Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation Second Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I now turn the conference over to Chief Investor Relations Officer and Executive Vice President of Corporate Initiatives, Mr. Joe Dorrego. Please go ahead, sir.

Thank you, Operator. Hello, and welcome to our second quarter fiscal 2020 earnings conference call. Joining me on the call today are Lachlan Murdoch, Executive Chairman and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve Tomsic, 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 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 both available in the Investor Relations section of our website. And with that, I’m pleased to turn the call over to Lachlan.

Thanks Joe. Good afternoon and thanks everyone for joining us for our fiscal 2020 second quarter earnings call. We just reported an exceptional quarter which really underscores the strength of Fox and our unique position in the market. Nowhere with that strength and uniqueness on greater display than this past weekend culminating with our groundbreaking broadcast of Super Bowl LIV. Let me say at the outset, how pleased I am of the efforts of our entire company. Our people delivered a flawless broadcast of Sunday's game to more than 150 million unique viewers across the country virtually guaranteeing its place as the most watched live television event of 2020. We surrounded the Super Bowl with an immersive and innovative programming lineup from Miami across Fox Sports, Fox News, Fox Sports 1 and our local stations. And we use this enormous platform to launch Season 3 of the Masked Singer right after the game which became TV's highest rated reality telecast in eight years. On Sunday, Fox had the largest revenue day in TV history generating around $600 million of gross revenue and providing an unmatched platform for over 100 advertisers from the pregame through the Masked Singer. And we delivered extraordinary ratings for our advertising, distribution and NFL partners. And while there's a massive amount of planning and activity that goes with broadcasting the Super Bowl, it is not been at the expense of delivering other imperatives for our business. During the first six months of the fiscal year, we have already achieved a substantial number of key operating milestones in support of Fox's growth and momentum. Among them were attaining number 1 status for the Fox Network and broadcast and maintaining the number one position of Fox News in all of cable. Delivering a strong sports calendar to viewers…

Thanks Lachlan, and good afternoon. As you just heard, our operating momentum continued in the second quarter and we continue to exceed the internal goals that we commence the year with. This past quarter we delivered strong top line growth led by an increase in total affiliate revenue of 7%. We achieved this growth despite aggregate industry pay TV subscribers continuing to decline at a rate in excess of 4% over calendar year to 2019. During this period, the losses across traditional distributors many of whom reported last week where at least partially offset by continued growth of digital MBPDs where subscribers have grown 2.3 million. In this past quarter, we saw digital MBPDs grow by over 1.5 million representing sequential quarterly growth of over 20%. As we've highlighted in the past, the natural seasonality of our business means the second quarter is traditionally the low watermark from an EBITDA margin standpoint. This is primarily due to the timing of broadcast sports and entertainment expenses that are concentrated in the fall season. This includes the investments in sports and entertainment content at the Fox Network which have - which as we have previously outlined, set us up well to complete our remaining distribution renewals in this cycle and achieve our longer term financial targets. Let me now take you through our second quarter results. And along the way, we remind you of some key factors that shaped the remainder of our fiscal year. In the second quarter, the company reported total revenues of $3.78 billion, up 5% over the comparative period in fiscal 2019, reflecting revenue growth across all operating segments. EBITDA was $261 million, which compares to the $445 million generated in the prior-year period. As growth at the cable segment was more than offset by lower operating results…

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

[Operator Instructions] And our first question comes from the line of Michael Nathanson. Please go ahead.

I have a two for anyone who want to take it. So first one is when you guys separated this new company out, the assumption was you’d have more bargaining clout with distributors because you have less channels to defend. As Lachlan said you achieved your goals in these negotiations just happened. Could you give us a sense of what those goals were and maybe how the goals have changed given the change in terms of landscape or for chord cutting? And then secondly, I believe you still own 5% stake in Roku. Could you talk about how that asset fits in with your cap allocation scheme especially in light of what happened last week with the impacts you guys had with Roku. So thanks.

Michael, thank you very much for the question. Two questions. John, do you want to address our success with affiliate fees, and I’ll address Roku.

Yes. So, Michael, thanks. I would say the first six months of the year was unprecedented for us with the amount of renewals that we had all of which were successful against our internal plans. And you're right when we said in the separation that our goals were different than we were at 21CF. It was because we now had the opportunity to use the full power and leverage of the FOX Network and FOX News on a pricing standpoint and on a full distribution standpoint. And your phrase of bargaining clout those as Lachlan referred to earlier are the two most successful television channels in America right now. So we were able to use that to achieve multi-year pricing for those channels at levels that were at or above what we planned and distribution fully with our distribution partners. So I think those are the two that we were really focused on.

