FISCAL 2021 SECOND QUARTER KEY
FINANCIAL HIGHLIGHTS
- Revenues were $2.41 billion, a 3% decline compared to $2.48
billion in the prior year – Adjusted Revenues increased 2% compared
to the prior year
- Net income of $261 million compared to $103 million in the
prior year
- Total Segment EBITDA was $497 million compared to $355
million in the prior year
- Reported diluted EPS were $0.39 compared to $0.14 in the
prior year – Adjusted EPS were $0.34 compared to $0.18 in the prior
year
- Book Publishing Segment EBITDA increased 65% compared to the
prior year, driven by strong revenue growth across every
category
- Move, operator of realtor.com®, reported 28% revenue growth
and was a key driver of Segment EBITDA growth at the Digital Real
Estate Services segment
- Dow Jones reported 43% Segment EBITDA growth, driven
by record digital advertising revenues and continued growth in
digital subscriptions
- Subscription Video Services Segment EBITDA grew 77% as
Foxtel benefited from lower costs while reaching a record of more
than 1.3 million paying OTT subscribers as of the quarter
end
News Corporation (“News Corp” or the “Company”) (Nasdaq: NWS,
NWSA; ASX: NWS, NWSLV) today reported financial results for the
three months ended December 31, 2020. Commenting on the results,
Chief Executive Robert Thomson said:
“The second quarter of fiscal 2021 was the most profitable
quarter since the new News Corp was launched more than seven years
ago, reflecting the ongoing digital transformation of the business.
We reported the largest profits for Dow Jones since the acquisition
of the company in 2007, with Segment EBITDA increasing 43 percent
and traffic across the Dow Jones digital network surging 48
percent.
There was also a 77 percent rise in Segment EBITDA at the
Subscription Video Services segment, where the exponential
evolution at Foxtel continued apace, with streaming customers
increasing over 90 percent, rights costs reset and audiences for
summer sports at unprecedented levels.
Rapid expansion continued at Move, which accounted for about 80
percent of Segment EBITDA growth in the Digital Real Estate
Services segment, while revenue grew 28 percent compared to a year
earlier. Realtor.com®’s traffic growth has now outpaced that of
Zillow for the last 11 months in a row, according to Comscore, and
monthly average unique users were 37 percent higher during the
quarter compared to the prior year.
In the Book Publishing segment, HarperCollins’ revenues rose 23
percent, with double digit growth across every category, and a 65
percent burgeoning of Segment EBITDA. And history was also made at
the New York Post, which reported its first profit in modern times
– a notable feat for what had been a chronic loss-making masthead
founded in 1801 by Alexander Hamilton.”
SECOND QUARTER RESULTS
The Company reported fiscal 2021 second quarter total revenues
of $2.41 billion, 3% lower compared to $2.48 billion in the prior
year period. The decline was mainly due to lower revenues at the
News Media segment, primarily driven by a $191 million, or 8%,
negative impact from the divestiture of News America Marketing,
weakness in the print advertising market, and a $34 million, or 1%,
negative impact from the closure or transition to digital of
certain regional and community newspapers in Australia. The decline
was partially offset by growth in the Book Publishing, Digital Real
Estate Services and Dow Jones segments, as well as a $75 million,
or 3%, positive impact from foreign currency fluctuations. Adjusted
Revenues (which exclude the foreign currency impact, acquisitions
and divestitures as defined in Note 2) increased 2%.
Net income for the quarter was $261 million compared to $103
million in the prior year, reflecting higher Total Segment EBITDA,
as discussed below, and higher Other, net, partially offset by
higher tax expense.
The Company reported second quarter Total Segment EBITDA of $497
million, a 40% increase compared to $355 million in the prior year.
The increase was primarily due to the strong performance at key
segments, driven by a combination of improved operating trends and
cost reductions, as well as an $18 million, or 6%, positive impact
from foreign currency fluctuations. Adjusted Total Segment EBITDA
(as defined in Note 2) increased 39%.
Diluted net income per share attributable to News Corporation
stockholders was $0.39 as compared to $0.14 in the prior year.
Adjusted EPS (as defined in Note 3) were $0.34 compared to $0.18
in the prior year.
SEGMENT REVIEW
For the three months ended
December 31,
For the six months ended December
31,
2020
2019
% Change
2020
2019
% Change
(in millions)
Better/ (Worse)
(in millions)
Better/ (Worse)
Revenues:
Digital Real Estate Services
$
339
$
294
15
%
$
629
$
566
11
%
Subscription Video Services
511
501
2
%
1,007
1,015
(1
)
%
Dow Jones(a)
446
430
4
%
832
812
2
%
Book Publishing
544
442
23
%
1,002
847
18
%
News Media(a)
573
811
(29
)
%
1,060
1,578
(33
)
%
Other
1
1
—
%
1
1
—
%
Total Revenues
$
2,414
$
2,479
(3
)
%
$
4,531
$
4,819
(6
)
%
Segment EBITDA:
Digital Real Estate Services
$
142
$
118
20
%
$
261
$
200
31
%
Subscription Video Services
124
70
77
%
202
151
34
%
Dow Jones
109
76
43
%
181
125
45
%
Book Publishing
104
63
65
%
175
112
56
%
News Media
66
66
—
%
44
73
(40
)
%
Other
(48
)
(38
)
(26
)
%
(98
)
(85
)
(15
)
%
Total Segment EBITDA
$
497
$
355
40
%
$
765
$
576
33
%
(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 $45 million, or 15%, compared
to the prior year, including a $12 million, or 4%, positive impact
from foreign currency fluctuations. Segment EBITDA in the quarter
increased $24 million, or 20%, compared to the prior year,
primarily due to $19 million of higher contribution from Move and a
positive impact of $7 million, or 6%, from foreign currency
fluctuations. Adjusted Revenues and Adjusted Segment EBITDA (as
defined in Note 2) increased 11% and 19%, respectively.
