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 the question-and-answer session. I would like to emphasize that functionality for the question-and-answer queue will be given at that time. 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 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 very much, Gabby, and welcome aboard. Well, we have concluded another successful fiscal year, achieving both the financial and operational goals we set for 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 were at our 2019 Investor Day will remember our commitment to you that we would have achieved $1 billion of incremental Television segment affiliate revenue by the end of calendar 2022. I'm more than pleased to confirm that we have achieved that $1 billion 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% above last year's upfront, with nearly 25% of our current year commitments across our growing digital properties. We achieved pricing increases in the high single to low double digits 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 2022 advertising revenue was generated by live content, with sports and news delivering 40% and 30% 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 US Senate races in 13 of our 18 markets, including what we expect to be heavy political spending 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 in 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. 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 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 one million viewers on FOX, at least 20% higher than the EPL on NBC and regular season NHL broadcast 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 owned production inside our partnership with Gordon Ramsay, whereas we used 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 into our focused investment cycle at Tubi, the platform generated TVT growth of nearly 40% and revenue growth of 45% 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% growth in TVT 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 a $1 billion 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're observing in real-time, underpinned by the best balance sheet in the business; the same 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.

Thanks Lachlan, and good morning, everyone. We ended our third full fiscal year with total company revenue growth of 8% and topline growth across all of our operating segments in every quarter of fiscal '22. Even in a year that for us was light on major sports events and was an off-cycle political year, total company advertising revenues led this growth with a 9% increase over fiscal 2021. Cable segment advertising revenues were up 9% and primarily benefited from higher pricing across our news and sports networks. Television segment advertising revenues were up 8% on the back of increased engagement of Tubi, as well as higher pricing and the normalization of live event programming at the FOX Network, following COVID-related disruptions last year. These gains were partially offset by the absence of the prior year's record political revenues and lower ratings of FOX Entertainment. Total company affiliate revenues increased 7% led by 10% growth at the Television segment and 5% at the Cable segment. Total company other revenues increased 15%, driven by higher sports sublicensing revenues as compared to prior year pandemic-related disruptions, growth in FOX Nation subscription revenues, and the consolidation of TMZ, MarVista, and Studio Ramsay Global. This growth in other revenues was partially offset by the impact of the divestiture of the company's sports marketing businesses last fiscal year. We also delivered sustained momentum in our consolidated digital revenues with a nearly 30% increase year-over-year. This digital growth was supported by the organic investments across our digital portfolio that we articulated at the outset of the fiscal year. These investments, the establishment of USFL, and higher programming rights amortization associated with the normalized sports and entertainment schedules contributed to a modest decrease in our full-year adjusted EBITDA which came in at $2.96 billion. Full-year net income attributable to stockholders was $1.21 billion or $2.11 per share, while adjusted EPS was $2.79, down modestly against the $2.88 reported last year, primarily due to the impacts on EBITDA I just mentioned. Turning to the quarter, we delivered total company revenues of $3.03 billion, up 5% over the same period in 2021. This growth was led by a 7% increase in total company advertising revenues, highlighted by the strength of FOX News, record June quarter political revenues at FOX Television stations, and continued growth of Tubi. Total company affiliate revenues grew 4%, with 7% growth at the Television segment and 2% growth at the Cable segment. Once again, this distribution revenue growth was driven by rate increases, as the rate of subscriber declines increased modestly in the quarter, with trailing 12-month industry sub losses running in the high 5% range. Total company other revenues increased 4% as the consolidation of our entertainment production companies and continued momentum at FOX Nation were partially offset by the timing of sports sublicensing revenues, which were impacted by COVID in the prior year. Quarterly adjusted EBITDA was $770 million, up 7% over the comparative period in fiscal 2021, as our revenue growth was partially offset by higher expenses, including the impact of the anticipated digital investments of FOX News Media and Tubi, and the first year deficit associated with the launch of the USFL. Net income attributable to stockholders of $306 million, or $0.55 per share, was higher than the $253 million or $0.43 per share in the prior