News Corporation Reports Third Quarter Results for Fiscal 2021

FISCAL 2021 THIRD QUARTER KEY FINANCIAL HIGHLIGHTS

  • Revenues were $2.34 billion, a 3% increase compared to $2.27 billion in the prior year, driven by the continued strong momentum across our key growth pillars
  • Net income of $96 million compared to a net loss of $(1) billion in the prior year, which included non-cash impairment charges of $1.1 billion
  • Total Segment EBITDA was $298 million compared to $242 million in the prior year
  • Reported EPS were $0.13 compared to $(1.24) in the prior year – Adjusted EPS were $0.09 compared to $0.03 in the prior year
  • Move, operator of realtor.com®, reported 37% revenue growth, with traffic reaching a record 108 million unique users in March, and was again a key driver of Segment EBITDA growth at the Digital Real Estate Services segment
  • Dow Jones Segment EBITDA increased 61%, with another strong increase in digital advertising revenues, record digital subscriptions, and continued robust growth at Risk & Compliance
  • Book Publishing Segment EBITDA increased 45%, benefiting from the success of numerous backlist titles, including the Bridgerton series
  • Reached multi-year partnership agreements with Google and Facebook for news content
  • Recently completed the acquisition of Investor’s Business Daily and announced the planned acquisitions of Houghton Mifflin Harcourt’s Books and Media segment and Mortgage Choice

NEW YORK–(BUSINESS WIRE)–News Corporation (“News Corp” or the “Company”) (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV) today reported financial results for the three months ended March 31, 2021. Commenting on the results, Chief Executive Robert Thomson said:

“The financial year is on a trajectory to be the most profitable since our reincarnation in 2013. This highlights the transformed character of the Company, with improved revenue performance and a 23 percent increase in profitability in the third quarter.

The results vindicate the strategy of simplifying the asset mix, vigorously pursuing digitization, slimming the cost base, and investing in three growth areas — Digital Real Estate Services, Dow Jones and Book Publishing — which collectively generated 55 percent Segment EBITDA growth in the third quarter.

Move, operator of realtor.com®, flourished, with 37 percent revenue growth, and more than 100 million unique users in March, a 60 percent increase on a year earlier. At Dow Jones, digital revenues reached 74 percent of the total, with digital advertising growing by a robust 30 percent and The Wall Street Journal subscriptions setting record after record. And at Book Publishing, revenues rose 19 percent, thanks to a valuable backlist and faster digital growth.

Foxtel’s resurgence during the pandemic reflected the enduring value of its broadcast offering, the rapid growth of streaming services, and a relentless focus on costs, all of which contributed to a 34 percent surge in Segment EBITDA.

We have reached historic deals with Google and Facebook, and continue our international campaign to reset the terms of trade for premium journalism. The cooperation in recent weeks with the Google team has certainly been productive and we look forward to further engagement with Facebook. These landmark agreements have meaningfully and materially changed the media landscape.

Finally, we successfully completed our inaugural bond offering, which was met with extremely high demand, and was a resounding vote of confidence in the Company’s strategy and its prospects.”

THIRD QUARTER RESULTS

The Company reported fiscal 2021 third quarter total revenues of $2.34 billion, 3% higher compared to $2.27 billion in the prior year period. The increase was driven by the $176 million, or 8%, positive impact from foreign currency fluctuations and continued growth in the Digital Real Estate Services, Book Publishing and Dow Jones segments. The growth was partially offset by lower revenues at the News Media segment, primarily driven by a $199 million, or 9%, negative impact from the divestiture of News America Marketing, weakness in the print advertising market and a $28 million, or 1%, negative impact from the closure or transition to digital of certain regional and community newspapers in Australia. Adjusted Revenues (which exclude the foreign currency impact, acquisitions and divestitures as defined in Note 2) increased 4%.

Net income for the quarter was $96 million compared to a net loss of $(1) billion in the prior year, reflecting the absence of $1.1 billion of non-cash impairment charges in the prior year, higher Total Segment EBITDA, as discussed below, and higher Other net, partially offset by higher tax expense.