Move’s revenues in the quarter increased $34 million, or 28%, to
$155 million, primarily as a result of higher real estate revenues.
Real estate revenues, which represented 83% of total Move revenues,
grew $30 million, or 30%, due to the continued strength in the
referral model and the recovery in the traditional lead generation
product, both benefiting from an over 30% increase in average
monthly lead volume and higher transaction volume. The referral
model also benefited from higher average home values and generated
approximately 30% of total Move revenues. The traditional lead
generation product saw continued strong demand from agents, driving
increased sell-through and yield. Based on Move’s internal data,
average monthly unique users of realtor.com®’s web and mobile sites
for the fiscal second quarter grew 37% year-over-year to 80
million.
In the quarter, revenues at REA Group increased $11 million, or
6%, to $184 million, primarily driven by a $12 million, or 7%,
positive impact from foreign currency fluctuations. The modest
revenue declines in the commercial and Asia businesses were offset
by growth in Australian residential depth revenues. Australian
national residential listing volumes in the quarter increased 10%
compared to the prior year as more markets recovered with the
relaxation of government restrictions, with listings in Melbourne
and Sydney up 25% and 13%, respectively.
Subscription Video Services
Revenues in the quarter increased $10 million, or 2%, compared
with the prior year, reflecting a $33 million, or 7%, positive
impact from foreign currency fluctuations and higher revenues from
OTT products. The revenue increase was partially offset by the
impact from fewer residential broadcast subscribers and an $11
million, or 2%, negative impact from lower commercial subscription
revenues resulting from the ongoing restrictions on pubs, clubs and
other commercial venues due to COVID-19. Adjusted Revenues
decreased 5% compared to the prior year.
As of December 31, 2020, Foxtel’s total closing paid subscribers
were 3.314 million, a 12% 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. 2.001 million of the total closing
subscribers were residential and commercial broadcast subscribers,
and the remaining 1.313 million consisted of Kayo, Binge and Foxtel
Now subscribers. As of December 31, 2020, there were 648,000 Kayo
subscribers (624,000 paying), compared to 372,000 subscribers
(350,000 paying) in the prior year. Binge, which launched in May
2020, had 468,000 subscribers (431,000 paying) as of December 31,
2020. As of December 31, 2020, there were 265,000 Foxtel Now
subscribers (258,000 paying), compared to 343,000 subscribers
(334,000 paying) in the prior year.
Broadcast subscriber churn in the quarter increased to 17.5%
from 16.0% in the prior year, due to fewer promotions and the
roll-off of lower value subscribers. Broadcast ARPU for the quarter
increased 3% to A$80 (US$58).
Segment EBITDA in the quarter increased $54 million, or 77%,
compared with the prior year. The improvement reflects $35 million
of lower sports programming rights and production costs, which was
primarily driven by the savings from renegotiated sports rights,
partially offset by the $20 million negative impact related to the
deferral of costs from the fourth quarter of fiscal 2020. The
Segment EBITDA improvement was also due to lower entertainment
programming costs, lower overhead expenses resulting from cost
reduction efforts and an $8 million positive impact from foreign
currency fluctuations. Adjusted Segment EBITDA increased 66%.
Dow Jones
Revenues in the quarter increased $16 million, or 4%, 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 70% of total revenues compared to 64% in
the prior year.
Circulation and subscription revenues increased $23 million, or
8%, including a $3 million, or 1%, 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 4%, driven by 21%
growth in Risk & Compliance products, partially offset by the
decline in revenues from other professional information business
products. Digital circulation revenues accounted for 63% of
circulation revenues for the quarter, compared to 57% in the prior
year.
During the second quarter, Dow Jones saw the highest
year-over-year growth 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 4.03 million average
subscriptions for the quarter, an 18% increase compared to the
prior year, of which digital-only subscriptions grew 29%. Total
subscriptions to The Wall Street Journal grew 19% compared to the
prior year, to a record 3.22 million average subscriptions in the
quarter. Digital-only subscriptions to The Wall Street Journal grew
28% to more than 2.46 million average subscriptions in the quarter,
and represented 76% of total Wall Street Journal subscriptions.
Advertising revenues decreased $5 million, or 4%, primarily due
to a 29% decline in print advertising revenues, driven by general
market weakness and lower print volume across The Wall Street
Journal and Barron’s due to COVID-19. The decline was partially
offset by record quarterly digital advertising revenues, driven by
custom revenue and a rebound in direct display sales. Digital
advertising revenues grew 29% compared to the prior year, which was
the highest growth rate in 10 years. Digital advertising accounted
for 58% of total advertising revenues in the quarter, compared to
43% in the prior year.
Segment EBITDA for the quarter increased $33 million, or 43%,
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.
