Fox(FOXA) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements The company reported increased revenues driven by affiliate fees and advertising, but net income and operating cash flow significantly decreased due to higher expenses and prior-year comparisons Unaudited Consolidated Statements of Operations Consolidated Statements of Operations (Q1 FY2022 vs Q1 FY2021) | Financial Metric | Three Months Ended Sep 30, 2021 (in millions) | Three Months Ended Sep 30, 2020 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $3,045 | $2,717 | +12.1% | | Operating Expenses | ($1,571) | ($1,168) | +34.5% | | Income before income tax expense | $952 | $1,479 | -35.6% | | Net income attributable to Fox Corporation stockholders | $701 | $1,106 | -36.6% | | Diluted EPS | $1.21 | $1.83 | -33.9% | Consolidated Balance Sheets Consolidated Balance Sheet Highlights | Account | As of Sep 30, 2021 (in millions) | As of June 30, 2021 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $5,411 | $5,886 | | Total current assets | $8,875 | $8,749 | | Total assets | $23,161 | $22,926 | | Total current liabilities | $2,869 | $3,002 | | Borrowings (Current + Non-current) | $7,953 | $7,951 | | Total liabilities | $11,431 | $11,599 | | Total Fox Corporation stockholders' equity | $11,430 | $11,123 | Unaudited Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Q1 FY2022 vs Q1 FY2021) | Cash Flow Activity | Three Months Ended Sep 30, 2021 (in millions) | Three Months Ended Sep 30, 2020 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $29 | $267 | | Net cash used in investing activities | ($75) | ($149) | | Net cash (used in) provided by financing activities | ($429) | $298 | | Net (decrease) increase in cash and cash equivalents | ($475) | $416 | | Cash and cash equivalents, end of period | $5,411 | $5,061 | Notes to the Unaudited Consolidated Financial Statements The notes provide details on business segments, accounting policies, significant commitments, share repurchases, dividends, and ongoing legal contingencies - The company operates in three segments: Cable Network Programming, Television, and Other, Corporate and Eliminations[22][58] Inventories, Net (in millions) | Category | Sep 30, 2021 | June 30, 2021 | | :--- | :--- | :--- | | Sports programming rights | $988 | $573 | | Entertainment programming rights | $484 | $355 | | Total inventories, net | $1,472 | $928 | - The company repurchased approximately 7 million shares for $250 million during the quarter and has a remaining authorization of approximately $2.15 billion under its $4 billion stock repurchase program[43] - A semi-annual dividend of $0.24 per share was declared and paid during the quarter, an increase from $0.23 in the prior year period[44] - Total firm commitments and future debt payments were approximately $46 billion as of September 30, 2021, a decrease from $47 billion at June 30, 2021, primarily due to sports programming rights payments[51] - The company is defending against defamation lawsuits filed by Smartmatic and Dominion Voting Systems, which it believes are without merit and does not anticipate will have a material adverse effect[54] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth driven by affiliate fees and advertising, offset by increased operating expenses leading to a decline in Segment EBITDA and net income Results of Operations Consolidated revenues grew 12% driven by affiliate fees and advertising, but Segment EBITDA declined due to significantly higher operating expenses from normalized programming schedules Consolidated Revenue by Type (Q1 FY2022 vs Q1 FY2021) | Revenue Type | Q1 2022 (in millions) | Q1 2021 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Affiliate fee | $1,667 | $1,533 | +9% | | Advertising | $1,130 | $969 | +17% | | Other | $248 | $215 | +15% | | Total revenues | $3,045 | $2,717 | +12% | Segment Revenues and EBITDA (Q1 FY2022 vs Q1 FY2021) | Segment | Revenue (in millions) | Revenue Change (%) | Segment EBITDA (in millions) | Segment EBITDA Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cable Network Programming | $1,416 | +7% | $774 | -1% | | Television | $1,581 | +17% | $359 | -21% | | Other, Corporate and Eliminations | $48 | +14% | ($69) | +4% | | Total | $3,045 | +12% | $1,064 (Adjusted) | -9% | - The increase in advertising revenue was primarily due to growth at Tubi, the return of a full college football schedule, and more original scripted programming at FOX Entertainment, as the prior year was impacted by COVID-19[81][90] - Operating expenses increased 35% primarily due to higher sports and entertainment programming rights amortization and production costs as live events and original programming returned to a more normal schedule[81][206] - Net income decreased 37%, primarily due to the absence of a $462 million settlement from Disney related to a tax reimbursement that was recognized in the prior-year quarter[82] Liquidity and Capital Resources The company maintained strong liquidity with $5.4 billion in cash, despite a significant decrease in operating cash flow due to lower Segment EBITDA and higher programming payments - As of September 30, 2021, the Company had approximately $5.4 billion of cash and cash equivalents and an unused $1.0 billion unsecured revolving credit facility[96] Cash Flow Summary (in millions) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29 | $267 | | Net cash used in investing activities | ($75) | ($149) | | Net cash (used in) provided by financing activities | ($429) | $298 | - The decrease in operating cash flow was primarily due to lower Segment EBITDA and higher sports and entertainment programming payments as schedules normalized post-COVID-19[98] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks were reported compared to the prior fiscal year's Annual Report on Form 10-K - There have been no material changes in the market risks reported in the 2021 Form 10-K[108] Controls and Procedures Management concluded disclosure controls were effective, with new general ledger and procure-to-pay systems implemented during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the period[109] - During the first quarter of fiscal 2022, the Company implemented new general ledger and procure-to-pay systems, leading to updates and changes in its processes and related control activities[110] Part II. Other Information Legal Proceedings This section refers to Note 8 of the financial statements for details on ongoing legal proceedings, including defamation claims - For a discussion of legal proceedings, the report refers to Note 8—Commitments and Contingencies in the financial statements[112] Risk Factors No material changes to risk factors were reported from the 2021 Form 10-K, except for an expanded discussion on content piracy threats - There have been no material changes to the risk factors from the 2021 Form 10-K, except for an expanded discussion on the threat of content piracy[113] - The updated risk factor emphasizes that technological developments, such as digital copying, file compression, and high-bandwidth internet, increase the threat of content piracy by making it easier to access, duplicate, and distribute high-quality pirated material[115] Issuer Purchases of Equity Securities The company repurchased 6.9 million shares for $250 million during the quarter, with $2.15 billion remaining under its $4 billion stock repurchase program Share Repurchases for the Three Months Ended September 30, 2021 | Stock Class | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Class A Common Stock | 4,740,533 | $36.92 | | Class B Common Stock | 2,195,707 | $34.16 | | Total | 6,936,240 | N/A | - The total cost of share repurchases during the quarter was approximately $250 million[119] - The remaining authorized amount under the $4 billion stock repurchase program was approximately $2.15 billion as of September 30, 2021[118][119] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL financial statements - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and financial information formatted in Inline XBRL (101, 104)[122]