Fox Corporation FY2021 Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2021; filed August 10, 2021. The filing is an annual report, not a 2020 fourth-quarter filing. It includes quarterly results for fiscal 2021 and fiscal 2020.
Business context
FOX is a U.S.-focused news, sports and entertainment company. Its principal segments are Cable Network Programming (including FOX News Media and sports networks) and Television (including the FOX Network, owned stations and Tubi). Other, Corporate and Eliminations includes the FOX Studio Lot, Credible and corporate costs. Revenue is primarily from affiliate fees and advertising.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $12.909 billion | $12.303 billion |
| Net income attributable to FOX stockholders | $2.150 billion | $999 million |
| Diluted EPS | $3.61 | $1.62 |
| Adjusted EBITDA | $3.087 billion | $2.779 billion |
| Cash from operating activities | $2.639 billion | $2.365 billion |
| Cash and cash equivalents at year-end | $5.886 billion | $4.645 billion |
| Borrowings, carrying value | $7.951 billion | $7.946 billion |
- Revenue grew 5%; affiliate fees rose 9% to $6.435 billion and advertising rose 2% to $5.431 billion. Affiliate fees represented about 50% of revenue and advertising about 42%.
- Net income attributable to stockholders more than doubled. Adjusted EBITDA increased 11%; its margin was approximately 23.9%, versus 22.6% in FY2020. Net margin was approximately 16.7%, versus 8.1%.
- Cash from investing activities was an outflow of $528 million and financing activities an outflow of $870 million. Capital expenditures were $484 million; operating cash flow less capital expenditures was approximately $2.155 billion, a simple calculation rather than a company-reported free-cash-flow measure.
- Year-end cash exceeded debt carrying value by approximately $2.065 billion. FOX had an unused $1.0 billion revolving credit facility due March 2024 and reported compliance with its covenants. $750 million of senior notes were due in January 2022.
- FY2021 included approximately $1.001 billion of share repurchases and $330 million of dividends/distributions in cash flow; the dividend was $0.46 per share. After year-end, FOX declared a $0.24-per-share semi-annual dividend.
Material changes and unusual items
- FY2021 revenue growth reflected higher affiliate fees, political and election-related advertising, Tubi growth, and an additional NFL Divisional playoff game. Offsetting factors included lower average traditional MVPD subscribers, fewer live college games, lower FOX Network ratings and the absence of the prior-year Super Bowl broadcast.
- Segment EBITDA increased to $2.876 billion in Cable Network Programming from $2.706 billion and to $555 million in Television from $430 million. Television advertising revenue declined 2%, while its affiliate fees rose 20%.
- Other, net was income of $579 million, compared with an expense of $248 million in FY2020. FY2021 included a $462 million reimbursement from Disney for a tax prepayment and $258 million of net gains on equity investments, chiefly Flutter-related fair-value gains. These items materially affected reported earnings.
- FY2020 included $451 million of impairment and restructuring charges, principally $425 million related to termination of a U.S. Golf Association programming-rights agreement. FY2021 restructuring charges were $35 million.
- For fiscal Q4 2020, revenue was $2.418 billion and net income attributable to FOX stockholders was $122 million, or $0.20 diluted EPS. The filing reports fiscal Q4 2021 revenue of $2.890 billion and attributable net income of $253 million, or $0.43 diluted EPS.
Outlook, commentary and risks
- The filing provides no formal numerical revenue or earnings guidance. Management described priorities including investment in live news and sports, original programming, Tubi and other digital offerings, and pursuing value from content through affiliate fees, advertising and digital distribution.
- FOX estimated that the tax-basis step-up from its separation could generate about $1.5 billion of tax deductions and reduce annual cash taxes by approximately $370 million for several years; estimates may change.
- FOX signed an expanded 11-year NFL media-rights agreement through the 2033 season. The agreement adds holiday games and expands digital rights, while adding long-term programming obligations and costs.
- Sports programming rights commitments totaled $36.905 billion as of June 30, 2021, including $4.371 billion due within one year. These are contractual commitments, not reported debt. Total listed commitments, borrowings and contractual obligations were $47.203 billion.
- COVID-19 disrupted live sports and entertainment production and affected advertising and affiliate revenue; further event disruption, economic weakness or changes in consumer behavior could have greater adverse effects. Other key risks include ongoing MVPD subscriber declines, advertising cyclicality, competition for sports rights, cybersecurity and privacy risks, regulation, and potential impairment of programming or intangible assets.
- FOX disclosed Smartmatic and Dominion defamation/disparagement lawsuits filed in 2021, which it said it would contest vigorously. The company stated it could not estimate additional potential liability and did not expect pending matters to have a material adverse effect; outcomes remain uncertain.
- Management and Ernst & Young reported effective internal control over financial reporting, and the auditor issued an unqualified opinion on the financial statements.
Important facts for investors to verify
- How much of the earnings increase reflects recurring segment performance versus the Disney tax reimbursement and investment gains.
- Whether affiliate-fee growth can offset continuing traditional MVPD subscriber losses, and whether advertising growth at Tubi and other digital services is sustainable.
- The economics, payment schedule and expected returns on the NFL agreement and the broader $36.9 billion sports-rights commitment.
- The outcome and potential financial exposure from the Smartmatic and Dominion litigation and other contingencies; the filing does not provide a clear loss estimate.
- Near-term refinancing or repayment plans for the $750 million note due January 2022, alongside the company’s buyback and dividend plans.
- Execution and costs associated with ending transition services from 21CF/Disney and the new general-ledger and procure-to-pay systems implemented July 1, 2021.