Fox - Q2 2023

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. Welcome to the Fox Corporation second quarter fiscal year 2023 earnings conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. I would like to emphasize that the functionality for the question-and-answer queue will be given at that time. If you should require assistance during the call, please press star then zero. 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.

Gabrielle Brown (Chief Investor Relations Officer and Executive VP)

Thank you, operator. Good morning, and welcome to our fiscal 2023 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 on our SEC filings, which are available in the Investor Relations section of our website. With that, I'm pleased to turn the call over to Lachlan.

Lachlan Murdoch (Executive Chair and CEO)

Thanks, Gabby, and thank you all for joining us this morning to discuss our second quarter results. Our fiscal second quarter continued to build upon the strength of the first quarter, excuse me, to deliver record first half ratings and revenue at Fox. Financially, we delivered a 4% increase in our top line, including 4% advertising revenue growth. Our EBITDA grew a massive 71%, principally due to strong advertising results from sports and political, as well as the impact of exiting Thursday Night Football. Our television segment led this growth and had a truly stellar performance. The station's group posted another record political midterm cycle with approximately $250 million booked during the first half of our fiscal year. This is higher than our previous midterm record and just shy of our fiscal 2021 presidential year record.

These are impressive numbers and reinforce the strength and breadth of our station group. Fox Sports was also a key growth driver this past quarter, where advertising pricing and demand remained solid on the back of viewership records for the NFL and for the World Cup. By every measure, Fox Sports is having an extraordinary year. Fox's domination of the fall was led by four of our most prominent rights packages, the NFL, Big Ten, the Big Ten Network, Major League Baseball, and FIFA, all coming together to produce a truly powerful schedule. For the fourth straight calendar year, Fox Sports is the industry leader in live events, with some notable achievements that bode well for our future, including the current NFL regular season on Fox averaged over 19 million viewers and finishes the number one NFL package on television.

America's Game of the Week averaged just over 24 million viewers and is projected to be the most-watched program of all of television for the 14th straight year. Our Thanksgiving game this year was the most-watched regular season game ever on any network, delivering 42 million viewers. College football had its most-watched season ever on Fox, led by Big Noon Saturday, which was the most-watched college football window for the 2nd straight year, while the annual Ohio State Michigan rivalry was the most-watched regular season college game on any network in 11 years. Of course, the 2022 Men's World Cup exceeded our expectations with average viewership of over the tournament up 30% from the 2018 matches. We can't wait for the Women's World Cup this summer, and we're already getting ready for the 2026 Men's World Cup here in North America.

Of course, the strength of the Fox Sports portfolio was on full display this past Thanksgiving with our traditional Thanksgiving NFL game, USA versus England in the World Cup, a huge college football game, and America's Game of the Week all spread over just four days. The ratings were impressive, the revenue we generated was even better. We wrote just shy of $250 million over the long weekend. The strength of Fox Sports has continued into the current quarter on the back of exciting playoff football and what will be a record sold-out Super Bowl this coming Sunday. At Tubi, we had another strong quarter where ad revenues grew by 25% over last year as we continue to outperform our peers. We have seen increases in almost every major KPI at Tubi, including CPMs, TVT, and engagement.

In fact, Tubi had its highest quarterly viewership in the fiscal second quarter, with total viewing time up 41% year-on-year, while December alone was the highest TVT and highest user month ever. These trends have continued early into the third quarter as Tubi adds viewers and content to the platform. At Fox Entertainment, Rob Wade has settled into his new role as CEO and has already launched two of the season's biggest hits. Accused ranked as the most watched debut on any broadcast or cable network in two years. Special Forces: World's Toughest Test is this season's number one unscripted program. Further, Fox Entertainment recently announced a multiyear extension with Hulu of our long-standing content licensing agreement, which bolsters Fox's streaming audience and provides Hulu with a key point of differentiation in a crowded streaming world.

