they see the strength of where Tubi is positioned as a leader in that market. We are constantly on a regular basis, balancing the ad load in Tubi and the fill rate of those advertising slots. Tubi has an incredibly smart ad tech that can do that dynamically, viewer-to-viewer, customer-to-customer. We can dial that up or down really as we see fit. We think it's important that in this early life cycle of advertising video-on-demand services, we maintain the highest quality viewer experience. So we’re pleased with where Tubi is. It would ultimately be up to us to increase that ad load, drive revenue, and bring it back to profitability. Tubi has been profitable in past quarters, but as of today, the right strategy is to continue to invest in the growth of Tubi, which we believe will be a leader in advertising video-on-demand in this country.

Operator, we can go to the next question.

We have a question from Jessica Reif Ehrlich, Bank of America. Please go ahead.

Thank you. Trying to think of how I make this one question. Your two key drivers are obviously advertising and distribution revenue. In advertising, you're incredibly well-positioned going into the upfront, given the incredible array of marquee sports. You'll also have USFL coming in, and news couldn't be more dominant. Can you give us color on expectations for your performance in the upfront market and the health of the overall industry? On the Pay TV side, while your outperformance in news and other areas is very strong, the Pay TV market has been shrinking. You seem pretty confident about the affiliate renewal cycles coming up. Can you give us color on that and how you offset the shrinking universe?

Sure. Thank you, Jessica. I am not sure if there were two questions or seven, but they are always good questions. So, thank you very much. On the outlook, I think I'll answer most of them as I go through this answer, but from an advertising perspective, particularly heading into these upfront negotiations, we're already in the upfront season, and as we get closer to the key end of that season, we're seeing really solid demand across our businesses. In pricing, entertainment is seeing pricing in the high-single-digit, mid- to high-single-digit range above last year. But in Sports News, as you said, we are very well positioned. We are seeing our pricing in the mid-double digits. So, the mid- to high-teens pricing increase is driven by demand for some live sports and live news. This gives us a great deal of confidence as we move into these upfront negotiations. You add to that, obviously, the inclusion of Tubi with 50% growth in DVT time and engagement. It’s a strong position to be in. Our sports properties are driving this interest from our clients. If I could give one word of advice, which I wouldn't do, but I'll share it: getting in early because some of these key events are selling extremely well already. We fully expect to see continued advertising strength. This does not even touch on the mid-term election cycle, which by all estimates will be a record cycle for us. We closely monitor the races in all of our markets, and it's pretty amazing to see where we have not only tight races but also contested primaries across the majority of our owned and operated stations. We think the coming mid-term elections will truly be an advertising boon for us. Moving on to Pay TV pricing, frankly, both from an advertising perspective, which is incredibly strong with the strength of FOX News, and from a distribution revenue point of view, we believe we are well-positioned. FOX News is competing with free-to-air broadcasters in terms of audiences. It's actually beating many nights of the week, and we expect our pricing power to continue strengthening with performance like that. So yes, I believe I’ve answered most, if not all, of your questions, Jessica. In short, we are well positioned from both an advertising and television distribution perspective, particularly as we approach a period where two-thirds of our distribution revenue is set to come up for renewals over the next two years.

Operator, we can go to the next question.

We have a question from Robert Fishman of MoffettNathanson. Please go ahead.

Good morning. A question on television profitability. Given the $30 million write-down of the scripted programming at FOX Entertainment in the quarter and as we get closer to fiscal 2023 when Thursday night football losses go away, can you just help frame the other swing factors that could impact a big increase in television EBITDA next year? Any early look into incremental digital investments and how you are thinking about the general entertainment programming spend to help fill that Thursday Night programming gap?

