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Edited Transcript of FOXA.OQ earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q1 2020 Fox Corp Earnings Call

Nov 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Fox Corp earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* John P. Nallen

Fox Corporation - COO

* Joseph Dorrego

Fox Corporation - Chief IR Officer & Executive VP of Corporate Initiatives

* Lachlan Keith Murdoch

Fox Corporation - Executive Chairman & CEO

* Steven Silvester Tomsic

Fox Corporation - CFO

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Conference Call Participants

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* Benjamin Daniel Swinburne

Morgan Stanley, Research Division - MD

* Brandon A Ross

LightShed Partners - Partner and Media & Technology Analyst

* Douglas David Mitchelson

Crédit Suisse AG, Research Division - MD

* Jessica Jean Reif Ehrlich

BofA Merrill Lynch, Research Division - MD in Equity Research

* John Christopher Hodulik

UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst

* Michael Brian Nathanson

MoffettNathanson LLC - Founding Partner & Senior Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and welcome to the Fox Corporation First Quarter Fiscal 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now turn the -- like to turn the conference over to our Chief Investor Relations Officer and Executive Vice President of Corporate Initiatives, Mr. Joe Dorrego. Please go ahead, sir.

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Joseph Dorrego, Fox Corporation - Chief IR Officer & Executive VP of Corporate Initiatives [2]

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Thank you, operator. Hello, everyone, and welcome to our first quarter fiscal 2020 earnings conference call. Joining me on the call today are Lachlan Murdoch, Executive Chairman and CEO; John Nallen, COO; and Steve Tomsic, our CFO. First, Lachlan and Steve will give some prepared remarks on the most recent quarter, and then we'll take questions from the investment community.

Please note that this call may include forward-looking statements regarding Fox Corporation's financial performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings.

Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA, or EBITDA as we refer to it on this call. Reconciliations of non-GAAP financial measures are included in our earnings release and our SEC filings, which are available in the Investor Relations section of our website.

And with that, I'm pleased to turn it over to Lachlan.

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Lachlan Keith Murdoch, Fox Corporation - Executive Chairman & CEO [3]

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Thanks, Joe. Good afternoon and thanks, everyone, for joining us today on Fox Corporation's 2020 First Quarter Earnings Call. Our first full fiscal year as a stand-alone public company is off to a solid start with good positive momentum across all our businesses. We have just reported strong financial results, which Steve will comment further on shortly. But perhaps more importantly, we are making significant progress on the operational goals and strategic initiatives that we outlined to you at our Investor Day.

Our strategy to build Fox around live sports, news and event programming is producing results and delivering audience growth and engagement faster than we expected. For example, we are now 6 weeks into the fall season, and Fox has established itself as both the #1 rated broadcast network and the only big 4 network to deliver year-on-year audience growth in the key 18-to-49 demographic and in total viewers. We are up 5% in 18-to-49 ratings and 10% in total viewers.

This leadership position stems from the investments we are making across our network, beginning with FOX Sports, which has accounted for 22 of the 50 most watched telecasts in the country since the NFL Kickoff. Our ratings are up 11% across our entire portfolio of college and pro football, led by Thursday night with viewership up 22%, and our Sunday broadcast, which is up 8% to a 3-year high.

Another new addition to the FOX Network was the debut of WWE's Friday Night Smackdown on October 4 to an average audience of nearly 4 million viewers. We are thrilled with our WWE partnership as it completes our strategy to program live content from Thursday through Sunday in the fall.

The momentum behind football and WWE continued into the second quarter with a solid Major League Baseball postseason, culminating with a historic 7-game World Series. Fox wins in adults 18 to 49 on 4 nights, Monday, Wednesday, Thursday and Friday, more nightly wins than any other network.

