Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation Second Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. [Operator Instructions] 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, operator. Good morning, and welcome to our Fiscal 2025 Second Quarter Earnings Call. Joining me on the call today are Lachlan Murdoch, Executive Chair and Chief Executive Officer; John Nallen, Chief Operating Officer; and Steve 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 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. And with that, I'm pleased to turn the call over to Lachlan.

Thank you, Gabby, and thank you all for joining us this morning. Just to start, I want to comment on the devastating impact of the Los Angeles wildfires over the past few weeks. At Fox, our top priority has been to support our staff who have been profoundly affected in many ways, including losing their homes and much, if not all, of their belongings. We are one family, and we are truly with you. And to aid the broader community, Fox has donated and raised over $5 million across our platforms thanks to the generosity of our audiences and employees. But sadly, as we have learned from past fires, the impact on the community is measured not in days or weeks but in years. Our focus has now shifted to the longer-term recovery for those most affected and to the rebuilding of the community around them. I want to thank our colleagues at KTTV and Fox News who kept viewers comprehensively informed with their coverage of the tragedy as it unfolded. We are deeply grateful for their work and also for the efforts of firefighters and many other first responders. Thank you. Now, on to our earnings. As you will have seen in the release this morning, our fiscal second quarter results again demonstrates the continued operating momentum and strong financial performance of Fox. Financially, Fox EBITDA more than doubled year-over-year to a second quarter record of $781 million, driven by revenue growth of 20% to just over $5 billion. These results are underpinned by industry-leading affiliate and advertising revenue growth and reflects strong on-screen delivery through our coverage of the presidential election, both at Fox News and across our local stations, strong NFL, College football and Major League Baseball postseason viewership and continued audience expansion at Tubi. We are…

Thanks, Lachlan, and good morning, everyone. Underscoring the strong momentum we have seen since the start of the year, Fox delivered standout results in the second quarter, highlighted by a 20% increase in revenues and a 123% increase in EBITDA to $781 million, a record fiscal second quarter for FOX. Our overall revenue growth was led by a 21% increase in advertising revenues with broad-based strength across our portfolio, including significant political ad spend collected at our local stations, strong MLB ratings and robust pricing across our key sports properties, continued growth at Tubi and strong engagement and news. Total company affiliate fee revenues grew a healthy 6% over the prior year quarter, once again demonstrating the strength of our brands and focused portfolio of channels. As Lachlan mentioned, we have now successfully completed all affiliate renewals that impact our fiscal two, 2025. Other revenues grew 70% year-over-year, driven by higher sports sublicensing revenues at our Cable segment. Similar to last quarter, this growth in revenue was largely offset by a corresponding increase in rights costs with no material impact on year-over-year overall EBITDA growth. Net income attributable to stockholders of $373 million or $0.81 per share was up versus the $109 million or $0.23 per share reported in the prior year period. Excluding non-core items, -- adjusted net income was $442 million and adjusted EPS was $0.96. This represents a more than 180% increase over the $0.34 per share recorded in the prior year. i: Additionallly as sports advertising revenues benefited from higher [indiscernible] and ratings. Cable affiliate fee revenues grew 4% over the prior year quarter as pricing gains from our affiliate renewals outpaced the impact from net subscriber declines of approximately 7%, improving from just under 8% last quarter. Cable other revenues grew $350 million due to…

Thank you, Steve. And now we will be happy t o take questions from the investment community.

[Operator Instructions] We have a question from John Hodulik from UBS. Please go ahead.

Okay, great. Thanks, guys. Lachlan, I got a follow-up on the D2C comment that you talked about launching in the near future. Any additional details you could provide in terms of timing, what's included and whether you need additional rights or any costs associated with launching the D2C service. And then on affiliate, you saw some nice acceleration there, and it sounds like you guys got all the renewals done. Any color in terms of pricing or what you see in terms of volumes that have been driving that acceleration? Thanks.

Thanks, John and good morning. So on D2C, I should just start by explaining the strategy and going back to make it very clear that we see the traditional cable bundle as still the most value for our consumers, and then frankly, the most value for the company. So we are huge supporters of the traditional cable bundle, and we will always be. But having said that, we do want to reach consumers wherever they are, and there's a large population, obviously, that are now outside of the traditional cable bundle, either cord cutters or cord nevers. And we are designing and we'll be able to say more about it shortly. But we are designing an offering to really target those cord-cutters and cord-nevers that are not traditionally in the cable bundle. We don't want, and we have no intention of turning a traditional distribution customer into our D2C customer. And so our subscriber expectations will be modest and we're going to price the service accordingly. And it's also important to note with those modest expectations, we do not expect any exclusive rights costs or additional incremental rights cost. This service will be a package of our existing content on our existing brands, targeted consumers that are not currently in the bundle. So the incremental cost will be relatively low, certainly relative to what our peers have spent in this space. And we're excited to be able to talk about it more in the coming weeks and months. In terms of timing and launch, we're certainly targeting a launch by the end of this calendar year. On affiliate, Steve, if you want to talk?