Book Publishing
Revenues in the quarter increased $102 million, or 23%, compared
to the prior year, including a $5 million, or 1%, positive impact
from foreign currency fluctuations. The revenue growth was
primarily due to higher sales in every category with the success of
titles such as Didn’t See That Coming by Rachel Hollis, The Happy
in a Hurry Cookbook by Steve Doocy, The Greatest Secret by Rhonda
Byrne and Code Name Bananas by David Walliams. Adjusted Revenues
increased 19%. Digital sales increased 15% compared to the prior
year, driven by growth in both e-book and downloadable audiobook
sales. Digital sales represented 18% of Consumer revenues for the
quarter. Segment EBITDA for the quarter increased $41 million, or
65%, compared to the prior year, primarily due to the higher
revenues discussed above and the mix of titles. Adjusted Segment
EBITDA increased 60%.
News Media
Revenues in the quarter decreased $238 million, or 29%, as
compared to the prior year, including a $22 million, or 3%,
positive impact from foreign currency fluctuations. The decline was
primarily driven by a $191 million, or 24%, impact from the
divestiture of News America Marketing in May 2020. The decline also
reflects weakness in the print advertising market and the $34
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 declined 11%
and 5%, respectively. Adjusted Revenues for the segment decreased
9% compared to the prior year.
Circulation and subscription revenues increased $12 million, or
5%, compared to the prior year, primarily due to digital subscriber
growth, a $9 million, or 4%, positive impact from foreign currency
fluctuations and price increases, partially offset by lower
single-copy sales revenue, primarily at News UK and the New York
Post.
Advertising revenues decreased $231 million, or 48%, compared to
the prior year, reflecting a $191 million, or 40%, 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 $28 million, or
6%, negative impact related to the closure or transition to digital
of certain regional and community newspapers in Australia,
partially offset by a $10 million, or 2%, positive impact from
foreign currency fluctuations and growth in digital advertising at
the New York Post and News UK.
In the quarter, Segment EBITDA was flat compared to the prior
year, as higher cost savings at News UK and News Corp Australia, as
well as a positive contribution from the New York Post, were offset
by lower revenues, as discussed above, and the absence of a $22
million one-time benefit in the prior year from the settlement of
certain warranty related claims in the U.K. Adjusted Segment EBITDA
increased 5%.
Digital revenues represented 31% of News Media segment revenues
in the quarter, compared to 22% in the prior year, and represented
29% 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 December 31, 2020 were 738,300, compared to 566,600 in the
prior year (Source: Internal data)
- The Times and Sunday Times closing digital subscribers as of
December 31, 2020 were 335,000, compared to 320,000 in the prior
year (Source: Internal data)
- The Sun’s digital offering reached 130 million global monthly
unique users in December 2020, compared to 140 million in the prior
year (Source: Google Analytics)
- New York Post’s digital network reached 141 million unique
users in December 2020, compared to 95 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 six months ended December
31,
2020
2019
(in millions)
Net cash provided by operating
activities
$
483
$
192
Less: Capital expenditures
(173
)
(237
)
310
(45)
Less: REA Group free cash flow
(65
)
(86
)
Plus: Cash dividends received from REA
Group
32
35
Free cash flow available to News
Corporation
$
277
$
(96
)
Net cash provided by operating activities of $483 million for
the six months ended December 31, 2020 was $291 million higher than
$192 million in the prior year, primarily due to higher Total
Segment EBITDA as noted above and lower working capital.
Free cash flow available to News Corporation in the six months
ended December 31, 2020 was $277 million compared to $(96) 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 six months ended December 31, 2020 were $79 million, compared
to $129 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
COVID-19 Impact and Outlook
The ongoing impact of the COVID-19 pandemic and measures to
prevent its spread continue to create significant economic
volatility, uncertainty and disruption, affecting the Company’s
businesses in a number of ways. The discussion below summarizes the
effects on the Company’s businesses during the six months ended
December 31, 2020 and through the date of this filing, as well as
expected trends for the second half of fiscal 2021:
Digital Real Estate Services: The real estate markets in
Australia, Asia and the U.S. have been, and may continue to be,
impacted as a result of social distancing measures, business
closures and economic uncertainty resulting from COVID-19. In
January, national residential listings in Australia were flat
compared to the prior year with a 12% increase in Melbourne and a
1% decline in Sydney. Consumer confidence is improving as COVID-19
cases remain extremely low in Australia. Based on the current
market outlook and excluding the impact of acquisitions, REA Group
expects core operating costs for fiscal 2021 to be broadly in-line
with the prior year. Second half results will be impacted by the
consolidation of Elara. In the U.S., Move is benefiting from strong
consumer demand, with unique users and leads at all-time highs,
despite active listings across the industry remaining at
historically low levels. Unique users at realtor.com® in January
grew 37% year-over-year to a record 94 million. Higher expected
revenues driven by growth in traffic and lead volumes will fund
reinvestment in the second half of fiscal 2021. The Company expects
to invest an additional $40 million in brand marketing and product
development compared to the prior year to drive further market
share and expand into adjacent verticals.
Subscription Video Services: Foxtel’s revenue trends have been
better than anticipated in the first half of fiscal 2021, with
higher ARPU offsetting higher churn, resulting in lower
year-over-year revenue declines in residential broadcast. Broadcast
churn is expected to remain elevated due to the suspension of
government stimulus payments and Foxtel’s ongoing emphasis on ARPU.