Turning to Fox News Media, the Fox News Channel ended the second quarter as the most-watched cable network in total day and in prime time, while maintaining its lead as the most-watched cable news network, beating CNN and MSNBC combined in both total viewers and demo in the quarter for both prime and total day. The Fox Business Network ended the quarter as the most-watched business cable network, beating CNBC in total viewers through the business day and market hours for the third consecutive quarter. Fox Nation accelerated subscriber growth over the last quarter and last year, and had the best quarter ever for engagement in terms of hours viewed, no doubt driven by brilliant, fresh content like Yellowstone: One-Fifty. Looking at the distribution side of our business, we have now completed most of the deals expiring in the first year of our multiyear affiliate renewal cycle.

The results confirm the confidence we have in monetizing our leading brands and content, and we are pleased that the market recognizes the value that Fox delivers to their offerings. It has been a truly strong quarter, one that showcased the very best of Fox and has shown that the underlying performance of Fox is exceptionally healthy. Looking ahead, into this third fiscal quarter, our top line will, of course, be aided by a record Super Bowl. We are still seeing solid national demand for our news and sports platforms, growth in the Tubi KPIs, and we are encouraged to see multiple ad categories pacing strongly positive at our local stations. Before handing the call over to Steve, I wanna add some perspective to the Fox story.

In the almost four years since the spin, Fox has grown and flourished while pursuing a simple strategy, a core business of trusted brands that delivers consistent and substantial audiences and a portfolio of digital growth initiatives that scale over time. With our focused sports and news franchises, we have taken a differentiated approach, choosing to serve our audience primarily through the pay TV ecosystem, which optimizes the delivery and value of live programming. Our ability to drive our business and execute our strategy is underpinned by a number of accomplishments. For example, our affiliate and advertising revenue growth is driven by our pricing power, reinforced by regularly delivering large-scale audiences and uniquely providing exclusive content to our pay TV distributors.

This approach has led to nearly $2 billion in affiliate revenue growth and over $1.3 billion in advertising revenue growth since the spin in 2019. By focusing on live content, our core Fox brands have been able to run sharply counter to the broader trend of linear TV. We can see this by looking at consumption trends. Over the past 10 years, consumption of Fox Sports events is up 18%, and consumption of Fox News is up 28%. Our portfolio of sports rights is secure and is the best out there, with the vast majority of them locked up for the foreseeable future. Our NFL rights, the single best package in all of television, extends through the 2033 season.

We've just completed the first year of our Major League Baseball extension and renewed our Big Ten rights, which each takes us out through the end of the decade. We have the European Championships through 2028 and another cycle with our FIFA World Cup rights. These long-term rights provide us the visibility and necessary flexibility to plan our businesses and pursue growth opportunities moving forward. On the digital side, we have made calculated investments in areas where we believe we can add significant value. Sports wagering and advertising video on demand are the two best examples of this. We have a firm footing in the sports gambling space.

We were the first among U.S. media companies to strike a partnership with a betting operator because we see the potential for sports betting to drive engagement, enhance the viewing experience, and keep viewers coming back to Fox Sports' linear and digital platforms. The various financial options and investments we have reflect our view that sports gambling is a long term play, and we are focused on cementing our leadership in this rapidly evolving and high-growth sector. Tubi, the number-one AVOD player, leads our streaming strategy with minimal investment when compared to our peers. Revenue and engagement KPIs at Tubi have far exceeded our expectations and are consistently growing in the healthy double-digit range since we acquired it almost three years ago.

The results at Tubi are proof that our strategy is working, and we will continue investing in and growing this platform. Finally, I'd like to address the recent announcement regarding News Corporation. As you know, my father and I reached the conclusion that exploring a combination with News Corp is not optimal for shareholders of Fox or News Corp at this time. As such, the special committees were disbanded, and no further time or action is being taken on this topic. I've said in the past that I think scale provides flexibility and that it's important to be prepared when opportunities present themselves. The rationale behind considering our accommodation with News Corp was about that, scale, flexibility, synergies, opportunities, great IP, and above all, creating value for all shareholders.

As the CEO of Fox, I've never felt more confident about our strategy, the quality of our assets, and the strength of our financial position. This confidence is clearly demonstrated by this morning's announcement to increase our share repurchase authorization to $7 billion, with the immediate deployment of $1 billion of the expanded authorization toward an accelerated share repurchase transaction while continuing our current in-market purchases. Consistent with our track record, we remain committed to delivering value for our shareholders in a thoughtful and disciplined manner, and we will continue to explore every opportunity to maximize that value over the long term. Now let me turn it over to Steve for more on the results.

