Fox Corporation FY2022 Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2022, compared primarily with fiscal 2021. Although the request metadata says “2021 Q4,” this filing is an annual report for FY2022, not a quarterly filing.
Business context
FOX operates a U.S.-focused news, sports and entertainment business through Cable Network Programming, Television, and Other, Corporate and Eliminations. Key assets include FOX News Media, FOX Sports, the FOX broadcast network and stations, and ad-supported streaming service Tubi. Revenue is generated principally from affiliate fees and advertising.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $13.974 billion | $12.909 billion |
| Operating expenses | $9.117 billion | $8.037 billion |
| Net income | $1.233 billion | $2.201 billion |
| Net income attributable to FOX stockholders | $1.205 billion | $2.150 billion |
| Diluted EPS | $2.11 | $3.61 |
| Adjusted EBITDA | $2.955 billion | $3.087 billion |
| Operating cash flow | $1.884 billion | $2.639 billion |
Revenue rose 8%; affiliate fees increased 7% to $6.878 billion, advertising increased 9% to $5.900 billion, and other revenue increased 15% to $1.196 billion. Affiliate fees represented about 49% of revenue and advertising about 42%. Adjusted EBITDA declined 4%; its calculated margin was about 21.1%, versus 23.9% in FY2021. Net income fell 44%, and diluted EPS declined 42%.
At June 30, 2022, cash and cash equivalents were $5.2 billion, total assets $22.2 billion, total equity $11.4 billion, and borrowings $7.206 billion carrying value ($7.25 billion principal). FOX had no revolver borrowings and $1.0 billion of available revolving credit. It repaid $750 million of notes due in January 2022. FY2022 investing cash outflow was $513 million and financing cash outflow was $2.057 billion. The company repurchased approximately 27.4 million shares for $1.0 billion; $1.4 billion remained under its $4 billion authorization. Dividends paid were $0.48 per share.
Changes and segment results
- Revenue growth reflected higher affiliate rates, stronger sports and FOX News advertising, Tubi growth, and the return of fuller live sports schedules compared with COVID-affected FY2021. Lower political advertising, as the 2020 election cycle did not recur, partly offset growth.
- Programming and production costs increased, including sports rights costs, Tubi and FOX News digital investment, USFL launch expenses, and increased original scripted programming. Television segment EBITDA declined 37% to $347 million despite 9% revenue growth.
- Cable Network Programming revenue increased 7% to $6.097 billion and segment EBITDA rose 2% to $2.934 billion. Television revenue increased 9% to $7.685 billion.
- Net income comparability was significantly affected by a $386 million loss on equity investments, primarily Flutter, and the absence of FY2021’s $462 million Disney reimbursement for prepaid divestiture taxes. FY2021 also included net investment gains. FY2022 “Other, net” was a $509 million expense, versus $579 million of income in FY2021.
- FY2022 acquisitions, primarily three entertainment production companies, involved approximately $240 million of cash consideration. The transition services agreements with 21CF/Disney ended during the year.
Outlook, risks and contingencies
The filing provides no specific consolidated revenue or earnings guidance. Management’s stated priorities include investing in live news, sports and entertainment, expanding digital distribution and Tubi, and developing owned production capabilities. Tubi recorded more than 4 billion hours of viewing in FY2022, nearly 40% above the prior year. FOX estimated that its stepped-up tax basis could reduce annual cash taxes by about $370 million for many years; this estimate is subject to revision.
Principal risks include ongoing MVPD subscriber declines, shifts toward streaming and changing advertising demand, dependence on distributors and renewal of carriage and sports-rights agreements, rising programming costs, economic weakness and inflation, cybersecurity and privacy exposure, and regulatory and tax uncertainty. Licensed-programming commitments totaled $34.160 billion at June 30, 2022, payable over the contractual terms, including long-term sports rights. FOX identified pending Smartmatic and Dominion defamation litigation and other legal matters; it said potential additional losses could not be estimated and did not expect the disclosed matters to have a material adverse effect. The company also reported an ongoing arbitration concerning its option related to FanDuel. No material goodwill or indefinite-lived intangible impairment was recorded, but a reporting unit’s fair value exceeded carrying value by less than 20%, leaving about $250 million of goodwill potentially exposed to adverse changes.
Most important facts for investors to verify
- Whether affiliate-rate increases can continue to offset declining traditional MVPD subscribers and sustain affiliate-fee revenue.
- Whether advertising and segment profitability can absorb rising sports-rights and content costs, especially given the Television segment’s EBITDA decline.
- The performance and valuation impact of FOX’s Flutter investment, including the pending FanDuel-related arbitration.
- Developments in Smartmatic, Dominion and other legal proceedings, including any change in the company’s inability to estimate potential losses.
- Cash-flow capacity after programming commitments, share repurchases, dividends and debt obligations; confirm the terms and timing of the $34.160 billion programming commitments.
- Whether the tax-basis benefit and the goodwill valuation cushion remain supportable as tax rules and market conditions change.