The success of the network extends well beyond sports, with our entertainment slate off to a great start led by 2 of the top 3 programs on television. We're pleased to be seeing such positive signs of momentum as we execute the strategy we laid out last May. Our mix of live and near-live tent-pole content mixed with high-quality entertainment is clearly paying dividends. The Masked Singer has returned for its second season as the #1 entertainment show on broadcast. And 9-1-1 is the top program on Mondays and is the #2 scripted program on all of television. And Prodigal Son is the highest-rated new broadcast program on any network this season. In fact, in entertainment programming only, Fox ranks #1 over the first 6 weeks of the season for the first time since 2011.

Speaking of #1, the FOX News network is on track to finish the calendar year as the #1 cable channel for the fourth straight year and is the #1 news channel for 18 years running. And speaking of news, our station group has continued to expand the already extraordinary amount of local news we broadcast, which positions us well for the robust political ad market we expect next year.

The real strength and value of these distinctive brands is evidenced by the momentum we've had on the distribution and affiliate renewal front, where we remain on pace to achieve the targets we have previously outlined. We have successfully renewed distribution agreements with Charter, DISH and Cox, along with affiliate agreements with Nexstar, Gray and Tegna. In each of these renewals, we were able to achieve value that reflects the strength of our core brands.

Having said that, we have seen the rate of subscriber declines in the traditional MVPD universe escalate in recent months, with this quarter yielding industry declines of over 4%. But it is important to note that the subscriber losses reported by just one distributor, which accounts for approximately 25% of pay television subscribers, represent the majority of the net losses we experienced over the past 12 months. That distributor accounts for almost 80% of total losses over the last year. And without them, sub losses would decrease to about 1.3%, helped by strong gains from the leading DMVPDs. This is important because it suggests that it is too early to draw firm conclusions from a market that is still clearly fluid, especially in light of surging results from our leading digital partners. It is, though, something we are clearly focused on.

Another area of focus is growing the company's digital revenues and businesses. I should mention that we do not include the MVPD distribution revenue in our digital results. The reach of our direct platforms has grown to over 250 million users per month, with total engagement growing to over 11 billion minutes per month. Interestingly, we now see well above 10% of our streaming audience consuming the 4K stream with very positive feedback, and we are excited to be the first broadcaster ever to stream the Super Bowl in 4K. It will be a groundbreaking experience for fans.

Our digital strategy, inclusive of businesses like FOX Bet and Credible, is crucial to heightened engagement with our audiences, which is already driving meaningful growth. Year-over-year, digital revenue has grown over 30% in the quarter, and we continue to work to optimize our digital platforms. For the first time ever, our FOX News, FOX Business and FOX Television Stations digital properties are all now underpinned by the same tech platforms. And FOX Sports is being transitioned this quarter, enabling us to drive improved monetization across these businesses.

Of course, driving that improvement also leads us to new business models and new revenue streams. In conjunction with the kickoff of the football season, we launched the free-to-play FOX Sports Super 6 app nationally, which has already achieved nearly 1 million registered users and almost 10 million plays. The Stars Group is now live with the digital sports wagering service Fox Bet in both New Jersey and Pennsylvania.

The proposed merger between Flutter Entertainment, the owner of FanDuel, and our partner, The Stars Group, will create many opportunities for us. We're excited to develop the Fox Bet brand in partnership with FanDuel and are confident in the dual-brand strategy to capitalize on the rapidly growing sports wagering market.

Over a month ago, FOX Business debuted a brand refresh across its linear and digital platforms, including a new logo and tagline, Invested in You. As part of this initiative, FOXBusiness.com and the FOX Business app were relaunched with new content and editorial tools to drive engagement. The initial performance of the relaunched digital properties has been encouraging as we have seen substantial increases in page views and in unique users.

A core part of our strategy for FOXBusiness.com is our acquisition of Credible Labs, which closed a few weeks ago. We are now beginning the process of integrating its service with our core businesses, starting with FOX Business.

