Grade: C — One Red Flag, One Watch Item, Strong Cash Generation
Framework: Tang Chao screening + Schilit *Financial Shenanigans* + Beneish M-Score
Data: SEC EDGAR 10-K (filed August 6, 2025) + Yahoo Finance
Auditor: Ernst & Young LLP — Unqualified opinion
Note: FOX (Class B shares) and FOXA (Class A shares) represent the same company. This report covers both.
One-line verdict: Fox Corporation should not be flagged for elimination. One red flag (goodwill plus intangibles at 55% of equity) reflects the media industry's reliance on content rights and brand value, not an impairment risk. Free cash flow of $2.99B at a 1.32x FCF/NI ratio, CFFO/NI of 1.47x, and an Altman Z-Score of 4.36 (safe zone) demonstrate strong financial health. Revenue surged 17% to $16.3B driven by the Super Bowl and FIFA Men's World Cup on FOX Sports, while net income jumped 51% to $2.26B. The sole genuine risk is concentration: Fox depends heavily on live sports rights that require escalating payments, and its Cable Network Programming segment faces structural cord-cutting headwinds. The fiscal year ends June 30 — this filing covers July 2024 through June 2025.
| Metric | Result |
|---|---|
| Red Flags | **1** (goodwill + intangibles 55% of equity) |
| Watch Items | **1** (cash covers 72% of debt) |
| Checks Completed | **14/18** |
| Beneish M-Score | **N/A** (insufficient data) |
| Altman Z-Score | **4.36** (safe zone) |
| F-Score Probability | **0.14%** (very low manipulation risk) |
| Report Period | FY2025 (ended June 30, 2025) |
Auditor Opinion and Critical Audit Matters
Ernst & Young LLP issued an unqualified opinion on both the financial statements and internal controls over financial reporting.
Critical Audit Matters (two identified):
Profitability
From the Consolidated Statements of Operations (in millions):
| Line Item | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Total Revenues | $14,913 | $13,980 | $16,300 |
| Net Income to Fox Stockholders | $1,239 | $1,501 | $2,263 |
| Basic EPS | $2.34 | $3.14 | $4.97 |
| Diluted EPS | $2.33 | $3.13 | $4.91 |
Revenue surged 17% to $16.3B, the highest in Fox Corporation's history as a standalone company. The 10-K attributes this to the Super Bowl broadcast and FIFA Men's World Cup licensing on FOX Sports. The company generated "revenues of $16 billion, of which approximately" a significant majority came from affiliate fees and advertising.
Net income jumped 51% from $1.50B to $2.26B, driven by higher revenues and operating leverage on fixed programming costs. EPS increased from $3.14 to $4.97 — a 58% improvement — with share buybacks contributing to per-share growth (total shares declined from ~478M to ~455M).
Segment EBITDA: Cable Network Programming generated $3.03B (up from $2.69B), and the Television segment also improved. The 10-K notes the revenue increase was partially offset by "legal settlement and other costs associated with the discontinuation of Venu Sports."
| Margin | FY2022 | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|---|
| Net Margin | 8.6% | 8.3% | 10.7% | 13.9% | Strong improvement |
Cash Flow
| Item | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Net income | $1,239 | $1,501 | $2,263 |
| **Operating cash flow** | **$1,800** | **$1,840** | **$3,324** |
| Capital expenditures | $(357) | $(345) | $(331) |
| **Free cash flow** | **$1,443** | **$1,495** | **$2,993** |
| Cash Quality Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| CFFO / Net Income | 1.45 | 1.23 | 1.47 |
| FCF / Net Income | 1.16 | 1.00 | 1.32 |
CFFO surged 81% from $1.84B to $3.32B. The 10-K attributes the increase to "higher segment EBITDA" and working capital improvements. This is an extraordinarily strong cash conversion.
FCF of $2.99B at 1.32x net income means Fox generated $1.32 in free cash for every $1 of reported profit. This is exceptional — very few media companies achieve this level of cash conversion. CapEx is minimal at $331M (declining YoY), reflecting Fox's asset-light model where the primary "assets" are content rights and brand value rather than physical infrastructure.
Dividends and buybacks: The 10-K discloses an annual dividend rate that would produce "approximately $250 million" in total dividends for fiscal 2026. Fox also conducts active share repurchases.
Balance Sheet
| Item | FY2024 | FY2025 |
|---|---|---|
| Cash + Short-term Investments | $4,319M | $5,351M |
| Total Debt | $8,152M | $7,465M |
| Total Equity | $10,814M | $12,067M |
| Goodwill | $3,639M | $3,639M |
| Intangible Assets | $2,969M | $2,969M |
| Total Assets | $21,972M | $23,195M |
Cash increased by $1B while debt decreased by $687M — an excellent deleveraging trend. Fox has access to "a five-year $1.0 billion unsecured revolving credit facility" and "access to the worldwide capital markets."
The 18-Point Screening
A. Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 55 days, -6 days YoY. Improving |
| A2 | AR vs Revenue Growth | PASS | AR +4.6% vs revenue +16.6% |
| A3 | Revenue vs CFFO | PASS | Revenue +16.6%, CFFO +80.7%. Cash growth massively outpaces revenue |
All three revenue quality checks pass cleanly. The CFFO growing 5x faster than revenue is an especially strong signal — the Super Bowl and World Cup generated immediate cash while programming rights were being amortized.
B. Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory vs COGS | PASS | Inventory -31.0%. Declining |
| B2 | CapEx vs Revenue | PASS | CapEx -4.1% vs revenue +16.6% |
| B3 | SG&A Ratio | N/A | Insufficient data |
| B4 | Gross Margin | N/A | Insufficient data |
Fox's declining inventory reflects programming rights being consumed (amortized) faster than new rights are being acquired — consistent with the Super Bowl/World Cup cycle where major events generate revenue and burn through prepaid content costs.
C. Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.47. Real cash |
| C2 | Free Cash Flow | PASS | FCF $2.99B, FCF/NI = 1.32 |
| C3 | Accruals Ratio | PASS | -4.6%. Negative accruals |
| C4 | Cash vs Debt | WATCH | Cash $5.4B covers 72% of $7.5B debt |
C4 — cash at 72% of debt is flagged as a watch item but is actually a reasonable position for a media company. Fox reduced debt by $687M during the year while growing cash by $1B.
D. Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | FAIL | **$6.6B = 55% of equity** |
| D2 | Leverage | PASS | Debt/EBITDA = 1.9x. Healthy |
| D3 | Soft Asset Growth | PASS | Other assets +1.2% vs revenue +16.6% |
| D4 | Asset Impairment | N/A | No write-off data |
D1 — Goodwill and intangibles at 55% of equity is the only red flag. Goodwill of $3.64B and intangible assets of $2.97B together represent 55% of $12.1B in equity. This is structural for a media company: Fox's value lies in its brand names (FOX News, FOX Sports), distribution agreements (affiliate fees), and content rights — all of which are intangible by nature. The goodwill stems from the separation from 21st Century Fox in 2019.
The risk of impairment is mitigated by: (1) Debt/EBITDA of only 1.9x, indicating the goodwill is backed by strong cash generation, (2) FOX News maintaining dominant cable news ratings, and (3) FOX Sports securing premier live sports rights. However, secular cord-cutting in Cable Network Programming could pressure the long-term value of these assets.
E. Acquisition Risk
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Serial Acquirer FCF | PASS | FCF after acquisitions positive |
| E2 | Goodwill Surge | PASS | Goodwill flat YoY |
F. Manipulation Detection
| # | Check | Result | Detail |
|---|---|---|---|
| F1 | Beneish M-Score | N/A | Insufficient data |
Key Risks from the 10-K
1. Sports Rights Cost Escalation
The 10-K states Fox has "secured a significant portion of its marquee rights under long-term contracts." While this provides revenue visibility, sports rights costs escalate at renewal. The Super Bowl and FIFA World Cup are non-annual events — FY2025's revenue surge is partly non-recurring. FY2026 will lack the Super Bowl (which rotates among networks) and could see a revenue dip.
2. Cable Cord-Cutting
Fox's Cable Network Programming segment generates the majority of the company's EBITDA. The structural decline in traditional cable subscribers means affiliate fee revenue faces long-term pressure. The 10-K acknowledges content is "distributed through traditional cable television systems, direct broadcast satellite operators and telecommunications companies."
3. Tubi's Growth Path
Under Fox's ownership, Tubi "has become one of the most relevant and fastest growing AVOD services." But AVOD (advertising-supported video on demand) operates at lower margins than cable affiliate fees. The transition from high-margin cable to lower-margin streaming creates a long-term margin question.
4. Venu Sports Discontinuation
The 10-K references "legal settlement and other costs associated with the discontinuation of Venu Sports" — a joint venture with Disney and Warner Bros. Discovery for sports streaming that was abandoned. This represents a failed strategic initiative and sunk costs.
5. Concentration in Murdoch Family Control
Fox Corporation has a dual-class share structure (FOX = Class B, FOXA = Class A). The Murdoch family controls voting power through Class B shares. The 10-K discloses 210.8M Class A shares and the Class B structure that gives the family effective control over the company.
Summary
Grade: C. Should not be flagged for elimination.
Fox Corporation's FY2025 10-K (ending June 30, 2025) shows a media company operating at peak performance: 17% revenue growth, 51% net income growth, FCF of $2.99B, and deleveraging. The sole red flag — goodwill and intangibles at 55% of equity — is structural for a media company whose value is inherently in brands and content rights rather than physical assets.
The financial quality is strong across every cash-based metric: CFFO/NI of 1.47x, FCF/NI of 1.32x, negative accruals ratio, Z-Score of 4.36 in the safe zone, and Debt/EBITDA of only 1.9x. The genuine risks are all forward-looking and business-related: the cyclicality of live sports events (no Super Bowl in FY2026), cord-cutting pressure on Cable Network Programming, and the profitability trajectory of Tubi as the streaming business scales.
**Disclaimer**: This report applies a forensic screening framework to public financial data. This is NOT investment advice.
Sources: Fox Corporation Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed August 6, 2025 (SEC EDGAR). Financial data cross-referenced with Yahoo Finance.