Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation Third Quarter 2021 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 the functionality for the question-and-answer queue will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to Chief Investor Relations Officer, Mr. Joe Dorrego. Please go ahead, sir.

Thank you, operator. Good morning, and welcome to our fiscal 2021 third 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 our website. And with that, I'm pleased to turn the call over to Lachlan.

Thanks, Joe. Good afternoon. And thank you all for joining us to discuss our third quarter results. Once again, we have delivered a quarter of exceptional financial results, underscoring our ability to execute on our operating plan while making great progress on our longer term growth initiatives. Financially, we generated approximately $900 million of EBITDA, nearly as much as we did in the prior year quarter, when we had the benefit of a record breaking Super Bowl on Fox. This past quarter, our total company affiliate revenues increased by double-digits, once again, highlighting that our set of essential brands coupled with a focused strategy yields consistent industry-leading results. Our advertising performance was equally notable, despite the tough Super Bowl comparisons in the prior year, as we continue to see robust advertiser demand for not only our national and local in your assets, but for Tubi and our broader digital portfolio as well. Steve will give further details on these and other financial highlights in a moment. Over recent quarters, market commentary has indicated a focus on ratings trends at FOX News and on the outcome of renewal negotiations with the NFL. Our achievements in these areas are entirely consistent with the positive expectations that we have long been communicating to you. Our clear leadership and news coupled with the long-term renewal of the NFL provides a strong foundation to grow our company for years to come. Let me address each one of them individually. We have for the last several quarters being exceptionally forthcoming and utterly transparent about our expected outlook for FOX News ratings throughout the election cycle. Last November, immediately prior to the presidential election, we shared our belief that post-election the appetite for news would moderate and that a proportion of the record audiences that we were…

Thanks Lachlan, good afternoon. Having delivered another strong quarter, we are encouraged by the robust underlying trends that underpin our distribution and advertising revenues. And our strategic investments are exceeding expectations highlighted by the trajectory of Tubi. Before reviewing our financial performance for the quarter, it is worth noting at the outset that our third quarter results are comparing against our broadcast to Super Bowl LIV in the prior corresponding quarter, which accounted for approximately $500 million of net advertising revenue and approximately $100 million of EBITDA across the company last year. Where appropriate, I will share both our reported results and the underlying performance when excluding the impact of Super Bowl LIV. Now turning to our results for the current quarter. Our leadership brands and focused portfolio of assets delivered double-digit growth in total company affiliate revenues and mid-single digit growth in underlying total company advertising revenues. Excluding the benefit of the Super Bowl in the prior quarter and the consolidation of Tubi in the current year quarter. Total company affiliate revenues increased 10% with 18% growth at the Television segment and healthy 6% growth at the Cable segment. Meanwhile, the rate of subscriber declines continue to moderate in the quarter, with trailing 12 months industry sub losses running at approximately 4.5%. Our reported advertising revenues declined 24% in the quarter, due to the absence of the prior year broadcast to Super Bowl LIV and a slower news cycle. Despite the headwinds from comparability, our brands continue to deliver robust CPM growth across the portfolio led by the FOX Network and FOX News. Encouragingly, our core local television stations like Super Bowl, Political and the impact of the next stock transaction return to growth across the base market in the quarter. Meanwhile, advertising revenue growth of Tubi continues to…

Thank you, Steve. And I’d be happy to take questions from the investment community.

[Operator Instructions] We have a question from the line of Alexia Quadrani with J.P. Morgan. Please go ahead.

Yes. Really circling back to the decision to get out of Thursday Night Football a year earlier. I'm curious what kind of programming you plan to replace it with? And then more generally speaking, what other sports rights would make sense for you guys in terms of potentially adding to that portfolio?

Thanks, Alexia. Hope you're doing well. So we are – Thursday Night Football, when we entered into that agreement some years ago, we were focused on building that brand for the NFL and really sort of increasing its ratings and its production quality, bring it back to one home, if you remember, it was split amongst a couple of different networks, and I think we achieved all those goals. But having that, it was expensive and Sunday afternoon football is really the home of football frankly for America and for Fox. So having the – securing the NFC package at an appropriate price for us was our absolute focus. By releasing Thursday Night Football are early – a year early that we have to. We're going to achieve roughly a $350 million to $400 million EBITDA positive impact in that fiscal year, which we think is important. And then invest in the NFL rights going forward, so financially, it was absolutely the right decision, and we're proud of how we've been custodians of Thursday Night Football over the last few years.

And in terms of other sports rights, you might make sense for you guys to look at or are you very happy with the NFL and NTL and the other sports you already have, and there is nothing else?

No. Look, we're always keeping an open eye on sports rights and sports rights that become available. I think we look at everything, but we're very sort of financially disciplined with what we believe they're worth on our – certainly on our platforms and paying appropriate prices that are going to drive either our growth, whether it's from a subscription or retransmission point of view or an advertising point of view. But we continue to look at any significant sports rights that come available.