While we remain focused on executing against our operational plans, we also continue to make progress towards other strategic initiatives while maintaining a balanced approach to capital allocation. To further strengthen our portfolio of assets, yesterday, we announced an agreement with Nexstar to acquire their local television stations in the Seattle and Milwaukee markets. In return, we have agreed to sell them our stations in the Charlotte market, which geographically aligns with Nexstar's existing operations in the Carolinas and in Virginia. It's a great deal for both companies and a rare win-win. This acquisition expands the reach of one of Fox's core assets, our television stations portfolio, and further strengthens what is already a highly profitable and cash-generative business. This transaction will expand our market presence to 14 of the top 15 DMAs and importantly adds 2 major markets with NFL, Major League Baseball, Pac-12 and Big Ten teams.

Finally, consistent with the timing we laid out at our Investor Day, we have today announced that our Board of Directors has authorized a $2 billion stock repurchase program. We are pleased to have the buyback authorization formally in place as part of our capital toolkit. The company also announced its intent to complete $500 million of software purchases in the near term.

In light of all the positive momentum I have just touched upon, in light of our success at the network, at sports, at news and in our growing station group, in light of our market-leading investments in sports gaming and in the Credible marketplace and in light of the unique cash benefits of our tax structure, we believe we are undervalued in respect to our peers and to other investment opportunities available to us at this time. This buyback reflects both our confidence in the long-term strength of our business and in our commitment to finding the most efficient use of our capital. We remain committed to deploying capital in a disciplined manner to maximize shareholder value through a balanced approach of organic investment, accretive M&A and return of capital to our stockholders. We will not follow a prescribed formula of deployment. Instead, we will be opportunistic and invest capital where we feel the company can achieve the greatest return on investment.

Now Steve will provide more detail on our financial results.

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Steven Silvester Tomsic, Fox Corporation - CFO [4]

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Thanks, Lachlan, and good afternoon. We've made a solid start to fiscal 2020. And notwithstanding the subscriber headwind Lachlan just mentioned, overall, we are exceeding our internal plans that we commenced the year with. We delivered healthy top line and double-digit EBITDA growth in the first quarter, which sets us up well for the remainder of fiscal 2020.

Let me now take you through our results and along the way, remind you of some key factors that shape the rest of our fiscal year. In the first quarter, the company reported total revenues of $2.7 billion, up 5% over the comparative period in fiscal 2019, reflecting revenue growth across all operating segments. EBITDA was $856 million, a 12% increase over the $761 million generated in the prior year led by higher contributions from the Television and Cable segment. This growth was partially offset by higher corporate expenses reported in the other segment, which reflect the costs of Fox operating as a stand-alone public company in the current year quarter versus the presentation of carve-out financial statements in the prior year.

From a bottom line perspective, net income attributable to stockholders of $499 million or $0.80 per share was lower than the $604 million or $0.97 per share in the prior year quarter. This decrease was primarily attributable to a $115 million reduction in the unrealized gain recognized in other net related to the change in fair value of the company's investment in Roku.

Excluding this impact and other onetime items, adjusted EPS of $0.83 was up slightly over last year's $0.82 per share as our strong operating performance was largely offset by below-the-line items such as interest and tax expense, which, as we have flagged in the past, now reflect the full amounts associated with operating as a stand-alone company.

So now turning to the performance of our operating segments for the quarter, where Cable Network EBITDA of $684 million was up 8% on revenue growth of 2%. The revenue increase was led by other revenue growth of $30 million. This increase was driven by pay-per-view boxing revenues, including the Pacquiao-Thurman bout that took place on July 20, along with increased sports sublicensing revenues and subscription revenues from Fox Nation.

Cable affiliate revenues were in line with those in the prior year quarter as the impact of higher average rates across essentially all of our brands was offset by the net decrease in pay television subscribers that Lachlan mentioned earlier. Barring material changes in current subscriber trends, we anticipate a return to growth in cable affiliate revenue in the second half of the fiscal year as rate resets from recent renegotiations begin to take effect.

Cable advertising revenues decreased 4%, reflecting lower contributions from the Women's FIFA World Cup in the current year as compared to the men's tournament in the prior year, along with the absence of UFC programming at the national sports networks.

EBITDA at our Cable segment increased 8% over the prior year, reflecting the higher revenues and a 5% reduction in costs. The decrease in expenses was attributable to lower rights and production costs related to the Men's FIFA World Cup in the prior year quarter and the absence of UFC programming in the current year quarter, partially offset by contractual increases on existing sports rights agreements.

At the Television segment, EBITDA was $251 million, an increase of $80 million or 47% from the prior year quarter on the back of revenue growth of 6%. The revenue growth was led by a 14% increase in television affiliate revenues, reflecting double-digit programming fee growth from non-owned station affiliates, and double-digit direct retransmission revenue growth at our owned and operated stations. This growth is consistent with the overall TV affiliate revenue trajectory we laid out at our Investor Day in May, where we announced our expectation to deliver revenues of approximately $2.65 billion by calendar year 2022. Other revenues in the Television segment grew by $34 million driven by higher digital content licensing revenues and revenues from our recently acquired animation studio, Bento Box.

As expected, advertising revenues in the quarter decreased by $12 million or 2% as higher entertainment advertising revenues, which include the impact of the broadcast of the Emmy Awards on Fox, were more than offset by the several -- by several expected cyclical factors versus the quarter a year ago. These include the impacts of political advertising revenues at the local stations related to the 2018 midterm elections and more FIFA World Cup matches in the prior year quarter.

Television segment expenses were in line with prior year amounts as the contractual increases on existing sports rights agreements and expenses associated with the broadcast of the Emmy Awards were offset by the absence of the rights expense associated with the broadcast of the Men's FIFA World Cup in the prior year quarter.

While most of you are already aware, at this point, it is worth remembering that seasonal and cyclical factors have a particularly pronounced impact on our quarterly results in our Television segment. This will be most visible in our Q2 results with the impact of higher sports rights and production expenses at the FOX Network, reflecting the contractual annual escalators on the NFL, Major League Baseball and college football contracts and the addition of WWE rights as well as lower political advertising revenue at our local television stations when compared to the prior year.

Finally, from a P&L perspective, the net EBITDA loss in our other segment amounted to $79 million, which reflects a full quarter of stand-alone costs as opposed to the carve-out basis of presentation in the corresponding quarter last year. These strong overall P&L results generated free cash flow, which we calculate as net cash provided by operating activities less cash invested in property, plant and equipment, of just over $160 million in this quarter. The modest rate conversion of EBITDA to free cash flow of approximately 20% reflects the typical seasonality you should expect to see in the business. Here, our first and second quarter cash flows are impacted by the working capital deficit from sports rights payments and the timing of cash collections on our earned advertising revenue, which both reverse in the second half of our fiscal year. On a full year basis, we continue to expect to benefit from natural low working capital usage along with our cash tax benefit.

From an overall balance sheet perspective, we ended the quarter with $3.3 billion in cash and $6.8 billion in debt. As Lachlan mentioned earlier, in the very near term, we will be deploying $500 million of cash on hand to the buyback of both A and B class shares. To do this, we have entered into an accelerated stock repurchase transaction to buy back $350 million of the company's Class A common stock and intend to promptly repurchase approximately $150 million of Class B common stock.

Additionally, as part of our balanced capital allocation approach and as we announced yesterday, approximately $300 million of capital will be directed to the Nexstar television stations transaction, which we expect to close in the second half of this fiscal year. And in October, we closed the acquisition of a 67% stake in Credible Labs for approximately $260 million.

And with that, I'd now like to return it back to Joe.

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Joseph Dorrego, Fox Corporation - Chief IR Officer & Executive VP of Corporate Initiatives [5]

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Thanks, Steve. And now, operator, we'd be happy to take questions from the investment community.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we'll go to the line of Doug Mitchelson with Crédit Suisse.

