FISCAL 2020 THIRD QUARTER KEY FINANCIAL
HIGHLIGHTS
- Revenues were $2.27 billion, an 8% decline compared to $2.46
billion in the prior year
- Non-cash impairment charges of $1.1 billion, primarily at
Foxtel and News America Marketing, led to a net loss of ($1)
billion compared to net income of $23 million in the prior
year
- Total Segment EBITDA was $242 million compared to $247 million
in the prior year
- Adjusted Revenues declined 4% and Adjusted Total Segment EBITDA
increased 1%
- Reported EPS were ($1.24) compared to $0.02 in the prior year –
Adjusted EPS were $0.03 compared to $0.04 in the prior year
- Completed the sale of News America Marketing to Charlesbank
Capital Partners on May 5th
- Dow Jones saw 20% growth in digital-only subscribers to over
2.5 million, including 15% growth in digital-only subscribers at
The Wall Street Journal, while experiencing record traffic across
its digital networks
News Corporation (“News Corp” or the “Company”) (Nasdaq: NWS,
NWSA; ASX: NWS, NWSLV) today reported financial results for the
three months ended March 31, 2020.
Commenting on the results, Chief Executive Robert Thomson
said:
“We are operating in a different, difficult time. Every business
and family is facing challenges and our thoughts, in particular,
are for those who are suffering deeply and personally from the
impact of COVID-19.
Our fiscal third quarter results demonstrate the strength of
News Corp and the power of our premium content. We also maintained
a robust balance sheet, with $1.4 billion in cash and cash
equivalents as of March 31st and an untapped $750 million corporate
revolving credit facility, providing a strong foundation for the
Company’s future.
Despite the onset of COVID-19, and particularly volatile,
adverse currency movements, profitability was relatively stable.
Notably, profitability was higher at the News and Information
Services segment, fueled by significant digital advertising and
subscriber growth at Dow Jones, including The Wall Street Journal,
which reached approximately 3 million subscribers in the last week,
a new record, with over 2.2 million that are digital-only.
The sale of News America Marketing was completed on May 5th and
we are continuing to simplify our Company to highlight the
intrinsic value of our core businesses, including the strategic
review of our Australian newspaper holdings, focusing on our larger
brands and our digital reach.
Clearly the pandemic will have an impact on our results in the
Fourth Quarter, but all of our businesses are embarking on
cost-cutting programs intended to deal with short-term need but
also to ensure that the Company is well-equipped to prosper in a
decidedly different business environment after the crisis
abates.
There will obviously be an impact on executive compensation, and
it is worth noting that bonuses are often the largest cash
component for our senior executives. Pay reductions will be led by
our Executive Chairman, Rupert Murdoch, who is voluntarily forgoing
his entire cash bonus for the current fiscal year, and as Chief
Executive I will forgo 75% of my annual cash bonus. The collective
cuts in bonuses and other cost initiatives will have a positive
impact on profitability and our cash position.”
THIRD QUARTER RESULTS
The Company reported fiscal 2020 third quarter total revenues of
$2.27 billion, 8% lower compared to $2.46 billion in the prior year
period. The decline reflects a $78 million, or 3%, negative impact
from foreign currency fluctuations. The rest of the decline
primarily reflects lower print-related advertising revenues at the
News and Information Services segment and lower subscription
revenues at Foxtel. Adjusted Revenues (which exclude the foreign
currency impact, acquisitions and divestitures as defined in Note
2) declined 4%.
Net loss for the quarter was ($1) billion compared to net income
of $23 million in the prior year, reflecting $1.1 billion of
non-cash impairment charges, primarily related to a write-down of
goodwill and indefinite-lived intangible assets at Foxtel and the
reclassification of News America Marketing to assets held for
sale.
The Company reported third quarter Total Segment EBITDA of $242
million, a 2% decline compared to $247 million in the prior year.
The decline reflects a $14 million, or 6%, negative impact from
foreign currency fluctuations. Cost savings at the News and
Information Services segment and lower corporate expenses at the
Other segment largely offset the revenue decline discussed above.
