管理層發言
Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation's First Quarter Fiscal Year 2026 Earnings Conference Call. As a reminder, this conference is being recorded. I'll now turn the conference over to Chief Investor Relations Officer, Ms. Gabrielle Brown. Please go ahead, Ms. Brown.
Thank you, Charlie. Good morning, and welcome to our fiscal 2026 first quarter earnings call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, President and Chief Operating Officer; and Steven Tomsic, our Chief Financial Officer. 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 EPS and 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. We also refer to free cash flow, which we define as net cash provided by operating activities less capital expenditures. And with that, I'm pleased to turn the call over to Lachlan.
Thank you, Gaby, and thank you all for joining us this morning to discuss our fiscal first quarter earnings. Fiscal 2026 started strong across our businesses with revenue growth of 5% and EBITDA growth of 2%. Advertising revenue grew 6% during the quarter despite not having last year's political revenue with robust trends at news, sports, entertainment, and Tubi. This is supported by a gain in engagement across the portfolio, which distinguishes us from our peers and again underscores the strength of our brands and the leading positions they hold in our ecosystem. Distribution revenue grew by 3%, with subscriber declines remaining below 7% for the third consecutive quarter. The momentum in Q1 is continuing into Q2, led by a very healthy advertising market for us, stemming from both the upfront and from a strong scatter market. In fact, we are enjoying the most robust advertising market we have seen for some time.
Also in this quarter, we launched FOX One. Though it's only been 2 months, we are encouraged by the enthusiastic response to the product. Subscriber trends have exceeded our expectations with those subscribers coming through direct acquisition and partnerships. We continue to believe that our content is best served as part of a bundle, whether it's in the pay-TV bundle or a direct-to-consumer bundle as it provides value and choice to the consumer. At FOX, we are distribution agnostic. We are committed to ensuring our networks and content reach as many households as possible. With that in mind, we launched 2 FOX One bundled partners earlier this month, ESPN and Verizon. These will build upon the strong momentum we have achieved with our groundbreaking Amazon Prime channels partnership. Kudos to everyone at Amazon from Andrew Jassy down for their tremendous support of the service. You have all done a tremendous job.
Unsurprisingly, in terms of engagement, we have a balanced mix on FOX One with news driving audience and reach during the week and sports events doing the same over the weekend. Across all forms of distribution, interest and engagement in FOX's portfolio of live sports is increasing. FOX Sports kicked off the fall season with solid momentum. The NFL on FOX is off to a great start, averaging almost 22 million viewers in September, a 12% increase over last season, and FOX's best start to an NFL season ever. And FOX's America's Game of the Week ranked as TV's #1 show through the end of September with an average of 30 million viewers. And our schedule only looks better from here right through to the NFC championship at the end of the season. Interest in college football continues to reach new heights as well. Through the end of September, FOX's Big Noon Saturday window averaged over 6 million viewers, up 22% over last season.
The strong start was punctuated by nearly 17 million viewers tuning in to watch Ohio State versus Texas, the most watched week 1 college football game ever on any network. Like with the NFL, we head into the back half of the college season with a strong roster of Big Ten and Big 12 matchups, highlighted by the Michigan, Ohio State game and capped off by both the Big Ten and Mountain West Conference championship games. And while we thought last year's Dodgers-Yankees World Series would be a tough act to follow, Major League Baseball has once again performed well for us. Regular season ratings were up 3%. And as we go into game 6 of a spectacular World Series, our total post-season advertising revenues will likely surpass last year's. Speaking of revenue, Tubi achieved 27% revenue growth in the first quarter, driven by an 18% increase in total view time. This overall engagement trend has continued into Q2.
Our expansive content library and our differentiated user base have solidified Tubi's position as the top premium AVOD platform in the U.S. And I'm happy to say Tubi reached profitability this past quarter. It's a great milestone, a credit to the Tubi brand, our viewer experience, and the revenue momentum we are seeing. This will likely lead to a partial moderation in the overall net investment we expected to deploy across our digital initiatives this year. FOX News sustained its strong ratings and audience momentum throughout the quarter. FOX News, once again, cemented its status as the most watched cable network in total day and in Primetime. Even more impressive, FOX News is the most viewed network in all television in weekday prime calendar year-to-date. This engagement and share led to the highest first quarter ad revenue in FOX News Media history with higher pricing across both direct response and national advertising during the quarter.