year quarter. This variance reflects the EBITDA movement I just described, along with the mark-to-market adjustments associated with the company's investments recognized in other than that. Excluding non-core items, adjusted EPS in the June quarter of $0.74 was up 14% over last year's $0.65. It is worth noting our effective income tax rate was higher for both the quarter, and the full year, primarily due to a $30 million re-measurement of our net deferred tax assets associated with changes in the mix of our jurisdictional earnings. This had no impact on our cash taxes. Now, let's turn to the performance of our operating segments for the quarter, starting with Cable Networks, which reported a 4% increase in revenues. This was led by a 14% increase in cable advertising revenues, driven by strong gains in both pricing and audience at FOX News, notwithstanding slightly higher levels of preemptions associated with our breaking news coverage. Also contributing to the overall segment revenue growth was a 2% increase in affiliate revenues, once again due to the healthy pricing gains across all of our networks. Cable other revenues were unchanged compared to the prior year, as the continued subscription momentum at FOX Nation, and the addition of the USFL were offset by the impact of the timing of sports sublicensing revenues as a result of COVID in the prior year. EBITDA at our Cable segment was down 7% against the prior year as these revenue increases were more than offset by increased expenses, including the planned digital investment and higher programming costs, including those associated with breaking news coverage at FOX News Media, as well as the launch of the USFL. Our television segment reported a 5% increase in quarterly revenues. This was led by a 7% increase in television affiliate revenues, reflecting increases for both direct retransmission revenues at our owned and operated stations, and our programming fees from non-owned station affiliates. Our Television segment delivered 4% growth in advertising revenues, driven by higher political advertising at the FOX Television stations, continued growth at Tubi, and the introduction of the USFL, partially offset by lower ratings of FOX Entertainment. Other revenues at television increased 3% in the quarter, primarily due to the impact of the acquisitions of TMZ and MarVista Entertainment, and the consolidation of our stake in Studio Ramsay Global, partially offset by the timing of deliveries at Bento Box. EBITDA at our Television segment increased over 50% as expenses were flat against the prior year quarter. Here, we saw an accelerated digital investment at Tubi, and the consolidation of the entertainment production assets offset by the timing of programming costs at FOX Entertainment. During the full year, we generated free cash flow, which we define as net cash provided by operating activities less CapEx of $1.6 billion. Over the course of fiscal 2022, we returned $1 billion of capital through the repurchase of 18.7 million Class A shares and 8.7 million Class B shares. This was supplemented by over $270 million in dividend payments and underlining our continued commitment to shareholder returns, today we announced an increase in our semi-annual dividend to $0.25 per share. With the payment of this dividend, we will have cumulatively returned over $3.75 billion of capital to our shareholders since the formation of FOX. This includes share repurchases totaling over $2.65 billion against our buyback authorization of $4 billion. From our balance sheet perspective, we ended the quarter with $5.2 billion in cash and approximately $7.2 billion in debt. Our fiscal 2022 financial performance along with the progress we have made on our strategic priorities provide a strong foundation for us to springboard into fiscal 2023 where the setup is incredibly favorable. We remain confident that collectively the financial tailwinds from Super Bowl 57, the early exit of Thursday Night Football, the momentum heading into November's midterm elections, and the start of our next major distribution cycle will deliver record revenues and EBITDA in fiscal 2023. As we've highlighted previously, our plans for fiscal 2023 incorporate maintaining our current level of investment in our digital growth initiatives. From an affiliate revenue perspective as you would expect, we make no predictions on industry subscriber volumes. However, from a rate perspective given the timing and nature of our affiliate renewals, you should expect to see the financial benefit of these renewals skewed to the second half of the fiscal year and concentrated toward our Television segment. Our focused strategy and operational execution continue to distinguish us. Together, they have delivered sustained financial outperformance since the establishment of FOX and will be showcased with a banner year of events in fiscal 2023. This momentum supported by the most robust balance sheet in the industry positions us well to navigate the broader macroeconomic turbulence while creating value for our shareholders. And with that, Gabby, let's now open it up for Q&A.

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

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

Okay, great. Thanks guys. Two quick ones if I could. First of all, on the Verizon renewal, anything you could tell us about pricing you got with that deal and how that positions you for the upcoming renewal cycle? And then looking out into 2023 given the cash balance and all these EBITDA drivers, how should we think about capital return and the buyback? And do we have to wait for a resolution to the FanDuel situation, or how should we think about just sort of giving all the cash on the books and what you'll generate this year? Thanks.