Adjusted Total Segment EBITDA (as defined in Note 2) increased
1%.
Net (loss) income per share attributable to News Corporation
stockholders was ($1.24) as compared to $0.02 in the prior
year.
Adjusted EPS (as defined in Note 3) were $0.03 compared to $0.04
in the prior year.
SEGMENT REVIEW
For the three months ended
For the nine months ended
March 31,
March 31,
2020
2019
% Change
2020
2019
% Change
(in millions)
Better/ (Worse)
(in millions)
Better/ (Worse)
Revenues:
News and Information Services
$
1,130
$
1,224
(8)
%
$
3,520
$
3,729
(6)
%
Subscription Video Services
462
539
(14)
%
1,477
1,666
(11)
%
Book Publishing
412
421
(2)
%
1,259
1,335
(6)
%
Digital Real Estate Services
261
272
(4)
%
827
876
(6)
%
Other
1
1
-
2
2
-
Total Revenues
$
2,266
$
2,457
(8)
%
$
7,085
$
7,608
(7)
%
Segment EBITDA:
News and Information Services
$
75
$
65
15
%
$
273
$
286
(5)
%
Subscription Video Services
68
98
(31)
%
219
295
(26)
%
Book Publishing
55
53
4
%
167
209
(20)
%
Digital Real Estate Services
74
73
1
%
274
299
(8)
%
Other
(30)
(42)
29
%
(115)
(114)
(1)
%
Total Segment EBITDA
$
242
$
247
(2)
%
$
818
$
975
(16)
%
News and Information Services
Revenues in the quarter decreased $94 million, or 8%, as
compared to the prior year, reflecting a $25 million, or 2%,
negative impact from foreign currency fluctuations. Within the
segment, Dow Jones revenues grew 5%, while revenues at News America
Marketing, News Corp Australia and News UK declined 16%, 14% and
9%, respectively. Adjusted Revenues for the segment decreased 5%
compared to the prior year.
Circulation and subscription revenues increased 1% compared to
the prior year, which includes a $10 million, or 2%, negative
impact from foreign currency fluctuations. Circulation and
subscription revenues again benefited from a healthy contribution
from Dow Jones’ consumer products, which saw a 4% increase in
circulation revenues, reflecting 20% growth in digital paid
subscribers and subscription price increases. Dow Jones’ consumer
products reached more than 3.5 million total subscribers,
reflecting a 10% increase compared to the prior year. The results
also reflect a 5% increase in revenues at Dow Jones’ Professional
Information Business, which benefited from 18% growth in its Risk
& Compliance products, and higher revenues from content
licensing partnerships. Price increases and digital subscriber
growth at other mastheads also contributed to the results. These
increases were largely offset by lower print volume across the
businesses.
Advertising revenues declined 14% compared to the prior year, of
which $12 million, or 2%, was related to the negative impact from
foreign currency fluctuations. The remainder of the decline was
driven by weakness in the print advertising market, lower revenues
at News America Marketing and the $14 million estimated negative
impact from the COVID-19 pandemic. The decline was partially offset
by growth in digital advertising. Advertising revenues at Dow Jones
declined 2% in the quarter due to an 18% decline in print
advertising, driven by market weakness across conference and
traditional sales, partially offset by 25% growth in digital
advertising. Advertising revenues represented 22% of total Dow
Jones revenues in the quarter, of which 47% was digital.
Segment EBITDA increased $10 million in the quarter, or 15%, as
compared to the prior year, reflecting higher contribution from Dow
Jones, lower losses at the New York Post and the absence of losses
resulting from the sale of Unruly in January 2020. The improvement
was partially offset by lower contribution from News America
Marketing. Segment EBITDA also included an estimated $11 million
negative impact from the COVID-19 pandemic. Adjusted Segment EBITDA
(as defined in Note 2) increased 4%.
Digital revenues represented 36% of News and Information
Services segment revenues in the quarter, compared to 31% in the
prior year. For the quarter, digital revenues for Dow Jones and the
newspaper mastheads represented 42% of their combined revenues, and
at Dow Jones, digital accounted for 58% 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 March 31, 2020 were 2,041,000, compared to
1,775,000 in the prior year (Source: Internal data)
- Closing digital subscribers at News Corp Australia’s mastheads
as of March 31, 2020 were 613,300, compared to 493,200 in the prior
year (Source: Internal data)
- The Times and Sunday Times closing digital subscribers as of
March 31, 2020 were 345,000, compared to 286,000 in the prior year
(Source: Internal data)
- The Sun’s digital offering reached approximately 164 million
global monthly unique users in March 2020 (Source: Google
Analytics; prior year comparable statistic unavailable due to
source change)
Subscription Video Services
Revenues in the quarter decreased $77 million, or 14%, compared
with the prior year, of which $38 million, or 7%, was due to the
negative impact from foreign currency fluctuations. Adjusted
Revenues for the segment decreased 7% compared to the prior year.
The remainder of the revenue decline was driven by lower
subscription revenues due to fewer broadcast subscribers, partially
offset by higher revenues from Kayo.
As of March 31, 2020, Foxtel’s total closing subscribers were
2.933 million, an increase of 1% compared to the prior year,
primarily due to subscriber growth at Kayo, partially offset by
lower broadcast subscribers. 2.208 million of the total closing
subscribers were residential and commercial broadcast subscribers,
and the remainder consisted of Foxtel Now and Kayo subscribers. As
of March 31, 2020, there were 444,000 Kayo subscribers, of which
408,000 were paying subscribers, compared to 199,000 subscribers
(148,000 paying) in the prior year. As of May 2nd, there were over
272,000 paying Kayo subscribers, which reflects the impact from the
cancellation and/or postponement of sports events as a result of
the COVID-19 pandemic. As of March 31, 2020 there were 338,000
Foxtel Now subscribers, of which 317,000 were paying subscribers,
compared to 357,000 subscribers (348,000 paying) in the prior
year.
Broadcast subscriber churn in the quarter improved to 17.5% from
17.7% in the prior year, primarily driven by improvements at the
Foxtel retail channel, partially offset by increased volume of
churn from lower-value customers on expiring contracts in wholesale
channels. Broadcast ARPU for the quarter was relatively stable at
A$79 (US$52).
Segment EBITDA in the quarter decreased $30 million, or 31%,
compared with the prior year, primarily due to lower revenues,
partially offset by $9 million of lower sports rights and
production costs related to the suspension of sporting events due
to COVID-19 and lower entertainment license fees. Adjusted Segment
EBITDA decreased 24%.
Book Publishing
Revenues in the quarter declined $9 million, or 2%, compared to
the prior year, reflecting a $3 million, or 1%, negative impact
from foreign currency fluctuations. The remainder of the revenue
decline was primarily due to the difficult comparisons to the prior
year, which had higher sales of Rachel Hollis’ titles, partially
offset by the success of new titles such as Open Book by Jessica
Simpson, Find Your Path by Carrie Underwood and Profiles in
Corruption by Peter Schweizer. Digital sales increased 3% compared
to the prior year, primarily due to growth in downloadable
audiobooks, and represented 23% of Consumer revenues for the
quarter. Segment EBITDA for the quarter increased $2 million, or
4%, compared to the prior year, primarily due to the different mix
of titles. Adjusted Segment EBITDA increased 6%.
Digital Real Estate Services
Revenues in the quarter declined $11 million, or 4%, compared to
the prior year, of which foreign currency fluctuations had a
negative impact of $12 million, or 4%. The decline also reflects
the negative impact from the COVID-19 pandemic, primarily at Move,
as discussed below. Segment EBITDA in the quarter increased 1%
compared to the prior year, as an increase in financial services
revenues at REA Group and lower costs were nearly offset by the $7
million, or 10%, negative impact from foreign currency
fluctuations. Adjusted Revenues were flat and Adjusted Segment
EBITDA increased 9%.