Breaking news coverage throughout the quarter also drove strong engagement at FOX News Digital, fueling growth in page views and minutes versus last year. FOX News Digital closed the quarter with over 6.5 billion social media video views, its highest total ever. The strong Q1 results we have just reported, coupled with the ongoing trends we are seeing across the company, give me great confidence in the positive outlook for FOX. This is particularly underpinned by the strength of the advertising market, our leadership position across news and sports, and by Tubi reaching quarterly profitability earlier than expected. Coming off a record fiscal 2025, fiscal 2026 will again highlight the uniqueness of our strategy, the quality of our assets, our ability to deliver on screen and financially, and the overall strength of our financial position. This confidence is clearly demonstrated by this morning's announcement of a $1.5 billion accelerated share repurchase transaction. Consistent with our track record, we remain committed to delivering value for our shareholders in a thoughtful and disciplined manner. And now let me turn it over to Steve for more on the results.
Thanks, Lachlan, and good morning, everyone. FOX has made a strong start to fiscal 2026, highlighted by robust total company revenue growth of 5%. Advertising revenues were up 6% over the prior year, even with the tough comparison to the start of last year's record political cycle, driven by continued momentum at Tubi, strength in pricing at news, and pricing and ratings growth at sports. Distribution revenues, which now include both affiliate fees for our linear channels as well as subscription fees for our direct-to-consumer streaming services, grew 3% over the prior year. Content and other revenues grew 12%, primarily due to higher entertainment content deliveries in the quarter. Total company expenses were up 6% year-over-year, largely due to investments in our digital-led growth initiatives and higher entertainment programming costs. This was partially offset by lower sports programming costs.
As a result, quarterly EBITDA grew 2% to $1.07 billion. Net income attributable to stockholders of $599 million or $1.32 per share compares to the $827 million or $1.78 per share reported in the prior year period. Excluding noncore items, adjusted net income was $686 million and adjusted EPS was $1.51, equating to a year-over-year increase of 4%. Now turning to our operating segments, where at our Cable Networks, revenue grew 4% over the prior year. Cable advertising revenues were up 7%, driven by robust pricing at FOX News, which more than offset the advertising impact from the absence of Copa America at our cable sports networks. Cable distribution revenues grew 3% in the quarter as pricing growth from our affiliate renewals outpaced the impact from industry subscriber declines, which continue to run at under 7%. Cable content and other revenues increased by $13 million, led by higher sports sublicensing revenues.
Cable expenses grew 2%, primarily due to higher sports programming rights and production costs led by international soccer rights. This was partially offset by lower news gathering costs relating to our coverage of last year's presidential election cycle. All in, EBITDA at our Cable segment was $800 million, an increase of 7% over the prior year quarter. Turning to our Television segment, where we delivered 5% growth in revenues. Television advertising revenues were up 6%, driven by continued growth at Tubi and strong sports pricing and engagement led by the NFL. This was partially offset by the absence of last year's political advertising revenues. Television distribution revenues grew 2% over the prior year quarter as healthy growth in fees across FOX owned and affiliated stations more than offset the impact from industry subscriber declines. Looking forward, with stable to improving subscriber erosion trends, we expect continued total company distribution revenue growth for the full year.
Reflecting the flow of our commercial terms with distributors in fiscal 2026, we would expect this growth to be driven by our Cable segment. Television content and other revenues increased 17%, primarily a result of higher content revenues tied to our entertainment production studios. Expenses at the Television segment grew 4% year-over-year, driven by higher entertainment programming costs and higher content costs at Tubi. This growth was partially offset by lower sports programming costs, primarily from the absence of WWE and last year's broadcast of the UEFA Euros. All in, quarterly EBITDA at our Television segment grew 7% to $399 million. Now turning to cash flow. Free cash flow was negative $234 million in the quarter. This is consistent with the seasonality of our working capital cycle, where the first half of our fiscal year is characterized by a concentration of payments for sports rights and the buildup of advertising-related receivables, both of which reverse in the second half of our fiscal year.
We remain active with our share buyback program, where we have repurchased a further $300 million so far this fiscal year. In addition, as you will have seen in this morning's release, underscoring our confidence in the outlook for the business and our commitment to create value for shareholders, we will enter into a $1.5 billion accelerated share repurchase transaction, consisting of $700 million of Class A common stock and $800 million of Class B common stock. This transaction will commence tomorrow, and we anticipate it being completed during the second half of fiscal 2026. This is all supported by the strength of our balance sheet, where we ended the quarter with approximately $4.4 billion in cash and $6.6 billion in debt.
Thank you, Steve. And now we would be happy to take questions from the investment community.
分析師問答
We have a question from John Hodulik of UBS.