Yes, sure. Hey John, it's Steve here. So in terms of affiliate, I think we've seen, obviously, from a volume perspective, the rate of attrition is off a little bit over the last couple of quarters, which is encouraging for us. And hopefully, these skinny bundles continue to see that trend continue. In terms of pricing, listen, I think it's reflective of strategy. It's reflective of the fact that we've got a very focused portfolio of channels that distributors really want, and you're seeing them because of their inclusion in those skinny bundles. And it's also a reflection of the fact that our distribution strategy prioritizes the bundle. And so obviously, these are tough negotiations. But as we've said for the last five years, we think that strategy of both content and distribution, should lead us to take share of wallet. And I think we're starting to see that.

Operator, next question, please.

We have a question from Michael Morris at Guggenheim. Please go ahead.

Thank you. Good morning. I wanted to ask about the strength that you're seeing at FOX News advertising. Maybe you can expand on that a bit. It sounds like you're seeing incremental and arguably sustainable demand from some of -- from advertising buyers. And I'm curious if you think I'm interpreting that right? And just sort of what the dynamic and what the sustainability is of the changes that you're seeing there? I also want to ask about the Tubi Super Bowl live stream. It seems like a big deal. Can you talk a little bit about what you hope to achieve by doing that? And then, are there any incremental costs related with that? Are there concerns about service quality, because I know that streaming big live events can be complicated? Appreciate it.

Thank you very much, Mike, and good morning as well. So on FOX News advertising, there's two elements here. You're 1,000%, right? We are seeing really a tremendous amount of new advertisers, clients coming on to the platform, and that's due to two reasons. I think the first reason is the strength in our ratings, which are really tremendous. And as I mentioned in my prepared comments, it's very pleasing to see that, that strength and momentum continue post the election and post the inauguration. With that strength, we've seen over 100 new clients who have not been FOX News advertisers, major national clients come on to the platform. And so that's driving demand and driving pricing as well and we see that continuing. In fact, if we see in the third quarter, our ratings and revenue are accelerating off the second quarter. So the -- onto Tubi's Super Bowl, it's a different question. We're excited that Tubi underscores it's not a change in strategy. We have always unlocked our digital platform for the Super Bowl. But this year, with -- obviously, it's a unique opportunity, and we're going to focus that audience on Tubi. Obviously, one of the great -- there's some technology streaming costs, obviously, but it's tiny compared to the opportunity in front of us. So very low incremental costs. The benefit for Tubi, obviously, you got a tremendous exposure and sort of marketing platform. But also critically, we hope to capture a lot of first-party data. We'll be driving people to register on Tubi on many of them for the first time. And that first-party data obviously is really critically important to our programmatic and other advertisers and partners and will help us drive our CPMs as we go into the future. So we're excited about the opportunity. It's not a necessarily a big change in strategy, but it's a huge opportunity for Tubi and it's something we were very keen to focus very intensely on. And what was the third question? It was I think it was at -- right. Okay. Thank you, Michael.

Operator, next question, please.

We have a question from Ben Swinburne of Morgan Stanley. Please go ahead.

Hi. This is Thomas Yeh on for Ben. I just wanted to double tap on the Tubi growth. Can you dimensionalize the investment needs that you see ahead? Should we think about the incremental investment as largely content-related? And when do we think the business kind of begin to benefit on an EBITDA front for FOX? And then as a follow-up, any update on the progress you've made on the various states requiring sports betting licensing just a time line coming into shape and how you might get approval over time would be helpful. Thank you so much.

Great. Thank you very much, Thomas, and say good day to Ben for us all. The -- on Tubi profitability, our investment in Tubi has reduced this year as the business continues to scale and really generate very positive advertising growth. We see that we'll continue to invest in Tubi throughout this year and next before it reaches profitability, but it's on track and on schedule to meet breakeven or profitability as per our kind of business plans and expectations for the business. So we are really excited about Tubi's future and it's a positive impact for our overall revenue base and EBITDA going into the future. On sports betting, we are talking to, I think, 27 -- 26, sorry -- 26 states for licensing. That process is obviously relatively complicated one, but it's moving forward. And we expect there to be sort of no significant hurdles with that process, but it will take time. Of course, we've given ourselves plenty of time because our option is not due for another -- end of 2030. So we've given ourselves another, sort of, five years to get through the process, but we would expect to be license very significantly before that. And we're happy the -- option today, the 18.6% of FanDuel is in the money on current consensus valuation by over $2.8 billion and our 2.5% holding in flutter, the parent company is worth over $1.1 billion. So our sports betting strategy has really been very positive for the company and for our register.