In the quarter, revenues at REA Group decreased 5% to $143
million from $151 million in the prior year, primarily due to the
$12 million negative impact from foreign currency fluctuations,
partially offset by higher revenues from its financial services
business.
Move’s revenues in the quarter decreased 2% to $118 million from
$121 million in the prior year, due to an estimated $6 million
negative impact from COVID-19, primarily as a result of the
customer relief measures referenced below, as well as lower
software and services revenue. Real estate revenues, which
represented 81% of total Move revenues, were flat as growth in its
performance-based Opcity product was offset by lower revenues from
its lead generation product resulting from the transfer of leads to
Opcity and customer billing relief measures instituted in March
related to COVID-19. Based on Move’s internal data, average monthly
unique users of realtor.com®’s web and mobile sites for the fiscal
third quarter grew 6% year-over-year to approximately 68
million.
CASH FLOW
The following table presents a reconciliation of net cash
provided by operating activities to free cash flow available to
News Corporation:
For the nine months ended March
31,
2020
2019
(in millions)
Net cash provided by operating
activities
$
462
$
661
Less: Capital expenditures
(335)
(417)
127
244
Less: REA Group free cash flow
(129)
(164)
Plus: Cash dividends received from REA
Group
65
69
Free cash flow available to News
Corporation
$
63
$
149
Net cash provided by operating activities of $462 million for
the nine months ended March 31, 2020 was $199 million lower than
$661 million in the prior year period, primarily due to lower Total
Segment EBITDA as noted above and lower cash distributions received
from affiliates.
Free cash flow available to News Corporation in the nine months
ended March 31, 2020 was $63 million compared to $149 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 nine months ended March 31, 2020 were $171 million,
compared to $223 million in the prior year period. We expect total
capital expenditures in fiscal 2020 to be approximately $435
million, which includes an anticipated 35 to 40% reduction in
capital expenditures at Foxtel. As a result, we continue to expect
that free cash flow available to News Corporation will be 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
COVID-19 Impact
The impact of the COVID-19 pandemic and measures to prevent its
spread have created significant volatility, uncertainty and
economic disruption and are affecting the Company’s businesses in a
number of ways, as detailed in the Company’s Current Report on Form
8-K filed on April 13, 2020. While these effects were not material
to the Company’s results of operations for the three and nine
months ended March 31, 2020, as they began to materialize toward
the end of the quarter, the Company expects a more significant
impact in the fourth quarter of fiscal 2020, particularly as
containment measures in a number of its operating geographies have
been extended into May or beyond. As of the date of this release,
the Company has observed the following effects on its
businesses:
News and Information Services: We have seen, and expect to
continue to see, adverse effects on advertising and single-copy
sales revenues as a result of widespread business closures, social
distancing measures and economic uncertainty. In April, advertising
revenues at Dow Jones declined more than 20% from the prior year,
although digital advertising only declined modestly. Advertising
revenues at News Corp Australia and News UK declined more than 45%,
including an approximately 5% negative impact from foreign currency
fluctuations. We have also continued to see strong growth in
digital subscribers across our key properties in April, including
over 20% year-over-year growth in digital-only subscribers at The
Wall Street Journal.
Subscription Video Services: While broadcast churn in April was
fairly stable, we expect the continued suspension of major sporting
events to adversely impact customer churn going forward and/or
result in fewer subscribers to our sports services in the
near-term, including at Kayo, where we saw a sharp decline in paid
subscribers, as noted above. Closures of pubs and clubs and lower
occupancy at hotels throughout Australia have also adversely
impacted, and are expected to continue to adversely impact,
commercial subscription revenues.
Book Publishing: The retail market continued to be adversely
affected by government restrictions globally. However, online sales
have been strong in recent weeks and e-books have returned to
growth.
Digital Real Estate Services: We have seen, and expect to
continue to see, declines in new listings and real estate
transactions as a result of social distancing measures and business
closures, as well as general economic uncertainty. At REA Group,
national residential listings in April declined 33% from the prior
year. We also expect continued adverse impacts on revenues related
to the proactive billing relief measures for customers.