So, hey, Robert, how are you? One of the pieces of work that the entertainment network has undertaken over the last year is really about transforming that business, allowing it to tightly control its programming costs. This hasn't been achievable before. This goes to the acquisition a few years ago of Bento Box so we can control more of our animation costs. It also goes to the acquisition of TMZ, allowing us to control high-quality factual content and specials that we put on the network. All these efforts, including MarVista, focus more on Tubi. I should mention the joint venture with Gordon Ramsay Productions; that's incredibly exciting. Gordon has been a key partner of ours for many years, and his plans for growing that business, not just in the U.S., but globally, are exciting to see. We have high expectations for that partnership. This all feeds into the network's ability to control its programming across multiple lots. The FOX network is only two hours a night in primetime, allowing us to manage the volume of hours easily. What was the last part of the question?

Yes. So, Robert, regarding the swing factors, there are significant tailwinds behind the TV segment going into next year. You mentioned Thursday Night Football dropping off; we previously indicated that this release amounts to around $350 million to $400 million to our bottom line for us. Furthermore, there are additional factors to consider next year: Super Bowl, political events, and the FIFA World Cup, combined with Tubi's exciting top-line momentum. So, we couldn’t be better positioned for fiscal 2023 from a Television segment perspective.

You could say I’m more pleased. Steve is very cautious.

Operator, we can go to the next question.

We have a question from Doug Mitchelson of Credit Suisse. Please go ahead.

Hi, Lachlan and team. Thank you for taking the question. Should investors expect fiscal 2023 to see operating leverage against your digital investments, with revenue growing faster than OpEx? Lachlan, I am not sure if you're prepared to give any sort of update on ambitions for Tubi, but it's been growing rapidly, you're investing a lot in it. FOX has been in an interesting position, not making a strong pivot to streaming like some of your peers, but Tubi is an interesting investment impacting margins this year. I'd appreciate understanding where you think that asset could go and what the investment cycle looks like.

Thank you very much, Doug. We see the level of investment this year in our digital properties, including Tubi but also FOX Weather and FOX Nation, at a solid level going forward. We've guided the market that we’ll invest between $200 million and $300 million into growing those businesses. We would not expect any significant level above that based on our current plans. This investment is appropriate, particularly for Tubi, which we believe will be the future of television viewing in this country. Tubi has an interesting origin story; it began with Farhad and an ad tech business over 11 to 12 years ago and ultimately evolved with the understanding of taking this intelligent ad tech and licensing programming along with that. It’s great to have the Tubi team focused on technology and understanding how to drive engagement and viewing, which differs greatly from an older media model. We believe Tubi is poised to continue winning in the market, and this level of investment is right to help it.

Operator, we have time for one more question.

Our last question will come from the line of Steven Cahall of Wells Fargo. Please go ahead.

Yes. Thanks very much. Good morning. Maybe first, I am sorry if I missed this, but I think you maybe indicated that you could be at an end of arbitration by June. So I just wanted to see if that timing is still correct? And would love to know if you have any metrics to update us on for FOX Bet and how that’s continued to grow? How do you feel about the relationship with Flutter and some of your strategic opportunities there? As we think about long-term sports rights, you've got a lot of rights, especially digital rights. Do you see those largely staying inside the linear ecosystem, or do you think there is an opportunity to sub-license some of those to peers investing heavily in their a la carte streaming products? Thank you.

Thanks very much, Steven. In terms of our sports wagering strategy and business, we are in arbitration. We expect that arbitration to be resolved in the summer, if not sooner. There is not much more we can say about it. The most important thing is the value of the business we're creating, particularly at the top with FOX Bet. Super 6, in particular, is a free game with $6.6 million, and we are in a traditionally quiet period for sports betting without football. The FOX Bet businesses continue to perform well in driving wagering customers into paying games. We are pleased with our operational delivery on our side of the partnership. We look forward to the end of arbitration and advancing our wagering strategy. Regarding sports rights, we believe it is crucial for them to remain on our owned linear platforms as they provide the most viewership for groundings. It is also key to our distribution strategy. Keeping the highest quality exclusive content within our platforms is vital. Sub-licensing those to others is not our preferred strategy.

At this point, we are 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.

Ladies and gentlemen, that does conclude your conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect.