Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation Third Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the 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, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.

Thank you, Polly. Good morning, and welcome to our fiscal 2025 third quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, our Chief Financial Officer. First, Lachlan and Steve will give some prepared remarks on the most recent quarter, and then we'll take questions from the investment community. Please note that, this call may include forward-looking statements regarding Fox Corporation's financial performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings. Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA, as we refer to it on this call. Reconciliations of non-GAAP financial measures are included in our earnings release and our SEC filings, which are available in the Investor Relations section of our website. And with that, I'm pleased to turn the call over to Lachlan.

Thank you, Gabby, and thank you all for joining us this morning. It's a particularly beautiful spring morning in New York this morning. I hope everyone's had a chance to enjoy it. Our fiscal third quarter underscored the central role Fox plays in informing and entertaining America. And our financial performance once again illustrates the strength of the Fox platform. Whether it be our market leading coverage, what has been a sustained active news cycle, or a record-breaking broadcast of the Super Bowl, we delivered across the board milestones during the third quarter. Total company advertising revenue grew 65% in the quarter, including the Super Bowl which generated over $800 million of gross advertising revenue across our businesses, a record for both our national broadcast network and our local TV stations. This year's matchup between Kansas City and Philadelphia delivered 128 million viewers across Fox platforms, making Super Bowl LIX the most watched telecast in US history. Our affiliate revenues also had a notable quarter, with total revenue growth of 3% on the back of higher rates and improved subscriber declines for the third consecutive quarter. These robust results continue to build upon Fox's noteworthy first half and put us on track to complete a strong fiscal year. Notably, these third quarter results reflected the highest free cash flow in Fox's history. While we recognize the commentary around the macro environment, we have seen no impact to our business. Our ratings and engagement are strong. National advertising scatter pricing is outpacing last year's upfront rates with solid demand and Tubi continues its top line momentum. We remain confident that our best-in-class assets, disciplined approach and fortress like balance sheet will continue to set us apart. In fact, in just a few hours we will host America's top advertisers at this…

Thank you, Lachlan. Good morning, everyone. As Lachlan said, Fox delivered another quarter of impressive results, highlighted by a 27% increase in total revenues and record free cash flow. Our advertising revenues increased 65%, led by the combination of a record-breaking Super Bowl, accelerating growth at Tubi and strong engagement and pricing at News. Total company affiliate fee revenues grew 3% over the prior year quarter, once again demonstrating the strength of our brands and focused portfolio of channels. Other revenues grew 20% year-over-year, driven by higher sports sub licensing revenues at our Cable segment. Similar to prior quarters, this growth in revenue was largely offset by a corresponding increase in rights cost, with no material impact on year-over-year overall EBITDA growth. Quarterly adjusted EBITDA was $856 million as compared to the $891 million reported in the prior year quarter as these revenue increases were offset by higher expenses. This was primarily due to higher sports rights amortization and production costs associated with our broadcast of the Super Bowl. Net income attributable to Fox stockholders was $346 million or $0.75 per share as compared to the $666 million or $1.40 per share reported in the prior year period. Excluding non-core items, adjusted net income was $507 million and adjusted EPS was $1.10, up slightly compared to the $9 per share recorded in the prior year. Now turning to our operating segments, starting with the Cable Network Programming segment which delivered 11% revenue growth and 7% EBITDA growth. Cable Advertising revenues grew 26% over the prior year driven by the strength in Fox News linear ratings and digital engagement and supported by healthy national and direct response pricing. Cable affiliate fee revenues grew 3% over the prior year quarter, as pricing gains from our affiliate renewals outpaced the impact from net…

Thanks, Steve. And now we would be happy to take questions from the investment community.

Thanks, Gabby. Ladies and gentlemen, I would like to emphasize the new functionality for the question-and-answer queue. [Operator Instructions] And we have a question from Michael Morris at Guggenheim. Please go ahead.

Thank you. Good morning. I wanted to ask about Fox One. I know you said details will follow, but love to try to get some details on your view of pricing of the product, the addressable market and whether you expect to take on any partnership or bundle or things like that. And if I could squeeze in one more, I know it's a little early, but Steve, could you give us any thoughts on looking into fiscal '26 and how we should think about any of the puts and takes after the strong fiscal '25 to-date? Thank you.

