Fox Corporation — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2021; comparisons are with the periods ended December 31, 2020. Fox operates Cable Network Programming, Television, and Other, Corporate and Eliminations. Amounts are in millions except per-share data.
Financial performance
| Metric | Quarter 2021 | Quarter 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $4,441 | $4,087 | $7,486 | $6,804 |
| Adjusted EBITDA | $310 | $305 | $1,374 | $1,471 |
| Net income (loss) attributable to Fox shareholders | $(85) | $224 | $616 | $1,330 |
| Diluted earnings (loss) per share | $(0.15) | $0.37 | $1.07 | $2.21 |
| Operating cash flow | Not presented separately | Not presented separately | $(656) | $237 |
| Capital expenditures | Not presented separately | Not presented separately | $(121) | $(242) |
Quarter revenue rose 9%; six-month revenue rose 10%. Adjusted EBITDA margin, calculated as Adjusted EBITDA divided by revenue, was approximately 7.0% for the quarter versus 7.5%, and 18.4% for six months versus 21.6%. Quarter net loss included a $211 million “Other, net” expense, including a $165 million loss on equity investments; the prior-year quarter included a $172 million gain, including a $220 million investment gain. Six-month comparisons were also affected by a $462 million Disney reimbursement recorded in the prior-year period.
Segments and material changes
- Cable Network Programming: Quarterly revenue increased 10% to $1,638 and Segment EBITDA rose 17% to $668. Six-month revenue increased 9% to $3,054 and Segment EBITDA rose 7% to $1,442. Higher affiliate fees and sports-related advertising and sublicensing revenue contributed; traditional MVPD subscriber declines were a partial offset.
- Television: Quarterly revenue increased 8% to $2,759, while Segment EBITDA loss widened to $273 from $185. Six-month revenue increased 11% to $4,340, while Segment EBITDA fell to $86 from $272. Sports rights and production costs, increased Tubi investment, and higher scripted-programming costs weighed on results.
- Other, Corporate and Eliminations: Segment EBITDA loss was $85 for the quarter and $154 for six months, broadly similar to prior-year periods.
- Revenue growth reflected higher affiliate fees, sports and entertainment advertising, Tubi growth, and other revenue. Lower political advertising after the prior-year elections and lower traditional pay-TV subscribers were offsets. The prior-year COVID-19 period had fewer or disrupted live sports events, affecting comparability of both revenue and costs.
Liquidity, debt and capital allocation
- At December 31, 2021, cash and cash equivalents were $4,255, down from $5,886 at June 30, 2021. Current assets were $8,514 and current liabilities $2,870.
- Borrowings totaled $7,954: $750 current and $7,204 non-current. The company had no borrowings under its $1.0 billion revolving facility, which matures in March 2024; it reported covenant compliance. The $750 million of 3.666% notes due in January 2022 were repaid in full after quarter-end.
- Six-month cash use included $656 from operations, $296 for investing and $679 for financing. Operating cash flow was affected primarily by higher programming payments and lower Adjusted EBITDA; financing cash use included share repurchases and dividends.
- Fox repurchased approximately 14 million shares for $497 during the six months; approximately $1.90 billion remained under its $4 billion authorization at December 31. After quarter-end it repurchased approximately 1.4 million shares for $53 million and declared a $0.24-per-share semiannual dividend, payable March 30, 2022.
- Firm commitments and future debt payments totaled approximately $44 billion at December 31, primarily reflecting programming and other contractual commitments. The filing does not provide a single quantified breakdown of these commitments in the supplied text.
Outlook, risks and unusual items
The filing provides no specific earnings or revenue guidance. Management cautioned that interim results are not necessarily indicative of full-year results, including because of COVID-19 impacts. It cited risks including sports-rights costs and renewals, traditional subscriber declines, advertising demand, distribution agreements, competition, technology and cybersecurity, and litigation.
Fox said it was contesting Smartmatic and Dominion defamation lawsuits and intended to defend them vigorously. It stated that additional losses, if any, could not be estimated and that it did not currently anticipate a material adverse effect from the disclosed pending matters. The filing also discusses FOX News harassment and discrimination claims and the U.K. Newspaper Matters indemnity; the related liability was $60 million at December 31, 2021. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether recurring operating performance supports revenue growth as sports programming and production costs rise, particularly in Television.
- How much reported earnings volatility is attributable to changes in the Flutter investment’s fair value and other non-operating items.
- Future operating cash generation and the timing and scale of programming-rights and other firm commitments.
- Developments in Smartmatic, Dominion, and other legal matters, for which potential additional losses were not estimable.
- Post-quarter debt repayment, share repurchases, and the declared dividend, and their effect on cash and leverage.