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Douglas David Mitchelson, Crédit Suisse AG, Research Division - MD [2]

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One question, I guess for Lachlan and John. I'm just curious for an update on the progress on investment spending. How much -- was the September quarter proportionate to the year in terms of the investment spending that you laid out at the Analyst Day? And how are each of those investments doing? Lachlan, you already touched on WWE, but in terms of the programming investment and in terms of Fox Nation, would love to get an update.

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Lachlan Keith Murdoch, Fox Corporation - Executive Chairman & CEO [3]

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Right. Doug, I'll let Steve tackle that one.

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Steven Silvester Tomsic, Fox Corporation - CFO [4]

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Doug, listen, in terms of the amount of investment spending actually deployed in the quarter, it's actually relatively modest. We called out at the Investor Day somewhere between $200 million and $250 million of net EBITDA investment over the course of that year, and I'd say less than 10% of that was deployed over the quarter. You'll see a significant amount of that come through in the quarter we're in now because we've obviously got WWE that launched on October 4 for us. We're now right in the middle of the fall schedule and entertainment programming in Fox Nation where we continue to build in terms of the programming and the marketing.

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Operator [5]

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And we'll go to the line of Jessica Reif Ehrlich with Bank of America.

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Jessica Jean Reif Ehrlich, BofA Merrill Lynch, Research Division - MD in Equity Research [6]

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I have one question that's a tough one, so maybe a multi-parter. Can you give us color on -- we saw the advertising numbers for this quarter, but as you look out to the second quarter and the third quarter with the Super Bowl, I mean, given your ratings in the upfront, can you just give us some color on what's going on? And you have a new advertising structure, which seems to be working well. And then anything you can say on -- any movement in discussions on the NFL negotiations would be great. Any color there?

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Lachlan Keith Murdoch, Fox Corporation - Executive Chairman & CEO [7]

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Great, Jessica. Those aren't tough questions, so I'm happy to take them. So thank you. Look, from an advertising point of view, talk a little bit about Super Bowl in a second. But in the quarter, despite some of the comparisons that Steve mentioned in his earlier comments, advertising has been quite strong, particularly across the entertainment and sports categories. We had a very successful upfront with entertainment pricing up double digits and with sports pricing up high single digits, which we've been very pleased to achieve.

In addition to that, one of the critical goals of our upfront was also to set the WWE pricing to broadcast pricing, not cable pricing, and we did that very successfully. Categories in the market are -- a number of categories are incredibly strong. The streaming services with Disney, Netflix and Apple recently have been spending good money. The tech sector with Google, Microsoft, Amazon, very strong clients. Pharmaceutical has been strong. They've been moving some of the money between demographics, so from some money sort of out of news but on to sports and entertainment. And of course, the financial services sector, clients like GEICO, Progressive, State Farm, have also been spending good money and supporting us very well.

So we're happy with where we are. I haven't mentioned news. News pricing in the upfront was up mid-single digits. The news market as an advertising market is softer than in entertainment and in sport. We think that's because of some of the ratings deficiencies at our competitors that are -- some volume is being given away more cheaply than we would agree to. So we're finding the news market softer than sports and news (sic) [entertainment].

Pacing in the -- sorry, in the quarter, our scatter pricing was up about 25%. Now there's very little scatter, so it's a good statistic. And going forward, it's lower than that but still up well above the upfront.

Which leads us to the Super Bowl. We're well ahead of last year -- obviously, we don't know last year, it was our competitor, but we're well ahead of our last Super Bowl where we were selling at this stage in the year. We're sold out of all of our A positions, and we have really good momentum as we continue to sell the Super Bowl. So we're very confident that the pricing will be -- I don't want to give the number, but the pricing will certainly be the highest cost per 30-second ad in any Super Bowl to date. So we're very pleased with that.

On the NFL, we don't have an update for you in terms of where we are with the negotiations. Obviously, we're engaged with the NFL every day as we broadcast their [fixtures] and -- but negotiations with the NFL in terms of a renewal of any of the packages has not started yet.