Thanks, Mike. So, I'll answer the Fox One questions, and I can't give you a great amount of detail, but we'll be rolling these things out, obviously, as we get closer to the fall and to the start of the football season, which we will be launching beforehand. The pricing will be in line with our wholesale pricing. So, we think that's the appropriate level at the most fair to our distributors. So, the pricing will be healthy. It will not be a discounted price and very much as targeted to the -- which goes to your addressable market question. We're targeting the service entirely to the cordless community, the cordless market out there. It would be a failure of us if we attract more connected subscribers or we do not want to lose a traditional cable subscriber to Fox One. And we're doing everything we can to make sure as much as is humanly possible, that's the way we market and that's the way we plan the business. But yes, we will be entering partnerships with other distributors and services to offer Fox One, as you see other streaming services do. So, we will be working with partners to gain as broad a possible distribution within the focus of that cordless viewer. Steve?

Yeah. Thanks, Lachlan. Hi, Mike. So, if I look at fiscal '26 versus fiscal '25, obviously, you look at sort of the big sort of seasonal cyclical drivers of our business. So, the big one from a sort of net margin perspective for us this year is political, which obviously is not there in an off year next year. But then sort of Super Bowl from a purely advertising revenue versus rights cost perspective, was a deficit for us this year that's not there in fiscal '26. But then we have FIFA coming through in the very, very back end, which crossovers fiscal '26 versus fiscal '27. Against all of that, we've got really, really nice tailwinds with our advertising business both at particularly both at Fox News and Tubi. And then, we're also continuing to see solid tailwinds with our affiliate revenue growth. And so, I think some of the swing factor with fiscal '26, which is probably a little bit too early to call, is the extent to which we moderate the investment in Tubi versus the D2C investment, particularly that launch cost investment going into the early part of next fiscal year. So, hopefully that gives you a few breadcrumbs.

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

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

Great. Thank you. In the past, you guys have talked about increasing demand from brand advertisers on Fox News. Could you update us on that? Are you seeing any sort of quantifiable shift from Dr. to brand advertising? And I know it's sold differently, but can you comment on the sort of difference in sort of price between what you're getting from Dr. And what you're getting from brand advertising? Thanks.

Thanks, John. So, I think we're now up to over 200 new advertisers since the election. I think when Steve let the cat out of the bag, it was over 100, 120 or something. But that's grown to over 200 new advertisers. And I think the really positive and important data point to know here is that they are continuing to advertise. So, this is not a knee jerk or one-off reaction to the election, but these advertisers have found our audience, the creative work and the positioning is working for them and they're sticking on our air and continue to advertise. So, we see that as a very positive sort of recognition of the power of Fox News, the power of our ratings and our programming, and that it's working for these new 200 advertisers and they're sticking with us. In terms of direct response, so I don't think this directly answers your question. I don't want to give specific sort of pricing out, but just so direct response during the quarter on Fox News was up over 30% direct response. And our scatter pricing was up over 50% off upfront pricing. So, the momentum that we're seeing within Fox News obviously driven first by really sort of record setting audience and share that's flung through nicely to the revenue line and that momentum seems to be continuing.

Great. Next question please.

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

Thank you. A couple things. One, all parts of your business have pretty much surprised on the upside over, I don't know a while, but maybe nothing more surprising than Tubi. Can you talk about the path to profitability and the drivers, whether it's programmatic and fill rates or content like what you're doing or what your plans are? And then the balance sheet is just so strong. So, clearly, you have lots of options. Can you give us some color on how you're thinking about that?

Sure. Hi, Jessica. I'll start and then hand over to Steve for the second part of the question. So no, thank you for acknowledging the strength of Tubi and the continued growth in Tubi. It's certainly not a surprise to us. We've had a great faith in this business and in its management over the long-term, and we believe not only has it had a great track record to date, but will continue to have great prospects and has huge opportunity going into the future. The growth in this quarter was fundamentally on Tubi. Like any free media service, it comes back to engagement. And Tubi grew 18% in total viewing time during the quarter. But this flowed through to a 35% revenue improvement in the quarter. So, directly from TBT then you run into your obviously your pricing and your fill rates, but this translated into 35% revenue improvement in the quarter. I think it's important to know and without -- Gabby kicking me on the table in April, that rate has accelerated in April. And so, we are really pleased as we see the progress of Tubi. There's a solid advertising base where people continue to advertise on the platform and is a very healthy both direct response and partner revenue streams. Tubi really is becoming a mainstream service across America. That said, what we've seen the difference of the last year or two is Tubi becoming something that's a very good business that serves 65% of its audience, is hard to reach the cordless audience. But it's more and more becoming something that mainstream everyday Americans are using as their free entertainment service. And the only frustrating part about the business is that we don't get the appropriate evaluation within our stock. We think it's a tremendously valuable business, and we're looking forward to outperforming with Tubi for years to come. Steve?

