Fiscal 2020 Second Quarter Key
Financial Highlights
- Revenues were $2.48 billion, a 6% decline compared to $2.63
billion in the prior year
- Net income was $103 million compared to $119 million in the
prior year
- Total Segment EBITDA was $355 million compared to $370 million
in the prior year
- Reported diluted EPS were $0.14 compared to $0.16 in the prior
year – Adjusted EPS were $0.18, flat with the prior year
- Completed the sale of Unruly to Tremor International in
January
- Dow Jones results reflected 17% growth in digital-only
subscribers, continued strength in Risk and Compliance
- News UK saw growth in advertising revenues and contributed to
strong Segment EBITDA growth at the News and Information Services
segment
- Profitability contribution from Move, operator of realtor.com®,
increased while the referral model continues to show promising
signs with improvement in close rates and other key metrics
News Corporation (“News Corp” or the “Company”) (Nasdaq: NWS,
NWSA; ASX: NWS, NWSLV) today reported financial results for the
three months ended December 31, 2019.
Commenting on the results, Chief Executive Robert Thomson
said:
“In the second quarter of Fiscal 2020, News Corp saw growth at
several of our news businesses and an increased profit contribution
from Move, operator of realtor.com®. The results were affected by a
sluggish Australian economy, uncharacteristic softness in book
publishing, and foreign exchange fluctuations. We expect
improvement in the second half as real estate markets show signs of
gradual recovery, Dow Jones benefits from new content licensing
arrangements and higher digital subscribers, and HarperCollins
capitalizes on an exciting slate of new releases.
Our News and Information Services segment posted notably higher
profitability driven by a strong increase at News UK as well as
continued growth at Dow Jones, where consumer subscriptions
recently reached a record 3.5 million, including two million
digital-only subscribers at The Wall Street Journal. I would
particularly like to highlight the Risk and Compliance business,
which is flourishing, with over 20 percent revenue growth for the
twelfth consecutive quarter. Client companies are wisely seeking to
minimize risk and maximize compliance.
We are seeing significant progress in our long battle for
equitable treatment from the dominant tech platforms, and our deals
with Apple and Facebook are beginning to yield financial dividends.
The Company took important steps on the path toward simplification
with the sale of Unruly, the ad tech business, while we are engaged
in negotiations for the sale of News America Marketing. We believe
that increasing investor focus on the core growth sectors, whether
Risk and Compliance or Digital Real Estate, will be to the
advantage of our shareholders.”
SECOND QUARTER RESULTS
The Company reported fiscal 2020 second quarter total revenues
of $2.48 billion, 6% lower compared to $2.63 billion in the prior
year period. The decline reflects a $50 million, or 2%, negative
impact from foreign currency fluctuations. The rest of the decline
primarily reflects the difficult prior year comparison at the Book
Publishing segment, lower subscription revenues at Foxtel, lower
print-related advertising revenues at the News and Information
Services segment and continued pressure at REA Group due to
challenges in the Australian housing market. The declines were
partially offset by continued growth in circulation and
subscription revenues at the News and Information Services segment.
Adjusted Revenues (which exclude the foreign currency impact,
acquisitions and divestitures as defined in Note 2) declined
4%.
Net income for the quarter was $103 million, a 13% decline
compared to $119 million in the prior year, primarily reflecting
lower Total Segment EBITDA, as discussed below.
The Company reported second quarter Total Segment EBITDA of $355
million, a 4% decline compared to $370 million in the prior year,
primarily reflecting lower revenues, as discussed above, and a $10
million, or 3%, negative impact from foreign currency fluctuations.
Adjusted Total Segment EBITDA (as defined in Note 2) decreased
3%.
Diluted net income per share attributable to News Corporation
stockholders was $0.14 as compared to $0.16 in the prior year.
Adjusted EPS (as defined in Note 3) were $0.18, flat with the
prior year.