The Company has taken various steps intended to offset the
impact of COVID-19 by reducing variable costs and implementing
cost-savings initiatives across its businesses. These initiatives
include, but are not limited to, significant reductions in
discretionary spending, non-essential capital expenditures and
headcount, as well as transitioning certain newspaper operations to
digital-only.
The ultimate impact of the COVID-19 pandemic, including the
extent of adverse impacts on the Company’s business, results of
operations and financial condition, is highly uncertain and cannot
be predicted. Additional information regarding risks related to the
COVID-19 pandemic will be addressed in the Form 10-Q for the
quarter ended March 31, 2020.
Subsequent Events
News America Marketing
On March 31, 2020, the Company entered into a definitive
agreement for the sale of its News America Marketing business,
which was completed on May 5, 2020.
REA Group Credit Facility
In April 2020, REA Group entered into a new A$148.5 million
working capital facility and an A$20 million overdraft
facility.
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
5:00pm EDT on May 7, 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, including expected impacts from the recent 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 and spread 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, 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: 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 nine months ended
March 31,
March 31,
2020
2019
2020
2019
Revenues:
Circulation and subscription
$
966
$
1,025
$
2,951
$
3,088
Advertising
576
670
1,861
2,052
Consumer
396
403
1,204
1,281
Real estate
209
218
669
693
Other
119
141
400
494
Total Revenues
2,266
2,457
7,085
7,608
Operating expenses
(1,281)
(1,400)
(3,968)
(4,224)
Selling, general and administrative
(743)
(810)
(2,299)
(2,409)
Depreciation and amortization
(160)
(168)
(484)
(494)
Impairment and restructuring charges
(1,125)
(34)
(1,451)
(71)
Equity losses of affiliates
(7)
(4)
(12)
(13)
Interest expense, net
(9)
(14)
(13)
(45)
Other, net
13
3
19
30
(Loss) income before income tax benefit
(expense)
(1,046)
30
(1,123)
382
Income tax benefit (expense)
10
(7)
(21)
(112)
Net (loss) income
(1,036)
23
(1,144)
270
Less: Net loss (income) attributable to
noncontrolling interests
306
(13)
272
(64)
Net (loss) income attributable to News
Corporation stockholders
$
(730)
$
10
$
(872)
$
206
Weighted average shares outstanding:
Basic
588
585
588
585
Diluted
588
589
588
587
Net (loss) income attributable to News
Corporation stockholders per share - basic and diluted
$
(1.24)
$
0.02
$
(1.48)
$
0.35
NEWS CORPORATION CONSOLIDATED
BALANCE SHEETS (Unaudited; in millions)
As of March 31, 2020
As of June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,388
$
1,643
Receivables, net
1,237
1,544
Inventory, net
363
348
Other current assets
753
515
Total current assets
3,741
4,050
Non-current assets:
Investments
325
335
Property, plant and equipment, net
2,225
2,554
Operating lease right-of-use assets
1,191
-
Intangible assets, net
1,846
2,426
Goodwill
3,831
5,147
Deferred income tax assets
306
269
Other non-current assets
963
930
Total assets
$
14,428
$
15,711
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
342
$
411
Accrued expenses
981
1,328
Deferred revenue
387
428
Current borrowings
