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. [Operator Instructions] 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 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, as compared to last year's upfront. Sports led the upfront market, illustrated by the fact that we sold more NFL Sunday advertising in the current upfront market than we did across Sunday and Thursday combined in the prior year's market. This…

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…

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

[Operator Instructions] 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 sort of upcoming renewal cycle? And then looking out into 2023 given the cash balance and sort of all these sort of 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 which you'll generate this year? Thanks.

Hey John, good morning. I'll start. I'll answer the Verizon renewal question and I'll let Steve answer the fun question about our cash on the books. So -- and he's got the keys. So, that's the important answer. The -- like on the Verizon renewal, I'm obviously not going to give you a specific exact pricing, but it's absolutely in line with what our forecast and sort of long-term plan suggested. We're very happy with our partnership with Verizon. And I think it's fair to say that we achieved industry-leading pricing increases for really are the best brands in the business between our local stations and retransmission renewals and the really incredible strength of FOX News and the loyalty and engagement of the FOX News audience, we're able to drive this industry leading pricing increases. Just one added element to that, which I think is important for us, is we're also able to achieved distribution for FOX Weather, which will continue to include in our future upcoming renewals. And also, we expanded our relationship with Verizon to include distribution of TUBI. So overall, we are very pleased with that renewal and we think it sets us up well for the next two years, but we have two-thirds of our distribution coming up. So we're very pleased and we appreciate the partnership with Verizon. Steve?

Yes, hi John. So, yes you're right. Listen, we've got a really strong balance sheet. We ended the year with a little over $5 billion in cash and we -- as the opening remarks indicate, we're really bullish about going into fiscal '23 from a revenue, EBITDA and cash flow perspective. But this now story remains consistent. We're going to continue to -- our biggest use of cash since the inception of FOX from a capital perspective is to be -- is to actually return it to shareholders and in my opening remarks, I talked about the volume that we have returned to shareholders and we continue to remain committed to that. We have $4 billion authorization. We have $1.35 billion of headroom left in that. But we're going to remain open to investing both organically and inorganically in the business. We're going to be balanced about that as we see opportunities on the horizon. So, a remarkably consistent story on our capital allocation.

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. One quick follow-up on your comments on the ad market. Any sort of thing you're seeing overall in the macro environment, whether it's your own deals or not that we should be aware of? And then second, I wonder if you can talk about -- you mentioned, I think it was high 5s of industry declines. I'm curious, if FOX affiliate customer accounts reflect that acceleration in the video industry decline or if maybe you're seeing a little bit less, given your different customer base? Thank you.

So, on the advertising market -- and good morning, Phil, I'll give you a little bit of color. I might jump around a little bit. But as I mentioned, for us, one of the most sort of pleasing things that we're seeing is actually in the local stations our base markets. So ex-political, the base market is very stable. And as I mentioned in my remarks, particularly the return to growth for the auto category is -- it's obviously something that's concerned us over the last couple of years with COVID and the softness in the auto category, the return of growth in the auto category is a really strong indicator of things to come. We are seeing locally two verticals or two categories that are soft. One is the local wagering sort of betting category soft. But that's really what we're seeing there. I think it's pretty interesting and perhaps predictable a shift of that business going to national. So where we're seeing softness in local for wagering, we're seeing strength in national for the betting market. I think that's the purpose or the reason for that is obviously as more states become legalized in the national platform is particularly national sports is an efficient and a good buy for the betting businesses. And then we're seeing some softness in government spending that was really COVID health spending over the last couple of years, which obviously is not there anymore. But that's being more than made up across our other strength in our other categories. So, two areas of weakness locally in betting and government, but it's more than made up by strength in other categories. In terms of the scatter market, we're actually seeing a -- scatter for us before we get into the fall sports cycle is a quiet. The summer is a quiet period for us or it has been. So we actually don't have a lot of scatter avails, but scatter pricing is up in the low double digits which is good to see that strength. And then from a macro environment point of view, again, we're seeing no impact in our advertising across our businesses with the exception of softness in, which I think has been well reported in other areas, some softness in programmatic advertising. For us, that's sort of 10% of our advertising business. So it's not having a significant or meaningful impact on us at all and that 10% is really due to programmatic advertising into TUBI and into our FOX News Media digital platforms. Steve, do you want to answer 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?