SEGMENT REVIEW
For the three months ended
For the six months ended
December 31,
December 31,
2019
2018
% Change
2019
2018
% Change
(in millions)
Better/
(Worse)
(in millions)
Better/
(Worse)
Revenues:
News and Information Services
$
1,241
$
1,257
(1
)
%
$
2,390
$
2,505
(5
)
%
Subscription Video Services
501
562
(11
)
%
1,015
1,127
(10
)
%
Book Publishing
442
496
(11
)
%
847
914
(7
)
%
Digital Real Estate Services
294
311
(5
)
%
566
604
(6
)
%
Other
1
1
-
1
1
-
Total Revenues
$
2,479
$
2,627
(6
)
%
$
4,819
$
5,151
(6
)
%
Segment EBITDA:
News and Information Services
$
142
$
112
27
%
$
198
$
221
(10
)
%
Subscription Video Services
70
84
(17
)
%
151
197
(23
)
%
Book Publishing
63
88
(28
)
%
112
156
(28
)
%
Digital Real Estate Services
118
121
(2
)
%
200
226
(12
)
%
Other
(38
)
(35
)
(9
)
%
(85
)
(72
)
(18
)
%
Total Segment EBITDA
$
355
$
370
(4
)
%
$
576
$
728
(21
)
%
News and Information Services
Revenues in the quarter decreased $16 million, or 1%, as
compared to the prior year, reflecting a $15 million, or 1%,
negative impact from foreign currency fluctuations. Within the
segment, Dow Jones and News UK revenues grew 4% and 2%,
respectively, while revenues at News Corp Australia and News
America Marketing declined 9% and 4%, respectively.
Circulation and subscription revenues increased 3% compared to
the prior year, which includes a $6 million, or 1%, negative impact
from foreign currency fluctuations. Circulation and subscription
revenues again benefited from a healthy contribution from Dow
Jones’ consumer products, which saw a 5% increase in circulation
revenues, reflecting 17% digital paid subscriber growth and
subscription price increases. Dow Jones’ consumer products reached
3.4 million total subscribers, reflecting an 8% increase compared
to the prior year. The results also reflect an 8% increase in
revenues at Dow Jones’ Professional Information Business, which
benefited from 21% growth in its Risk & Compliance products.
Price increases and digital subscriber growth at other mastheads
also contributed to the results. These increases were largely
offset by lower print volume in Australia and the U.K.
Advertising revenues declined 5% compared to the prior year, of
which $7 million, or 1%, was related to the negative impact from
foreign currency fluctuations. The remainder of the decline was
driven by weakness in the print advertising market, primarily in
Australia, and lower home delivered revenues, which include
free-standing insert products, at News America Marketing. The
declines were mitigated by growth at News UK, led by strong digital
advertising growth at The Sun. Advertising revenues at Dow Jones
declined 5% in the quarter. Digital revenues represented 43% of
total Dow Jones advertising revenues in the quarter.
Segment EBITDA increased $30 million in the quarter, or 27%, as
compared to the prior year, benefiting from a $22 million one-time
benefit from the settlement of certain warranty related claims
pertaining to previously incurred and ongoing repairs and
maintenance costs for News UK’s printing business. The results also
reflect higher contribution from News UK, resulting from cost
savings, and from Dow Jones, as well as lower losses at the New
York Post. The improvement was partially offset by the lower
revenues at News Corp Australia and News America Marketing
referenced above.
Digital revenues represented 36% of News and Information
Services segment revenues in the quarter, compared to 32% in the
prior year. For the quarter, digital revenues for Dow Jones and the
newspaper mastheads represented 39% of their combined revenues, and
at Dow Jones, digital accounted for 57% of its circulation
revenues. Digital subscribers and users across key properties
within the News and Information Services segment are summarized
below:
- The Wall Street Journal average daily digital subscribers in
the three months ended December 31, 2019 were 1,929,000, compared
to 1,709,000 in the prior year (Source: Internal data)
- Closing digital subscribers at News Corp Australia’s mastheads
as of December 31, 2019 were 566,600, compared to 460,300 in the
prior year (Source: Internal data)
- The Times and Sunday Times closing digital subscribers as of
December 31, 2019 were 320,000, compared to 269,000 in the prior
year (Source: Internal data)
- The Sun’s digital offering reached approximately 140 million
global monthly unique users in December 2019 (Source: Google
Analytics; prior year comparable statistic unavailable due to
source change)
Subscription Video Services
Revenues in the quarter decreased $61 million, or 11%, compared
with the prior year, of which $25 million, or 5%, was due to the
negative impact from foreign currency fluctuations. Adjusted
Revenues for the segment decreased 6% compared to the prior year.
