Fox Corporation (FOXA) Earnings Call Transcript & Summary

[Audio Gap] or proxies he or she presents. Only one speaker will be recognized for each organization or shareholder. Speakers are limited to one question, which should be no longer than 1 minute in length and is related to the matters being considered at this Annual Meeting and to the business of Fox Corporation, the use of cameras, recording devices and other electronic devices is prohibited at the Annual Meeting. We ask that you comply with these and other rules of the meeting so that we may conduct an orderly meeting. In the interest of supporting the health and well-being of everyone here today, we also ask that you adhere to the health and safety protocols provided to you and posted on our website. If anyone has not received the rules for today's meeting, please raise your hand, and a staff member will bring you a copy now. Thank you. The meeting will now begin.

Good morning, everyone, and thank you for joining us. I'm Lachlan Murdoch, Executive Chair and CEO of Fox Corporation. It's my pleasure to welcome you to our 2022 Annual Meeting of Stockholders. Let me start by introducing our directors, all of whom are nominated for election at this meeting. They are joined by key members of our management team. On stage with me are directors, Mr. Rupert Murdoch, Chair, Mr. Roland Hernandez, Chair of the Audit Committee; Mr. Jack Nasser, Chair of the Compensation Committee and Lead Independent Director; Speaker, Paul Ryan, Chair of the Nominating and Corporate Governance Committee; Mr. Bill Burke and Ms. Ann Dias. Mr. Carey is joining us by teleconference. Joining us on stage is Mr. Via Din, Chief Legal and Policy Officer; and additionally, in the front row, Mr. John Nallen, Chief Operating Officer; and Mr. Steve Tomsic, Chief Financial Officer. Also present today is Mr. Ian Elston of Ernst & Young LLP, the company's independent registered public accounting firm. In accordance with the company's bylaws, I hereby appoint Mr. Jim Rate from American Election Services, LLC as the independent Inspector of Election for this Annual Meeting. Before we commence the formal business of today's meeting, let me touch on some highlights from this past fiscal year and update you on what has already been a successful autumn season. Fiscal '22 was another successful year at Fox, where we once again achieved our financial and operational goals. These results demonstrate that our unique strategy of focusing on our core brands and the audiences they serve, especially in news and sports. While investing in high-growth digital initiatives is working. Our success reflects the dedication and contribution of every member of the FOX team, and the Board and I are grateful for their contributions. At Fox Sports, we remain the industry leader in live sports event viewing for a third consecutive calendar year in 2021. And in April, we successfully launched the inaugural season of the new United States Football League. At Fox Entertainment, we leveraged our broadcast network to build and support businesses beyond linear television. The development of our portfolio of creative businesses this past year included Bento Box, TMZ, Studio Ramsay Global and MarVista Entertainment. [ Through ] MarVista, Fox produced 13 original domestic titles for Tubi, as we continue to build Tubi's industry-leading advertising supported video-on-demand library. Tubi had another very strong year in growing revenue by approximately 45% across the fiscal year, generating total view time growth of nearly 40% and expanding distribution to partners such as LG, Samsung and Facebook. During fiscal '22, FOX continued to deliver best-in-class news to our local and national audiences. Our FOX Television stations produced approximately hundred hours a week of local news coverage across 18 markets. And FOX News was the only cable news network to post viewership gains in the key adult 25 to 54 demographic, as well as in total viewers, while importantly attracting a more politically and ethnically diverse audience than ever before. Specifically, FOX News was watched by more Democrats and independents than MSNBC and CNN in total day and was the #1 cable news network among Hispanic and Asian households in total day viewers. Fiscal '23, is off to an amazing start and there is no better moment than right now to showcase the impact and breadth of a portfolio that only Fox delivers. FOX Sports is in the midst of an incredibly strong football season powered by Big Noon Saturday in college football and the NFL with America's Game of the week on Sundays. This week, the Major League Baseball World Series is on Fox, and we're just days away from the kickoff of what promises to be a historic Soccer World Cup from Qatar, which will be broadcast by FOX here in the United States. And we're certainly looking forward to another NFL Super Bowl on FOX in February and the return of the USFL next spring. In September, FOX Entertainment launched the '22, '23 