In addition, higher average OTT subscribers through January should
result in higher than expected OTT revenue for the full year. The
ongoing disruption in operations at pubs and clubs from government
imposed occupancy restrictions and lower occupancy at hotels
throughout Australia due to the domestic travel restrictions are
expected to continue to adversely impact commercial subscription
revenue. Given Foxtel’s continued investment in its OTT products as
well as higher costs from the higher revenue, the Company now
expects the full year overall net cost reductions to be less than
$73 million (A$100 million), compared to the previous estimate of
net A$160 million ($117 million), inclusive of approximately $58
million (A$80 million) of higher sports costs in the second half of
fiscal 2021, particularly in the fourth quarter, compared to the
prior year. U.S. dollar amounts are converted by using the fiscal
2021 second quarter average exchange rate (See Note 2).
Dow Jones and News Media: COVID-19 continues to exacerbate print
advertising weakness and negatively impact weekday print volumes
due to increased economic uncertainty and lower demand for single
copy and amenity newspapers driven by decreased foot traffic
resulting from remote working, social distancing measures and other
government restrictions. The latest national lockdown in the U.K.,
the continuation of remote working in the U.S. and, to a lesser
extent, the current domestic travel restrictions in Australia are
expected to continue to negatively impact these revenue streams in
the second half of the fiscal year. However, the Company has seen
increases in digital paid subscriptions and digital audience gains
at online versions of many of its news properties. Additionally,
the Company implemented strict and immediate discretionary cost
controls towards the end of fiscal 2020 in response to COVID-19 and
related uncertainty. At the News Media segment, cost declines in
the second half are expected to moderate from the rate of decline
in the first half as the Company laps these COVID-19 related cost
savings as well as the sale of News America Marketing. At Dow
Jones, given the performance in the first half of fiscal 2021, the
Company expects expenses to increase modestly in the second half
compared to the prior year period as the Company reinvests in its
digital assets to drive longer-term growth.
Book Publishing: While the Company has benefited from changing
consumer behavior as a consequence of COVID-19, such as the
increase in free time for consumers to read and the increase in the
average number of books purchased, the Company continues to monitor
the sustainability of these recent consumer patterns. Currently the
Company is expecting performance to moderate in the second half of
fiscal 2021, particularly in the fourth quarter, in part due to the
strong performance in the prior year, which benefited from
increased consumer demand at the onset of COVID-19 lockdowns and
restrictions.
Other: The Company expects costs to increase by at least $50
million in the second half of fiscal 2021, primarily due to higher
employee costs related to stock price performance, the absence of
the bonus reductions for certain employees, including the senior
executive team, implemented in the prior year in response to
COVID-19, as well as initial investment spending as the Company
ramps up the global shared services initiative.
Dividends
The Company today declared a semi-annual cash dividend of $0.10
per share for Class A Common Stock and Class B Common Stock. This
dividend is payable on April 14, 2021 to stockholders of record as
of March 17, 2021.
COMPARISON OF NON-GAAP TO U.S. GAAP INFORMATION
Adjusted Revenues, Total Segment EBITDA, Adjusted Total Segment
EBITDA, Adjusted Segment EBITDA, adjusted net income attributable
to News Corporation stockholders, Adjusted EPS and free cash flow
available to News Corporation are non-GAAP financial measures
contained in this earnings release. The Company believes these
measures are important tools for investors and analysts to use in
assessing the Company’s underlying business performance and to
provide for more meaningful comparisons of the Company’s operating
performance between periods. These measures also allow investors
and analysts to view the Company’s business from the same
perspective as Company management. These non-GAAP measures may be
different than similar measures used by other companies and should
be considered in addition to, not as a substitute for, measures of
financial performance calculated in accordance with GAAP.
Reconciliations for the differences between non-GAAP measures used
in this earnings release and comparable financial measures
calculated in accordance with U.S. GAAP are included in Notes 1, 2
and 3 and the reconciliation of net cash provided by operating
activities to free cash flow available to News Corporation is
included above.
Conference call
News Corporation’s earnings conference call can be heard live at
4:30pm EST on February 4, 2021. To listen to the call, please visit
http://investors.newscorp.com.
Cautionary Statement Concerning Forward-Looking
Statements
This document contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements include, but are not
limited to, statements regarding trends and uncertainties affecting
the Company’s business, results of operations and financial
condition, including expected impacts from the ongoing COVID-19
pandemic and related public health measures, the Company’s strategy
and strategic initiatives, including potential acquisitions,
investments and dispositions, and the outcome of contingencies such
as litigation and investigations. These statements are based on
management’s views and assumptions regarding future events and
business performance as of the time the statements are made. Actual
results may differ materially from these expectations due to the
risks and uncertainties related to COVID-19 and the risks,
uncertainties and other factors described in the Company’s filings
with the Securities and Exchange Commission (many of which may be
amplified by COVID-19). The ultimate impact of the COVID-19
pandemic, including the extent of adverse impacts on the Company’s
business, results of operations, cash flows and financial
condition, will depend on, among other things, the severity,
duration, spread and any reoccurrence of the pandemic, the impact
of governmental actions and business and consumer behavior in
response to the pandemic, the effectiveness of actions taken to
contain or mitigate the outbreak and prevent or limit any
reoccurrence, including the development, availability and public
acceptance of effective treatments and vaccines, the resulting
global economic conditions and how quickly and to what extent
normal economic and operating conditions can resume, all of which
are highly uncertain and cannot be predicted. More detailed
information about this and other factors that could affect future
results is contained in our filings with the Securities and
Exchange Commission. The “forward-looking statements” included in
this document are made only as of the date of this document and we
do not have and do not undertake any obligation to publicly update
any “forward-looking statements” to reflect subsequent events or
circumstances, and we expressly disclaim any such obligation,
except as required by law or regulation.