Steve Tomsic (CFO)

Thanks, Lachlan, and good morning, everyone. Excuse me. Fox continued to deliver financially in the fiscal second quarter, with total company revenue growth of 4% and 71% growth in EBITDA. Notwithstanding the absence of Thursday Night Football, our overall revenue growth was led by a 4% increase in advertising revenues, where in the quarter we saw continued strength in political advertising at the stations, which when viewed across the full fiscal first half, nearly matched the political record set during the 2020 presidential cycle. Our sports advertising was supported by a full roster of marquee events, and Tubi continued to sustain its high-growth trajectory. Our affiliate revenues increased by 1%, with limited renewal activity impacting the quarter and trailing 12-month subscriber losses remaining consistent at approximately 7%.

Quarterly adjusted EBITDA was $531 million, up $220 million over the prior year. In addition to our revenue growth, we also benefited from lower expenses as a result of our early exit from the Thursday Night Football agreement. Net income attributable to stockholders was $313 million, or $0.58 per share, up meaningfully against the net loss of $85 million or -$0.15 per share reported in the prior year period. Alongside our growth in EBITDA, you'll recall that our GAAP P&L is regularly impacted by the change in fair value of the company's investment in Flutter, which we recognize in other net. Excluding this impact and other non-core items, growth was strong with adjusted EPS of $0.48 per share, up $0.35 against last year's $0.13 per share.

Turning to our segments, at Television, we delivered 6% revenue growth, including a 5% increase in advertising revenues. As you know, our advertising revenues in the December quarter of last year benefited from our coverage of Thursday Night Football. Despite that comparable headwind, we delivered meaningful gains across the segment. This was led by the strong political cycle, the addition of the World Cup at Fox Sports, and continued strong growth at Tubi. On the NFL specifically, we also benefited from strong pricing, a record-breaking Thanksgiving Day broadcast, and the timing of week 18 of the season sliding back into the December quarter. Meanwhile, advertising revenue growth at Tubi was up 25% in the quarter and exceeded $200 million on the back of record levels of engagement.

In an uneven programmatic advertising marketplace, we are able to maintain CPMs and are well-positioned to deploy more inventory as market conditions strengthen. Television affiliate fee revenues were up 6% as healthy growth in pricing across all Fox affiliated stations continued to outpace the impact from subscriber declines. Other revenues increased 26% in the quarter, primarily reflecting the consolidation of the prior year acquisition of MarVista Entertainment. EBITDA at our Television segment was up $529 million to $256 million as we benefited from the strong political market and realized the anticipated financial benefit from the exit of our Thursday Night Football agreement. These benefits were partially offset by higher costs from the FIFA World Cup and the annual growth in rights amortization we see across our sports portfolio.

Similar to the levels reported in our fiscal first quarter, our net EBITDA investment in Tubi amounted to approximately $50 million in the December quarter. At Cable, we saw revenues generally in line with the prior year. Cable advertising revenues were essentially flat. As Lachlan mentioned, we continue to see meaningful pricing gains in national advertising across our leadership brands. Additionally, our national sports networks benefited from the broadcast of the World Cup in the quarter. However, this was offset by a softer direct-to-response marketplace that impacted Fox News Media. Cable affiliate fee revenues were broadly flat, coming in at $1.03 billion. As we have signaled previously, we are in the early days of our next distribution renewal cycle, where we expect revenue gains to be skewed towards the Television segment.

Cable other revenues were up 7% in the quarter, once again led by high in Fox Nation subscription revenues. EBITDA at our Cable segment was $353 million, compared to the $668 million reported last year, largely due to higher costs of the national sports networks led by the World Cup and postseason baseball. Expenses were also elevated at Fox News Media due to the digital investments at Nation and Weather and higher legal costs associated with ongoing litigation. Turning to cash flow, where consistent with the normal seasonality of our working capital cycle, we recorded a free cash flow deficit of $610 million in the quarter.

