Fox Corporation Q2 2022 Financial Report Analysis: Key Insights and Recommendations

Snapshot of Key Information

• Company: Fox Corporation
• Filing Type: Quarterly Report (Form 10-Q)
• Reporting Period: Three months ended March 31, 2022
• Total Revenues: $3,455 million, up 7% YoY
• Net Income: $290 million, down 50% YoY
• Total Assets: $22,016 million
• Total Liabilities: $10,816 million
• Recommendation: Hold - While the company shows revenue growth, the significant drop in net income raises concerns.

Detailed Analysis

Revenue Insights

Fox Corporation reported total revenues of $3,455 million for the three months ended March 31, 2022, representing a 7% increase compared to $3,215 million in the same period last year. The growth can be attributed to:

• Cable Network Programming Revenues: Increased to $1,583 million, driven by higher affiliate fees and advertising revenues.
• Television Revenues: Rose to $1,820 million, supported by improved advertising and higher affiliate fees.

The nine-month revenue figures also reflect a positive trend, totaling $10,941 million, up from $10,019 million year-over-year, marking a 9% increase.

Profitability Metrics

Net income for the quarter declined sharply to $290 million, down 50% from $582 million in the same quarter last year. This significant drop can be attributed to:

• Increased operating expenses, particularly in the television segment due to higher sports programming costs and digital investments.
• A decrease in political advertising revenue due to the absence of key election cycles.

For the nine months, net income was reported at $925 million, down from $1,897 million during the same period in 2021, suggesting a concerning trend in profitability.

EBITDA and Operating Expenses

• EBITDA for the three months stood at $811 million, highlighting operational efficiency despite rising costs.
• Operating Expenses totaled $2,164 million for the quarter, a 15% increase, reflecting higher costs related to programming rights and digital initiatives.

Balance Sheet Strength

• Total Assets: $22,016 million, slightly down from previous periods, indicating potential liquidity concerns.
• Total Liabilities: $10,816 million, with current liabilities showing a notable decrease, suggesting improved short-term financial management.
• Equity: Stockholders' equity stood at $11,200 million, indicating a strong capital base but a slight reduction compared to the previous year.

Cash Flow Analysis

• Net Cash Provided by Operating Activities: $951 million for the nine months, down from $1,866 million in the prior year.
• Net Cash Used in Investing: $(386 million), primarily for acquisitions.
• Net Cash Used in Financing: $(1,817 million), significantly higher than the previous year, driven by debt repayments and share repurchases.

Market and Competitive Landscape

The broader media landscape is increasingly competitive, with pressures from digital streaming services affecting traditional revenue streams. Fox’s investments in digital platforms like Tubi are essential for maintaining relevance in this shifting market.

Macroeconomic Considerations

Current macroeconomic conditions, including inflationary pressures and potential interest rate hikes, may impact consumer spending on advertising and subscription services. Fox must navigate these challenges while continuing to optimize operational efficiency.

Conclusion and Recommendations

Fox Corporation demonstrated resilience with revenue growth across its segments but is grappling with significant profitability challenges reflected in the drastic decline in net income. The company's strong balance sheet and cash flow management are positive indicators, but the competitive landscape and macroeconomic conditions pose ongoing risks.

Final Recommendation: Hold

Investors are advised to hold their positions in Fox Corporation. The revenue growth is encouraging, but the decline in profitability and net income raises caution. Monitoring the company's operational adjustments and market positioning over the next quarters will be crucial for future investment decisions.

This comprehensive analysis of Fox Corporation's quarterly financial report aims to equip investors with the insights necessary to make informed decisions while keeping abreast of the evolving market conditions and competitive landscape.