-
449
Other current liabilities
979
724
Total current liabilities
2,689
3,340
Non-current liabilities:
Borrowings
1,115
1,004
Retirement benefit obligations
248
266
Deferred income tax liabilities
238
295
Operating lease liabilities
1,249
-
Other non-current liabilities
321
495
Commitments and contingencies
Equity:
Class A common stock
4
4
Class B common stock
2
2
Additional paid-in capital
12,137
12,243
Accumulated deficit
(2,845)
(1,979)
Accumulated other comprehensive loss
(1,466)
(1,126)
Total News Corporation stockholders'
equity
7,832
9,144
Noncontrolling interests
736
1,167
Total equity
8,568
10,311
Total liabilities and equity
$
14,428
$
15,711
NEWS CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited; in millions)
For the nine months ended
March 31,
2020
2019
Operating activities:
Net (loss) income
$
(1,144)
$
270
Adjustments to reconcile net (loss) income
to cash provided by operating activities:
Depreciation and amortization
484
494
Operating lease expense
128
-
Equity losses of affiliates
12
13
Cash distributions received from
affiliates
7
30
Impairment charges
1,398
9
Other, net
(19)
(30)
Deferred income taxes and taxes
payable
(67)
22
Change in operating assets and
liabilities, net of acquisitions:
Receivables and other assets
(1,593)
37
Inventories, net
(47)
(74)
Accounts payable and other liabilities
1,303
(110)
Net cash provided by operating
activities
462
661
Investing activities:
Capital expenditures
(335)
(417)
Acquisitions, net of cash acquired
(2)
(187)
Investments in equity affiliates and
other
4
(36)
Proceeds from business dispositions
(7)
50
Proceeds from property, plant and
equipment and other asset dispositions
10
49
Other, net
3
18
Net cash used in investing activities
(327)
(523)
Financing activities:
Borrowings
925
450
Repayment of borrowings
(1,161)
(801)
Dividends paid
(100)
(102)
Other, net
(5)
(48)
Net cash used in financing activities
(341)
(501)
Net change in cash and cash equivalents,
including cash classified within current assets held for sale
(206)
(363)
Less: Net change in cash classified within
current assets held for sale
(10)
-
Cash and cash equivalents, beginning of
period
1,643
2,034
Exchange movement on opening cash
balance
(39)
(23)
Cash and cash equivalents, end of
period
$
1,388
$
1,648
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 (loss)
income to Total Segment EBITDA.
For the three months ended March
31,
2020
2019
Change
% Change
(in millions)
Net (loss) income
$
(1,036)
$
23
$
(1,059)
**
Add:
Income tax (benefit) expense
(10)
7
(17)
**
Other, net
(13)
(3)
(10)
**
Interest expense, net
9
14
(5)
(36)
%
Equity losses of affiliates
7
4
3
75
%
Impairment and restructuring charges
1,125
34
1,091
**
Depreciation and amortization
160
168
(8)
(5)
%
Total Segment EBITDA
$
242
$
247
$
(5)
(2)
%
** - Not meaningful
For the nine months ended March
31,
2020
2019
Change
% Change
(in millions)
Net (loss) income
$
(1,144)
$
270
$
(1,414)
**
Add:
Income tax expense
21
112
(91)
(81)
%
Other, net
(19)
(30)
11
37
%
Interest expense, net
13
45
(32)
(71)
%
Equity losses of affiliates
12
13
(1)
(8)
%
Impairment and restructuring charges
1,451
71
1,380
**
Depreciation and amortization
484
494
(10)
(2)
%
Total Segment EBITDA
$
818
$
975
$
(157)
(16)
%
** - 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 nine months ended March 31, 2020
and 2019.