The Company reported third quarter Total Segment EBITDA of $298 million, a 23% increase compared to $242 million in the prior year. The increase was primarily due to higher revenues, as discussed above, and a $32 million, or 13%, positive impact from foreign currency fluctuations. The growth was partially offset by higher costs in the Other segment due to higher employee costs, primarily related to stock price performance, as well as investment spending related to the global shared services initiative. The results also reflect a $24 million negative impact from the divestiture of News America Marketing in the prior year. Adjusted Total Segment EBITDA (as defined in Note 2) increased 24%.

Net income (loss) per share attributable to News Corporation stockholders was $0.13 as compared to $(1.24) in the prior year.

Adjusted EPS (as defined in Note 3) were $0.09 compared to $0.03 in the prior year.

SEGMENT REVIEW

 

 

 

For the three months ended

March 31,

 

For the nine months ended

March 31,

 

 

2021

 

2020

 

% Change

 

2021

 

2020

 

% Change

 

 

(in millions)

 

Better/

(Worse)

 

(in millions)

 

Better/

(Worse)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital Real Estate Services

 

$

351

 

 

 

$

261

 

 

 

34

 

%

 

$

980

 

 

 

$

827

 

 

 

19

 

%

Subscription Video Services

 

523

 

 

 

462

 

 

 

13

 

%

 

1,530

 

 

 

1,477

 

 

 

4

 

%

Dow Jones(a)

 

421

 

 

 

397

 

 

 

6

 

%

 

1,253

 

 

 

1,209

 

 

 

4

 

%

Book Publishing

 

490

 

 

 

412

 

 

 

19

 

%

 

1,492

 

 

 

1,259

 

 

 

19

 

%

News Media(a)

 

550

 

 

 

733

 

 

 

(25

)

%

 

1,610

 

 

 

2,311

 

 

 

(30

)

%

Other

 

 

 

 

1

 

 

 

** 

 

1

 

 

 

2

 

 

 

(50

)

%

Total Revenues

 

$

2,335

 

 

 

$

2,266

 

 

 

3

 

%

 

$

6,866

 

 

 

$

7,085

 

 

 

(3

)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital Real Estate Services

 

$

117

 

 

 

$

74

 

 

 

58

 

%

 

$

378

 

 

 

$

274

 

 

 

38

 

%

Subscription Video Services

 

91

 

 

 

68

 

 

 

34

 

%

 

293

 

 

 

219

 

 

 

34

 

%

Dow Jones(a)

 

82

 

 

 

51

 

 

 

61

 

%

 

263

 

 

 

176

 

 

 

49

 

%

Book Publishing

 

80

 

 

 

55

 

 

 

45

 

%

 

255

 

 

 

167

 

 

 

53

 

%

News Media(a)

 

8

 

 

 

24

 

 

 

(67

)

%

 

52

 

 

 

97

 

 

 

(46

)

%

Other

 

(80

)

 

 

(30

)

 

 

** 

 

(178

)

 

 

(115

)

 

 

(55

)

%

Total Segment EBITDA

 

$

298

 

 

 

$

242

 

 

 

23

 

%

 

$

1,063

 

 

 

$

818

 

 

 

30

 

%

** – Not meaningful

   

(a) 

 

In the fourth quarter of fiscal 2020, the Company revised the composition of its reportable segments to present the Dow Jones business as a separate segment. Previously, the financial information for this segment was aggregated with the businesses within the News Media segment and, together, formed the News and Information Services segment. All prior periods have been revised to reflect the new segment presentation.

Digital Real Estate Services

Revenues in the quarter increased $90 million, or 34%, compared to the prior year, driven by strong performance at Move and a $28 million, or 10%, positive impact from foreign currency fluctuations. Segment EBITDA in the quarter increased $43 million, or 58%, compared to the prior year, primarily due to $36 million of higher contribution from Move resulting from higher revenues, as well as a positive impact of $14 million, or 19%, from foreign currency fluctuations. The growth was partially offset by higher employee costs at both Move and REA Group and the increase in expenses due to the acquisition of Elara. Adjusted Revenues and Adjusted Segment EBITDA (as defined in Note 2) increased 22% and 52%, respectively.