Lachlan Murdoch (Executive Chair and CEO)

This typical first half trend reflects the 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. From a capital deployment perspective, fiscal year to date, we have repurchased $550 million via our share buyback program. This takes the total cumulative amount repurchased to $3.15 billion, representing 15% of our total shares outstanding since the launch of the program in 2019. Today we declared a $0.25 semiannual dividend. As Lachlan mentioned, this morning we also announced an incremental buyback authorization of $3 billion, taking our total authorization to $7 billion.

We will immediately deploy $1 billion of this expanded authorization toward an accelerated share repurchase transaction, while concurrently continuing with our normal course buyback pacing, which would see us repurchase $450 million in additional shares across the remainder of the fiscal year. These meaningful capital return measures are enabled by the strength of our of our financial position, where we again close the quarter with a very robust balance sheet comprising $4 billion in cash and $7.2 billion in debt. With that, let me turn it back to Gabby.

Gabrielle Brown (Chief Investor Relations Officer and Executive VP)

Thank you, Steve. Now we would be happy to take questions from the investment community.

Operator (participant)

Ladies and gentlemen, I'd like to emphasize the functionality for the question-and-answer queue. If you wish to ask a question, please press 1 then 0 on your touch-tone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from queue at any time by once again pressing one then zero. If you're using a speakerphone, please pick up the handset before pressing the numbers. It has been requested that you limit yourself to one question. Once again, if you have a question, please press one then zero at this time. One moment, please, for your first question. Your first question comes from the line of Robert Fishman from MoffettNathanson. Please go ahead.

Robert Fishman (Partner and Sernior Research Analyst)

Hi, good morning, everyone. Lachlan, you've talked about the importance of scale in the media industry. Now that the News Corp deal is no longer being explored, can you just help investors think about what the future of Fox is as a standalone entity in the coming years? Ultimately, do you think it'd be better off combined with another strategic or financial partner?

Lachlan Murdoch (Executive Chair and CEO)

Hey, good morning, Robert. Good to hear your voice. Thank you for the question. I think, you know, I do think scale is important. As we look at sort of our growth going forward and enhancing sort of our growth opportunities, I think scale is important. Equally important is the depth of our business. We think about scale in terms of adding and broadening our sort of business business lines, but also the depth of how we engage with our consumers. We'll be investing, I think, equally, probably equally in both. If we look at our strategy and how it's performing, you know, I think you just have to look at our results.

I mean, this quarter, our results have really been truly stellar. I think we stand out in the media landscape, certainly in this country, in terms of the health of our results. That goes to our strategy. We're very focused. We're focused on a core set of brands that are really must-have brands in the United States media landscape. We like our strategy. We're absolutely focused on it, we will pursue both scale and further investment into the depth of our engagement with our consumers.

Operator (participant)

Your next question comes from the line of Jessica Reif Ehrlich from Bank of America Securities. Please go ahead.

Jessica Reif Ehrlich (Managing Director and Senior U.S. Media and Entertainment Analyst)

Thank you. Good morning. I guess two topics. You know, can you give us some color on the advertising outlook? Obviously, it will be a good, great quarter with the Super Bowl. Just besides that, underneath that. Two, you know, maybe talk a little bit more about the drivers of growth. I think you are adding Warner Bros. Discovery FAST channels. I think that Steve said that something that you held back advertising. What is going on with demand there? How many minutes are you selling, and how many can you go up to?

Lachlan Murdoch (Executive Chair and CEO)

Hey, Jessica. Good morning. Let me start with the advertising market. As you mentioned, obviously, and I'll be able to talk to the kind of the outlook. Yeah, advertising, like, you know, I know there's a lot of talk about advertising being soft in the market. You know, we're really not seeing that. We're seeing advertising being sort of fluid and money coming in late. It's, it is different. It's a different environment than we were in, you know, a year ago or even a couple quarters ago. At the end of the day, you know, we're still, you know, hitting our goals and achieving our revenue targets. It's just coming in late. The.

