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01/11 04:03
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows a positive outlook with strong advertising revenue growth, a successful FOX One launch, and Tubi's profitability. The $5 billion share repurchase plan further boosts investor confidence. Despite a decline in net income due to non-core items, adjusted metrics show growth. The Q&A highlights positive subscriber uptake for FOX One and strong pricing for FOX News, with strategic investments planned for Tubi. The overall sentiment is positive, though tempered by free cash flow concerns and lack of specific guidance for FOX One subscribers.
Revenue Growth 5% year-over-year increase, driven by strong advertising and distribution revenue growth.
EBITDA Growth 2% year-over-year increase, attributed to robust advertising revenues and controlled expenses.
Advertising Revenue 6% year-over-year increase, despite the absence of last year's political revenue, supported by strong trends in news, sports, entertainment, and Tubi.
Distribution Revenue 3% year-over-year increase, with subscriber declines remaining below 7% for the third consecutive quarter.
Tubi Revenue Growth 27% year-over-year increase, driven by an 18% increase in total view time and reaching profitability this quarter.
Cable Networks Revenue 4% year-over-year increase, with a 7% increase in cable advertising revenues driven by robust pricing at FOX News.
Television Segment Revenue 5% year-over-year increase, with a 6% increase in advertising revenues driven by Tubi and strong sports pricing and engagement.
Net Income Attributable to Stockholders $599 million, down from $827 million in the prior year, due to non-core items. Adjusted net income was $686 million, a 4% year-over-year increase.
Adjusted EPS $1.51, a 4% year-over-year increase.
Free Cash Flow Negative $234 million, consistent with the seasonality of working capital cycle, including payments for sports rights and advertising-related receivables.
FOX One launch: FOX One was launched this quarter and has received an enthusiastic response. Subscriber trends have exceeded expectations through direct acquisition and partnerships.
Tubi profitability: Tubi achieved profitability this past quarter, driven by a 27% revenue growth and an 18% increase in total view time.
Advertising revenue growth: Advertising revenue grew 6% during the quarter, supported by strong trends in news, sports, entertainment, and Tubi.
Sports engagement: FOX Sports saw increased engagement, with NFL viewership up 12% and college football viewership up 22% compared to last season.
Revenue growth: Total company revenue grew 5%, with advertising revenues up 6% and distribution revenues up 3%.
Cost management: Total company expenses increased by 6%, driven by investments in digital growth initiatives and higher entertainment programming costs, partially offset by lower sports programming costs.
Share repurchase program: A $1.5 billion accelerated share repurchase transaction was announced, reflecting confidence in the business outlook and commitment to shareholder value.
Digital initiatives: Tubi's profitability is expected to lead to a partial moderation in net investment across digital initiatives this year.
Subscriber Declines: Subscriber declines remain below 7% for the third consecutive quarter, but this trend could still pose a risk to distribution revenue growth if it worsens.
Advertising Revenue Dependence: While advertising revenue grew 6%, it is heavily reliant on market conditions and could be impacted by economic downturns or shifts in consumer behavior.
Content Costs: Higher entertainment programming costs and investments in digital-led growth initiatives increased total company expenses by 6%, which could pressure margins if revenue growth slows.
Sports Programming Costs: Although lower sports programming costs partially offset other expenses, the reliance on high-cost sports rights could pose financial risks if viewership or advertising revenue declines.
Political Advertising Revenue: The absence of last year's political advertising revenue impacted growth, highlighting the company's vulnerability to cyclical revenue streams.
Free Cash Flow: Free cash flow was negative $234 million in the quarter due to seasonality in working capital, which could strain liquidity if not managed effectively.
Subscriber Erosion Trends: While subscriber erosion trends are stable to improving, any reversal in this trend could negatively impact distribution revenue.
Economic Sensitivity: The company's performance is tied to economic conditions, particularly in advertising markets, making it vulnerable to economic downturns.
Advertising Market: Momentum in Q1 is continuing into Q2, led by a very healthy advertising market stemming from both the upfront and a strong scatter market. The company is enjoying the most robust advertising market seen in some time.
FOX One: Subscriber trends have exceeded expectations with subscribers coming through direct acquisition and partnerships. FOX One bundled partners, including ESPN and Verizon, were launched earlier this month, building on momentum achieved with the Amazon Prime channels partnership.
Tubi: Achieved 27% revenue growth in Q1, driven by an 18% increase in total view time. Tubi reached profitability in Q1, earlier than expected, which will likely lead to a partial moderation in the overall net investment expected to deploy across digital initiatives this year.
Sports Engagement: Interest and engagement in FOX's portfolio of live sports is increasing. NFL on FOX is off to a record start, averaging almost 22 million viewers in September, a 12% increase over last season. College football viewership is also up 22% over last season.
Fiscal 2026 Outlook: Coming off a record fiscal 2025, fiscal 2026 is expected to highlight the uniqueness of the company's strategy, the quality of its assets, and its ability to deliver financially. The company announced a $1.5 billion accelerated share repurchase transaction, demonstrating confidence in its financial position and outlook.
Distribution Revenue: With stable to improving subscriber erosion trends, continued total company distribution revenue growth is expected for the full year, driven by the Cable segment.
Share Buyback Program: The company announced a $1.5 billion accelerated share repurchase transaction. This includes $700 million of Class A common stock and $800 million of Class B common stock. The transaction is expected to commence immediately and be completed during the second half of fiscal 2026. Additionally, the company has already repurchased $300 million worth of shares earlier in the fiscal year.
The earnings call presents a mixed sentiment. Positive aspects include strong advertising market outlook, FOX One launch, Tubi's growth, FIFA World Cup impact, and a $5 billion share repurchase plan. However, the Q&A reveals significant uncertainties, such as unpredictable holiday demand, competition in wooden toys, and vague management guidance. The lack of specific guidance and the cautious outlook on Q4 performance temper the positive elements, resulting in a neutral prediction for stock movement.
The earnings call shows a positive outlook with strong advertising revenue growth, a successful FOX One launch, and Tubi's profitability. The $5 billion share repurchase plan further boosts investor confidence. Despite a decline in net income due to non-core items, adjusted metrics show growth. The Q&A highlights positive subscriber uptake for FOX One and strong pricing for FOX News, with strategic investments planned for Tubi. The overall sentiment is positive, though tempered by free cash flow concerns and lack of specific guidance for FOX One subscribers.
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