Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation First Quarter Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I'll now turn the conference over to Chief Investor Relations Officer and the Executive Vice President of Corporate Initiatives, Mr. Joe Dorrego. Please go ahead, sir.

Thank you, Greg. Hello, and welcome to our fiscal 2021 first quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chairman 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 the Web site. And with that, I'm pleased to turn the call over to Lachlan.

Thanks, Joe. Good morning and thank you all for joining us to discuss our first quarter results. Today is a big day for Fox, and not just because we get to brag about our strong financial performance, continued operating momentum, and burgeoning digital assets, such as FOX Bet and Tubi, but because every four years we have the privilege and the responsibility of reporting on a U.S. presidential election. This very moment, as we speak, our viewers are starting their election day turning on their TV sets to where they left them last night, the FOX News channel, or opening their web browsers to FOXNews.com, or checking the FOXNews app for the latest report. Throughout the day, tens of millions of Americans around the country will turn to FOX to follow our coverage of the presidential election as well as senate, state, and local races. They do this because they trust us, and our legion of hardworking and diligent news professionals. Hours ago, our studios across the country were lit for today's coverage, and anchors, producers, camera operators, engineers, news editors, reporters, and more all got ready for a long day and night ahead, but are real preparation for today began years ago. In fact, it is over 12 months since we launched our Democracy 2020 campaign. This intentional, careful planning has served us well. The energy and excitement are palpable in the newsrooms of our local Fox television stations and at FOX News, where Bret Baier and Martha MacCallum will be live from Studio F in just a few hours. The news teams at the Fox television stations and FOX News have done a superb job throughout this election season, and viewers from across the political spectrum have been turning to us in record numbers as a result. FOX…

Thanks, Lachlan, and good morning. It's a busy day, so let's get straight to our results. The company delivered total revenues of $2.72 billion, up 2% over the comparative period in fiscal 2020 led by affiliate revenues that grew 10%, once again demonstrating the strength of our brand and our focused portfolio of channels. From an advertising revenue perspective, we continued to face strong growth of FOX News media and record political revenue source returned to growth at our FOX television station. The underlying and sustained strength resulted by COVID-19 related supply side factors that saw the postponement of live sports event and key scripted entertainment content at the FOX Network. Quarterly adjusted EBITDA was $1.17 billion, up $310 million over the comparative period in fiscal '20 due to the top line increases in revenue and the timing of programming expenses as a result of COVID-19. This improvement in EBITDA flowed through to the bottom-line when net income attributable to stockholders of $1.11 billion or $1.83 per share was higher than the $499 million or $0.80 per share in the prior year quarter. This increase included a onetime gain recognized in other net associated with the reimbursement of the cash tax prepayment from Disney following the disposition of certain 21st Century Fox assets. Excluding the impact of the Disney reimbursement and other non-core items, adjusted EPS of $1.18 was up 42% compared to last year's $0.83 per share primarily reflecting revenue and EBITDA growth. Turning to the performance of our operating segments for the quarter with cable network's EBITDA $781 million was up 14% on revenue growth of 3%. Cable affiliate revenue increased 4% supported by higher average rates partially offset by net decrease pay television subscribers of 6%. Cable advertising revenues increase 18% led by another quarter of impressive…

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

[Operator Instructions] Your first question comes from the line of Doug Mitchelson from Credit Suisse. Please go ahead.

Thanks so much. Lachlan, I think maybe the obvious question is, I know you like to have some walking-around money. With $5 billion of cash on the balance sheet are you seeing a lot of interesting activity in the M&A market, when you think about the increased visibility that you just talked about on this call, relative to what we had three months ago or six months. Does that change your focus in terms of your appetite for buying back stock? How are you thinking about deploying that capital over time? And if you don't mind, one quick follow-up, are you willing to give us what the total viewing time is for Tubi? I know you noted that it was up 100%. Thanks so much.