Thank you.

Operator, can we go to the next question, please?

We have a question from the line of Ben Swinburne with Morgan Stanley. Please go ahead.

Thanks. Good afternoon. I wanted to ask a couple of questions on Tubi sort of the longer-term strategy. I know you guys have owned it, I think for about a year, maybe a little less. On the programming side, Lachlan, how are you thinking about programming Tubi as it relates to content that Fox owns and produces sort of the way you've run the broadcast network over the years versus just trying to build a big audience that you can monetize through advertising and using third-party content. If you have a view on that yet, it'd be interested in. And then as you go to market in the upfront and think about even the $350 million guidance you've given, how do we think about how incremental that is? In other words, I guess there is an argument that maybe some of that money is just coming out of Fox broadcast without a one pocket into the other. Can you just talk a little bit about your conviction in driving incremental revenue into the company from Tubi over the course of the next year or so?

Sure. So thanks, Ben. Thanks for the question. So first of all on Tubi, the programming strategy at Tubi is entirely as we've discussed and this is a critical difference between Tubi and certainly other subscription video on-demand services and the hybrid advertising into a subscription video on-demand services that we see our competitors operating. And the Tubi is entirely focused on total viewing time. And the reason we're entirely focused on total viewing time is because that translates directly into revenue. So the more we can grow total viewing time and this is as opposed to purely users or and as far as service subscribers, the more we can grow total viewing time, we can translate that very directly into increased advertising revenues. And so, when we look at our programming strategy, we're not interested in spending billions of dollars as the others are on sort of driving subscriber basis with very expensive programming. What we're interested in doing is very efficiently scaling our programming to drive our total viewing time. And we can do this because of the technology, we can really target specific genres and specific cohorts of our viewers to drive their total viewing time, and hence drive revenue. So it directly correlates with it, so we've had a record total viewing time in the last months and it completely correlates with having driving record revenue. So that's a business model and that fits into the – sort of the efficiency of our programming strategy. To the second question, in terms of where we moving money from one pocket to the other, absolutely not. I don't know, well, I'm sure you did have the opportunity to watch the Tubi presentation at the new fronts just a few days ago. What Tubi allows for us and frankly for any advertiser that's also advertising at broadcast, it allows them to increase their reach dramatically. The advertisers are trying to reach new viewers and viewers that don't traditionally watch broadcast, they're younger, they're more diverse, they really need to go to Tubi to reach those audiences that can't reach them anywhere else. So what that allows us to do is really expand both the amount of the partnership, the scale of partnership with our current advertisers, but also find new advertisers that we haven't enjoyed our relationship with before.

Operator, you can go to the next question, please.

Our next question comes from the line of Jessica Reif Ehrlich with BofA Securities. Please go ahead.

Thank you. I have a question on sports betting, but just two small follow-ups, but it's from the previous questions. If you could say on Tubi like what the incremental investment will be in the coming year and on Thursday Night Football, will that effect your retrans, do you think over the next couple of years? And then for my question, it's on sports betting. Can you talk about the impact now on, I guess the owners are benefiting from advertising. Are you seeing any impact on ratings in markets where it's legal and what are the expectations down the road? There is a direct investment, but what are the ripple effects of sports betting? And if you can include your new acquisition of outset, you haven't said what you're paying or how big it is and so you'll integrate it? Thanks.

Thanks, Jessica. I lost track of how many questions it was. So if you could – if I forget any, please remind me, it's good to hear your voice. So first on Tubi and I think it was the further investment in Tubi. We're really focused on being very efficient, being very disciplined around an investment in Tubi, while at the same time not losing sight of the immense opportunities that the Tubi is. I think we've designed our programming strategy and our marketing strategy around that. So a lot of the investment you will see will be accommodation of continuing to assign the revenue and what would have been sort of profitability of Tubi back into growing the business and adding some modest for capital in addition to that. So it's not a tremendous sized investment when it comes to sort of the scale of a Fox, but we think it's appropriate, given the opportunity that Tubi presents us. On Thursday Night Football, I think you asked what the effect on retransmission would be, the logic behind being able to release Thursday Night Football, not to follow it in the new deal and indeed to release it a year early is that we don't think it gives us incremental retransmission revenue above what we already get for the premium NFL package in the country, which is Sunday afternoon NFC package. So due to that, we can really save the cost of the Thursday Night Football package and invest further in Sunday, retaining all of our potential retransmission revenue through Sunday football. On sports betting, there was a couple questions, but I think the impact of sports betting and on the ecosystem sports betting in every market where there is licensed operators, they are spending heavily which is a terrific benefit to our station groups. We think this will continue. It's a very competitive market and this won't ameliorate anytime soon. And all the more reason why we consider further investment in Outkick is a great example is sort of a leading operator in both sports news and critically in sports opinion. You haven't seen Outkick or listened to any of its podcasts or radio shows or been through its website. You should, it's really a unique and special voice. And I think the one that aligns with the Fox audience incredibly well. So we're very excited to bring that team to be a part of ours.