season with the return of some of America's favorite shows like The Masked Singer and the Cleaning Lady. And in October, Terror on Tubi returned with 27,000 hours of content, including 6 brand-new Tubi originals. Tubi recently launched 200 live content channels and expanded their video-on-demand library to more than 48,000 idles. When Hurricane Ian brought devastation to Florida and other areas this fall, FOX News and our local stations teamed up with FOX Weather to provide comprehensive coverage prior to the storm and in its terrible aftermath. And FOX was pleased to donate and helped raise more than $2.5 million to support the Red Cross' relief efforts. The strength of our core business and our leadership positions in live news and sports propelled us to a strong fiscal '22 and have positioned us well for stronger '23. Our balance sheet remains extremely strong, which allows us to continue to invest in our growing streaming businesses and other strategic areas. Our commitment to return capital to our shareholders was reflected in fiscal '22 with nearly $1.3 billion in dividends and share buybacks. In fact, since launching FOX in March of 2019, we have now returned over $4 billion in capital to our shareholders. Finally, let me comment on the announcement made last month regarding a potential combination of FOX and of News Corp. As has been made public, both Fox and News Corp have formed separate special committees to explore a potential combination following letters received from my father, Rupert Murdoch and the Murdoch Family Trust. For a combination transaction to proceed, it will need the approval of both special communities and a supportive vote by the majority of the minority nonaffiliated shareholders of each company. The special committee has not made any determination at this time, and there can be no certainty that the company will engage in such a transaction. Given the importance of the work of the special committees, I'm not in a position to take any questions on the proposed transaction at this time, as I said earlier on this week's earnings call. As always, we appreciate your support, and thank you for joining us here today both in person and those of you joining us virtually. And now on to the formal business of this meeting. This meeting is held pursuant to a notice of Annual Meeting of Stockholders mailed on or about September 19, 2022, to each record holder and a share of common stock on September 12, 2022. A list of holders of the company's Class B common stock entitled to vote at this meeting has been available at the company's headquarters for the past 10 days and is available at the meeting for examination by any stockholder desiring to do so. All documents concerning the call and notice of this meeting are available here today and will be filed with the records of the meeting. The Inspector of Election has examined the proxies received and reports that holders of a majority in voting power of all of the outstanding shares of Class B common stock entitled to vote at the meeting are present in person or represented by proxy. Therefore, I hereby declare a quorum present at the meeting. On behalf of our Board of Directors, I would like to express my appreciation to all stockholders who returned their proxies. It is now 10:10 a.m. on November 3, 2022. The polls are now open for voting. Those stockholders voting in person should mark their ballots and a company representative will be available to collect them for tabulation. Those of you who requested a ballot so you could vote in person were provided with a ballot when you entered the building. Ballots are also available in the room where registration took place. However, we urge stockholders to allow their proxies to stand. You will have an opportunity to ask questions after all matters being submitted to stockholders for vote are presented. Please hold your questions until that time. The first matter to be acted upon by the stockholders is proposal 1, the election of directors. The Board has nominated William Burck, Chase Carey, Anne Dias, Roland Hernandez, Rupert Murdoch, Jacq Nasser, Paul Ryan and myself to serve as directors. If elected, these director nominees will each serve a 1-year term expiring at the 2023 Annual Meeting or until their successors are duly elected and qualified. Proposal 2 is for the ratification of the election of the selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending June 30, 2023. Proposal 3 is for an advisory vote on executive compensation. Proposal 4 is for the amendment to our charter to reflect new Delaware law provisions regarding Officer exculpation. Proposal 5 is a stockholder proposal submitted by Mr. Kenneth Steiner, represented by Ms. KM. Franklin, who has given notice that she intends to present for action at this meeting. A proposal regarding disclosure of money spent on lobbying. And Ms. Fenton desires to may speak for a few minutes on the proposal. How would you like to speak briefly on this proposal.