Thanks, Doug. It's good to hear your voice. I hope you're well. First of all, on the -- thank you for also pointing out our $5.1 billion of cash and our really superb balance sheet position, we've worked hard to create the position we're in, and I think we are, looking forward, and as I sort f alluded to in my prepared comments, we are now coming through a period of uncertainty for all businesses, [either period or week] [ph] we are seeing greatly improved visibility going forward. So I think that means is though we have a good idea of what our future capital needs are, we're deeply confident in our underlying business and cash generation. So, as we look at our cash on the balance sheet we really think about balancing how to deploy that towards acquisitions, organic investments in our business, and capital returns to our shareholders. We don't have a formula in terms of how we would allocate between those categories, but we have, to date, bought back $900 million worth of our stock, which leaves us with $1.1 billion of capacity under our buyback authorization, which we fully intend to complete. To your second question, the Tubi total time spent viewing, in September alone was 220 million hours viewed. Thanks, Doug.

We can go to the next question.

Your next question comes from the line of Alexia Quadrani from JPMorgan. Please go ahead.

Thank you very much. You've made -- you really hit some impressive milestones at Tubi, and I think a lot more new content. I'm curious when we may get maybe some more information or a bigger update on your long-term DTC strategy, and then just a quick follow-up, any color you can share on the NFL negotiations and how important maybe Thursday Night versus Sunday Afternoon is to you?

Thanks, Alexia. Let me address the second question first. Obviously we're not going to get into the detail of our NFL negotiation, but as I previously mentioned, the NFL, and on earlier earnings calls as well. The NFL along with, obviously, Major League Baseball, remains amongst our very top priorities, and really our number one programming partner. It's been a partnership that's gone back 27 years. We look forward to continuing that partnership, and you can see it in our ratings. While NFL ratings have been soft this year because of a number of factors which we believe are unique to this particular year with sports -- premium sports moving all to the fall, creating a more crowded marketplace for sports fans. And also with, frankly, the news cycle, where we've seen news viewing, you have to remember that the news audience and the sports audience, particularly the NFL audience has a tremendous overlap. Cable news viewing I think is up 46% during this NFL season. So we think some of the softness in the ratings is unique to this season, and because of that we're confident in the partnership -- in our partnership with the NFL going forward. In terms of Tubi, as you see fragmentation in the linear television market, particularly in linear entertainment. Tubi is the beneficiary of that. Tubi sits on the other side of that ledger, which is gaining audience and users from linear television markets. So think Tubi has a lot of tailwinds behind it, and we're excited to report on its milestones as they are achieved, and going forward.

We can go to the next question.

Your next question comes from the line of Michael Morris from Guggenheim. Please go ahead.

Hi, thank you. Good morning. One question on expenses, can you share what expense growth would have looked like excluding the programming disruptions that we've experienced. I think your operating expense, looks like it's down about 14% in the quarter, and Steve, you referenced sort of an unwind of that going forward. So I'm curious how much of that does unwind, and whether this disruption has impacted how you think strategically about that mix of investment in scripted programming versus sports and news? And then one other, just real quick, if I could, I'm curious of you can share any thoughts on how the outcome of today's presidential election may impact FOX News going forward? Do you think ratings can vary based on an outcome? And also, the president has in the past referenced perhaps starting a news network, and how you would think about that competitively.

So, Steve, I should answer the first question, you can answer the…

Let me, Michael, just in terms of expenses, listen, the impact of COVID is getting harder and harder to split out because you just don't know where the advertising would have -- it can affect you on the advertising, but if I just look at expenses and really just try and isolate for things that have been scheduled out of Q1 into Q2, Q3, Q4, I'd say that we benefited from about $270 million -- $280 million of expenses in Q1 that will shift into the back-half or the back three quarters of the year. You'll have a reasonable concentration of that hit Q2 because it's when you'll have a heavy concentration of both NFL and college football, and then we'll see the entertainment hit, largely, Q3 and to Q4.