About News Corporation
News Corp (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV) is a global,
diversified media and information services company focused on
creating and distributing authoritative and engaging content and
other products and services. The company comprises businesses
across a range of media, including: digital real estate services,
subscription video services in Australia, news and information
services and book publishing. Headquartered in New York, News Corp
operates primarily in the United States, Australia, and the United
Kingdom, and its content and other products and services are
distributed and consumed worldwide. More information is available
at: www.newscorp.com.
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited; in millions,
except per share amounts)
For the three months ended
December 31,
For the six months ended December
31,
2020
2019
2020
2019
Revenues:
Circulation and subscription
$
1,030
$
990
$
2,032
$
1,985
Advertising
448
677
780
1,285
Consumer
523
421
964
808
Real estate
281
242
516
460
Other
132
149
239
281
Total Revenues
2,414
2,479
4,531
4,819
Operating expenses
(1,198
)
(1,351
)
(2,362
)
(2,689
)
Selling, general and administrative
(719
)
(773
)
(1,404
)
(1,554
)
Depreciation and amortization
(167
)
(162
)
(331
)
(324
)
Impairment and restructuring charges
(23
)
(29
)
(63
)
(326
)
Equity losses of affiliates
(3
)
(3
)
(4
)
(5
)
Interest expense, net
(12
)
(8
)
(20
)
(4
)
Other, net
54
2
71
6
Income (loss) before income tax
expense
346
155
418
(77
)
Income tax expense
(85
)
(52
)
(110
)
(31
)
Net income (loss)
261
103
308
(108
)
Less: Net income attributable to
noncontrolling interests
(30
)
(18
)
(43
)
(34
)
Net income (loss) attributable to News
Corporation stockholders
$
231
$
85
$
265
$
(142
)
Weighted average shares outstanding:
Basic
591
588
590
587
Diluted
593
590
592
587
Net income (loss) attributable to News
Corporation stockholders per share:
Basic
$
0.39
$
0.15
$
0.45
$
(0.24
)
Diluted
$
0.39
$
0.14
$
0.45
$
(0.24
)
NEWS CORPORATION
CONSOLIDATED BALANCE
SHEETS
(Unaudited; in
millions)
As of December 31, 2020
As of June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
1,562
$
1,517
Receivables, net
1,444
1,203
Inventory, net
203
348
Other current assets
387
393
Total current assets
3,596
3,461
Non-current assets:
Investments
353
297
Property, plant and equipment, net
2,315
2,256
Operating lease right-of-use assets
1,074
1,061
Intangible assets, net
1,934
1,864
Goodwill
4,292
3,951
Deferred income tax assets
337
332
Other non-current assets
1,193
1,039
Total assets
$
15,094
$
14,261
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
291
$
351
Accrued expenses
1,094
1,019
Deferred revenue
400
398
Current borrowings
212
76
Other current liabilities
864
838
Total current liabilities
2,861
2,682
Non-current liabilities:
Borrowings
1,044
1,183
Retirement benefit obligations
254
277
Deferred income tax liabilities
339
258
Operating lease liabilities
1,160
1,146
Other non-current liabilities
362
326
Commitments and contingencies
Equity:
Class A common stock
4
4
Class B common stock
2
2
Additional paid-in capital
12,091
12,148
Accumulated deficit
(2,976
)
(3,241
)
Accumulated other comprehensive loss
(990
)
(1,331
)
Total News Corporation stockholders'
equity
8,131
7,582
Noncontrolling interests
943
807
Total equity
9,074
8,389
Total liabilities and equity
$
15,094
$
14,261
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited; in
millions)
For the six months ended December
31,
2020
2019
Operating activities:
Net income (loss)
$
308
$
(108
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
331
324
Operating lease expense
64
86
Equity losses of affiliates
4
5
Cash distributions received from
affiliates
7
5
Impairment charges
—
292
Other, net
(71
)
(6
)
Deferred income taxes and taxes
payable
21
(35
)
Change in operating assets and
liabilities, net of acquisitions:
Receivables and other assets
(172
)
(1,661
)
Inventories, net
27
3
Accounts payable and other liabilities
(36
)
1,287
Net cash provided by operating
activities
483
192
Investing activities:
Capital expenditures
(173
)
(237
)
Acquisitions, net of cash acquired
(90
)
(2
)
Investments in equity affiliates and
other
(11
)
(8
)
Proceeds from property, plant and
equipment and other asset dispositions
3
10
Other, net
(5
)
3
Net cash used in investing activities
(276
)
(234
)
Financing activities:
Borrowings
146
917
Repayment of borrowings
(248
)
(1,161
)
Dividends paid
(80
)
(81
)
Other, net
(37
)
(3
)
Net cash used in financing activities
(219
)
(328
)
Net change in cash and cash
equivalents
(12
)
(370
)
Cash and cash equivalents, beginning of
period
1,517
1,643
Exchange movement on opening cash
balance
57
(1
)
Cash and cash equivalents, end of
period
$
1,562
$
1,272
NOTE 1 – TOTAL SEGMENT EBITDA
Segment EBITDA is defined as revenues less operating expenses
and selling, general and administrative expenses. Segment EBITDA
does not include: depreciation and amortization, impairment and
restructuring charges, equity losses of affiliates, interest
(expense) income, net, other, net and income tax (expense) benefit.