Operator, next question please.

We have a question from Michael Ng from Goldman Sachs. Please go ahead.

Hi. Good morning. Thank you for the question. I wanted to ask about the subscriber trends, declines of 7% improving -- are you seeing any of the impact from the benefits of skinny bundle inclusion yet? Do you expect to outperform the market on sub declines over time because of inclusion there? And then just a quick follow-up to Steve. You had said that you expect digital losses to go from, I think, mid-$300 million last year to high $200 million. Any updates there just given the comments around investing as well as the 2b outperformance today? Thank you.

Thanks, Mike. So I'll let Steve talk to the losses. I talk to the gains. I didn’t to losses. But we see them as good investments. But on sub trends, look, you're right, look, 7% subscriber lines in this quarter is the second consecutive quarter where sub trends have -- sub declines have reduced. We see that as a very positive trend. I think it's too early really for these, sort of, skinny bundles, if you want to call them skinny bundles, I'll call this something a little bit different. But it's too early really say that, that's having a major impact. Although I think there probably is some seasonality in subscriber trends with obviously being in the middle of energized and exciting sports season. So there probably is some seasonality in that, but we are very heartened by the trends moving in the right direction. With these skinny bundles, if you look at the bundles from a FOX perspective on DIRECTV with MySports or on Comcast with Xfinity Sports and News TV, pretty much the entirety of our portfolio, our bouquet of channels, a couple of small exceptions are in those bundles. So in both of those I mentioned, FOX, the FOX, Network, FOX News, FOX Business, FOX Sports 1, FOX Sports 2 and the Big Ten network. And so from a FOX perspective, this is not a skinny bundle. This is a lean and mean bundle. So like it's JAK. And from us, we -- from a financial perspective, we do as well in the JAK bundle as we do in our normal traditional bundle. So, we're very pleased with this trend of the bundle. It's financially and economically a positive for us. We would hope that this bundle will be attractive to the cordless customers, the cord cutters and cord-nevers. But to the extent that it does turn a traditional cable subscriber, I hope it doesn't. But if it does, we are certainly whole and if not, in some instances, better off. So, we're pleased with the emergent bundle, and we think it bodes well for our -- for the business going forward. Steve, do you want to talk to the--

Yes, sure, not sure I'll call it that. So, in terms of digital, Mike, we're staying on track in terms of improvement in digital investment that you alluded to for the full fiscal year. In fact, just this quarter, we have probably close to $40 million to the good in terms of lower digital investment. Half of that comes from better EBITDA at Tubi. I would say just with Tubi, as you look to the outlook for the sort of balance of the year, obviously, with the Super Bowl Tubi's going to take max advantage of the marketing and user acquisition that comes with that. So, you should expect them to step on the gas a little bit in terms of investing around that next in Q3. But no, we're spot on track in terms of bringing that digital investment down. But to the extent that we see more opportunities, then we'll remain opportunistic, but at the moment, we've been on track.

Operator, we have time for one more question.

Your final question is from Robert Fishman at MoffettNathanson. Please go ahead.

Hi, good morning everyone. Just following up on the sports strategy. After? Netflix won the rights for Women's World Cup, can you just talk about how you feel Fox is positioned to continue to compete with Netflix and the other digital bidders for future sports rights? And then just to clarify on the D2C offering coming back to that, will that plan include FOX News or FOX Nation content? Or is that just a sports-only offering? Thanks so much.

Very much, Robert. So, on the sports strategy overall, we continue to believe that our reach is the number one, two, and three priority for leagues and certainly for our business. And what we will continue through -- and it actually ties into the direct-to-consumer strategy because to put our content in front of every consumer that wants it on any platform and every platform. And so by really driving our engagement with consumer viewers across traditional linear platforms, across cable distribution, across the digital MVPDs, and across our own D2C services targeting these cord cutters and cord-nevers that will put us in absolutely the best position with the broadest reach to continue to serve both our viewers, but also sports fans. That package, the D2C package, we'll announce more as we -- in the coming future, but we would see that package as our package is holistic of all of our content of sports and news.

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 our call today.

Thank you.

Thanks everyone. Thank you.

Ladies and gentlemen, that does conclude the Fox Corporation second quarter fiscal year 2025 earnings conference call. Thank you.