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Operator [8]

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And next we'll go to the line of Michael Nathanson with MoffettNathanson.

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Michael Brian Nathanson, MoffettNathanson LLC - Founding Partner & Senior Research Analyst [9]

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I'm going to ask a couple around Nexstar. So can you talk a bit about the accretion math behind the station swap? And do you move to Fox's retrans rate card right away? And is that higher than Nexstar's rate card? And then lastly, beside from rate retrans step-ups, if there are any, are there any benefits you derive from getting in those markets? You called out the geographic footprint, but I want to know like what does that drive? What does that benefit you from changing the location in these markets?

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Steven Silvester Tomsic, Fox Corporation - CFO [10]

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It's Steve here. In terms of the retrans benefits, it pretty much is a straight move from taking what they were paying us from those stations from a programming fee perspective and then assuming them into our retrans rates. That's a pretty immediate impact and synergy benefit of taking the stations onto our balance sheet. So it virtually hits our P&L from day 1. Remember, though, this won't close until later in the fiscal year, so you probably won't see much of that in fiscal '20.

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John P. Nallen, Fox Corporation - COO [11]

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And Michael, John. Just adding those key markets, which were pretty well missed, the only one who's missing when you look at our footprint, particularly for the NFL and the other sports we're in, is just a big revenue upside for us, helps on both the national and the local level. And we achieve cost synergies, too. Given the size of the station group that we have, we just would naturally achieve some cost synergies there.

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Operator [12]

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Next, we'll go to the line of Ben Swinburne with Morgan Stanley.

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Benjamin Daniel Swinburne, Morgan Stanley, Research Division - MD [13]

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Just on the buyback and sort of the balance sheet, you guys have talked about $1.5 billion minimum cash balance at the Investor Day. As you noted, you guys are over $3 billion. And I think even after the ASR, the acquisitions you've announced, the dividend, you're still not even spending your free cash flow this year, at least on our numbers. So I'm just wondering if you have any time line in mind or a sense of urgency about optimizing the balance sheet from a cash debt perspective. It's a not-subtle way of me trying to figure out how fast you're going to buy back your stock, obviously. So...

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John P. Nallen, Fox Corporation - COO [14]

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You never -- Ben, you've never been subtle.

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Lachlan Keith Murdoch, Fox Corporation - Executive Chairman & CEO [15]

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Thanks, Ben.

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John P. Nallen, Fox Corporation - COO [16]

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But look, the buyback is just one element of our overall disciplined, balanced allocation of our capital. So today, we're pleased to announce that authorization and the deployment of the $500 million. And I'd remind you that this announcement is right in line with the timetable that we had established. It's been well developed by our Board, established in the best interest of all our shareholders. And with its adoption, ongoing authorizations will be determined as an ordinary course matter with the Board.

Now to deal with your question specifically, while we fully expect to complete the authorization, we won't follow a formulaic approach to any current or future buyback deployment. It just doesn't make any sense to us. So we'll invest our capital where we feel we can generate the greatest long-term return on our investment for our shareholders and amongst the various legs of disciplined and balanced capital allocation.

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Operator [17]

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And we'll go to the line of Rich Greenfield with LightShed.

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Brandon A Ross, LightShed Partners - Partner and Media & Technology Analyst [18]

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It's Brandon Ross. It's Brandon. First, on FS1. So Disney took UFC from you guys and recently took Bundesliga, and I'm pretty sure they renewed with Formula 1. So just -- can you help us with how you plan to fill the programming hole there? And then thinking about the Super 6 mobile game that you guys launched, which looks like an on-ramp to legalized betting for you guys, can you give us any takeaways that you've learned so far there?