Could you provide any updates on FOX One regarding subscriber uptake and engagement? What content is popular on the platform? Did you notice increased growth after launching the ESPN bundle? Also, congratulations on achieving positive margins with Tubi. What should we expect for the long-term margin trends on that platform?
Thanks, John. Regarding FOX One, it's still early since the launch was only a couple of months ago, but the uptake has far exceeded our expectations. This shouldn't come as a surprise, as it's an excellent platform, and the team has done a fantastic job developing a remarkable service with premium content and brands. We are very pleased with its initial progress both in subscriber numbers and engagement. There's a healthy mix of sports and news viewing, with sports driving engagement over the weekends and news during the week. We do not anticipate any slowdown as we move into the busy autumn sports season. Subscriber growth is flowing well, particularly through NFL and college football, as well as post-season baseball. It's encouraging to see those subscribers and viewers engaging with our other content on the platform, mainly news. As for Tubi, we have previously mentioned our satisfaction with achieving profitability this past quarter. While we should expect some seasonality in that, we anticipate growing profitability and expect Tubi to be a significant contributor to EBITDA in the medium term, with margins ultimately in the 20% to 25% range.
We have a question from Michael Morris of Guggenheim.
I wanted to ask you about the stronger pricing on FOX News and seek to understand how this pricing compares to your potential and what is driving its strength. At the end of last year, you mentioned a significant number of new advertisers expressing interest. I am trying to understand where we currently stand in the pricing cycle and what you believe the potential is. Additionally, you noted a moderation in investment levels due to the success at Tubi, which is encouraging. Could you provide some guidance on where you anticipate that might land, perhaps in relation to last year’s investment levels or another metric that could help us gauge your current thinking?
Thank you very much, Michael. I'll address both questions. Regarding FOX News pricing, the strength comes from the market share we are gaining, which is consistent with previous quarters. In total day for Q1 and in P2+, we have increased our share by 63% compared to our news competitors, and for Primetime, we’re at 65% share against the same group. Equally significant is that we are the number one channel in all of television year-to-date. As we head into the fall with entertainment programming and football, there will be challenging comparisons. However, being the top channel year-to-date in all of television is a major accomplishment. It's also important to note that our CPMs are about half of those of broadcast networks. This is attracting a number of new advertisers with interest.
Yes, you're still connected.
I thought I heard a goodbye. So I was on a roll. Our advertising is about half of what the networks are able to achieve from a CPM perspective, making it a very efficient buy for our clients who are trying out the channel and continue to increase their spending. We've gained around 350 new national clients on FOX News this year, and they are continuing to spend, often increasing their investment. The pricing is driving higher rates, both directly through partnerships and indirectly through robust direct response pricing. We believe this momentum will continue. Regarding our investment levels in new businesses, achieving profitability earlier than expected will definitely adjust the conservative estimates provided last quarter. We are very pleased about this, but we will keep investing in these businesses as necessary. It’s a modest investment for our future, and we will continue to invest where it makes strategic sense to grow those businesses.
Your next question is from the line of Michael Ng of Goldman Sachs.
I just have one and a quick follow-up. Just on the comment around distribution growth for the company for this year. I was wondering if you could just expand a little bit on what you think the key drivers of the stable to improving subscriber erosion trends are? And how important is FOX One to your outlook on distribution growth? And then just as a follow-up, I was just wondering if you could explain a little bit more about the ASR, why now and also why the composition between Class As and Bs just given the more limited float on Bs?
Thank you, Mike. Regarding distribution growth, we're starting to see early benefits from skinny bundles, and we are involved in all of them. This marks the third consecutive quarter of reduced subscriber loss, which is encouraging as we witness some improvement in subscriber retention. The increased flexibility for consumers allows them to choose skinny bundles instead of full packages. These bundles primarily focus on entertainment, news, and sports, which is a positive trend. Additionally, digital distributors are performing well. FOX One will not significantly affect our overall subscriber numbers; it actually contributes to them by attracting subscribers who are cord-cutters or have never subscribed. However, our goals for FOX One remain modest, in the low to mid-single-digit millions of subscribers, so it will not have a substantial short-term impact.
Yes. To elaborate on the distribution growth, I want to reiterate that we expect to see a positive impact based on the growth in subscriber trends and, as mentioned by Lachlan, FOX One should be entirely additive to our current figures. We anticipate that our total company distribution revenue will grow this year. Concerning the TV segment, considering the timing of our rate increases, we expect our full fiscal year '26 TV affiliate revenue to approximate what we achieved in '25. However, because of the timing of these rate increases, we are projecting overall distribution revenue growth for the total company in '27, driven by both segments. We are confident about this aspect. Regarding your question on the ASR, the way the splits will operate is tied to the entry into the transaction tomorrow. We will receive 80% of the shares back upon settlement immediately. The remaining shares will take most of the current fiscal year to finalize.
