Business Context and Reporting Period
Company: Fox Corporation (FOX)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended September 30, 2024 (First Quarter of Fiscal 2025)
Business Overview: A news, sports, and entertainment company operating primarily through two reportable segments: Cable Network Programming and Television. Other operations include Credible (consumer finance) and the FOX Studio Lot, reported under Corporate and Other.
Key Financial Metrics
| Metric (in millions) | Q1 2025 (Sep 30, 2024) | Q1 2024 (Sep 30, 2023) |
|---|---|---|
| Revenues | $3,564 | $3,207 |
| Operating Expenses | $(2,018) | $(1,862) |
| Net Income | $832 | $415 |
| Net Income Attributable to Stockholders | $827 | $407 |
| Diluted EPS | $1.78 | $0.82 |
| Adjusted EBITDA | $1,048 | $869 |
| Cash and Cash Equivalents | $4,052 | $3,829 |
| Total Borrowings | $7,199 | $7,197 |
| Net Cash Provided by Operating Activities | $158 | $1 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 11% ($357 million) driven by higher affiliate fees, advertising, and other revenues.
- Advertising: Up 11% ($129 million), primarily due to political advertising from the 2024 elections and growth at Tubi.
- Affiliate Fees: Up 6% ($103 million), driven by higher rates per subscriber, partially offset by subscriber declines.
- Other Revenues: Up 47% ($125 million), largely due to sports sublicensing revenue.
- Profitability: Net income attributable to stockholders more than doubled (103% increase) to $827 million. This was significantly boosted by a $236 million unrealized gain on the investment in Flutter Entertainment plc (recorded in Non-operating other, net).
- Segment EBITDA: Cable Network Programming EBITDA rose 23% to $748 million; Television EBITDA rose 6% to $372 million.
- Expenses: Operating expenses increased 8% ($156 million), primarily due to higher sports programming rights amortization (college football, NFL, soccer tournaments) and increased newsgathering costs for the election.
- Cash Flow: Operating cash flow improved dramatically to $158 million from $1 million, aided by higher Segment EBITDA and lower restructuring payments.
Guidance, Outlook, Risks, and Unusual Items
- Unusual Items: The quarter included a significant non-operating gain of $233 million, primarily from the change in fair value of the Flutter Entertainment investment. Excluding this, core operating performance drove the increase in Adjusted EBITDA.
- Legal Contingencies:
- Defamation Litigation: The Smartmatic lawsuit remains pending with a trial expected in 2025; the company believes the claims are without merit. The Dominion lawsuit was settled in April 2023 for $800 million.
- FOX News Allegations: Ongoing allegations of sexual harassment and discrimination; the company states no material adverse effect is anticipated.
- Derivative Lawsuits: Stockholders filed lawsuits regarding election fraud coverage; a motion to dismiss is scheduled for November 2024.
- Strategic Developments: The proposed joint venture "Venu Sports" with ESPN and Warner Bros. Discovery is currently blocked by a preliminary injunction pending appeal.
- Capital Allocation: The company repurchased approximately 6 million shares for $250 million during the quarter. Remaining repurchase authorization is approximately $1.15 billion. A semi-annual dividend of $0.27 per share was paid.
- Outlook: Management notes that operating results for interim periods are not necessarily indicative of full-year results. No specific forward-looking financial guidance was provided in this text.
Investor Verification Checklist
- Flutter Investment Volatility: Verify the sustainability of the $236 million unrealized gain on Flutter Entertainment and its impact on future earnings volatility.
- Subscriber Trends: Confirm the trajectory of subscriber declines across cable networks and the effectiveness of rate increases in offsetting these losses.
- Legal Exposure: Monitor the status of the Smartmatic lawsuit and the outcome of the motion to dismiss in the derivative litigation regarding election coverage.
- Sports Rights Costs: Assess the long-term impact of rising sports programming rights amortization (NFL, college football) on operating margins.
- Venu Sports Status: Track the legal appeal regarding the preliminary injunction blocking the Venu Sports joint venture launch.