Move’s revenues in the quarter increased $44 million, or 37%, to $162 million, primarily as a result of higher real estate revenues. Real estate revenues, which represented 84% of total Move revenues, increased $41 million, or 43%, due to very strong growth in the traditional lead generation product and the referral model, both benefiting from an over 40% increase in average monthly lead volume. The traditional lead generation product saw a strong increase in demand from agents, driving improvements in sell-through and yield. The referral model also benefited from higher average home values and transaction volume and generated approximately 25% of total Move revenues. Based on Move’s internal data, average monthly unique users of realtor.com®’s web and mobile sites for the fiscal third quarter grew 44% year-over-year to 98 million, with a record 108 million unique users in March, an increase of 60% compared to the prior year.

In the quarter, revenues at REA Group increased $46 million, or 32%, to $189 million, primarily driven by a $28 million, or 19%, positive impact from foreign currency fluctuations, higher Australian residential depth revenues due to strong national listings and the acquisition of Elara. Australian national residential listing volumes in the quarter increased 8% compared to the prior year, with listings in Melbourne and Sydney up 13% and 5%, respectively.

Subscription Video Services

Revenues in the quarter increased $61 million, or 13%, compared with the prior year, reflecting a $79 million, or 17%, positive impact from foreign currency fluctuations and higher revenues from Kayo and Binge. The revenue increase was partially offset by the impact from fewer residential broadcast subscribers and a $7 million negative impact from lower commercial subscription revenues primarily resulting from lower occupancy at hotels due to ongoing national travel restrictions related to COVID-19. Adjusted Revenues decreased 4% compared to the prior year.

As of March 31, 2021, Foxtel’s total closing paid subscribers were 3.541 million, a 21% increase compared to the prior year, primarily due to the launch of Binge and the growth in Kayo subscribers, partially offset by lower residential and commercial broadcast subscribers. 1.946 million of the total closing subscribers were residential and commercial broadcast subscribers, and the remaining 1.595 million consisted of Kayo, Binge and Foxtel Now subscribers. As of March 31, 2021, there were 914,000 Kayo subscribers (851,000 paying), compared to 444,000 subscribers (408,000 paying) in the prior year. Binge, which launched in May 2020, had 679,000 subscribers (516,000 paying) as of March 31, 2021. As of March 31, 2021, there were 238,000 Foxtel Now subscribers (228,000 paying), compared to 338,000 subscribers (317,000 paying) in the prior year.

Broadcast subscriber churn in the quarter increased to 20.1% from 17.5% in the prior year, due to fewer promotions and the roll-off of lower value subscribers. Broadcast ARPU for the quarter increased 2% to A$80 (US$62).

Segment EBITDA in the quarter increased $23 million, or 34%, compared with the prior year. The improvement was primarily driven by $22 million of lower sports programming rights and production costs, which reflects the savings from renegotiated sports rights. The Segment EBITDA improvement was also due to a $14 million positive impact from foreign currency fluctuations as well as lower transmission, marketing and employee costs, partially offset by the increased investment in OTT products. Adjusted Segment EBITDA increased 13%.

Dow Jones

Revenues in the quarter increased $24 million, or 6%, compared to the prior year, primarily due to growth in circulation and subscription and digital advertising revenues, partially offset by lower print advertising revenues. Digital revenues at Dow Jones in the quarter represented 74% of total revenues compared to 68% in the prior year. Adjusted Revenues increased 5% compared to the prior year.

Circulation and subscription revenues increased $26 million, or 9%, including a $4 million, or 2%, positive impact from foreign currency fluctuations. Circulation revenue grew 8%, reflecting the continued strong growth in digital-only subscriptions, partially offset by lower single-copy and amenity sales related to COVID-19. Professional information business revenues grew 9%, driven by 24% growth in Risk & Compliance products. Digital circulation revenues accounted for 64% of circulation revenues for the quarter, compared to 58% in the prior year.

During the third quarter, Dow Jones saw the highest year-over-year increase in total subscriptions and digital-only subscriptions for both The Wall Street Journal and total Dow Jones’ consumer products in its history. Total subscriptions to Dow Jones’ consumer products reached a record 4.27 million average subscriptions for the quarter, a 19% increase compared to the prior year, of which digital-only subscriptions grew 29%. Total subscriptions to The Wall Street Journal grew 21% compared to the prior year, to a record 3.38 million average subscriptions in the quarter. Digital-only subscriptions to The Wall Street Journal grew 29% to 2.63 million average subscriptions in the quarter, and represented 78% of total Wall Street Journal subscriptions.

