Fox Earnings: Super Bowl and Tubi Drive Impressive Ad Revenue Growth

Fox FOXA reported a strong quarter as the broadcast division benefited from the Super Bowl and the ongoing adoption growth of free ad-supporting streaming TV. The affiliate fee growth at the broadcast segment was impressive once again as the division continues to buck the recent acceleration in cord cutting. In comparison, the cable division struggled as the direct response ad market at Fox News and Nation continues to suffer from elevated supply across the market. We are maintaining our fair value estimate of $43.

Revenue increased 18% versus a year ago to $4.1 billion, with the cable segment down 1% to $1.6 billion and broadcast up 36% to $2.5 billion. The firm’s adjusted EBITDA margin plummeted by 290 basis points to 20.4%, due in part to the mix shift toward the much lower-margin broadcast segment.

Retransmission and reverse compensation growth drove broadcast affiliate fee growth of 9%. Management remains confident that the firm can continue to drive fee increases as Fox enters year two of its multiyear renewal cycle. Broadcast ad revenue skyrocketed by 61% to $1.6 billion due to the Super Bowl, extra NFL playoff games, and Tubi. The Super Bowl was the most watched event in TV history with over 115 million viewers and generated roughly $650 million in gross ad revenue. Tubi also provided a boot to the results as the Fast platform posted 38% growth in total viewing time, driving a 25% increase in ad revenue.

Cable affiliate fee revenue was flat year over year at $1.1 billion, due in part to limited contract renewals. Management continues to adopt a positive outlook for overall affiliate fee growth even at the current levels of subscriber declines. Cable advertising revenue was also flat, as the benefit from World Baseball Cup was offset by headwinds for Fox News, as the continued oversupply in the spot market led to weaker pricing.