Thank you. Proposal 5, disclose money spent on lobbying, whereas full disclosure of FOX's lobbying activities and expenditures to assess whether its lobbying is consistent with FOX's expressed goals and stockholders' best interest resolved. The stockholders of FOX request the preparation of a report updated annually disclosing #1, company policy and procedures governing lobbying, both direct and indirect and grassroots lobbying communications, #2, payments by FOX used for: A, direct or indirect lobbying or B, grassroots lobbying communications in each case, including the amount of the payment and the recipient; #3, Fox's membership in and payments to any tax-exempt organization that writes and endorses model legislation; #4, description of management's and the Board's decision-making process and oversight for making payments described in Sections 2 and 3 above. For purposes of this proposal, a grassroots lobbying communication, as a communication directed to the general public that A, refers to specific legislation or regulation. B, reflects a view on the legislation or regulation and encourages the recipient of the communication to take action with respect to the legislation or regulation. Indirect lobbying is lobbying engaged in by a trade association or other organization of which FOX is a member. Both direct and indirect lobbying and grassroots lobbying communications include efforts at the local, state and federal levels. This report shall be presented to the Audit Committee and posted on FOX'S website. Shareholders encourage transparency and FOX's use of funds to lobby. FOX spent $9 million on federal lobbying from 2019 to 2021. This does not include state lobbying or FOX also lobbies but disclosure is uneven or absent. For example, FOX spent $1.2 million lobbying in California from 2011 to 2021. FOX fails to disclose its third-party payments to trade associations and social welfare organizations or the amounts used for lobbying to stockholders. Companies can give unlimited amounts to third-party groups that spend millions on lobbying and often undisclosed grassroots activity. These groups may be spending at least double what's publicly reported. Fox serves on the Board of the National Association of Broadcasters and NCTA, the Internet and Television Association, which together spent $45 million on federal lobbying in 2020 and 2021 and also belongs to the business roundtable, which has spent over $355 million on lobbying since 1998. Stockholders cannot tell the magnitude of FOX's trade association payments nor how much is used to lobby and FOX fails to disclose its payments and memberships in social welfare organizations that lobby like Americans for Tax Reform and Taxpayers Protection Alliance, and FOX does not disclose memberships in tax-exempt organizations that write and endorse model legislation, such as the American Legislative Exchange Council. FOX'S lack of lobbying disclosure presents reputational risks that could harm long-term value creation. According to the 2021 Harris Corporate Reputation survey, FOX ranked 99th of the 100 most visible U.S. companies. Last year, this proposal received majority support from outside shareholders, including support from BlackRock and Vanguard. Thus, I urge FOX to expand its lobbying disclosure. FOX has made progress and needs to make more progress in disclosing funds used for lobbying. Please vote yes, Proposal 5, disclosed money spent on lobbying. Thank you.

Thank you very much Ms. Franklin. Speaker Ryan, can you please state the company's position on the stockholder proposal to disclose money spent on lobbying?

I'd be happy to. Ms. Franklin. Nice to see you, and thank you for your proposal in question. The Board recommends against this proposal, which is identical to the one that was presented last year. But I think it's very important to note that we engaged with the author of the proposal and incorporated several of the recommendations, which we thought were very prudent recommendations. Although this proposal didn't pass, we have identified many of these proposals that we have now put in practice. We wanted to improve our trends -- our disclosures to provide clarity and transparency about the company's political participation. We are doing that. We published an annual political activities report that accepted most of the proposed recommendations, except for the suggestion that the company track and disclose grassroots lobbying communications, defined as "a communication directed to the general public that A, refers to specific legislation or regulation; B, reflects a view on the legislation or regulation; and C, encourages the recipient of the communication to take action with respect to the legislation or regulation." Here is our issue. This definition would include our news coverage of local, state and federal legislative and regulatory proposals across all of our news channels, broadcast network and our television stations, identifying, tracking and disclosing this political coverage, the core of our news offerings, not only would be impractical, but we believe it would offend editorial integrity and First Amendment principles the mainstay of this organization. The Board, therefore, recommends against this proposal, but we do reiterate our commitment to further clarity and transparency in our political disclosures as we are now doing.