Good morning, John. I'll start by addressing the Verizon renewal question, and then I'll let Steve discuss our cash position. Regarding the Verizon renewal, I can’t disclose specific pricing, but it aligns perfectly with our forecasts and long-term plans. We are very pleased with our partnership with Verizon. We have secured industry-leading price increases for our top brands, including our local stations and retransmission renewals, as well as the strong reputation and audience loyalty of FOX News. This has enabled us to achieve those price increases. Additionally, we have successfully included FOX Weather distribution in our future renewals and expanded our relationship with Verizon to cover Tubi. Overall, we are happy with this renewal, which sets us up well for the next two years, but we still have two-thirds of our distribution to renew. We value our partnership with Verizon. Steve?

Yes, hi John. You're right. We have a very strong balance sheet, finishing the year with just over $5 billion in cash. As mentioned in my opening remarks, we are optimistic about fiscal '23 regarding revenue, EBITDA, and cash flow. This narrative remains consistent. Our primary use of cash since FOX's inception has been to return value to shareholders, and I highlighted the significant amounts we've returned to them. We currently have a $4 billion authorization, with $1.35 billion remaining. We're also open to both organic and inorganic investments in the business and will approach that in a balanced way as opportunities arise. Our capital allocation strategy remains remarkably consistent.

Operator, we can go to the next question.

And that is from Phil Cusick with JPMorgan. Please go ahead.

Thank you very much. Good morning. I have a quick follow-up regarding your comments on the advertising market. Are there any trends in the macro environment that we should be aware of, regardless of your own deals? Additionally, you mentioned a high single-digit decline in the industry. I'm curious if the FOX affiliate customer accounts are experiencing a similar decline in the video industry, or if you are seeing a lesser impact due to your different customer base? Thank you.

On the advertising market, good morning, Phil. I'll provide some insight. One of the most encouraging developments we've observed is in our local stations and base markets. Excluding the political sector, our base market remains stable. The return to growth in the auto category, which has concerned us over the past couple of years due to COVID and its impact on the automotive sector, is a strong sign for the future. Locally, we are seeing softness in two areas: the local wagering or betting category and government spending, which was driven by COVID-related health initiatives that are no longer present. However, this is more than compensated by strength in other categories. In terms of the scatter market, we are experiencing a quiet period before the fall sports cycle, typical for summer, leading to limited scatter availability. Nonetheless, scatter pricing has increased in the low double digits, indicating positive strength. From a broader economic perspective, we have not noticed any significant impact on our advertising business except for some softness in programmatic advertising, which constitutes about 10% of our advertising efforts. This has not materially affected us and primarily pertains to programmatic advertising through Tubi and our FOX News Media digital platforms. Steve, would you like to address the second part of the question?

Yes. So Phil, just on the rate of subscriber erosion, I think with our channels – our must-carry channels. So I think we're best positioned to buffer any sort of weakness in the subscriber universe. I think where people find it challenging to reconcile between sort of how we report numbers and how where you see numbers from the Street, there's a couple of things. One is we're in a two-month delay versus what's being reported by the distributors. And the other piece is there's a fair amount of opacity around some of the platforms that don't report. So you got the many of the virtual MVPDs don't break out their numbers and DIRECTV no longer breaks out its numbers. And so that's probably where you're seeing the sort of friction between the reported numbers.

Operator, we go to the next question, please.

That's the line of Robert Fishman with MoffettNathanson. Please go ahead.

Good morning, everyone. There's lots of chatter right now around the Big Ten renewal in the marketplace. Just wondering if there's anything you can share specifically on those rights or maybe bigger picture of how FOX is positioned to renew key sports rights with your current portfolio of assets compared to either some of the pure digital companies or other media companies with SVOD services? And then how do you think about the ROI of the sports rights investments going forward?

Good morning, Robert. Overall, I'll start with a general overview and then focus on the Big Ten. We will always evaluate sports rights as they become available. We've been quite disciplined in how we analyze and consider acquiring additional sports rights. We assess each sport's potential both in terms of audience size and the advertising revenue we can generate. We also examine our subscriber base and what we can attribute to our affiliation agreements with distributors regarding subscription revenue. Our approach to sports rights is scientific and disciplined, looking at various sports in the marketplace to see what aligns with FOX Sports. Historically, we have passed on sports rights that we deemed too costly or unlikely to generate additional revenue for our business, and this approach remains. Regarding the Big Ten, the Big Ten Network is a crucial strategic partner for us. We have enjoyed a strong relationship and look forward to possibly renewing those rights with new broadcast partners involved. The Big Ten will make an announcement soon, and we are excited about our ongoing long-term and profitable partnership with them.