Look, I think, to be honest, that goes to the strength of our portfolio, right? I think being in news and being in sports, and the leader in those two categories, I think sets us apart in the advertising marketplace from a lot of our peers. I don't want to say that that's our strength or, and certainly our relative strength in advertising is not indicative of the whole marketplace, but it's definitely indicative of our brands and our ability to achieve our revenue goals. You know, this Super Bowl, to talk about some specifics. As I said, the money came in late, so we had some nervous moments.

You know, we will write just shy of gross, about $600 million of revenue next Sunday. We are sold out. It'll be a record Super Bowl for us, both in terms of total revenue and obviously in what we've achieved for each spot. Ex the Super Bowl, if you back out the Super Bowl, we are still up in national advertising revenue. I think that again bodes to the, you know, certainly the strength of our brands and so the power of Fox. If I look at local stations, Jessica, categories, we're really happy to see a lot of categories back into robust growth.

Auto for is pacing up almost 30%. Health up 30%, pharmaceuticals up 45%, travel up 60%. Of course, this is offset with categories like, you know, crypto, money exchanges, I think down 97%. I'm still trying to find out who the 3% left that's advertising. There are some sort of swings and roundabouts, but the key categories are back, you know, back in a very, in a very strong way. That's probably more than you wanted on advertising, Jessica. On Tubi, look, all of our, well, I'd say almost all of our KPIs are at record highs.

I think December, the end of December was actually a particularly strong year period in terms of TVT and engagement. What we'll see is we'll see revenue. Revenue's up 25%, but I think what we're really pleased about is when your engagement and your total viewing time is up by more than that. As the market strengthens, you know, we expect, you know, certainly more revenue to flow and follow that audience that we've garnered in Tubi. All of the major studios continue to work with us.

I think we're seeing a benefit of people realizing that their libraries, their sort of deep libraries, we can help them monetize those libraries. We're seeing, you mentioned the Warner Bros. deal. We're seeing everyone work with us, which is why Tubi has, you know, the biggest television movie library in streaming anywhere in the world. We're really very, very pleased with it.

Gabrielle Brown (Chief Investor Relations Officer and Executive VP)

Next question, please, operator.

Operator (participant)

Your next question comes from the line of Phil Cusick from JPMorgan. Please go ahead.

Phil Cusick (Managing Director and Senior Analyst)

Hi, guys. Thanks. Wonder if we could talk about wagering. Lachlan, you discussed cementing your leadership today, and last quarter, I think you discussed potential volatility in that market. Where do you see the market going at this point, and how ideally would you like to see Fox involved? Thanks.

Lachlan Murdoch (Executive Chair and CEO)

Well, look, the market, we've remained incredibly excited and optimistic about the wagering market going forward in this country. You know, obviously it'll take some more time for the states to be licensed. You'll start to see a shift from wagering advertising and marketing shift from local markets to national markets. We're obviously incredibly well positioned on both sides to capture, you know, revenue from the wagering operators as they battle it out for supremacy in each of their markets. We've done extremely well at the local stations.

I think we'll see that, you know, shift to the national markets where, obviously Fox Sports and to some extent, Fox News and the Entertainment Network will continue to capture that revenue. We're incredibly optimistic about it. I think from a corporate perspective, we're also the, you know, the best positioned media brand, you know, to continue to partner with our wagering partners. You know, particularly obviously the 18.6% option that we have in FanDuel is, you know, a fantastic position to be in. We have about a ten year option. I think we have about eight years to go on the option, and, you know, Flutter will be our partner for a long time.

We feel, you know, very well in terms of where we're positioned.

Gabrielle Brown (Chief Investor Relations Officer and Executive VP)

Next question, please, operator.

Operator (participant)

Your next question comes from the line of Ben Swinburne from Morgan Stanley. Please go ahead.

Ben Swinburne (Managing Director, Head of U.S. Media Research)

Ask when Tom Brady's joining the Fox booth, so might as well be me. If you don't want to answer that one, maybe just a couple of strategic questions picking up on Phil's. What do you guys think the value of FOX Bet is? What could that business or that asset be over the longer term in sort of the, you know, sort of the bull case? You know, you extended with Hulu, not a huge shock, but just any comment on, you know, sort of whether that's enough of a needle mover financially or how robust the market was for those, for that content? 'Cause obviously that's a lot of licensing revenue potential. Just wondering if you could comment a little bit on how you approach that renewal and the outcome.