Revenues
Total Segment EBITDA
For the three months ended
For the three months ended
March 31,
March 31,
2020
2019
Difference
2020
2019
Difference
(in millions)
(in millions)
As reported
$
2,266
$
2,457
$
(191)
$
242
$
247
$
(5)
Impact of acquisitions
(3)
-
(3)
-
-
-
Impact of divestitures
(1)
(12)
11
1
9
(8)
Impact of foreign currency
fluctuations
78
-
78
14
-
14
Net impact of U.K. Newspaper Matters
-
-
-
4
2
2
As adjusted
$
2,340
$
2,445
$
(105)
$
261
$
258
$
3
Revenues
Total Segment EBITDA
For the nine months ended
For the nine months ended
March 31,
March 31,
2020
2019
Difference
2020
2019
Difference
(in millions)
(in millions)
As reported
$
7,085
$
7,608
$
(523)
$
818
$
975
$
(157)
Impact of acquisitions
(24)
-
(24)
13
-
13
Impact of divestitures
(29)
(52)
23
9
15
(6)
Impact of foreign currency
fluctuations
212
-
212
37
-
37
Net impact of U.K. Newspaper Matters
-
-
-
5
8
(3)
As adjusted
$
7,244
$
7,556
$
(312)
$
882
$
998
$
(116)
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 nine months ended March 31, 2020 and 2019 are as
follows:
Fiscal Year 2020
Q1
Q2
Q3
U.S. Dollar / Australian Dollar
0.69
0.68
0.66
U.S. Dollar / British Pound Sterling
1.23
1.29
1.28
Fiscal Year 2019
Q1
Q2
Q3
U.S. Dollar / Australian Dollar
0.73
0.72
0.71
U.S. Dollar / British Pound Sterling
1.30
1.29
1.30
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and nine months ended March 31, 2020 and 2019 are as
follows:
For the three months ended March
31,
2020
2019
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
News and Information Services
$
1,153
$
1,212
(5)
%
Subscription Video Services
500
539
(7)
%
Book Publishing
415
421
(1)
%
Digital Real Estate Services
271
272
-
Other
1
1
-
Adjusted Total Revenues
$
2,340
$
2,445
(4)
%
Adjusted Segment EBITDA:
News and Information Services
$
76
$
73
4
%
Subscription Video Services
74
98
(24)
%
Book Publishing
56
53
6
%
Digital Real Estate Services
81
74
9
%
Other
(26)
(40)
35
%
Adjusted Total Segment EBITDA
$
261
$
258
1
%
For the nine months ended March
31,
2020
2019
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
News and Information Services
$
3,552
$
3,680
(3)
%
Subscription Video Services
1,574
1,666
(6)
%
Book Publishing
1,269
1,335
(5)
%
Digital Real Estate Services
847
873
(3)
%
Other
2
2
-
Adjusted Total Revenues
$
7,244
$
7,556
(4)
%
Adjusted Segment EBITDA:
News and Information Services
$
282
$
298
(5)
%
Subscription Video Services
234
295
(21)
%
Book Publishing
168
209
(20)
%
Digital Real Estate Services
308
302
2
%
Other
(110)
(106)
(4)
%
Adjusted Total Segment EBITDA
$
882
$
998
(12)
%
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 March 31, 2020 and 2019.
For the three months ended March
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:
News and Information Services
$
1,130
$
(1)
$
(1)
$
25
$
-
$
1,153
Subscription Video Services
462
-
-
38
-
500
Book Publishing
412
-
-
3
-
415
Digital Real Estate Services
261
(2)
-
12
-
271
Other
1
-
-
-
-
1
Total Revenues
$
2,266
$
(3)
$
(1)
$
78
$
-
$
2,340
Segment EBITDA:
News and Information Services
$
75
$
-
$
1
$
-
$
-
$
76
Subscription Video Services
68
-
-
6
-
74
Book Publishing
55
-
-
1
-
56
Digital Real Estate Services
74
-
-
7
-
81
Other
(30)
-
-
-
4
(26)
Total Segment EBITDA
$
242
$
-
$
1
$
14
$
4
$
261
For the three months ended March
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
$
1,224
$
-
$
(12)
$
-
$
-
$
1,212
Subscription Video Services
539
-
-
-
-
539
Book Publishing
421
-
-
-
-
421
Digital Real Estate Services
272
-
-
-
-
272
Other
1
-
-
-
-
1
Total Revenues
$
2,457
$
-
$
(12)
$
-
$
-
$
2,445
Segment EBITDA:
News and Information Services
$
65
$
-
$
8
$
-
$
-
$
73
Subscription Video Services
98
-
-
-
-
98
Book Publishing
53
-
-
-
-
53
Digital Real Estate Services
73
-
1
-
-
74
Other
(42)
-
-
-
2
(40)
Total Segment EBITDA
$
247
$
-
$
9
$
-
$
2
$
258
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the nine months ended March 31, 2020 and 2019.