And then to your second question, Michael, as far as the impact on FOX News of the presidential election, of course it's been a, to date, an incredible news cycle throughout the election, but also through the other incredible news stores and massive news stories throughout the year, obviously COVID being the main one. We see as we -- and by the way, that's driven ratings, it's driven revenue. I think FOX News advertising revenue is up 36%, which is a tremendous result, but as you look at our audience, and you look at our ratings you have to look at -- and this is true for the whole news ecosystem, you have to look at it in two different ways. One is the total news audience and the appetite for news and the second is share. The first, the appetite for the news and the news cycles, the news stories that are out are sort of out of our control, and I would expect as we enter a more normal news cycle, which has to happen eventually, that appetite for news will shift back to appetite for the great American pastimes of watching football, and watching baseball, and watching The Masked Singer, or I Can See Your Voice, and we look forward to that shift. Having said that, what we can control within the news ecosystem, what we aim to control is share, and I strongly believe, and we've seen this through I think now 18 years, off the top of my head, of different administrations and different political cycles, we've maintained our number one position through all of that. So I think that answers the first part of your question or give you some insight on how we're thinking about the first part of your question. So the news cycle will moderate. We fully expect to be number one, and maintain share through that. I think the second part of your question, Michael, was around new entrants and competition into the news environment. We love competition. We have always thrived with competition, and we have strong competition now. I would say the only difference today versus some years ago, as our audience has grown and our reach has grown, we see our competition as no longer only cable news providers, but also as the traditional broadcast networks, and as you know, FOX News has been the number one network, including broadcast networks now, as I mentioned, through from Labor Day through to Election Day.

We can go to the next question.

Your next question comes from the line of Michael Nathanson from MoffettNathanson. Please go ahead.

Yes, thanks. I have one for Lachlan and one for Steve. Lachlan, on sports gambling, I believe you have an option to buy 18.5% of FanDuel next year, in '21. I wonder how do you think about that, and just given how the market is valuing sports gambling how are you thinking about putting excess capital into that business? And then for Steve, we always ask you about affiliate fees when people are disappointed. This quarter, you're surprisingly upside; you've given us the update on subscriber trends. Is anything else coming on, a little bit of new pricing; perhaps some new deals came through? So any more color on the acceleration in affiliate fees would be helpful. Thanks.

Thank you. Thanks very much. So our FanDuel option this is an easy answer and a quick one. We have a 10-year option to acquire 18.5% of FanDuel. We think it's a huge opportunity. We think that option today has tremendous value, and we work on literally a daily basis with Flutter to both increase the value of FanDuel and also increase the value of FOX Bet and Super 6, our 50-50 joint venture with them. So our excitement about the space in sports wagering is unabated, but with the nature of a long-term option, we would wait until an appropriate time to exercise that option, and you wouldn't expect us to do that in the near-term.

Hi, Michael, it's Steve. In terms of the affiliate, if I look at it sequentially the biggest driver was just the subs were a little bit better versus Q4. So, Q4 as Lachlan mentioned versus Q1 this year with 50 basis points to the better. There's a couple of small things in it, we are lapping -- last quarter where we were out there with these personal period of time. This quarter, we had no Keep Americans Connected sort of accrual in the numbers. It's more underlined than it is any particular one-offs.

We can go to the next question.

Your next question comes from the line of Jessica Reif Ehrlich from Bank of America Securities. Please go ahead.

Thank you. I also have a question on sports gambling and one quick follow-up. So, Lachlan, you launched FOX Bet I guess over a year ago. Has stay-at-home changed consumer behavior or your expectations for the long-term opportunity? And maybe you can frame the long-term opportunity of your various pieces, and what led to the partnership that you recently signed with the Philadelphia Eagles where you're incorporating bricks-and-mortar strategy into your approach with the FOX Bet studio and lounge that's being built at Lincoln Field, and then, just a quick follow-up on Tubi, what was the advertising contribution this quarter? Can you frame what advertising change would have been without Tubi? Thank you.