Next question, please.

The next question is from Robert Fishman with MoffettNathanson. Please go ahead.

Hi, good afternoon. I also have an NFL related follow-up question. So with Sunday NFL rights locked up, do you expect your relative negotiating position to actually improve in your next set of deals with both the distributors and your TV station affiliates, especially if some of your peers make their live NFL games available on their streaming platforms?

Yes, so we are very mindful of the exclusive value of live NFL on broadcast television. And we're very mindful of the value that that attributes to both our O&Os, and also to all of our highly valued affiliates. So we don't have a – on a streaming service behind a paywall where we would currently put a similar cast of our NFL games. And we have no plans currently to do so.

Go to the next question, please.

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

Thanks so much. So I just wanted continue on the NFL vein, Lachlan. Thank you for taking the question. There's been a lot of discussion about the digital flexibility, the NFL broadcast rights holders have earned under these new NFL contracts. And Comcast already indicated it will simulcast its Sunday night football games on Peacock. Do you have any concerns regarding the impact more NFL streaming by your competitors if not by you might have on pay-TV subscriber levels as a result of more NFL games being streamed, and you noted the ability to be flexible in your business model, given the rights that you have. So what's the fail-safe if you start to see more erosion than you might've liked in the pay-TV subscriber base. What does Fox do to monetize those rights and earn a return on that contract? That'd be helpful. Thank you so much.

Thanks, Doug. Yes, look, a huge part for us, and I can't speak for anyone else, but of our negotiations with the NFL in particular, because this is such a long-term deal was making sure we had the flexibility going forward to monetize these rights in different ways. And it's hard enough to think or to predict five years or six years out rather than sort of 12 years or 13 years out. And so we made sure we had every ounce of flexibility within our rights package to be able to evolve our business model and monetize these rights going forward. Having said that, today clearly the best monetization, the best opportunity to monetize the rights are through broadcast television, both with our owners and our affiliates. And that's really where our focus is.

Operator, we have time for one more question.

We have a question from the line of Kannan Venkat with Barclays. Please go ahead.

Thank you. So Lachlan, I guess, if you just step back and look at some of the strategic decisions you guys have made recently, which is walking away from Thursday night football and investing in Tubi and sports betting. Broadly, it almost seems like a pivot in the business model where you guys were the loss leaders in football in the mid-90s and one slice of football and investing in other areas, is that how we should think about the investment priorities going forward, which is potentially new areas become bigger priorities for investment. And legacy television broadly becomes a cash source to pivot your business model. And then broadly, you think about the broadcast business, football is of course important, but what role does it have in the broader ecosystem? I mean, it is structurally in decline with respect to pay-TV subscribers and the kind of role it used to play in the past with respect to reach is very different versus what it plays today. So if you could just expand on the portfolio on the legacy television side and what the strategic priorities are across your portfolio? Thanks.

Thank you very much. Look, I think our so-called legacy television businesses are all very healthy and we expect it to grow them significantly. But when you look at them from a point of view in terms of how we grow and how we – I think you used the word pivot, our business model going forward. You have to look at what they can offer in broader – with broader opportunities to monetize their existing content, right, and their existing genre of content. So if you look in the sports business, the sports business is really what's driving our wagering business, right, on our betting business. You're going to see us be really one of the major players, certainly from a media point of view in the sports wagering business in America, going forward, we're going to continue to exploit that marketplace and to grow in that marketplace. And that's really driven off the – our engagement with our audiences through our sports broadcasting business. We wouldn't have nearly the opportunity I believe in wagering, a stand-alone without coupling it with the FOX Sports and overall Fox brand and Fox audience. And this can be seen very clearly through our success with our FOX Bet Super 6. FOX Bet Super 6 in the last year, we grew very aggressively through marketing it across all of our platforms, FOX Sports, FOX Entertainment, FOX News. And we drove to over five million users. There was no other free-to-play game like that and at that scale in the United States and what that allows us to do with FOX Bet Super 6 obviously, is in the markets where we're licensed, drive that traffic or drive that sort of the widest part of that funnel into sports wagering and also the poker and casino businesses where they're licensed. So there's a tremendous opportunity there, but it's really because of our strength in our traditional sports broadcasting business. The same thing by the way is true at FOX News, we branded the FOX News business, FOX News Media, I think a couple of years ago. And that's really because you can't look at FOX News anymore as just a linear cable channel. The opportunities of FOX News to grow revenue beyond the impressive growth within cable is really through it's powerful website, it's podcasting, FOX Nation, new channels like FOX Weather. We're seeing a tremendous opportunities to expand its reach and the power of its brands.

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 our conference call for today. Thank you for using AT&T Executive Teleconference. You may now disconnect.