Lachlan Murdoch (Executive Chair and CEO)

Thanks, Ben. I'll answer the Tom Brady part of the question and maybe the Hulu part. I'll let Steve talk to the value of FOX Bet and importantly, the obviously the Flutter or FanDuel option. Let me, I won't be the first to congratulate Tom on a stellar career and congratulate him on his retirement. You know, the whole Fox Sports team and Fox Corporation overall, you know, is really excited to have Tom join the team here. That will be in the fall of next year, 2024. He's gonna take a little bit of time to decompress and which he well deserves after such a stellar career.

I'm gonna just quickly talk to Hulu. The Hulu renewal was important, very important to us and also very important to Hulu. The kind of symbiotic relationship that we have with Hulu, you know, it grows in significance as viewers, you know, more and more, you know, watch our content on a sort of catch-up basis. When we look at our hit shows, we're not monetizing them in the first window, in the live or even live plus same day window, as you all know, in the same manner that we used to.

Being able to capture the engagement, you know, after live and the same day or even live plus seven days is critically important, and our Hulu deal really allows us to do that. For Hulu, it gives them, you know, tremendous content the next day, and they are able to, I'd say sort of benefit from or piggyback on, you know, the marketing spend and the reach that we give all of our content as we push it out. It works very well for Hulu and it works very well for us. Steve, do you wanna talk to the FOX Bet value?

Steve Tomsic (CFO)

Ben, listen, on FOX Bet, I think we take a step back and just see our betting in totality in terms of the investment. FOX Bet is 1 component of it, and it's an important component. We'd like to see it in more states than the four states it's in at the moment. It's being operated by Flutter, who bear the investment cost of that asset. In some respects, we're at their behest in terms of how they develop that. We look at it as a clear mark of success in terms of FOX Bet Super 6 for us, in terms of the way we've developed that and cross-promoted that with our stations.

You know, also it's not just FOX Bet sports betting, but it also includes the PokerStars, non-sports betting assets. It's an important asset, but when we look at the totality of our betting position, we increasingly think that the option that we have over FanDuel is the one that's really important for us. It's the leading market player. We have the opportunity over a long period of time to take a very meaningful stake in a player that's sort of a head and shoulders market leader right now.

Gabrielle Brown (Chief Investor Relations Officer and Executive VP)

Operator, we can go to the next question.

Operator (participant)

Your next question comes from the line of Doug Mitchelson from Credit Suisse. Please go ahead.

Doug Mitchelson (Media and Cable/Satellite/Wireless Analyst)

Thank you. You know, good morning, Lachlan. Where are you in the life cycle for your digital investments? I'm just sort of curious when I think about Tubi pretty consistently been talking about growth, you know, every quarter on these calls and engagement viewer and adding more content. You know, how much more, you know, content is there to add? How much more growth is there to drive a Tubi? Same question on the Fox Digital side. Thanks.

Lachlan Murdoch (Executive Chair and CEO)

Thanks, Doug. I'm trying to think about, you know, the question. In terms of the life cycle for our sort of digital investments, I think, you know, the realities they're teenagers that are, that are, you know, putting on muscle and growing and growing, you know, pretty spectacularly. If I look at Tubi as an example, and you think about, you know, the key metric we've talked about now for several quarters is the total viewing time. Total viewing time is, you know, I don't know, it's not equivalent, but it's like ratings. We can get. We continue to grow total viewing time.

The revenue that we're seeing follow that, we have 25% up in this quarter, which I think is pretty fantastic. The opportunity is much higher, right? 'Cause the total viewing time has grown faster at a much bigger rate or a faster rate than the revenue has. Already within Tubi and when we look at these metrics, there's a ripeness for, you know, very significant revenue growth. The digital investments are adolescents, but they're, you know, a huge upside as they get older.