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Lachlan Keith Murdoch, Fox Corporation - Executive Chairman & CEO [19]

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So let me just start with Fox Sports 1. I would politely, respectfully disagree with you in terms of sort of any kind of programming hole. The Fox Sports 1 programming lineup is pretty impressive, huge amount of college sports, huge amount of NASCAR, for instance, the primary home of our NASCAR programming, boxing. And so we're very pleased with the programming on Fox Sports 1. We'll obviously look at continuing to strengthen that as opportunities that are fit with our program strategy emerge. So we are pleased with where Fox Sports 1 sits today, and I think our distributors are. If you look at the renewals across all of our affiliate renewals, Fox Sports 1 continues to drive increases in affiliate fees and rate. So our affiliates agree with us.

And sorry, which was the question on...

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John P. Nallen, Fox Corporation - COO [20]

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On Super 6.

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Lachlan Keith Murdoch, Fox Corporation - Executive Chairman & CEO [21]

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On Super 6.

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John P. Nallen, Fox Corporation - COO [22]

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Yes.

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Lachlan Keith Murdoch, Fox Corporation - Executive Chairman & CEO [23]

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So Super 6 has been incredibly successful. If you look at the strategy of any of these -- Fox Bet, if you look at what the strategy was in Sky, in Britain and other countries where legalized sports -- digital sports wagering has occurred, having a free-to-play game, a sort of top of the phone, to attract users is critically important. Having -- with Super 6 and the success, the very early and then rapid success of Super 6, I think, bodes very well to dropping those users down into a Fox Bet for pay game. So we're pleased with Super 6, and we're pleased with Fox Bet.

I should mention, and I didn't -- I was remiss not to mention this to -- in response to Jessica's question. Already, if you look just in the New York, New Jersey market, really for the New Jersey sports betting, there are already 13 active gaming advertisers. And so one of the reasons we're quite pleased about this liberalization of sports wagering rules state-by-state is not only do we think we'll gain tremendous long-term value through Fox Bet, but also just from an advertising point of view, we're now seeing several million dollars year-to-date already start to flow through in only the very limited number of states where sports wagering is legalized.

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Joseph Dorrego, Fox Corporation - Chief IR Officer & Executive VP of Corporate Initiatives [24]

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Operator, we have time for one more question.

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Operator [25]

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Okay. And that will be from the line of John Hodulik with UBS.

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John Christopher Hodulik, UBS Investment Bank, Research Division - MD, Sector Head of the United States Communications Group and Telco & Pay TV Analyst [26]

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Maybe on the affiliate side, I guess it did 4.3% growth this quarter. I think at the end of last year, you guys said 7% is sort of in the mix. Obviously, a lot of moving parts. Maybe talk about -- a little bit about -- the renewals you guys have talked about, when that you should see that hit -- impact the P&L? And yes, is that 7% still a good guide for the year?

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Steven Silvester Tomsic, Fox Corporation - CFO [27]

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It's Steve. I think that's around the mark. You should see the pattern here, and it's a similar pattern to what we saw last year, which is September quarter and December quarter are pretty flat for us, and you should see -- so you should expect December this year to be a similar kind of performance for us.

But then with the renegotiations that we've just done, which Lachlan outlined in his opening remarks, the rate resets that we get out of those renegotiations really begin to kick in at the start of the calendar year next year. So when you look at our first half, second half growth rate, the growth rate will absolutely be skewed to that second half, and in particular our third quarter where you'll see -- we see the benefit of those rate resets really kicking in. Again, it will be skewed towards retransmission growth as against cable affiliate. But we feel pretty comfortable where we are for the full year and also that $2.65 billion target for calendar '22.

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Joseph Dorrego, Fox Corporation - Chief IR Officer & Executive VP of Corporate Initiatives [28]

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And at this point, we are out of time. Thank you, everybody, for joining today's call. If you have any further questions, please give Dan Carey or me a call. Speak -- talk to you next quarter.

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Operator [29]

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And ladies and gentlemen, that does conclude our conference call for today. Again, thank you very much for your participation and for using the AT&T Executive TeleConference. You may now disconnect.