Advertising revenues increased $1 million, or 1%, primarily due to 30% growth in digital advertising revenues, the fastest year-over-year growth in a decade, driven by continued strength in direct display sales and improvement across most categories, most notably financial services. Digital advertising accounted for 61% of total advertising revenues in the quarter, compared to 48% in the prior year. The growth was partially offset by a 25% decline in print advertising revenues, driven by continued general market weakness and lower print volume across The Wall Street Journal and Barron’s due to COVID-19.

Segment EBITDA for the quarter increased $31 million, or 61%, primarily due to higher revenues, as discussed above, and lower costs related to lower print volume and other discretionary cost savings, partially offset by higher compensation costs. Adjusted Segment EBITDA increased 59%.

Book Publishing

Revenues in the quarter increased $78 million, or 19%, compared to the prior year, including a $10 million, or 2%, positive impact from foreign currency fluctuations. The revenue growth was primarily due to higher backlist sales, including the series of Bridgerton titles by Julia Quinn and The Boy, the Mole, the Fox and the Horse by Charlie Mackesy, as well as the success of new titles such as Just as I Am by Cicely Tyson. Adjusted Revenues increased 15%. Digital sales increased 38% compared to the prior year, driven by growth in both e-book and downloadable audiobook sales. Digital sales represented 26% of Consumer revenues for the quarter. Segment EBITDA for the quarter increased $25 million, or 45%, compared to the prior year, primarily due to the higher revenues discussed above, partially offset by higher costs related to increased sales volume and higher employee costs. Adjusted Segment EBITDA increased 43%.

News Media

Revenues in the quarter decreased $183 million, or 25%, as compared to the prior year, including a $55 million, or 7%, positive impact from foreign currency fluctuations. The decline was primarily driven by a $199 million, or 27%, impact from the divestiture of News America Marketing in May 2020. The decline also reflects weakness in the print advertising market and the $28 million, or 4%, impact from the closure or transition to digital of certain regional and community newspapers in Australia. Within the segment, revenues at News Corp Australia and News UK both increased 2%. Adjusted Revenues for the segment decreased 7% compared to the prior year.

Circulation and subscription revenues increased $32 million, or 13%, compared to the prior year, primarily due to a $26 million, or 10%, positive impact from foreign currency fluctuations, digital subscriber growth and price increases, partially offset by lower single-copy sales revenue, primarily at News UK.

Advertising revenues decreased $215 million, or 50%, compared to the prior year, reflecting a $199 million, or 47%, negative impact from the divestiture of News America Marketing. The remainder of the decline was driven by continued weakness in the print advertising market, exacerbated by COVID-19, and a $23 million, or 5%, negative impact related to the closure or transition to digital of certain regional and community newspapers in Australia, partially offset by a $22 million, or 6%, positive impact from foreign currency fluctuations and growth in digital advertising at the New York Post.

In the quarter, Segment EBITDA decreased $16 million, or 67%, compared to the prior year, reflecting a $24 million negative impact from the divestiture of News America Marketing. The decline was partially offset by higher cost savings at News UK and News Corp Australia, as well as an improvement at the New York Post. Adjusted Segment EBITDA increased by $5 million.

Digital revenues represented 30% of News Media segment revenues in the quarter, compared to 19% in the prior year, and represented 28% of the combined revenues of the newspaper mastheads. Digital subscribers and users across key properties within the News Media segment are summarized below:

  • Closing digital subscribers at News Corp Australia’s mastheads as of March 31, 2021 were 760,000, compared to 613,300 in the prior year (Source: Internal data)
  • The Times and Sunday Times closing digital subscribers as of March 31, 2021 were 354,000, compared to 345,000 in the prior year (Source: Internal data)
  • The Sun’s digital offering reached 119 million global monthly unique users in March 2021, compared to 164 million in the prior year (Source: Google Analytics)
  • New York Post’s digital network reached 139 million unique users in March 2021, compared to 199 million in the prior year (Source: Google Analytics)

CASH FLOW

The following table presents a reconciliation of net cash provided by operating activities to free cash flow available to News Corporation:

 

 

For the nine months ended

March 31,

 

 

2021

 

2020

 

 

(in millions)

Net cash provided by operating activities

 

$

1,060

 

 

$

462

 

Less: Capital expenditures

 

(253

)

 

(335

)

 

 

807

 

 

127

 

Less: REA Group free cash flow

 

(114

)

 

(129

)

Plus: Cash dividends received from REA Group

 

69

 

 

65

 

Free cash flow available to News Corporation

 

$

762

 

 

$

63

 

Net cash provided by operating activities of $1,060 million for the nine months ended March 31, 2021 was $598 million higher than $462 million in the prior year, primarily due to higher Total Segment EBITDA as noted above and lower working capital, partially offset by higher tax payments.