The difference between the As and the Bs is important because the Bs are currently trading at a 10% to 11% discount compared to the As. This presents a clear efficiency advantage in purchasing the Bs over the As. Additionally, looking at our buyback activities since then, we have currently repurchased about $6.9 billion cumulatively, with $5.9 billion in As and only $1 billion in Bs. We believe this is the right mix for the remainder of the fiscal year.
We have a question from Jessica Reif Ehrlich of Bank of America.
So my first question is, even with the accelerated share buyback, you have significant balance sheet flexibility. Can you discuss how you might utilize that? Do you anticipate changes in your asset mix in the coming years? It seems evident that there will be mergers and acquisitions in the industry. How do you plan to engage, or not, and what would be the impact on FOX? Additionally, Lachlan, you mentioned strength in both upfront and scatter advertising. Can you provide more details on the overall advertising landscape, particularly regarding sports, entertainment, and Tubi?
Sure. Jessica, Steve can elaborate on the balance sheet, but you are correct that it is industry-leading. We take pride in it and work hard to keep it strong. Ultimately, it will be used for M&A. We will continue to evaluate all opportunities that arise, including those we identify internally, and we anticipate more M&A activity in the near future. However, there's nothing currently on the table. We believe M&A will be vital for our growth ahead and will approach it with discipline, targeting areas we see as having tailwinds rather than headwinds. We won't invest in sectors with high exposure to the cable industry or entertainment-related cable assets. Regarding advertising, since 2019, when new FOX was established, we have experienced the strongest advertising market in our verticals. This is particularly relevant for live news and sports, as they benefit from our broad reach and the movement of funds from linear cable entertainment to live sports and news.
Furthermore, Tubi has shown exceptional revenue growth across the board. National advertising was particularly strong in pharmaceuticals, financial services, and tech driven by AI companies. In sports, the NFL remains robust, and we believe this World Series could exceed our postseason revenue from last year. College football is also performing well. FOX News has experienced significant price increases in both direct response and premium branded advertising. Local stations have shown improvement, as the market's mixed reception has become more positive. We've seen strong pharma advertising for local stations, while challenges remain in restaurants, with telecom slightly weaker and auto remaining flat. We are optimistic about our stations' outlook. Last year, Tubi attracted significant political advertising due to its targeted audience, which is challenging to reach for advertisers. Nonetheless, Tubi continues to achieve impressive growth, and we are pleased with the overall advertising outlook and our position within that ecosystem.
Operator, we have time for one more question.
We have a question from Ben Swinburne of Morgan Stanley.
Maybe taking another stab just at the investment levels this year. I think Steve's conservative estimate last quarter was $350 million, I believe, for '26. I don't know if maybe you'd give us an update based on how you guys are trending so far? And then Lachlan, kind of back to FOX One, just anything you called out and thanked Prime Video for their contribution. But just anything interesting or surprising to you in how, I guess, sort of you're acquiring FOX One customers when you look at all the different options and channels? I know it's early, but I would be interested.
Let me start with FOX One. Thanks, Ben. Partnerships are very important, and the ones we launched with ESPN and Verizon are expected to play a significant role in FOX One's growth. I must say that Amazon has been an outstanding partner; they have excelled in distributing the product and acquiring subscribers, and we greatly appreciate their support. From a content standpoint, it’s no surprise that sports are a major attraction on the platform, driving a lot of engagement over the weekends. This engagement helps channel those users towards news and entertainment content during the week. The current sports season and the busy autumn period are crucial for driving subscriber acquisitions. While it's still early in the process, we are very pleased with FOX One's performance, which is a testament to the team's hard work. I guess I need to hand this over to Steve.
Yes. So Ben, you're spot on. We did call it $350 million on the Q4 call for what we expected to see in fiscal '26. I think as we sit here today, we think that as we sort of qualified, we think we thought that was a conservative estimate. We still think it's a conservative estimate. But I think it's too early in the year to sort of put you on to a different number.
Great. At this point, we are out of time. But if you have any further questions, please give me or Charlie Costanzo a call. Thanks so much for joining us today.
Thanks, everyone.
Ladies and gentlemen, that does conclude the Fox Corporation First Quarter Fiscal Year 2026 Earnings Conference Call. Thank you.