And in light of that Michael. You know I think we can say that I'm – I know we can say that you know our announced expectation that we will do a $1 billion of additional affiliate revenue by calendar 2022, we are absolutely still expecting to hit that number and cross the hurdle. So and that's factoring in the subscriber volume declines. So I think we're really doing a terrific job in driving those affiliate fees. In regards to Roku, as you know sort of widely reported last Friday our distribution deal with Roku was expiring. We went through frankly a very normal course sort of negotiation with them not unlike the negotiations we have with all of our distributors. What happens in these negotiations and often this is what becomes public as both sides prepare for a non-resolution of the issues, but ultimately they like all of our distributors and platforms so the value of the Fox brands and content on their platform and we were able to resolve our differences and agree to a new agreement really I think to mutual benefit. Throughout it all it was very professional. We have a huge regard for Anthony Wood and his management team at Roku. We think they're doing a tremendous stake, positioned the company to really be one of the leading if not the lead beneficiary of over the top streaming and we are happy shareholders in the company.

I think we're ready for the next question.

The next question comes from line of Alexia Quadrani with JPMorgan. Please go ahead.

On FOX News you've seen such a great rebound, which given the news environment looks like this momentum will continue. I guess my question is how well can you capitalize on the ratings gross on an advertising perspective? Do you have enough inventory to sell? And then just a follow up on the NFL, any color you could give us in terms of when you think the discussions for renewal might really kick in?

So, on advertising. So, you're right. We're obviously doing well because of our rating strength and obviously not just at the FOX Network, but at FOX News as well. And the – as I mentioned in my earlier comments we see that that ratings strength really just continuing. In fact last night over the State of the Union broadcast I think – I know because I’ve seen the numbers. Maybe many of you have already. But FOX News ratings were double the ratings of CNN and MSNBC combined. So it really is a tremendous performance. What we've been doing and I think others have followed our lead is working to build in as many advertising units as we can. This includes using the innovative use of sort of squeezing back advertising and having sort of a split screen sort of experience where you can cover some of the breaking news while also showing that the ad or the ad break. So we are gathering as much of that revenue as possible. I think the important note though around FOX News advertising is really the expansion in the number of marketers and partners that we have on FOX News. There's a growing sense in the market that if you want to reach Middle America there's no better place than placing your brand, your advertising than on FOX News. So, the advertising team is doing a tremendous job and we expect to capture a significant amount through the upside revenue as we run to this political season. And that’s not to say none of them have mentioned the local stations obviously in California we have two markets, in Texas where we have three markets, North Carolina, Virginia, Minnesota and now with the addition soon of Wisconsin now we are very well placed in swing states will it be a significant amount of our advertising spend towards this election.

Second part of the question.

Oh, the NFL sorry, I was too provoked for both on the first part of the question. NFL renewal conversations have early stages but they certainly have begun. We obviously spent practically all of last week with the NFL both the administration and many of the terrific families of the owners of the teams. We feel we're in a good place to work with them. As our most important partner to you know, to renew our rights going forward. But it's early days in the conversations.

Operator, I think we can go to the next question.

Our next question will be from the line of Michael Morris with Guggenheim. Please go ahead.

On the affiliate revenue in fiscal second quarter you guided to sort of a similar level to what you saw in the first. But you reported that acceleration. My question is can you parse that was it all virtual MVPD driven were there other parts? Did it have anything to do with your new renewals that you done? And is that an incremental tailwind as you move into the step ups next year that will also be beneficial. And then just on the digital side, you’ve been clear about your partnerships with your traditional providers? You have left the door open to doings something digital. I believe that’s the case if or when that the time that that would make sense. If you look at your current content base, do you have what you need to perhaps pursue that or are there specific places that you would still want to bolster to have a product ready? Thank you.

You want me to take that? I’ll take the affiliate.

So Michael, in terms of the affiliate, the combination of what you just outlined. So we got the benefit of an increasing that stub period in the final quarter of the calendar year with a couple of the renewals that we completed last calendar year. The other piece to it is just a little bit around subscriber mix where we obviously talk to the sort of heightened level of growth - the digital MVPDs and given the sort of more recent deal vintage there. The pricing is a little bit better than some of the older deals and so we benefited from that but it doesn't - as I said in my opening remarks we continue to expect that we'll get progressive increases in cable affiliate growth going into this second half of our fiscal year.

