Fox Corporation — Form 10-Q Summary
Reporting period: The filing covers the quarter and nine months ended March 31, 2021 (Fox’s fiscal 2021 third quarter), compared with the same periods in 2020. The supplied request metadata says “2020 Q3,” but the filing itself reports fiscal 2021 Q3.
Business context and financial performance
Fox operates Cable Network Programming, Television, and Other, Corporate and Eliminations businesses, spanning news, sports, broadcast television, and the ad-supported streaming service Tubi. Amounts below are in millions except per-share data.
- Quarter revenue: $3,215, down 7% from $3,440. Affiliate fees rose 10% to $1,719, while advertising fell 24% to $1,198, reflecting the prior-year Super Bowl comparison and lower FOX Network ratings, partly offset by Tubi and other NFL broadcasts.
- Quarter earnings: Net income attributable to Fox stockholders was $567, versus $78; diluted EPS was $0.96, versus $0.13. Adjusted EBITDA was $899, down 2% from $920. The earnings comparison was substantially affected by investment fair-value changes and other unusual items.
- Nine-month revenue and earnings: Revenue was $10,019, up 1%. Net income attributable to stockholders was $1,897, versus $877; diluted EPS was $3.17, versus $1.42. Adjusted EBITDA was $2,370, up 16% from $2,037.
- Segments: Quarter Cable Network Programming revenue was $1,471 and Segment EBITDA $850 (up 7%); Television revenue was $1,695 and Segment EBITDA $135 (down 40%). For nine months, Cable Network Programming Segment EBITDA increased 8% to $2,202, and Television increased 56% to $407.
- Cash flow: Nine-month operating cash flow was $1,866, versus $1,345; investing cash outflow was $329, versus $397; financing cash outflow was $417, versus $986. Cash and cash equivalents ended at $5,765, up from $4,645 at June 30, 2020.
- Liquidity and debt: Borrowings totaled $7,950 at March 31, 2021, including $749 current and $7,201 non-current, compared with $7,946 at June 30, 2020. Fox had an unused $1.0 billion revolving credit facility maturing in March 2024 and reported covenant compliance. Senior debt ratings were Baa2/Stable from Moody’s and BBB/Stable from S&P.
- Margins: Adjusted EBITDA was approximately 28% of quarterly revenue versus 27% a year earlier; nine-month adjusted EBITDA margin was approximately 24% versus 21%. These are calculated from the filing’s non-GAAP figures.
Material changes and unusual items
- Quarter revenue declined despite higher affiliate fees; nine-month revenue edged higher as affiliate-fee growth largely offset weaker advertising and other revenue. Traditional MVPD subscriber declines partly offset contractual rate increases.
- Nine-month net income benefited from a $462 million Disney reimbursement of Fox’s prepaid Divestiture Tax and gains on equity investments. “Other, net” was income of $752 for nine months, versus an expense of $345 in the prior-year period; it included investment gains and the reimbursement. Quarterly “Other, net” was income of $61 versus an expense of $632, largely reflecting investment fair-value movements.
- The prior-year quarter included the Super Bowl; the current period also reflected COVID-19-related sports schedule changes, fewer live college football games, and reduced scripted programming. Fox recorded estimated affiliate-fee credits for under-delivered college football games; the final amount depends on affiliate fees and games delivered in future seasons.
- Fox repurchased approximately 24 million shares for $725 million during the nine months and had approximately $675 million remaining under its authorization at March 31. It declared a $0.23-per-share dividend, paid in April.
- Firm commitments and future debt payments totaled approximately $48 billion, versus $37 billion at June 30, 2020. The increase was primarily related to a new NFL media-rights agreement, partly offset by sports-rights payments and the early exit from the NFL Thursday Night Football package.
Outlook, risks and contingencies
The filing provides no numerical earnings or revenue guidance. Management said the outlook remains uncertain, particularly because COVID-19 may affect advertising demand, sports programming and production, and consumer subscriptions. Further event cancellations or schedule shifts could hurt advertising and, over time, affiliate-fee revenue. Management’s assessments as of March 31 found no COVID-19-related financial-statement impact, but future assessments could result in material effects.
Fox reported Smartmatic and Dominion defamation lawsuits filed in 2021 and said it intends to defend them vigorously. The company could not estimate potential additional losses for these and certain other claims, though it did not anticipate that their ultimate resolution would materially adversely affect its business, financial condition, results or cash flows. The filing also discusses FOX News harassment and discrimination claims and the U.K. Newspaper Matters indemnity.
Important facts for investors to verify
- How much of reported earnings growth reflects recurring operations versus investment gains and the Disney tax reimbursement.
- The final affiliate-fee credits for college football under-delivery and the effect of any further sports disruptions.
- Advertising recovery, Tubi monetization, and the continuing trend in traditional MVPD subscribers.
- The economics and payment schedule of the new NFL rights commitments and the full $48 billion commitments figure.
- Potential exposure from Smartmatic, Dominion and other legal matters; the filing does not provide a clear loss estimate.
- The company’s continuing share repurchases, dividend payments, cash balance and debt maturities.