The remainder of the revenue decline was driven by the impact from
lower broadcast subscribers and changes in the subscriber package
mix, partially offset by higher revenues from Foxtel’s OTT
products, Kayo, which launched in November 2018, and Foxtel
Now.
As of December 31, 2019, Foxtel’s total closing subscribers were
2.952 million, an increase of 3% compared to the prior year,
primarily due to subscriber growth at Kayo, partially offset by
lower broadcast subscribers. 2.268 million of the total closing
subscribers were broadcast and commercial subscribers, and the
remainder consisted of Foxtel Now and Kayo subscribers. As of
December 31, 2019, there were 372,000 Kayo subscribers, of which
350,000 were paying subscribers, compared to 72,000 subscribers
(42,000 paying) in the prior year. As of February 5th, there were
more than 370,000 paying Kayo subscribers. As of December 31, 2019,
there were 343,000 Foxtel Now subscribers, of which 334,000 were
paying subscribers, compared to 358,000 subscribers (354,000
paying) in the prior year.
Broadcast subscriber churn in the quarter was 16.0% compared to
15.6% in the prior year, due to increased volume of churn from
lower-value customers on expiring contracts in wholesale channels,
partially offset by improvements at the Foxtel retail channel.
Broadcast ARPU for the quarter declined 1% compared to the prior
year to over A$77 (US$53), primarily due to the changes in the
subscriber package mix.
Segment EBITDA in the quarter decreased $14 million, or 17%,
compared with the prior year, primarily due to lower revenues,
partially offset by lower total costs, including programming and
transmission costs. Adjusted Segment EBITDA (as defined in Note 2)
decreased 12%.
Book Publishing
Revenues in the quarter declined $54 million, or 11%, compared
to the prior year, of which foreign currency fluctuations had a
negative impact of $2 million, or 1%. The revenue decline was
primarily due to the difficult comparisons to the prior year, which
had higher sales of Homebody: A Guide to Creating Spaces You Never
Want to Leave by Joanna Gaines, Girl, Wash Your Face by Rachel
Hollis, The Hate U Give by Angie Thomas and The Subtle Art of Not
Giving a F*ck by Mark Manson. The decline was partially offset by
the success of The Pioneer Woman Cooks: The New Frontier by Ree
Drummond and The Beast of Buckingham Palace by David Walliams.
Digital sales increased 5% compared to the prior year, primarily
due to growth in downloadable audiobooks, and represented 19% of
Consumer revenues for the quarter. Segment EBITDA for the quarter
declined $25 million, or 28%, from the prior year, primarily due to
the lower revenues noted above and the different mix of titles.
Digital Real Estate Services
Revenues in the quarter declined $17 million, or 5%, compared to
the prior year, of which foreign currency fluctuations had a
negative impact of $8 million, or 2%. Segment EBITDA in the quarter
declined $3 million, or 2%, compared to the prior year, primarily
due to the $5 million negative impact from foreign currency
fluctuations, as lower revenues at REA Group were more than offset
by lower costs at Move. Adjusted Revenues declined 3% and Adjusted
Segment EBITDA increased 2%.
In the quarter, revenues at REA Group decreased 8% to $173
million from $189 million in the prior year, primarily due to the
negative impact from foreign currency fluctuations, lower revenues
associated with declines in listing volumes and fewer new project
launches, partially offset by higher yield and improved product mix
in the residential business.
Move’s revenues in the quarter decreased 1% to $121 million from
$122 million in the prior year, primarily due to lower revenues
from software and services. The decline was partially offset by 4%
growth in its real estate revenues, which represented 82% of total
Move revenues, reflecting growth in audience and higher lead
volume, as well as higher revenues from Local Expert. Realtor.com®
continued to migrate leads from its ConnectionsSM Plus product to
its performance-based Opcity product, which resulted in a delay in
the timing of revenue recognition. Move continues to see
improvements in all key metrics with the Opcity product, including
close rates. Based on Move’s internal data, average monthly unique
users of realtor.com®’s web and mobile sites for the fiscal second
quarter grew 9% year-over-year to approximately 59 million, with
mobile representing more than half of all unique users.
