Wednesday, February 21, 2024

News Corp and Foxtel Report 3Q Results

News Corporation (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV) has reported financial results for the three months ended March 31, 2021.

In terms of Subscription Video Services, the company reported that 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%.

Foxtel’s capital expenditures for the nine months ended March 31, 2021 were $103 million, compared to $171 million in the prior year.

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 2.00% to 3.25%, depending on the Foxtel Debt Group’s net leverage ratio.

Other key financial highlights include:

  • Revenues were USD$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®, 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

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, 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.


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