Fox Corporation (FOXA/FOX) — Form 10-Q Summary
Reporting-period note: The supplied filing is for the quarter ended March 31, 2022—Fox’s fiscal third quarter of 2022—not 2021 Q3. Comparisons below are with the three and nine months ended March 31, 2021. Amounts are USD millions unless stated otherwise.
Business context and reporting period
Fox is a news, sports and entertainment company, reporting Cable Network Programming, Television, and Other, Corporate and Eliminations. Its Television segment includes broadcast programming, stations and Tubi; Cable Network Programming primarily distributes news and sports content.
Financial performance and position
| Metric | Three months ended March 31, 2022 | Prior-year quarter | Nine months ended March 31, 2022 | Prior-year nine months |
|---|---|---|---|---|
| Revenue | $3,455 | $3,215 | $10,941 | $10,019 |
| Net income | $290 | $582 | $925 | $1,929 |
| Net income attributable to Fox | $283 | $567 | $899 | $1,897 |
| Diluted EPS | $0.50 | $0.96 | $1.57 | $3.17 |
| Adjusted EBITDA | $811 | $899 | $2,185 | $2,370 |
Revenue increased 7% for the quarter and 9% year to date, while Fox-attributable net income declined 50% and 53%, respectively. Adjusted EBITDA margin, calculated as Adjusted EBITDA divided by revenue, was approximately 23.5% for the quarter (28.0% prior year) and 20.0% year to date (23.7% prior year).
Quarterly segment results: Cable Network Programming revenue was $1,583 and Segment EBITDA $864, up 8% and 2%; Television revenue was $1,820 and Segment EBITDA $35, up 7% and down 74%. For the nine months, Cable revenue and EBITDA were $4,637 and $2,306, up 8% and 5%; Television revenue and EBITDA were $6,160 and $121, up 10% and down 70%.
Operating cash flow was $951 for the nine months, versus $1,866 a year earlier. Investing cash outflow was $386; financing cash outflow was $1,817. Cash declined by $1,252 from fiscal year-end to $4,634. At March 31, cash was $4,634, current assets $7,916 and current liabilities $2,121. Borrowings were $7,205, all non-current; cash less borrowings was approximately $2,571. Fox had an unused $1.0 billion revolving facility maturing in March 2024 and reported covenant compliance. It repaid $750 of senior notes in January.
Material changes and drivers
- Higher affiliate fees, advertising and other revenue drove growth. Management cited contractual rate increases, stronger advertising pricing and ratings, Tubi growth, and more sports events compared with COVID-affected prior periods. Subscriber declines at traditional distributors partly offset affiliate-fee gains.
- Operating expenses rose 15% in the quarter and 16% year to date, reflecting higher sports rights amortization and production costs, digital investment, and more original programming. A roughly $30 million write-down of television-series production costs was recorded due to COVID-related costs and production delays.
- Television’s EBITDA decline reflected expenses growing faster than revenue, including sports programming costs, Tubi investment, and entertainment programming and marketing costs. Cable EBITDA increased modestly despite higher sports and digital costs.
- “Other, net” changed to a loss of $233 for the quarter from a gain of $61, and a loss of $375 year to date from a gain of $752. This primarily reflected fair-value losses on the Flutter investment; the prior-year nine-month comparison also included a $462 Disney reimbursement related to the Divestiture Tax prepayment.
- Fox spent $748 on share repurchases in the nine-month period, repurchasing approximately 20 million shares; $1.65 billion remained authorized at March 31. Subsequent to quarter-end, it repurchased approximately 1.4 million shares for $52 million.
- Fox paid approximately $240 million cash for acquisitions during the nine months, primarily three entertainment production companies; acquired businesses’ reported contribution was not material.
Outlook, risks and contingencies
The filing provides no quantified earnings or revenue guidance. Management cautions that interim results are not necessarily indicative of full-year results and notes ongoing uncertainty, including COVID-19 impacts. Key stated risks include changes in consumer behavior and distribution, traditional pay-TV subscriber declines, advertising demand, sports-rights costs and renewals, content popularity, competition, technology and cybersecurity issues, regulation, and litigation.
Firm contractual commitments and future debt payments totaled approximately $43 billion at March 31, 2022, down from $47 billion at June 30, 2021, primarily due to sports programming-rights payments. Fox disclosed Smartmatic and Dominion defamation suits and other legal matters, including FOX News-related claims. It said it intends to defend the defamation cases, could not estimate additional potential losses, and did not expect the disclosed pending matters to materially harm its business, financial condition, results or cash flows. The U.K. Newspaper Matters Indemnity liability was $65 million. No material changes to previously disclosed risk factors or market risks were reported.
Important facts for investors to verify
- Confirm the intended period: this filing covers fiscal Q3 2022, not Q3 2021.
- Track whether revenue growth can offset rising sports, programming and digital investment costs, particularly in Television.
- Assess the impact of Flutter fair-value volatility and other non-operating items on reported earnings.
- Review cash generation against the $43 billion of firm commitments and future debt payments, and monitor capital returns and remaining repurchase authorization.
- Monitor subscriber trends, sports-rights renewals, advertising conditions, COVID-related programming effects and the outcome or financial exposure of disclosed litigation.