10-QPeriod: Q2 FY2020

Fox Corp Quarterly Report for Q2 Ended Dec 31, 2019

Filed February 5, 2020For Securities:FOXAFOX

Summary

Fox Corporation's (FOXA) second fiscal quarter of 2020, ending December 31, 2019, showed robust top-line growth with total revenues increasing by 5% to $3.78 billion compared to the prior year period. This growth was driven by a 7% increase in affiliate fees and a 32% surge in other revenues, primarily from the FOX Studios lot and consolidation of Credible and Bento Box. Advertising revenue saw a modest 1% increase. However, operating expenses rose by 10%, outpacing revenue growth, leading to a significant increase in interest expenses due to senior note issuance. Despite these cost pressures, net income attributable to stockholders surged by a remarkable 3650% to $300 million from $8 million in the prior year, largely due to favorable changes in the fair value of investments. Adjusted EBITDA, a key operational metric, saw a notable decrease of 41% to $261 million, reflecting higher operating expenses and a significant increase in interest expense. The company also announced a substantial $2 billion stock repurchase program authorization, with an initial $350 million accelerated share repurchase (ASR) agreement initiated in November 2019. Strategically, Fox Corp is acquiring three television stations from Nexstar Media Group for approximately $350 million, while divesting two stations for $45 million. The acquisition of a 67% stake in Credible for approximately $260 million also closed in October 2019. These moves signal a focus on strategic growth and capital return to shareholders.

Financial Highlights

47 data points
Beta

Revenue

$3.78B

Net Income

$300.00M

7.9% Net Margin

EPS (Diluted)

$0.48

Total Assets

$20.45B

Cash & Equivalents

$1.99B

Free Cash Flow

-$529.00M

Financial Statements
Beta
Revenue$3.78B
SG&A Expenses$431.00M
Interest Expense$90.00M
Net Income$300.00M
EPS (Basic)$0.49
EPS (Diluted)$0.48
Shares Outstanding (Basic)617.00M
Shares Outstanding (Diluted)620.00M

Key Highlights

  • 1Total revenues increased by 5% to $3.78 billion for the three months ended December 31, 2019, compared to the prior year period.
  • 2Net income attributable to Fox Corporation stockholders significantly increased to $300 million, up from $8 million in the prior year, driven by favorable investment revaluations.
  • 3Adjusted EBITDA declined by 41% to $261 million for the quarter, primarily due to increased operating and interest expenses.
  • 4The company announced a $2 billion stock repurchase program authorization, demonstrating a commitment to returning capital to shareholders.
  • 5Strategic acquisitions include three television stations from Nexstar for approximately $350 million and a 67% stake in Credible for approximately $260 million.
  • 6Cable Network Programming segment EBITDA grew 7% to $556 million, driven by higher affiliate fees and lower expenses.
  • 7Television segment EBITDA experienced a substantial decrease to $(214) million from $(14) million, impacted by higher operating expenses that outpaced revenue growth.

Frequently Asked Questions

The substantial increase in net income attributable to Fox Corporation stockholders was primarily driven by unrealized gains related to changes in the fair value of the company's investments in equity securities. This offset increased operating expenses and interest expenses.

Adjusted EBITDA decreased by 41% due to a combination of factors, including a 10% increase in operating expenses, a 31% rise in selling, general, and administrative expenses (partially due to operating as a standalone company), and a substantial increase in interest expense from newly issued senior notes. These increased costs more than offset the 5% growth in total revenues.

Fox Corp is actively pursuing strategic acquisitions and capital returns. This includes the planned acquisition of three TV stations from Nexstar, the completed acquisition of a majority stake in Credible, and a $2 billion stock repurchase program. These actions indicate a focus on portfolio enhancement and shareholder value.

The Cable Network Programming segment showed positive momentum with a 7% increase in Segment EBITDA to $556 million, driven by higher affiliate fees and lower expenses. In contrast, the Television segment's Segment EBITDA declined significantly to $(214) million, as increased operating expenses, particularly for sports and entertainment programming rights, outpaced revenue growth.