Management believes that Segment EBITDA is an appropriate measure
for evaluating the operating performance of the Company’s business
segments because it is the primary measure used by the Company’s
chief operating decision maker to evaluate the performance of and
allocate resources within the Company’s businesses. Segment EBITDA
provides management, investors and equity analysts with a measure
to analyze the operating performance of each of the Company’s
business segments and its enterprise value against historical data
and competitors’ data, although historical results may not be
indicative of future results (as operating performance is highly
contingent on many factors, including customer tastes and
preferences).
Total Segment EBITDA is a non-GAAP measure and should be
considered in addition to, not as a substitute for, net income
(loss), cash flow and other measures of financial performance
reported in accordance with GAAP. In addition, this measure does
not reflect cash available to fund requirements and excludes items,
such as depreciation and amortization and impairment and
restructuring charges, which are significant components in
assessing the Company’s financial performance. The Company believes
that the presentation of Total Segment EBITDA provides useful
information regarding the Company’s operations and other factors
that affect the Company’s reported results. Specifically, the
Company believes that by excluding certain one-time or non-cash
items such as impairment and restructuring charges and depreciation
and amortization, as well as potential distortions between periods
caused by factors such as financing and capital structures and
changes in tax positions or regimes, the Company provides users of
its consolidated financial statements with insight into both its
core operations as well as the factors that affect reported results
between periods but which the Company believes are not
representative of its core business. As a result, users of the
Company’s consolidated financial statements are better able to
evaluate changes in the core operating results of the Company
across different periods. The following tables reconcile net income
(loss) to Total Segment EBITDA for the three and six months ended
December 31, 2020 and 2019:
For the three months ended
December 31,
2020
2019
Change
% Change
(in millions)
Net income
$
261
$
103
$
158
**
Add:
Income tax expense
85
52
33
63%
Other, net
(54
)
(2
)
(52
)
**
Interest expense, net
12
8
4
50%
Equity losses of affiliates
3
3
—
—%
Impairment and restructuring charges
23
29
(6
)
(21)%
Depreciation and amortization
167
162
5
3%
Total Segment EBITDA
$
497
$
355
$
142
40%
** - Not meaningful
For the six months ended December
31,
2020
2019
Change
% Change
(in millions)
Net income (loss)
$
308
$
(108
)
$
416
**
Add:
Income tax expense
110
31
79
**
Other, net
(71
)
(6
)
(65
)
**
Interest expense, net
20
4
16
**
Equity losses of affiliates
4
5
(1
)
(20)%
Impairment and restructuring charges
63
326
(263
)
(81)%
Depreciation and amortization
331
324
7
2%
Total Segment EBITDA
$
765
$
576
$
189
33%
** - Not meaningful
NOTE 2 – ADJUSTED REVENUES, ADJUSTED TOTAL SEGMENT EBITDA AND
ADJUSTED SEGMENT EBITDA
The Company uses revenues, Total Segment EBITDA and Segment
EBITDA excluding the impact of acquisitions, divestitures, fees and
costs, net of indemnification, related to the claims and
investigations arising out of certain conduct at The News of the
World (the “U.K. Newspaper Matters”) and foreign currency
fluctuations (“Adjusted Revenues,” “Adjusted Total Segment EBITDA”
and “Adjusted Segment EBITDA,” respectively) to evaluate the
performance of the Company’s core business operations exclusive of
certain items that impact the comparability of results from period
to period such as the unpredictability and volatility of currency
fluctuations. The Company calculates the impact of foreign currency
fluctuations for businesses reporting in currencies other than the
U.S. dollar by multiplying the results for each quarter in the
current period by the difference between the average exchange rate
for that quarter and the average exchange rate in effect during the
corresponding quarter of the prior year and totaling the impact for
all quarters in the current period.
The calculation of Adjusted Revenues, Adjusted Total Segment
EBITDA and Adjusted Segment EBITDA may not be comparable to
similarly titled measures reported by other companies, since
companies and investors may differ as to what type of events
warrant adjustment. Adjusted Revenues, Adjusted Total Segment
EBITDA and Adjusted Segment EBITDA are not measures of performance
under generally accepted accounting principles and should not be
construed as substitutes for amounts determined under GAAP as
measures of performance. However, management uses these measures in
comparing the Company’s historical performance and believes that
they provide meaningful and comparable information to investors to
assist in their analysis of our performance relative to prior
periods and our competitors.