Then when you talk about Fox Digital, the digital assets, you know, I was pretty amazed. We went through some numbers yesterday, just things like the local TV stations. The digital advertising business now at the local TV stations is really, you know, becoming quite significant. When we look across our whole portfolio and, you know, we push further into our websites, our FAST channels, you know, our apps, this revenue is becoming, you know, very significant and even in parts of the company that you wouldn't expect. You know, so we, you know, we believe that the future of our business is obviously digital, and we're making that transition, you know, pretty rapidly and very robustly.

Yeah.

Gabrielle Brown (Chief Investor Relations Officer and Executive VP)

Operator, we have time for one more question.

Operator (participant)

Okay. That question comes from the line of John Hodulik from UBS. Please go ahead.

John Hodulik (Managing Director, Telecom and Media Analyst)

First question on the balance sheet. I mean, investors will definitely gonna like the accelerated repurchase, but you still have $4 billion on the books. Relatively low debt. I mean, just maybe talk about sort of the usage of that cash. I mean, how much cash do you need on the books? And maybe what the M&A environment looks like out there and what kind of opportunities you see. Then on the affiliate line, you said, you know, you haven't seen the impact of the renewals and the third that you'll see over the renewals you'll expect to do over the next couple of years.

I mean, when do you expect to sort of get into the sort of, you know, the wheelhouse and see those lines really start to turn from renewals? Thanks.

Lachlan Murdoch (Executive Chair and CEO)

Thanks, John. Steve, jump in at any point, but.

Steve Tomsic (CFO)

Go now if you want.

Lachlan Murdoch (Executive Chair and CEO)

No, no. I'll start. Thanks, John. First of all, on the balance sheet, you know, well, I think we do have a enviable balance sheet. We're gonna deploy our capital as we have in a very disciplined manner, and entirely focused on, you know, shareholder returns for all of our shareholders. That'll be both as evidenced this morning with our accelerated share repurchase, which we think is a great sort of a mechanism and strategy to return some of this capital to our shareholders.

We will also obviously, we'll be looking at M&A and other opportunities to deploy our capital against. You know, we don't have anything on the table today. You know, we are, I think, in a strong position to capture opportunities when they present themselves. Obviously, there are, you know, other companies in our sector that are not in as great a position and, you know, will be things that we'll I'm sure cast our eyes over.

We, you know, we do expect, the M&A will be part of a more important part of our toolkit as we deploy capital, but we have nothing on the table in front of us, today. Before I go on to affiliates, Steve, do you have anything to add?

Steve Tomsic (CFO)

Just John, I think if you fast-forward, like, if you fast-forward to the end of the fiscal based on the ASR and our regular way share repurchases, we'll have done $4.6 billion in share repurchases by 30 June, call it. You compare that against how much we've deployed in M&A, which on a gross basis is about $1.9 billion. On a net basis after asset sales is probably $500 million-$600 million. We've been super balanced, super disciplined on M&A, and if anything, the skew so far in the life of Fox has been towards capital returns to shareholders. We're gonna continue to be thoughtful in the way we deploy capital.

Lachlan Murdoch (Executive Chair and CEO)

On the affiliate question, John, you know, I think we are now through for this fiscal year, all of our significant affiliate renewals. We'll start again in the, you know, very beginning of the next fiscal year, this summer with some important renewals. For this fiscal, we're through them. You know, what we've seen in the renewals this past year is, you know, the importance really of our Fox brands with our affiliate partners and the pricing power that we have with them.

I think that's been pretty, you know, very evident in all of our renewals to date. You know, more and more, like when you look at the split between our cable affiliate revenue and our television affiliate revenue, we really negotiate those together. You know, we've been focused on the television half of that ledger, but you have to think about the strength of these brands as a co-combined strength and, you know, where we in the marketplace find our kind of best ability to push rate is where we do. That's been really on the television side, the retransmission side of that ledger.

It's the strength of the portfolio that allows us to do that. Yeah, we're looking forward to, you know, continued success in our affiliate renewals really as we get into the next fiscal year.

John Hodulik (Managing Director, Telecom and Media Analyst)

At this point, we are out of time. If you have any further questions, please give me or Dan Carey a call. Thank you again for joining us today.

Lachlan Murdoch (Executive Chair and CEO)

Thank you, everyone.

Operator (participant)

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