Free cash flow available to News Corporation in the nine months ended March 31, 2021 was $762 million compared to $63 million in the prior year period. The improvement was primarily due to higher cash provided by operating activities, as mentioned above, and lower capital expenditures. Foxtel’s capital expenditures for the nine months ended March 31, 2021 were $103 million, compared to $171 million in the prior year.

Free cash flow available to News Corporation is a non-GAAP financial measure defined as net cash provided by operating activities, less capital expenditures (“free cash flow”), less REA Group free cash flow, plus cash dividends received from REA Group.

The Company considers free cash flow available to News Corporation to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company’s balance sheet and for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, dividend payouts and repurchasing stock. The Company believes excluding REA Group’s free cash flow and including dividends received from REA Group provides users of its consolidated financial statements with a measure of the amount of cash flow that is readily available to the Company, as REA Group is a separately listed public company in Australia and must declare a dividend in order for the Company to have access to its share of REA Group’s cash balance. The Company believes free cash flow available to News Corporation provides a more conservative view of the Company’s free cash flow because this presentation includes only that amount of cash the Company actually receives from REA Group, which has generally been lower than the Company’s unadjusted free cash flow. A limitation of free cash flow available to News Corporation is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for the limitation of free cash flow available to News Corporation by also relying on the net change in cash and cash equivalents as presented in the Company’s consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

OTHER ITEMS

Outlook

In the Other segment, the Company expects costs in the fourth quarter to increase by approximately $20 million compared to the prior year, primarily as a result of higher employee costs due to the absence of bonus reductions related to COVID-19 and stock price performance, as well as ongoing investment spending as the Company ramps up the global shared services initiative. Except as discussed above, the expected trends for the remainder of fiscal 2021 remain consistent with those discussed in the second quarter.

Subsequent Events

Agreement to acquire HMH Books & Media

In March, the Company entered into an agreement to acquire the Books & Media segment of Houghton Mifflin Harcourt (“HMH Books & Media”) for $349 million in cash. HMH Books & Media publishes renowned and awarded children’s, young adult, fiction, non-fiction, culinary and reference titles. The acquisition will add an extensive and successful backlist, a strong frontlist in the lifestyle and children’s segments and a productions business that will provide new opportunities to expand HarperCollins’s intellectual property across multiple formats. HMH Books & Media will be a subsidiary of HarperCollins and its results will be included in the Book Publishing segment. The acquisition is subject to customary closing conditions, including regulatory approvals, and is expected to close in the fourth quarter of fiscal 2021.

REA Group agreement to acquire Mortgage Choice

In March, REA Group entered into an agreement to acquire Mortgage Choice Limited (“Mortgage Choice”) for approximately A$244 million in cash (approximately $186.5 million based on exchange rates as of the date of the announcement), to be funded by an increase in REA Group’s syndicated debt facilities. Mortgage Choice is a leading Australian mortgage broking business, and the acquisition is expected to complement REA Group’s existing Smartline broker footprint and accelerate REA Group’s financial services strategy to establish a leading mortgage broking business with national scale. Mortgage Choice will be a subsidiary of REA Group and its results will be included in the Digital Real Estate Services segment. The acquisition is subject to customary closing conditions, including Mortgage Choice shareholder, court and regulatory approvals and receipt of an independent expert opinion that the transaction is in the best interests of Mortgage Choice shareholders, and is expected to close in the fourth quarter of fiscal 2021.

Foxtel Debt Amendment

In April, the Foxtel Debt Group amended its 2019 Credit Facility and 2017 Working Capital Facility to, among other things, extend the debt maturity from November 2022 to May 2024 and reduce the applicable margin to between 2.

Contacts

Investor Relations
Michael Florin

212-416-3363

[email protected]

Leslie Kim

212-416-4529

[email protected]

Corporate Communications
Jim Kennedy

212-416-4064

[email protected]

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