Fox Corp Q1 FY2027 earnings call

• Financial Strength: The company reported record Q1 results with revenue up 22% to $4.6 billion and EBITDA up 54% to $1.6 billion. Adjusted EPS reached $2.54, a 68% increase year-over-year.
• Sports Dominance: Strong performance driven by the historic broadcast of the FIFA Men's World Cup final, MLB postseason, and NFL season openings. Fox’s America’s Game of the Week averaged nearly 25 million viewers, remaining the #1 show in all television.
• Fox 1 Success: Launched over a year ago, Fox 1 has exceeded expectations with positive trailing 12-month subscriber growth when including incremental subscribers. Approximately 97% of new Fox 1 subscribers are cord-cutters (do not have cable). Subscriber acquisitions increased over 30% in September compared to the previous football season start.
• Tubi Growth: Tubi revenue grew 35% year-over-year, supported by a 23% increase in total view time. It generated over $50 million in targeted political advertising revenue during the midterm cycle. Management expects this momentum to continue into the next quarter.
• Political Advertising: Record political ad spending surpassed $350 million for the midterm cycle across the full portfolio, including local stations and national sports/news/entertainment platforms.
• Fox News Positioning: Despite difficult comparisons to last year's intense news cycle, Fox News remained the most watched cable news network, maintaining higher audience share than peers in prime and total day slots. Management cited viewer fatigue analogous to the 2006 midterms but expressed confidence in their ability to manage it.
• Roku Transaction: Significant progress made toward closing the acquisition, including shareholder and foreign regulatory approvals. The company is working cooperatively with the DOJ for HSR clearance and expects to close soon. The combination aims to build a leading position in streaming by combining Roku’s platform with Fox’s premium content.

• Cable Segment: Revenue increased by 8% and EBITDA grew by 7%. Advertising revenue rose 8%, driven by sports (including the FIFA World Cup), partially offset by lower digital news advertising. Distribution revenue grew 10% due to pricing growth and net subscriber increases, notably supported by Fox 1. Content and other revenues increased 1% via higher sports sublicensing. Expenses rose 10% due to higher sports programming rights and production costs.
• Television Segment: Revenue surged 32% and EBITDA jumped 134%. Television advertising revenue grew 60%, led by the World Cup and early midterm political advertising at owned-and-operated stations. Tubi contributed significantly with mid-30% revenue growth and expanding EBITDA. Distribution revenue grew 4% from healthy fee growth. Content and other revenues fell 4% due to lower entertainment studio content, partially offset by Tubi's contribution. Expenses increased 8% due to World Cup amortization and higher Tubi content costs.

• Full-Year Outlook: Management expressed confidence that fiscal 2027 will demonstrate differentiated strategy and financial strength following a record FY2026.
• Share Repurchases: Buybacks were temporarily inactive in Q1 but are expected to resume in the current quarter. Full-year repurchases are anticipated to remain in line with historical ranges.
• Free Cash Flow: Strong free cash flow generation was noted, attributed to timing differences in World Cup working capital (rights payments in FY26 vs. receivables collection in FY27).
• No Specific Numeric Guidance: No specific forward-looking revenue or EPS targets were provided for the remainder of the fiscal year beyond general confidence in continued growth.

• Regulatory Approval Risk: The completion of the Roku transaction is contingent upon obtaining final Horizontal Merger Review (HSR) clearance from the Department of Justice, which remains pending.
• Viewer Fatigue: Potential decline in engagement for Fox News due to voter fatigue during midterm elections, similar to trends seen in 2006, though management believes viewers are not switching to competitors.
• Seasonality: Fox 1 subscriber growth may be seasonal, potentially fluctuating with sports seasons, which could impact future distribution revenue stability.
• Market Competition: The digital advertising market remains hyper-competitive, particularly for Fox News Digital, despite its #1 ranking in America.

Q: Michael Ng asked about Fox 1's impact on distribution growth and opportunities as the NFL season begins. He sought insights into long-term revenue implications given the net positive subscriber growth.

A: Lachlan Murdoch stated Fox 1 has 'hit it out of the park,' with 97% of new subscribers being cord-cutters, effectively offsetting traditional cable declines. However, he cautioned that growth may be seasonal as sports seasons come and go, noting that while current performance exceeds budgets, sustaining this level of incremental addition indefinitely requires careful monitoring of sports calendar impacts.

Q: John Hodulik requested updates on CPM bridging between Fox News and broadcast, and comments on the health of the CTV ad market given Tubi's strong growth versus peers like YouTube.

A: Murdoch highlighted that political advertising exceeded $350 million, contributing significantly to both local and national revenue streams. Regarding CPMs, he noted substantial upside potential to bridge the gap between Fox News and broadcast rates. On Tubi, he attributed success to reaching a diverse, largely cordless audience that is hard to target, confirming that TVT growth continues to drive robust revenue momentum into the current quarter.

Q: Jessica Reif Ehrlich questioned the sustainability of Tubi's >30% revenue growth and its margin outlook, and whether resuming buybacks signaled an imminent closure of the Roku deal.

A: Murdoch acknowledged Tubi's exceptional performance, stating margins are expected to reach the 20% range once the business matures further. Steven Tomsic clarified that the decision to resume share buybacks is independent of the Roku transaction timeline; the two are separate decisions, and buyback resumption does not indicate a specific expectation for when the deal will close.

Q: David Karnovsky asked about the decline in cable digital news ad revenue amidst difficult web traffic conditions and how Fox plans to approach FIFA rights for the 2030 cycle.

A: Murdoch affirmed that Fox News Digital remains the #1 digital news site in America by revenue, performing well in a hyper-competitive market. Regarding FIFA rights, he confirmed Fox will evaluate the 2030 and 2034 packages in a disciplined manner, consistent with their approach to all sports rights, rather than committing to aggressive bidding strategies without clear strategic alignment.