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,
2019
2018
(in millions)
Net cash provided by operating
activities
$
192
$
358
Less: Capital expenditures
(237
)
(264
)
(45
)
94
Less: REA Group free cash flow
(86
)
(105
)
Plus: Cash dividends received from REA
Group
35
37
Free cash flow available to News
Corporation
$
(96
)
$
26
Net cash provided by operating activities of $192 million for
the six months ended December 31, 2019 was $166 million lower than
$358 million in the prior year period, primarily due to lower Total
Segment EBITDA as noted above and lower cash distributions received
from affiliates of $22 million.
Free cash flow available to News Corporation in the six months
ended December 31, 2019 was $(96) million compared to $26 million
in the prior year period. The decline was primarily due to lower
cash provided by operating activities, as mentioned above,
partially offset by lower capital expenditures. Foxtel’s capital
expenditures for the six months ended December 31, 2019 were $129
million, compared to $139 million in the prior year period. Free
cash flow available to News Corporation has typically been higher
in the second half of the fiscal 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
Subsequent Events
In January 2020, the Company sold Unruly to Tremor International
Ltd (“Tremor”) for approximately 7% of Tremor’s outstanding shares.
The transaction is subject to certain cash adjustments, and the
Company agreed not to sell the Tremor shares for a period of 18
months after closing. At closing, the Company and Tremor entered
into a three year commercial arrangement which granted Tremor the
exclusive right to sell outstream video advertising on all of the
Company’s digital properties in exchange for a total minimum
revenue guarantee for News Corp of £30 million.
In February 2020, Foxtel and certain of its subsidiaries entered
into a subordinated shareholder loan facility agreement (the
“Telstra Facility”) with Telstra, an Australian Securities
Exchange-listed telecommunications company which owns a 35%
interest in Foxtel. The Telstra Facility provides Foxtel with up to
A$170 million that can be used to finance cable transmission costs
due to Telstra under a services arrangement between Foxtel and
Telstra. The Telstra Facility bears interest at a variable rate of
Australian BBSY plus an applicable margin of 7.75% and matures in
December 2027. The terms of the Telstra Facility allow for the
capitalization of accrued interest to the principal
outstanding.
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 15, 2020 to stockholders of record as
of March 11, 2020.
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
5:30pm EST on February 6, 2020. 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, the Company’s strategy and strategic initiatives,
including potential acquisitions, investments and dispositions such
as the strategic review and potential sale of NAM, 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 changes in global economic, business,
competitive market, regulatory and other factors. More detailed
information about these 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: news and information services,
subscription video services in Australia, book publishing and
digital real estate services. 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
For the six months ended
December 31,
December 31,
2019
2018
2019
2018
Revenues:
Circulation and subscription
$
990
$
1,029
$
1,985
$
2,063
Advertising
677
718
1,285
1,382
Consumer
421
478
808
878
Real estate
242
248
460
475
Other
149
154
281
353
Total Revenues
2,479
2,627
4,819
5,151
Operating expenses
(1,350
)
(1,484
)
(2,687
)
(2,824
)
Selling, general and administrative
(774
)
(773
)
(1,556
)
(1,599
)
Depreciation and amortization
(162
)
(163
)
(324
)
(326
)
Impairment and restructuring charges
(29
)
(19
)
(326
)
(37
)
Equity losses of affiliates
(3
)
(6
)
(5
)
(9
)
Interest expense, net
(8
)
(15
)
(4
)
(31
)
Other, net
2
7
6
27
Income (loss) before income tax
expense
155
174
(77
)
352
Income tax expense
(52
)
(55
)
(31
)
(105
)
Net income (loss)
103
119
(108
)
247
Less: Net income attributable to
noncontrolling interests
(18
)
(24
)
(34
)
(51
)