And then, Michael, on the digital question, I think we're always going to play to our strengths and our strengths are very clearly live news, live sport and big event entertainment programming. And if we - you asked do we have what we need to succeed in those sectors whether it's on the broadcast or in a direct-to-consumer experience. We have the two of the most watched channels in America the number one broadcast our network and the number one cable channel. So clearly our audiences are engaging with our content. They're engaging with our content today in a number of different forms not just broadcast. I mentioned in my earlier remarks, I think it was 11.7 million people watched the Super Bowl via streaming. Our broadcast Super Bowl of our streaming and 70% which is actually a remarkable number 70% of those - of that 11.7 million watch it on platforms that we own. So I think we are already progressing down that path. And I should also just call out Fox Nation which is obviously a really excellent sort of direct-to-consumer product out of Fox News. 80% of the people who sample Fox Nation and take a free trial, 80% of them are convert - to paid subscribers. And December and January were the two highest months in history in terms of both subscriber acquisition but also and just as importantly in terms of engagement on the platform. So, we're really very happy with how Fox Nation is progressing as well.

Operator, the next question please.

Our next question will be from Doug Mitchelson with Credit Suisse. Please go ahead.

It's interesting to hear you mentioned sort of investments in direct-to-consumer. So I just want to continue along that theme. Is this sort of an urgent priority for the company or something that just want to lean into the next three years - a few years to capture growth? And I think what investors want to know is at what point would you take Fox Broadcast Network or Fox News, put them online à la carte that, maybe a big premium to your wholesale rate? But what has to happen in the broader environment for that to become an interesting pivot for the company. And if I could I was just going to ask John in the weeds question. He had massing around last year, second half the season as well, so you're certain the comp year-over-year on that. But I imagine the ad rates this year are a little bit better than the ad rates last year at any sort of color around sort of ad rate increase on that show would be would be super interesting? Thank you.

Look, it's something what we're always looking at, but we also have an eye on not damaging the current business model where we generate still and tremendous and growing amount of revenue from our cable subscribers. So I think that we have the capability to go direct consumer. We took the technology that we built with us when we separated from Disney. We are running direct-to-consumer businesses with Fox Sports in pay-per-view with Fox Nation and in a different manner through Credible. So, we're happy where we are now, and we'll see what the future brings.

And Doug, just look, advertising I think both Lachlan and Steve touched on that advertising, we just haven't seen markets like this for a while. And each of our products is leading into this, each of our shows and whether it's entertainment or sports. But just as guys you'll remember, the upfront was up 10% and scatter is now up over 20% on top of that. So, it's not like massing. It was fully sold in the upfront, so we're enjoying the benefit of what is a very active market right now.

Okay. Operator, I think we have time for one more question.

Our last question comes from the line of John Hodulik with UBS. Please go ahead.

Maybe for Lachlan, I'm following up on the political question and $200 million. Can you give us some more color on the sort of the pacing as you saw that’s been the last election cycle through the year and maybe the benefits you saw on maybe sort of TV side and versus the cable side. And then secondly, and this is maybe for Steve. You completed the $500 million buyback, obviously very low leverage. How should we think of the buyback pacing going forward?

I'll let John answer the buyback - the buyback piece. But I mean I don't steal your thunder, John. But we fully expect to spend the remaining amount of $1.5 billion that we have approval to buyback share so. But I’ll let John give some more detail on that - on the…

Yes, thank you for your headline.

So - sorry, John. On the political pacing, it's really - it's very strong but it's - we're at the very beginning of it. Obviously we've seen from national advertising from both sides of the political spectrum. On the local side we haven't seen any advertising yet locally from the President's reelection campaign. But of course we’ve seen a lot of advertising already starting to come in from the democratic side. It's relatively short and I think it was reported in the Bloomberg campaign has expected to sort of double its advertising spend earlier this week. But the Bloomberg campaign is buying on a week-to-week basis so it's hard to predict that out. But obviously we expect it to be very strong and particularly as I mentioned in the markets of our of our local TV stations.

John, it's John. I'll - end it on really something Lachlan said at the beginning. This is with respect to the buyback which is our commitment to returns of capital to the shareholders is just an integral element of the overall balance capital allocation. We committed to a $2 billion authorization and we're going to complete that.

Okay at this point, we are out of time. But if you have any further questions please give me or Dan Carey a call. Thank you once again for joining today's call.

Thanks everyone.

Ladies and gentlemen, this does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.