FOX Quarterly Results for Q2 2015

(press release) Twenty-First Century Fox, Inc. today reported financial results for the three months ended December 31, 2015.

The Company reported total quarterly revenues of $7.38 billion, a decrease of $49 million, or 1%, from the $7.42 billion of adjusted revenues (1) reported in the prior year. The decline compared to last year’s adjusted revenues reflects higher affiliate and advertising revenues at the Cable Network Programming and Television segments that were more than offset by lower revenues generated at the Filmed Entertainment segment due to lower home entertainment revenues and the absence of revenues from Shine in the current quarter. The adverse impact of foreign exchange rates in the current quarter impacted adjusted revenue growth by $207 million, or 3% in total.

Quarterly total segment operating income before depreciation and amortization (“OIBDA”)(2) of $1.73 billion increased $35 million, or 2%, from the $1.70 billion of adjusted OIBDA(3) reported in the prior year. The increase compared to last year’s adjusted OIBDA primarily reflects 8% growth at the Company’s Cable Network Programming segment partially offset by reduced contributions from the Filmed Entertainment segment. The adverse impact of foreign exchange rates impacted adjusted OIBDA growth by $109 million, or 6%.

The Company reported quarterly income from continuing operations attributable to stockholders of $674 million ($0.34 per share), compared with $6.22 billion ($2.89 per share) in the prior year. Excluding the net income effects of Other, net and gains and other adjustments related to Sky and Endemol Shine Group included in Equity earnings from affiliates, adjusted quarterly earnings per share(4) from continuing operations attributable to stockholders was $0.44 compared with the adjusted year-ago result of $0.53, which included the recognition of various tax benefits of $0.12 per share.

Commenting on the results, Executive Chairmen Rupert and Lachlan Murdoch said:

“During the quarter, our cable business continued to drive our growth, delivering sustained increases in domestic affiliate fees and gains in advertising revenue, underscoring the power of our global brands and distinctive programming. In addition, we are encouraged by progress at the FOX Broadcast Network, which delivered significant advertising gains from both our sports and entertainment programming. At our television production business, we deliberately invested in a higher number of new original series this quarter in support of the network’s new primetime schedule and in creating valuable long-term assets for the Company. We continued with our top priority of delivering standout storytelling and are proud of our industry-leading Academy Award nominations as well as Golden Globe wins across both our film and television businesses.”

CABLE NETWORK PROGRAMMING
Cable Network Programming quarterly segment OIBDA increased 8% to $1.25 billion, driven by a 9% revenue increase on strong affiliate revenue growth and higher advertising revenues partially offset by a 10% increase in expenses. The increase in expenses was primarily due to the impact from the consolidation of newly acquired National Geographic Partners businesses as well as higher planned sports programming costs led by soccer, Major League Baseball and college football rights. Foreign exchange fluctuations, primarily in Latin America and Europe, adversely impacted segment OIBDA growth by 5%.

Domestic affiliate revenue increased 10% reflecting continued strong growth at FS1 and Fox News and sustained growth across all of the other domestic cable networks. Domestic advertising revenue grew 3% over the prior year period reflecting solid growth at Fox News and the Regional Sports Networks, led by higher ratings for National Basketball Association games, partially offset by lower advertising revenues at FX Networks from lower ratings. Domestic OIBDA contributions increased 7% over the prior year led by higher contributions from Fox News and the domestic sports channels.

International affiliate revenue decreased 1% as 11% local currency growth at STAR and the Fox International Channels (“FIC”) was more than offset by a 12% adverse impact from the strengthened U.S. dollar. Despite an 11% adverse impact from the strengthened U.S. dollar, international advertising revenue increased 15% as the STAR and FIC channels generated strong local currency growth. Quarterly OIBDA at the international cable channels increased 8% reflecting strong local currency growth partially offset by the adverse impact of the strengthened U.S. dollar.

TELEVISION
Television generated quarterly segment OIBDA of $279 million, an $11 million decrease over the $290 million reported in the prior year quarter. Quarterly segment revenues were 6% higher than the corresponding period in the prior year due to strong retransmission consent revenue growth and a 4% increase in advertising revenues, primarily reflecting low double digit advertising growth at the FOX Broadcast Network, which benefited from higher national pricing and increased audiences for both the National Football League and the new primetime schedule led by Empire, partially offset by lower cyclical political advertising revenues at the TV stations. The decrease in segment OIBDA was driven by higher contractual sports programming costs at the FOX Broadcast Network that more than offset the higher revenues.

FILMED ENTERTAINMENT
Filmed Entertainment generated quarterly segment OIBDA of $302 million, a $34 million decrease from the $336 million reported in the same period a year-ago. Quarterly segment revenues decreased $392 million to $2.36 billion, primarily due to lower worldwide home entertainment revenues reflecting difficult comparisons to last year’s strong performance of X-Men: Days of Futures Past and Dawn of the Planet of the Apes with this year’s home entertainment performance of Spy, the absence of revenue contributions from Shine and the adverse impact of the strengthened U.S. dollar partially offset by higher television production network revenues. The OIBDA decline over the prior year primarily reflects lower contributions from the television production business due to higher deficits related to more new series delivered during the quarter and the absence of contributions from successful series that concluded in the prior year, including Sons of Anarchy, partially offset by higher film studio contributions driven by the worldwide theatrical performance of The Martian, which has grossed over $600 million in worldwide box office to date. Segment OIBDA comparisons were also adversely impacted by a 14% negative impact from foreign exchange rate fluctuations.