The following tables reconcile reported revenues and reported
Total Segment EBITDA to Adjusted Revenues and Adjusted Total
Segment EBITDA for the three and six months ended December 31, 2020
and 2019:
Revenues
Total Segment EBITDA
For the three months ended
December 31,
For the three months ended
December 31,
2020
2019
Difference
2020
2019
Difference
(in millions)
(in millions)
As reported
$
2,414
$
2,479
$
(65
)
$
497
$
355
$
142
Impact of acquisitions
(14
)
—
(14
)
3
—
3
Impact of divestitures
(1
)
(210
)
209
1
(4
)
5
Impact of foreign currency
fluctuations
(75
)
—
(75
)
(18
)
—
(18
)
Net impact of U.K. Newspaper Matters
—
—
—
3
(1
)
4
As adjusted
$
2,324
$
2,269
$
55
$
486
$
350
$
136
Revenues
Total Segment EBITDA
For the six months ended December
31,
For the six months ended December
31,
2020
2019
Difference
2020
2019
Difference
(in millions)
(in millions)
As reported
$
4,531
$
4,819
$
(288
)
$
765
$
576
$
189
Impact of acquisitions
(24
)
—
(24
)
2
—
2
Impact of divestitures
(1
)
(420
)
419
1
(15
)
16
Impact of foreign currency
fluctuations
(125
)
—
(125
)
(26
)
—
(26
)
Net impact of U.K. Newspaper Matters
—
—
—
5
1
4
As adjusted
$
4,381
$
4,399
$
(18
)
$
747
$
562
$
185
Foreign Exchange Rates
Average foreign exchange rates used in the calculation of the
impact of foreign currency fluctuations for each of the three month
periods in the six months ended December 31, 2020 and 2019 are as
follows:
Fiscal Year 2021
Q1
Q2
U.S. Dollar per Australian Dollar
$0.71
$0.73
U.S. Dollar per British Pound Sterling
$1.29
$1.32
Fiscal Year 2020
Q1
Q2
U.S. Dollar per Australian Dollar
$0.69
$0.68
U.S. Dollar per British Pound Sterling
$1.23
$1.29
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and six months ended December 31, 2020 and 2019 are as
follows:
For the three months ended
December 31,
2020
2019
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
Digital Real Estate Services
$
327
$
294
11
%
Subscription Video Services
478
501
(5
)
%
Dow Jones
443
429
3
%
Book Publishing
526
441
19
%
News Media
550
604
(9
)
%
Other
—
—
—
%
Adjusted Total Revenues
$
2,324
$
2,269
2
%
Adjusted Segment EBITDA:
Digital Real Estate Services
$
141
$
118
19
%
Subscription Video Services
116
70
66
%
Dow Jones
108
76
42
%
Book Publishing
101
63
60
%
News Media
64
61
5
%
Other
(44
)
(38
)
(16
)
%
Adjusted Total Segment EBITDA
$
486
$
350
39
%
For the six months ended December
31,
2020
2019
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
Digital Real Estate Services
$
611
$
566
8
%
Subscription Video Services
954
1,015
(6
)
%
Dow Jones
828
811
2
%
Book Publishing
971
846
15
%
News Media
1,017
1,161
(12
)
%
Other
—
—
—
%
Adjusted Total Revenues
$
4,381
$
4,399
—
%
Adjusted Segment EBITDA:
Digital Real Estate Services
$
257
$
201
28
%
Subscription Video Services
190
151
26
%
Dow Jones
180
125
44
%
Book Publishing
170
112
52
%
News Media
42
56
(25
)
%
Other
(92
)
(83
)
(11
)
%
Adjusted Total Segment EBITDA
$
747
$
562
33
%
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the three and six months ended December 31, 2020 and
2019:
For the three months ended
December 31, 2020
As Reported
Impact of Acquisitions
Impact of Divestitures
Impact of Foreign Currency
Fluctuations
Net Impact of U.K. Newspaper
Matters
As Adjusted
(in millions)
Revenues:
Digital Real Estate Services
$
339
$
—
$
—
$
(12
)
$
—
$
327
Subscription Video Services
511
—
—
(33
)
—
478
Dow Jones
446
—
—
(3
)
—
443
Book Publishing
544
(13
)
—
(5
)
—
526
News Media
573
(1
)
—
(22
)
—
550
Other
1
—
(1
)
—
—
—
Total Revenues
$
2,414
$
(14
)
$
(1
)
$
(75
)
$
—
$
2,324
Segment EBITDA:
Digital Real Estate Services
$
142
$
6
$
—
$
(7
)
$
—
$
141
Subscription Video Services
124
—
—
(8
)
—
116
Dow Jones
109
—
—
(1
)
—
108
Book Publishing
104
(3
)
—
—
—
101
News Media
66
—
—
(2
)
—
64
Other
(48
)
—
1
—
3
(44
)
Total Segment EBITDA
$
497
$
3
$
1
$
(18
)
$
3
$
486
For the three months ended
December 31, 2019
As Reported
Impact of Acquisitions
Impact of Divestitures
Impact of Foreign Currency
Fluctuations
Net Impact of U.K. Newspaper
Matters
As Adjusted
(in millions)
Revenues:
Digital Real Estate Services
$
294
$
—
$
—
$
—
$
—
$
294
Subscription Video Services
501
—
—
—
—
501
Dow Jones
430
—
(1
)
—
—
429
Book Publishing
442
—
(1
)
—
—
441
News Media
811
—
(207
)
—
—
604
Other
1
—
(1
)
—
—
—
Total Revenues
$
2,479
$
—
$
(210
)
$
—
$
—
$
2,269
Segment EBITDA:
Digital Real Estate Services
$
118
$
—
$
—
$
—
$
—
$
118
Subscription Video Services
70
—
—
—
—
70
Dow Jones
76
—
—
—
—
76
Book Publishing
63
—
—
—
—
63
News Media
66
—
(5
)
—
—
61
Other
(38
)
—
1
—
(1
)
(38
)
Total Segment EBITDA
$
355
$
—
$
(4
)
$
—
$
(1
)
$
350
For the six months ended December
31, 2020
As Reported
Impact of Acquisitions
Impact of Divestitures
Impact of Foreign Currency
Fluctuations
Net Impact of U.K. Newspaper
Matters
As Adjusted
(in millions)
Revenues:
Digital Real Estate Services
$
629
$
—
$
—
$
(18
)
$
—
$
611
Subscription Video Services
1,007
—
—
(53
)
—
954
Dow Jones
832
—
—
(4
)
—
828
Book Publishing