Net income (loss) attributable to News
Corporation stockholders
$
85
$
95
$
(142
)
$
196
Weighted average shares outstanding:
Basic
588
585
587
584
Diluted
590
587
587
586
Net income (loss) attributable to News
Corporation stockholders per share - basic
$
0.15
$
0.16
$
(0.24
)
$
0.34
Net income (loss) attributable to News
Corporation stockholders per share - diluted
$
0.14
$
0.16
$
(0.24
)
$
0.33
NEWS CORPORATION
CONSOLIDATED BALANCE
SHEETS
(Unaudited; in
millions)
As of December 31, 2019
As of June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,272
$
1,643
Receivables, net
1,570
1,544
Inventory, net
358
348
Other current assets
518
515
Total current assets
3,718
4,050
Non-current assets:
Investments
325
335
Property, plant and equipment, net
2,476
2,554
Operating lease right-of-use assets
1,299
-
Intangible assets, net
2,257
2,426
Goodwill
4,976
5,147
Deferred income tax assets
283
269
Other non-current assets
948
930
Total assets
$
16,282
$
15,711
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
375
$
411
Accrued expenses
1,072
1,328
Deferred revenue
411
428
Current borrowings
-
449
Other current liabilities
869
724
Total current liabilities
2,727
3,340
Non-current liabilities:
Borrowings
1,201
1,004
Retirement benefit obligations
258
266
Deferred income tax liabilities
268
295
Operating lease liabilities
1,343
-
Other non-current liabilities
358
495
Commitments and contingencies
Equity:
Class A common stock
4
4
Class B common stock
2
2
Additional paid-in capital
12,183
12,243
Accumulated deficit
(2,114
)
(1,979
)
Accumulated other comprehensive loss
(1,117
)
(1,126
)
Total News Corporation stockholders'
equity
8,958
9,144
Noncontrolling interests
1,169
1,167
Total equity
10,127
10,311
Total liabilities and equity
$
16,282
$
15,711
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited; in millions)
For the six months ended
December 31,
2019
2018
Operating activities:
Net (loss) income
$
(108
)
$
247
Adjustments to reconcile net (loss) income
to cash provided by operating activities:
Depreciation and amortization
324
326
Operating lease expense
86
-
Equity losses of affiliates
5
9
Cash distributions received from
affiliates
5
27
Impairment charges
292
-
Other, net
(6
)
(27
)
Deferred income taxes and taxes
payable
(35
)
40
Change in operating assets and
liabilities, net of acquisitions:
Receivables and other assets
(1,661
)
(140
)
Inventories, net
3
(43
)
Accounts payable and other liabilities
1,287
(81
)
Net cash provided by operating
activities
192
358
Investing activities:
Capital expenditures
(237
)
(264
)
Acquisitions, net of cash acquired
(2
)
(185
)
Investments in equity affiliates and
other
(8
)
(13
)
Proceeds from business dispositions
-
5
Proceeds from property, plant and
equipment and other asset dispositions
10
32
Other, net
3
16
Net cash used in investing activities
(234
)
(409
)
Financing activities:
Borrowings
917
263
Repayment of borrowings
(1,161
)
(470
)
Dividends paid
(81
)
(81
)
Other, net
(3
)
(45
)
Net cash used in financing activities
(328
)
(333
)
Net change in cash and cash
equivalents
(370
)
(384
)
Cash and cash equivalents, beginning of
period
1,643
2,034
Exchange movement on opening cash
balance
(1
)
(32
)
Cash and cash equivalents, end of
period
$
1,272
$
1,618
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 months ended
December 31,
2019
2018
Change
% Change
(in millions)
Net income
$
103
$
119
$
(16
)
(13
)
%
Add:
Income tax expense
52
55
(3
)
(5
)
%
Other, net
(2
)
(7
)
5
71
%
Interest expense, net
8
15
(7
)
(47
)
%
Equity losses of affiliates
3
6
(3
)
(50
)
%
Impairment and restructuring charges
29
19
10
53
%
Depreciation and amortization
162
163
(1
)
(1
)
%
Total Segment EBITDA
$
355
$
370
$
(15
)
(4
)
%
For the six months ended December
31,
2019
2018
Change
% Change
(in millions)
Net (loss) income
$
(108
)
$
247
$
(355
)
**
Add:
Income tax expense
31
105
(74
)
(70
)
%
Other, net
(6
)
(27
)
21
78
%
Interest expense, net
4
31
(27
)
(87
)
%
Equity losses of affiliates
5
9
(4
)
(44
)
%
Impairment and restructuring charges
326
37
289
**
Depreciation and amortization
324
326
(2
)
(1
)
%
Total Segment EBITDA
$
576
$
728
$
(152
)
(21
)
%
** - 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, 2019
and 2018.