Thank you very much, Speaker Ryan. I will now present the results from the Inspector of Elections preliminary report based on the proxies we have received. The Inspector of Elections final report will be filed with our Corporate Secretary following the meeting. A preliminary report of the inspector of election reflects that a majority of the eligible votes cast have been voted for the election of each of the directors, for the ratification of the selection of version Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending June 30, 2023, for the approval of executive compensation and against the stockholder proposal to disclose money spent on lobbying. That a majority of the outstanding Class B common stock have been voted for the amendment to our charter to reflect new Delaware Law regarding officer exculpation. I thank you very much for your support. We will report the final results of this meeting in an SEC filing, which we will make after the market closes today. If you're a stockholder and have a question regarding any of the proposals, regarding the business and operations of the company, you may step up to the microphones and present the blue or pink admission ticket that you received upon registering with the company representative. Before asking your question, please state your name and affiliation. As noted in the rules of the meeting that were provided to you when you registered today, each speaker will be recognized once, regardless of the number of shares that speaker owns or proxies to speaker represents. Only one speaker will be recognized for each organization or shareholder. Each speaker is limited to one question, which should be no longer than a minute length. We ask that you comply with the rules of the meeting that we can conduct an orderly meeting and those who would like to speak have an opportunity to do so. At this time, stockholders may proceed to the microphones and ask any further questions.

I'm a personal shareholder. I was just wondering if you feel it's helpful to have people talking derogatory about the prior president being in the conservative right wing of the party either family members or Board members as being helpful to the franchise of FOX. And are you going to consider rebidding for the publishing company?

Thank you very much for an -- good morning. Thank you for joining us. So on editorial matters, I think FOX News covers news fairly balanced, in a fairly balanced manner. And it's really -- we leave it up to our Suzanne Scott, the CEO of FOX News and her producers and journalists to cover all political figures evenly across the political spectrum. On the News Corporation and the potential combination with news corporation, as I mentioned in my prepared comments, really not able to talk about the special committees of deliberations or whether a combination will even occur. But I appreciate the question.

Good morning. [indiscernible] I'm a shareholder with the company. First of all, I'd like to express my gratitude to the Board for their authorization of the treasury stock repurchases and especially how the company has purchased these shares without disturbing the relationship between liabilities and cash over 3 years. It's pretty impressive that we've been able to pull in 77 million shares with actually that relationship of liabilities and cash improving. My question is regarding Tubi. How did our expansion into Central America? How is that going? And are we still on target, say, to have over $1 billion in revenues by 2024?

Mr. [ Kellogg ] thank you for joining us. Tubi, as I mentioned this morning and also on our earnings call is well deep into an incredible expansion phase. But the business is primarily focused on the United States and is growing extraordinarily well. We do have some international operations. As you mentioned, there are a few Central American markets and also in Britain, Canada and I think Australia and New Zealand. But those are very small operations at this stage. And we're very focused on sort of winning the advertising video-on-demand market in the United States. We think it's a tremendous opportunity for us. And as we grow internationally, we'll do so. I think cautiously and prudently under making sure that we don't take our was from the United States. Thank you for your question. Are there any other ballots that need to be collected? It is now 10:25 a.m. on November 3, 2022. The polls are now closed. That concludes the business described in the notice of meeting, and the meeting is adjourned. Thank you for your attendance. Any stockholder wishing to inspect the minutes to contact our Corporate Secretary. Thank you.