Sure. So, first on Fox Bet, I think I know wagering has exploded during COVID and stay-at-home. People who -- and particularly as -- well, while sports was in a hiatus, gaming was growing strongly, and as sports came back, sports wagering grew tremendously. So, if you look at the trajectory of where that industry is going and particularly as states incrementally or consecutively open up to wagering, this business remains a larger, and larger opportunity for us. However, Jessica, as you'll remember, the structure of our partnership with Flutter is that they control the FOX Bet business today, and they fund the FOX Bet business today as Fox Corporation is not a licensed entity. Having said that, we work with them incredibly closely in terms of the promotion of FOX Bet in order to grow the value within that joint venture. The second part of your question on Tubi, we are now -- and we have now for several months selling Tubi -- and I should have actually also spoken to this with Alexia's question, we are selling Tubi in every single one of our conversations with our advertising partners. Tubi increases Fox's reach by over 20% and it's a young and diverse audience which is unduplicated, or largely unduplicated part of the Fox audience. So, every time I talk to Farhad, which is very regularly, there's a new daily revenue record that he hits, which is tremendous to see, and look, to be honest, we're only at the beginning. So, when we think of both the key metrics of time spent viewing, total users, and as importantly or maybe most importantly, revenue, Tubi consistently and continually is exceeding every expectation in our acquisition case.

Operator, we have time for one more question.

Okay. That question comes from the line of Ben Swinburne from Morgan Stanley. Please go ahead.

Thanks. Good morning. Steve, you mentioned record political, I'm wondering if you could size that in this -- at the stations, either this quarter or for the cycle, so we think about the contribution from political in the television segment over the six month period or so accurately, and then, maybe I'll just ask about Sunday Ticket in the NFL for Lachlan or whoever wants to take it, there were some press reports overnight that the AT&T is probably not going to retain that package. I'm just wondering as you guys think about the NFL landscape, is that a package that could be interesting to FOX maybe over a Tubi-like platform, or are you concerned that that may go wider than the satellite distribution model we've seen in the past impacting potentially the local broadcast ratings? I'm just curious if you have a perspective on the outcome there.

Hey Ben, I'll take the political advertisement. It's been a month to quarter and a month to half quarter. The good thing about this cycle is it's not just been a local story; we've been looking significant amount of national political revenue. So, for the quarter, we did a shade under 100 million across the group of which 70% of that was local, and then, when we look at it across the first-half, so July 1 through to today, we have plenty of skills under the next earnings call, we'll push close to $300 million of ad revenue, political ad revenue for the full six months, of which about just north of 200 will be local. So, it's been an enormous quarter-and-a-half for us.

And then, just before I touch on Sunday Ticket, I think one of the unique elements of this political cycle Ben is the growth in national political advertising as Steve mentioned. In prior years, political advertising has been almost entirely local, and the growth in national political advertising, particularly on FOX News but also importantly in sports, has been a new and I think a -- very positive development, and it goes obviously also to the quality of our audience. That also by the way has the impact usually on -- I think usually -- Jessica asked the question about the advertising market, but -- I suppose there were more important things to discuss, but what the robustness of the political market has really done is really drive our scatter pricing up. As advertisers have scrambled to find time, scatter advertising across local stations, across sports, across news and across entertainment is up strongly. We took the strategic decision to hold back a little bit more time than we normally would in our upfront negotiations, about roughly 5% more time we held back for scatter, and that bet is paying off handsomely. As we move on to Sunday Ticket, Sunday Ticket is a tremendous consumer offering. It doesn't work I think without a subscription, under anything other than a subscription model. So, it's not really something that we would consider or have the business model to monetize, but thank you for the question, Ben.

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 all once again for joining today's call.

Thanks, everyone.

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