Revenues
Total Segment EBITDA
For the three months ended
For the three months ended
December 31,
December 31,
2019
2018
Difference
2019
2018
Difference
(in millions)
(in millions)
As reported
$
2,479
$
2,627
$
(148
)
$
355
$
370
$
(15
)
Impact of acquisitions
(5
)
-
(5
)
(2
)
-
(2
)
Impact of divestitures
-
(5
)
5
-
-
-
Impact of foreign currency
fluctuations
50
-
50
10
-
10
Net impact of U.K. Newspaper Matters
-
-
-
(1
)
4
(5
)
As adjusted
$
2,524
$
2,622
$
(98
)
$
362
$
374
$
(12
)
Revenues
Total Segment EBITDA
For the six months ended
For the six months ended
December 31,
December 31,
2019
2018
Difference
2019
2018
Difference
(in millions)
(in millions)
As reported
$
4,819
$
5,151
$
(332
)
$
576
$
728
$
(152
)
Impact of acquisitions
(21
)
-
(21
)
13
-
13
Impact of divestitures
-
(12
)
12
-
(1
)
1
Impact of foreign currency
fluctuations
134
-
134
23
-
23
Net impact of U.K. Newspaper Matters
-
-
-
1
6
(5
)
As adjusted
$
4,932
$
5,139
$
(207
)
$
613
$
733
$
(120
)
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, 2019 and 2018 are as
follows:
Fiscal Year 2020
Q1
Q2
Australian Dollar / U.S. Dollar
0.69
0.68
British Pound Sterling / U.S. Dollar
1.23
1.29
Fiscal Year 2019
Q1
Q2
Australian Dollar / U.S. Dollar
0.73
0.72
British Pound Sterling / U.S. Dollar
1.30
1.29
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and six months ended December 31, 2019 and 2018 are as
follows:
For the three months ended
December 31,
2019
2018
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
News and Information Services
$
1,251
$
1,252
-
Subscription Video Services
526
562
(6
)
%
Book Publishing
444
496
(10
)
%
Digital Real Estate Services
302
311
(3
)
%
Other
1
1
-
Adjusted Total Revenues
$
2,524
$
2,622
(4
)
%
Adjusted Segment EBITDA:
News and Information Services
$
141
$
112
26
%
Subscription Video Services
74
84
(12
)
%
Book Publishing
63
88
(28
)
%
Digital Real Estate Services
123
121
2
%
Other
(39
)
(31
)
(26
)
%
Adjusted Total Segment EBITDA
$
362
$
374
(3
)
%
For the six months ended December
31,
2019
2018
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
News and Information Services
$
2,426
$
2,495
(3
)
%
Subscription Video Services
1,074
1,127
(5
)
%
Book Publishing
854
914
(7
)
%
Digital Real Estate Services
577
602
(4
)
%
Other
1
1
-
Adjusted Total Revenues
$
4,932
$
5,139
(4
)
%
Adjusted Segment EBITDA:
News and Information Services
$
199
$
220
(10
)
%
Subscription Video Services
160
197
(19
)
%
Book Publishing
112
156
(28
)
%
Digital Real Estate Services
226
226
-
Other
(84
)
(66
)
(27
)
%
Adjusted Total Segment EBITDA
$
613
$
733
(16
)
%
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the three months ended December 31, 2019 and
2018.
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:
News and Information Services
$
1,241
$
(5
)
$
-
$
15
$
-
$
1,251
Subscription Video Services
501
-
-
25
-
526
Book Publishing
442
-
-
2
-
444
Digital Real Estate Services
294
-
-
8
-
302
Other
1
-
-
-
-
1
Total Revenues
$
2,479
$
(5
)
$
-
$
50
$
-
$
2,524
Segment EBITDA:
News and Information Services
$
142
$
(2
)
$
-
$
1
$
-
$
141
Subscription Video Services
70
-
-
4
-
74
Book Publishing
63
-
-
-
-
63
Digital Real Estate Services
118
-
-
5
-
123
Other
(38
)
-
-
-
(1
)
(39
)
Total Segment EBITDA
$
355
$
(2
)
$
-
$
10
$
(1
)
$
362
For the three months ended
December 31, 2018
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:
News and Information Services
$
1,257
$
-
$
(5
)
$
-
$
-
$
1,252
Subscription Video Services
562
-
-
-
-
562
Book Publishing
496
-
-
-
-
496
Digital Real Estate Services
311
-
-
-
-
311
Other
1
-
-
-
-
1
Total Revenues
$
2,627
$
-
$
(5
)
$
-
$
-
$
2,622
Segment EBITDA:
News and Information Services
$
112
$
-
$
-
$
-
$
-
$
112
Subscription Video Services
84
-
-
-
-
84
Book Publishing
88
-
-
-
-
88
Digital Real Estate Services
121
-
-
-
-
121
Other
(35
)
-
-
-
4
(31
)
Total Segment EBITDA
$
370
$
-
$
-
$
-
$
4
$
374
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the six months ended December 31, 2019 and 2018.