Yeah. Thanks, Jessica and thanks for noticing the balance sheet. So, listen, yeah, we're at $4.8 billion of cash. The debt position is comfortable. And listen, that's only going to improve through the back half of the year because Q4 is typically a strong free cash flow quarter for us. So, obviously, as we think about usage of that capital, obviously we look at that on a balanced basis across buybacks and kind of running out of our authorization. So, you should expect that to be topped up as part of normal course board business over the course of the remainder of the year. And then, if we look at it sort of the other options with respect to that capital, we've obviously invested organically in the business. And Tubi, which Lachlan just described, has been a key beneficiary of that investment over the last couple of years and that has paid dividends for us. We'll continue to do that. And I guess the next cab off the rank there will be our Fox One venture. And then, we look at everything from a non-organic basis. But the bar is incredibly high. And so, ultimately, we'll deploy capital where it's best for the shareholders.

Next question, please.

We have a question from Ben Swinburne, Morgan Stanley. Please go ahead.

Thanks. Good morning, everyone. Everyone's doing well. I wanted to ask about your strategy around direct-to-consumer and sort of the broader affiliate revenue growth at the company. You guys are growing nicely even with cord cutting, which is not true for your competitors. And a lot of them have gone down this path that you talked about, Lachlan, of sort of bundling the streaming service in with their linear networks. And while it's hard to tell from outside, in some cases it looks like one plus one is less than two for those competitors. And I'm just wondering how you're thinking about what you can get out of launching D2C versus any risk you see in your MVPD relationships because you're now going to be essentially competing with your networks through those bundles. And just to finish up the risk conversation, there's been some FCC noise around capping reverse retrains, and I would love to hear your thoughts on that if you see that as a real risk. Thanks so much.

Thanks, Ben. So, first on D2C and how we view that with and how the balances with our affiliate relationships and obviously, ongoing growth in the affiliate revenue line for us. So, I should start with saying we remain incredibly supportive of and positive about the traditional cable bundle and the traditional cable distribution. And as that applies to both our cable channels and also our sort of broadcast affiliate stations. So, we will continue to support in every way possible the traditional model. It served really the whole industry very well and it served us very well. And we will not be engaging in sort of activities or strategies that undermine the traditional distribution models. Having said that, we think that D2C, it's time for us to launch a D2C service. It's time for us to target that service specifically to cord nevers. Going back to Jessica's question before, when I mentioned that 65% of the Tubi audience, it's cord nevers, that's remarkably high. And I failed to mention that that is actually higher for Tubi than anyone in our competitive set. So, 65% of our audience and users being cord nevers, that's higher than Roku, it's higher than Pluto, it's higher than Freebie Max, Paramount Plus or Peacock. And that shows us two things. It shows us why Tubi is so valuable to advertisers who need the reach, who can't get to that audience without us. But it also shows a growing expertise in the company about how we focus on this cordless segment. And so, we're going to really take a lot of the learnings we have from Tubi to focus our D2C strategy away from people who might be churning out of the cable universe. We do see -- this is part of the ecosystem that…

Great. Next question, please operator.

We have a question from Steven Cahall from Wells Fargo. Please go ahead.

Thanks. So, on Fox One, I think that's a pull forward in timing. If I recall, it was going to be year-end and now it's before the football season. So, I think, is that right? And congrats on that. And how are you thinking about bundling opportunities with Fox One? I just think about cord cutters and cord nevers are probably looking for some integrated subscription options, some integrated viewing experiences that go across sports and across the NFL. So, just curious how you're thinking about partnering opportunities on Fox One. And then, Steve, maybe just following up on Jessica's question, could you talk about the timeline for the FanDuel licensing that you need to go through? And is it correct for us to assume that as soon as you're able to exercise that it's in your interest because the option only gets higher over time, or are you still balancing the exercise of that option with other capital allocation opportunities and priorities? Thanks.