For the nine months ended March
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:
News and Information Services
$
3,520
$
(15)
$
(28)
$
75
$
-
$
3,552
Subscription Video Services
1,477
-
-
97
-
1,574
Book Publishing
1,259
-
-
10
-
1,269
Digital Real Estate Services
827
(9)
(1)
30
-
847
Other
2
-
-
-
-
2
Total Revenues
$
7,085
$
(24)
$
(29)
$
212
$
-
$
7,244
Segment EBITDA:
News and Information Services
$
273
$
(2)
$
8
$
3
$
-
$
282
Subscription Video Services
219
(1)
-
16
-
234
Book Publishing
167
-
-
1
-
168
Digital Real Estate Services
274
16
1
17
-
308
Other
(115)
-
-
-
5
(110)
Total Segment EBITDA
$
818
$
13
$
9
$
37
$
5
$
882
For the nine months ended March
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
$
3,729
$
-
$
(49)
$
-
$
-
$
3,680
Subscription Video Services
1,666
-
-
-
-
1,666
Book Publishing
1,335
-
-
-
-
1,335
Digital Real Estate Services
876
-
(3)
-
-
873
Other
2
-
-
-
-
2
Total Revenues
$
7,608
$
-
$
(52)
$
-
$
-
$
7,556
Segment EBITDA:
News and Information Services
$
286
$
-
$
12
$
-
$
-
$
298
Subscription Video Services
295
-
-
-
-
295
Book Publishing
209
-
-
-
-
209
Digital Real Estate Services
299
-
3
-
-
302
Other
(114)
-
-
-
8
(106)
Total Segment EBITDA
$
975
$
-
$
15
$
-
$
8
$
998
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 (loss) income
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 nine months ended
March 31, 2020 and 2019.
For the three months ended
For the three months ended
March 31, 2020
March 31, 2019
(in millions, except per share data)
Net (loss) income attributable to
stockholders
EPS
Net income attributable to
stockholders
EPS
Net (loss) income
$
(1,036)
$
$
23
$
Less: Net loss (income) attributable to
noncontrolling interests
306
(13)
Net (loss) income attributable to News
Corporation stockholders
$
(730)
$
(1.24)
$
10
$
0.02
U.K. Newspaper Matters
4
0.01
2
-
Impairment and restructuring
charges(a)
1,125
1.90
34
0.05
Other, net
(13)
(0.02)
(3)
-
Tax impact on items above
(52)
(0.09)
(15)
(0.03)
Impact of noncontrolling interest on items
above
(319)
(0.53)
(2)
-
As adjusted
$
15
$
0.03
$
26
$
0.04
(a)
During the three months ended March 31, 2020, the Company
recognized non-cash impairment charges of $931 million related to
the goodwill and indefinite-lived intangible assets at Foxtel and a
non-cash impairment charge of $175 million as a result of the
reclassification of News America Marketing to assets held for
sale.
For the nine months ended
For the nine months ended
March 31, 2020
March 31, 2019
(in millions, except per share data)
Net (loss) income available to
stockholders
EPS
Net income available to
stockholders
EPS
Net (loss) income
$
(1,144)
$
$
270
$
Less: Net loss (income) attributable to
noncontrolling interests
272
(64)
Net (loss) income available to News
Corporation stockholders
$
(872)
$
(1.48)
$
206
$
0.35
U.K. Newspaper Matters
5
0.01
8
0.01
Impairment and restructuring charges
(a)
1,451
2.46
71
0.12
Other, net
(19)
(0.03)
(30)
(0.05)
Tax impact on items above
(98)
(0.17)
(25)
(0.05)
Impact of noncontrolling interest on items
above
(321)
(0.54)
(4)
-
As adjusted
$
146
$
0.25
$
226
$
0.38
(a)
During the nine months ended March 31, 2020, the Company
recognized non-cash impairment charges of $931 million related to
the goodwill and indefinite-lived intangible assets at Foxtel and a
non-cash impairment charge of $175 million as a result of the
reclassification of News America Marketing to assets held for sale.
During the nine-months ended March 31, 2020, in addition to the
write-down of News America Marketing to fair value less costs to
sell, the Company recognized non-cash impairment charges of $292
million, primarily related to the goodwill and indefinite-lived
intangible assets at News America Marketing.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507006104/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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