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:
News and Information Services
$
2,390
$
(14
)
$
-
$
50
$
-
$
2,426
Subscription Video Services
1,015
-
-
59
-
1,074
Book Publishing
847
-
-
7
-
854
Digital Real Estate Services
566
(7
)
-
18
-
577
Other
1
-
-
-
-
1
Total Revenues
$
4,819
$
(21
)
$
-
$
134
$
-
$
4,932
Segment EBITDA:
News and Information Services
$
198
$
(2
)
$
-
$
3
$
-
$
199
Subscription Video Services
151
(1
)
-
10
-
160
Book Publishing
112
-
-
-
-
112
Digital Real Estate Services
200
16
-
10
-
226
Other
(85
)
-
-
-
1
(84
)
Total Segment EBITDA
$
576
$
13
$
-
$
23
$
1
$
613
For the six months ended December
31, 2018
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:
News and Information Services
$
2,505
$
-
$
(10
)
$
-
$
-
$
2,495
Subscription Video Services
1,127
-
-
-
-
1,127
Book Publishing
914
-
-
-
-
914
Digital Real Estate Services
604
-
(2
)
-
-
602
Other
1
-
-
-
-
1
Total Revenues
$
5,151
$
-
$
(12
)
$
-
$
-
$
5,139
Segment EBITDA:
News and Information Services
$
221
$
-
$
(1
)
$
-
$
-
$
220
Subscription Video Services
197
-
-
-
-
197
Book Publishing
156
-
-
-
-
156
Digital Real Estate Services
226
-
-
-
-
226
Other
(72
)
-
-
-
6
(66
)
Total Segment EBITDA
$
728
$
-
$
(1
)
$
-
$
6
$
733
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, 2019 and 2018.
For the three months ended
For the three months ended
December 31, 2019
December 31, 2018
(in millions, except per share data)
Net income attributable to
stockholders
EPS
Net income attributable to
stockholders
EPS
Net income
$
103
$
$
119
$
Less: Net income attributable to
noncontrolling interests
(18
)
(24
)
Net income attributable to News
Corporation stockholders
$
85
$
0.14
$
95
$
0.16
U.K. Newspaper Matters
(1
)
-
4
0.01
Impairment and restructuring charges
29
0.05
19
0.03
Other, net
(2
)
-
(7
)
(0.01
)
Tax impact on items above
(5
)
(0.01
)
(6
)
(0.01
)
Impact of noncontrolling interest on items
above
(1
)
-
(2
)
-
As adjusted
$
105
$
0.18
$
103
$
0.18
For the six months ended
For the six months ended
December 31, 2019
December 31, 2018
(in millions, except per share data)
Net (loss) income available to
stockholders
EPS
Net income available to
stockholders
EPS
Net (loss) income
$
(108
)
$
$
247
$
Less: Net income attributable to
noncontrolling interests
(34
)
(51
)
Net (loss) income available to News
Corporation stockholders
$
(142
)
$
(0.24
)
$
196
$
0.33
U.K. Newspaper Matters
1
-
6
0.01
Impairment and restructuring charges
(a)
326
0.55
37
0.06
Other, net
(6
)
(0.01
)
(27
)
(0.05
)
Tax impact on items above
(46
)
(0.08
)
(10
)
(0.01
)
Impact of noncontrolling interest on items
above
(2
)
-
(2
)
-
As adjusted
$
131
$
0.22
$
200
$
0.34
(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/20200206005972/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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