1,002
(22
)
—
(9
)
—
971
News Media
1,060
(2
)
—
(41
)
—
1,017
Other
1
—
(1
)
—
—
—
Total Revenues
$
4,531
$
(24
)
$
(1
)
$
(125
)
$
—
$
4,381
Segment EBITDA:
Digital Real Estate Services
$
261
$
6
$
—
$
(10
)
$
—
$
257
Subscription Video Services
202
—
—
(12
)
—
190
Dow Jones
181
—
—
(1
)
—
180
Book Publishing
175
(4
)
—
(1
)
—
170
News Media
44
—
—
(2
)
—
42
Other
(98
)
—
1
—
5
(92
)
Total Segment EBITDA
$
765
$
2
$
1
$
(26
)
$
5
$
747
For the six months ended December
31, 2019
As Reported
Impact of Acquisitions
Impact of Divestitures
Impact of Foreign Currency
Fluctuations
Net Impact of U.K. Newspaper
Matters
As Adjusted
(in millions)
Revenues:
Digital Real Estate Services
$
566
$
—
$
—
$
—
$
—
$
566
Subscription Video Services
1,015
—
—
—
—
1,015
Dow Jones
812
—
(1
)
—
—
811
Book Publishing
847
—
(1
)
—
—
846
News Media
1,578
—
(417
)
—
—
1,161
Other
1
—
(1
)
—
—
—
Total Revenues
$
4,819
$
—
$
(420
)
$
—
$
—
$
4,399
Segment EBITDA:
Digital Real Estate Services
$
200
$
—
$
1
$
—
$
—
$
201
Subscription Video Services
151
—
—
—
—
151
Dow Jones
125
—
—
—
—
125
Book Publishing
112
—
—
—
—
112
News Media
73
—
(17
)
—
—
56
Other
(85
)
—
1
—
1
(83
)
Total Segment EBITDA
$
576
$
—
$
(15
)
$
—
$
1
$
562
NOTE 3 – ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO NEWS
CORPORATION STOCKHOLDERS AND ADJUSTED EPS
The Company uses net income (loss) attributable to News
Corporation stockholders and diluted earnings per share (“EPS”)
excluding expenses related to U.K. Newspaper Matters, impairment
and restructuring charges and “Other, net”, net of tax, recognized
by the Company or its equity method investees, as well as the
settlement of certain pre-Separation tax matters (“adjusted net
income (loss) attributable to News Corporation stockholders” and
“adjusted EPS,” respectively), to evaluate the performance of the
Company’s operations exclusive of certain items that impact the
comparability of results from period to period, as well as certain
non-operational items. The calculation of adjusted net income
(loss) attributable to News Corporation stockholders and adjusted
EPS may not be comparable to similarly titled measures reported by
other companies, since companies and investors may differ as to
what type of events warrant adjustment. Adjusted net income (loss)
attributable to News Corporation stockholders and adjusted EPS are
not measures of performance under generally accepted accounting
principles and should not be construed as substitutes for
consolidated net income (loss) attributable to News Corporation
stockholders and net income (loss) per share as determined under
GAAP as a measure of performance. However, management uses these
measures in comparing the Company’s historical performance and
believes that they provide meaningful and comparable information to
investors to assist in their analysis of our performance relative
to prior periods and our competitors.
The following tables reconcile reported net income (loss)
attributable to News Corporation stockholders and reported diluted
EPS to adjusted net income attributable to News Corporation
stockholders and adjusted EPS for the three and six months ended
December 31, 2020 and 2019:
For the three months ended
December 31, 2020
For the three months ended
December 31, 2019
(in millions, except per share data)
Net income attributable to
stockholders
EPS
Net income attributable to
stockholders
EPS
Net income
$
261
$
103
Less: Net income attributable to
noncontrolling interests
(30
)
(18
)
Net income attributable to News
Corporation stockholders
$
231
$
0.39
$
85
$
0.14
U.K. Newspaper Matters
3
0.01
(1
)
—
Impairment and restructuring charges
23
0.04
29
0.05
Other, net
(54
)
(0.10
)
(2
)
—
Tax impact on items above
(2
)
—
(5
)
(0.01
)
Impact of noncontrolling interest on items
above
(1
)
—
(1
)
—
As adjusted
$
200
$
0.34
$
105
$
0.18
For the six months ended December
31, 2020
For the six months ended December
31, 2019
(in millions, except per share data)
Net income attributable to
stockholders
EPS
Net (loss) income attributable to
stockholders
EPS
Net income (loss)
$
308
$
(108
)
Less: Net income attributable to
noncontrolling interests
(43
)
(34
)
Net income (loss) attributable to News
Corporation stockholders
$
265
$
0.45
$
(142
)
$
(0.24
)
U.K. Newspaper Matters
5
0.01
1
—
Impairment and restructuring
charges(a)
63
0.10
326
0.55
Other, net
(71
)
(0.12
)
(6
)
(0.01
)
Tax impact on items above
(12
)
(0.02
)
(46
)
(0.08
)
Impact of noncontrolling interest on items
above
(2
)
—
(2
)
—
As adjusted
$
248
$
0.42
$
131
$
0.22
(a)
During the six months ended December 31,
2019, the Company recognized $292 million of non-cash impairment
charges, primarily at News America Marketing.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210204006066/en/
Investor Relations Michael Florin
212-416-3363 mflorin@newscorp.com Leslie Kim 212-416-4529
lkim@newscorp.com Corporate
Communications Jim Kennedy 212-416-4064
jkennedy@newscorp.com
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