Thanks, Steve. So, first with Fox One, I think we might have originally -- you might be right or you might be half right in that. I think we might have originally said that in the year, but I think we did say after that that it would be available for the football season. So, I think we have said that before. So once again, we're not breaking any news on this call except for the name. The name's breaking news. So, it's not. It's an aggressive timeline. You're correct to launch a service, but we've been planning this for a long time. We've had the technology in place for a long time. Obviously, we benefit from a lot of the work done around the venue service which didn't go forward. So, we feel confident in reaching that timeframe. Of course, being up before the football season is a critical day for us. But we are very confident moving forward that we're going to make that date, and we'll announce a specific day in the weeks or months ahead. We will be bundling with a number of other services. Again, I wouldn't want to announce that prematurely on this call, but obviously with a service as valuable as Fox, a lot of other streaming services have approached us about bundling, and we will be moving forward with a number of those relationships. Fox One will also be available to every traditional subscriber of our services. We don't want to compete with our distributors. That's not our intent. So, if you're already paying for the Fox services through your cable subscription, you'll be able to download and receive a Fox One as well.

Steve, just to pick up on the FanDuel option, just a level set there. So, we've got until the end of 2030 to exercise our option over 18.6% of that business. So, it's a state-by-state licensing regime. And so, we're actively in discussions with each of the 26 states that, that we need to get licensed with. As you would know, there's an incredible amount of value locked in that option. So, if I just look at where the Street's at in terms of the -- in the moneyness. So that sort of the value of the 18.6 versus the strike price is worth about $2.8 billion to us in intrinsic value. And so, it's absolutely in our interest to get licensed, and we will get licensed over the coming years. But I think when you look at the sort of the accretion in the strike price of about 5% a year, that's not a driving factor in terms of our decision on when to deploy capital towards that. It's really about sort of getting through the licensing regime, and then we hit go.

Operator, we have time for one more question.

We have a question from Michael Ng from Goldman Sachs. Please go ahead.

Hey, good morning. Thank you very much for the question. I was just wondering if you could give us an update on the digital investments. I think last quarter was the high $200 millions, obviously with the outperformance of Tubi to date as well as the greater clarity into the timing and launch of Fox One. I was wondering if you could just talk about that for this year and perhaps into next again. And then secondly, there have been reports of plans for Disney to vacate the Fox Lot in Century City. I was just wondering if you had any future plans there that you could discuss or options that you may have. Thank you.

Thanks, Mike. So, on the digital investment and Steve, give more detail, but Tubi continues to improve financially. We are continuing to invest in Tubi harbor and we'll continue to do that really as we see fit. That sort of suits the business. We think we've built an incredibly valuable business in Tubi and so, we don't want to create kind of a false hurdle for us in terms of profitability, but it's sooner rather than later. And Tubi, as you know, has now reached beyond billion dollars in revenue for the trailing 12 months. So, the business is on absolutely the right trajectory. But we'll continue to invest in it for the near to medium term future. Obviously though, as that business reaches profitability, we continue to invest organically in the future of our businesses. And so, the overall investment in digital properties remains broadly in line. Steve can give you more detail on that, but just let me quickly answer the Disney Fox Lot question. So, obviously, the sound stagers are in very high demand and will continue to work with Disney and others as they see them effectively booked out. What Disney has announced they will -- or indicated to us that they will vacate, is there office space on the lock that is not connected to production and that represents less than a third of the office space on the Fox Lot. It's highly valuable real estate, probably valuable lettable are real estate in the Century City sort of Santa Monica region of Los Angeles, and we think we'll have no problem in filling it. Steve, do you want to add anything?

Yeah. So, Mike, just on digital investment, I think in fiscal '24 we're in the mid 3s. We'd expect that to come down for fiscal '25. Tubi included in our numbers, this quarter was a bit of a surge in Tubi investment spend. It obviously had the Super Bowl and marketed heavily around that and really went -- really use that as a sort of marketing piece as well as a user acquisition piece. But you should expect to see that come back a bit in the final quarter and see our overall digital sort of growth investment envelope shrink over the -- when you look at full year versus full year and it's probably a bit premature to talk about where we land in fiscal '26. I definitely expect Tubi, as Lachlan mentioned, to continue to improve and answer the question of how we start the Fox Lot [ph] investment. End of Q&A:

Great. At this point, we're out of time. But if you have any further questions, please give me or Charlie Costanzo a call. Thanks once again for joining us today.

Thank you.

Ladies and gentlemen, that does conclude the Fox Corporation third quarter fiscal year 2025 earnings conference call. Thank you.