Hey, good morning, Robert. So, overall I mean I'll talk overall then I can come down to drill down to Big Ten. We're always going to look at sports rights as they become available. I think we've been very disciplined in terms of how we analyze and how we think about acquiring any additional incremental sports rights. We look at it both obviously from what any individual sport can achieve both in terms of an audience and advertising revenue we can attach to that. We specifically also drill down into what we can see from our subscriber what we can attribute to our affiliation agreement with a distributor in terms of subscription revenue. So we do take a pretty scientific and I think a very disciplined approach to how we view sports rights, but we do look at all the sports across the marketplace and see what would fit within FOX Sports. I think the – if you look past – over the past years the store hasn't been written is the sports rights that we pass on right that we decide are too expensive or won't add any incremental revenue to our business. So – and that continues to be the way we look at it. As regards to Big Ten, Big Ten Network is a key strategic partner of ours. We've had a great relationship with them. And we look forward to renewing those rights potentially with some new broadcast partners within the mix. That will be an announcement the Big Ten will make we expect in the near-term, but it's one that we will leave for them to make. But we're looking forward to our continued long-term and profitable relationship 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.

Thanks Ben. So look, we continue to have beliefs or have a fundamentally strong belief in the sports betting business. We think it's a huge opportunity in the marketplace, specifically in its association with the FOX Sports brand. We drive the largest sports audiences in this country. And no other broadcaster can achieve kind of the reach and engagement that we deliver, during the -- certainly during the autumn and the fall on a weekly basis. And so, we've proven this last couple of years with FOX Bet's, Super 6 which really taking our sports audiences. And I know we've talked about it, before then by taking our sports audiences from television into FOX Bet Super 6 provide a tremendous funnel, which FOX Bet is the ultimate beneficiary of. That continues to be our strategy and it continues to be very successful. As regards to, Flutter we're still in our arbitration process with them. We look forward to the clarity of getting through that process, which we expect to be in the next couple of months certainly sort of by the beginning of the autumn. But once that situation is clarified and also in early September as you see the NFL season kick off again, you'll see a lot more activity around FOX Bet and FOX Bet Super 6.

Hey Ben just picking up on your question around organic investment. So the way we define -- we had -- we called out $200 million to $300 million of net EBITDA of our investment for fiscal 2022. So put another way our fiscal 2022 EBITDA would have be $200 million to $300 million higher than what it was had we not made those investments. We don't -- we anticipate maintaining that level of investment meaning that when you compare 2023 to 2022 you will not have that drag on the results. So that explains that 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. And hope you’re well. So on -- we have a Big Ten digital rights and we will keep those in the new deal. So I hope that clarifies, that again I don't want to say too much because it's really -- it's for the Big Ten to announce their new agreements. In terms of upfront volumes ex, I think your question was what are they ex-Super Bowl. Obviously, we look at everything ex-Super Bowl, because it's obviously such a huge year for us. We're looking forward to we're getting record pricing for Super Bowl, and we're well ahead of plan in terms of selling our Super Bowl position. But ex-Super Bowl upfront volumes were about 15% higher than the last upfront. I think one of the -- and that's across entertainment sports and news. I think the important thing to note there, though is that the upfront volumes to some degree, are a metric that we control. We chose a very purposefully and I think in a very disciplined and hopefully, a judicious way to sell more volume into this upfront, because we felt it was a period where having certainty around or the highest level of certainty we can around, our sales and our inventory was important. So for instance, in years where we would -- in the past years where we would sell in the mid-70s percent of our kind of available ad impressions. We announced we sold in this upfront, in the low to mid-80s. And I think that was sort of a smart decision and one that we felt was appropriate, given any uncertainty around the economy of the advertising market going forward.

Doug, it's Steve. Just on the free cash flow. I think from a working capital perspective a big swing factors, I think from an accounting version of working capital, remember, that going into we're into a Super Bowl year. So therefore, we amort 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.