Cable news and media network Fox (NASDAQ:FOXA) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 15.6% year on year to $3.45 billion. It made a non-GAAP profit of $1.09 per share, improving from its profit of $0.95 per share in the same quarter last year.
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FOX (FOXA) Q1 CY2024 Highlights:
- Revenue: $3.45 billion vs analyst estimates of $3.44 billion (small beat)
- EPS (non-GAAP): $1.09 vs analyst estimates of $0.96 (13.5% beat)
- Gross Margin (GAAP): 40.5%, up from 33.2% in the same quarter last year
- Free Cash Flow of $1.39 billion is up from -$615 million in the previous quarter
- Market Capitalization: $14.77 billion
BroadcastingBroadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. FOX's annualized revenue growth rate of 4.3% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. FOX's recent history shines a dimmer light on the company as its revenue was flat over the last two years.
We can dig even further into the company's revenue dynamics by analyzing its most important segments, Advertising and Affiliate, which are 35.8% and 56.2% of revenue. Over the last two years, FOX's Advertising revenue (marketing services) was flat while its Affiliate revenue (licensing and retransmission fees) averaged 3% year-on-year growth.
This quarter, FOX reported a rather uninspiring 15.6% year-on-year revenue decline to $3.45 billion of revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 7% over the next 12 months, an acceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, FOX has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 10.3%, slightly better than the broader consumer discretionary sector.
FOX's free cash flow came in at $1.39 billion in Q1, equivalent to a 40.4% margin and down 6.1% year on year. Over the next year, analysts predict FOX's cash profitability will improve. Their consensus estimates imply its LTM free cash flow margin of 7.8% will increase to 11.1%.
Key Takeaways from FOX's Q1 ResultsIt was good to see FOX beat analysts' operating margin expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $32.32 per share.