Fox Corporation 10-K Summary
Period note: The supplied filing is Fox Corporation’s Form 10-K for the fiscal year ended June 30, 2023, filed August 11, 2023. It is not a 2022 Q4 filing; the filing presents annual results, not a standalone quarter.
Business context
Fox operates Cable Network Programming, Television, and Other, Corporate and Eliminations. Its portfolio includes FOX News Media, FOX Sports, the FOX broadcast network, 29 owned television stations, Tubi, production businesses, the FOX Studio Lot, and Credible. Revenue is principally generated from affiliate fees and advertising.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $14.913 billion | $13.974 billion | +7% |
| Operating expenses | $9.689 billion | $9.117 billion | +6% |
| Net income | $1.253 billion | $1.233 billion | +2% |
| Net income attributable to Fox stockholders | $1.239 billion | $1.205 billion | +3% |
| Diluted EPS | $2.33 | $2.11 | +10% |
| Adjusted EBITDA | $3.191 billion | $2.955 billion | +8% |
| Operating cash flow | $1.800 billion | $1.884 billion | Down $84 million |
| Capital expenditures | $357 million | $307 million | Up $50 million |
Derived margins: Adjusted EBITDA was approximately 21.4% of revenue and net income approximately 8.4%. Operating cash flow less capital expenditures was approximately $1.443 billion, versus $1.577 billion in FY2022.
Revenue mix in FY2023: affiliate fees $7.051 billion, advertising $6.606 billion, and other revenue $1.256 billion. Advertising benefited from Super Bowl LVII, the FIFA Men’s World Cup, midterm election spending, additional NFL postseason games, and Tubi growth. The absence of Thursday Night Football and lower FOX Network ratings partially offset those gains.
Segments and changes versus prior year
- Television: Revenue rose 13% to $8.710 billion; Segment EBITDA increased to $1.009 billion from $347 million, mainly reflecting event-driven advertising and Tubi growth, partly offset by higher sports rights and production costs.
- Cable Network Programming: Revenue declined 1% to $6.043 billion and Segment EBITDA fell 16% to $2.472 billion. Subscriber declines, weaker direct-response advertising pricing, higher sports-rights costs, and increased legal and digital spending weighed on results.
- Other, Corporate and Eliminations: Segment EBITDA loss narrowed to $290 million from $326 million.
- Consolidated results included $111 million of restructuring charges, compared with none in FY2022. Interest expense, net, fell to $218 million from $371 million, largely because interest income increased with higher rates.
Cash, debt and liquidity
- Cash and cash equivalents were $4.272 billion at June 30, 2023, down from $5.200 billion a year earlier.
- Borrowings had a $7.210 billion carrying value, including $1.249 billion classified as current and due in January 2024; face-value senior notes totaled $7.250 billion. The company had no borrowings outstanding under its $1.0 billion revolving facility, which matures in June 2028.
- Approximate net debt using carrying-value borrowings less cash was $2.938 billion. The company reported compliance with credit-facility covenants. Senior debt ratings were Baa2/Stable from Moody’s and BBB/Stable from S&P.
- Financing cash outflow was $2.290 billion, including $2.0 billion of share repurchases and $299 million of dividends paid. The company repurchased approximately 54 million shares and had $2.4 billion remaining under its $7 billion authorization.
- The company declared a higher semiannual dividend of $0.26 per share after year-end and estimated approximately $260 million of FY2024 dividends at the new annual rate.
Outlook, risks and unusual items
- The filing provides no formal numerical revenue or earnings guidance. Management described continued investment in news, sports, entertainment, Tubi, and other digital distribution, while highlighting industry-wide shifts to streaming and ongoing MVPD subscriber declines.
- Fox paid approximately $800 million in April 2023 to settle Dominion Voting Systems litigation and a related lawsuit. The filing reports $894 million of total legal settlement costs in Other, net for FY2023. The pending Smartmatic case seeks $2.7 billion; Fox said its outcome is uncertain, not reasonably estimable, and could materially affect results or cash flows. A trial was not expected before 2025.
- Other, net also included a $403 million net gain on equity investments, principally reflecting changes in the fair value of Flutter shares, and a $117 million U.K. Newspaper Matters indemnity expense.
- Programming rights are a significant long-term commitment: $31.115 billion of licensed-programming commitments were disclosed, including $5.102 billion due within one year. Major sports contracts include NFL rights through the 2033 season, MLB rights through 2028, and NASCAR rights through 2024.
- WGA members were on strike beginning May 2023 and SAG-AFTRA members beginning July 2023; management warned that labor disruptions could delay production and raise costs. Other key risks include advertising cyclicality, sports-rights costs and renewal, distributor negotiations, privacy and cybersecurity regulation, and broadcast-license requirements.
- The FanDuel option gives Fox the right, subject to conditions and regulatory approvals, to acquire an 18.6% interest for an option price of approximately $4 billion as of June 30, 2023. Fox has no obligation to invest unless it exercises the option.
- The company expects the corporate alternative minimum tax to apply starting in FY2024; management warned it could change the timing of cash tax benefits from tax-basis amortization and increase annual cash taxes.
Investor facts to verify
- Confirm the intended reporting period: this filing covers FY2023, not 2022 Q4.
- Review the Smartmatic litigation disclosures and any subsequent developments, potential costs, and effects on cash flow or reputation.
- Assess whether advertising and Tubi growth can offset continuing subscriber declines, weaker ratings, and the loss or cost of major sports rights.
- Track the January 2024 note maturity, remaining share-repurchase authorization, and the substantial licensed-programming commitments.
- Evaluate the cash-tax impact of the alternative minimum tax and the timing and value of the FanDuel option.