Operator, we go to the next question, please.

That is the line of Ben Swinburne with Morgan Stanley. Please go ahead.

Hey. Good morning guys. Two questions, one, I think there's been a lot of enthusiasm over the past couple of years about Fox's opportunity in sports betting. I think it's gotten a little quieter on that front at least in terms of the market discussion. Could you guys update us on what you see ahead of the company there both directly with FOX Bet? And is there any timing on something with Flutter, and also just sort of the benefits to the broader business? And then I just wanted to clarify, Steve, you said you expect to maintain the current investment level in fiscal 2023 versus 2022. Is that a comment on just the amount of capital you're deploying, or is that sort of an EBITDA net impact on EBITDA, just to make sure we understood the comment there? Thanks.

Thank you, Ben. We firmly believe in the potential of the sports betting business, seeing it as a significant opportunity, particularly connected to the FOX Sports brand. We attract the largest sports audiences in the country, and no other broadcaster can achieve the same level of reach and engagement that we provide, especially during the fall season on a weekly basis. Over the past couple of years, we have demonstrated this with FOX Bet and Super 6, successfully moving our sports audiences from television to FOX Bet Super 6, creating a valuable funnel that benefits FOX Bet. This remains our strategy and is proving to be very successful. Regarding Flutter, we are still in the arbitration process with them and look forward to gaining clarity in the coming months, likely by the start of autumn. Once that situation is resolved, and with the NFL season kicking off in early September, we expect to see increased activity around FOX Bet and FOX Bet Super 6.

Hey Ben, regarding your question about organic investment, we identified an impact of $200 million to $300 million on our net EBITDA from our investments for fiscal 2022. In other words, our EBITDA for fiscal 2022 would have been $200 million to $300 million higher without those investments. We plan to maintain that level of investment, which means that when you compare 2023 to 2022, this will not negatively affect our results. I hope that clarifies things for you.

Operator, we have time for one more question.

Very good. That's the line of Doug Mitchelson with Crédit Suisse. Please go ahead.

Thanks so much. If I could get a clarification on the Big Ten, you have digital rights for Big Ten games and you'll maintain those in any new deal that you're looking at? Another clarification, I'm wondering if you have upfront volumes ex-Super Bowl and ex-FIFA. I'm just trying to get an ex-unusual, how strong are your upfront volumes? And then, lastly Steve, any swing factors in that free cash flow outlook for fiscal 2023 that we should be thinking about working capital or CapEx or anything like that? And good morning everybody. Thank you.

Hi, good morning, Doug. I hope you’re doing well. To clarify, we have digital rights for Big Ten games, and we will retain those in the new deal. I don’t want to say too much because it’s really up to the Big Ten to announce their new agreements. Regarding upfront volumes without the Super Bowl, they were about 15% higher than the last upfront. We consider everything without the Super Bowl since it’s such a significant year for us. We’re seeing record pricing for the Super Bowl and are well ahead of our sales plan for that position. However, I want to emphasize that upfront volumes are somewhat within our control. We intentionally decided to sell more volume in this upfront period because we believed it was important to have maximum certainty around our sales and inventory. In previous years, we typically sold around 75% of our available ad impressions, but this time we sold in the low to mid-80s percent range. We felt that was a wise decision given the uncertainty surrounding the economy and the advertising market moving forward.

Doug, it's Steve. Just on the free cash flow. I think from a working capital perspective a big swing factor is, I think from an accounting version of working capital, remember that going into we're into a Super Bowl year. So therefore, we amortize a ton of the NFL costs in a Super Bowl year, so it has an impact on our working capital. Our CapEx was down to a touch over $300 million this year, which was down from a touch north of $480 million the year before, you should expect the $300 million to go up a touch. But the rest of it is, I think really pretty much stock in trade in terms of cash flow swings. There's nothing particularly unique about next year apart from the tailwinds that we have going into it from an operating perspective.

Great. 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.

Thanks everyone.

Thank you.

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