FISCAL 2021 FIRST QUARTER KEY FINANCIAL
HIGHLIGHTS
- Revenues were $2.12 billion, a 10% decline compared to $2.34
billion in the prior year, primarily driven by the sale of News
America Marketing
- Net income of $47 million compared to a net loss of $(211)
million in the prior year, which included non-cash impairment
charges of $273 million
- Total Segment EBITDA was $268 million compared to $221
million in the prior year
- Reported EPS were $0.06 compared to $(0.39) in the prior
year – Adjusted EPS were $0.08 compared to $0.04 in the prior
year
- Segment EBITDA at Digital Real Estate Services grew 45%,
with record revenue and profit contribution by Move, operator of
realtor.com®, led by its referral model
- Segment EBITDA at Dow Jones grew 47%, driven by record
average consumer product subscriptions of 3.88 million, led by 29%
growth in digital-only subscriptions
- Book Publishing saw 13% and 45% growth in revenues and
Segment EBITDA, respectively, benefiting from continued strong
performance in digital sales
News Corporation (“News Corp” or the “Company”) (Nasdaq: NWS,
NWSA; ASX: NWS, NWSLV) today reported financial results for the
three months ended September 30, 2020.
Commenting on the results, Chief Executive Robert Thomson
said:
“News Corp has started the fiscal year strongly, with higher
revenue in many of our segments during the first quarter, and a 21
percent increase year-on-year in profitability, despite the
disruptive economic consequences of COVID-19.
Total revenues for the quarter were $2.1 billion, a fall of 10
percent, but that contraction was largely due to the sale of News
America Marketing, and the adjusted decline was 3 percent.
Meanwhile, three of our segments, Dow Jones, Digital Real Estate
Services and Book Publishing, reported year-over-year Segment
EBITDA increases of at least 45 percent, highlighting the success
of our investment strategy in publishing and digital real
estate.
Dow Jones posted a record first quarter in profitability and
higher revenues, thanks to its role as one of the world’s most
trusted providers of business news and analysis. There is undoubted
U.S. and international potential for Dow Jones to expand audiences
and revenues, and the team is pleased by the early returns on a
subscriber offering for the previously free MarketWatch
service.
Digital Real Estate Services flourished, even though property
markets have naturally been unsettled by the pandemic and the
understandable restrictions on home inspections. Move, the operator
of realtor.com®, reported record revenues and profit contribution
for the quarter, and played an important role in our overall
profitability. HarperCollins’ strong results reflected the
importance of savvy commissioning, combined with sensible cost
control.
It is clear that the digital landscape is changing
fundamentally, and the Company has been an important catalyst for
that change. The principle of a premium for premium content is now
recognized, and there will inevitably be further developments in
algorithmic transparency and the digital advertising market, two
areas in which News Corp has been a leading advocate.
We are continuing our drive to be a more focused, more digital
company and we believe the positive results of that strategy are
already clear. Our aim is to generate enhanced returns for our
investors in the months, quarters and years to come.”
FIRST QUARTER RESULTS
The Company reported fiscal 2021 first quarter total revenues of
$2.12 billion, 10% lower compared to $2.34 billion in the prior
year period. The decline was due to a $200 million, or 9%, negative
impact from the divestiture of News America Marketing, weakness in
the print advertising market, a $35 million, or 2%, negative impact
from the closure or transition to digital of certain regional and
community newspapers in Australia and lower subscription revenues
at the Subscription Video Services segment. The decline was
partially offset by growth in the Book Publishing and Digital Real
Estate Services segments, as well as a $50 million, or 2%, positive
impact from foreign currency fluctuations. Adjusted Revenues (which
exclude the foreign currency impact, acquisitions and divestitures
as defined in Note 2) decreased 3%.
Net income for the quarter was $47 million compared to a net
loss of $(211) million in the prior year, reflecting the absence of
impairment charges and higher Total Segment EBITDA, as discussed
below, partially offset by higher tax expense.
The Company reported first quarter Total Segment EBITDA of $268
million, a 21% increase compared to $221 million in the prior year.
The increase was primarily due to strong growth at the Digital Real
Estate Services, Dow Jones and Book Publishing segments, partially
offset by a decline at the News Media segment, reflecting the
absence of a net $12 million contribution due to the divestitures
of News America Marketing and Unruly. Adjusted Total Segment EBITDA
(as defined in Note 2) increased 23%.
Net income (loss) per share attributable to News Corporation
stockholders was $0.06 as compared to $(0.39) in the prior
year.
Adjusted EPS (as defined in Note 3) were $0.08 compared to $0.04
in the prior year.
SEGMENT REVIEW
For the three months ended
September 30,
2020
2019
% Change
(in millions)
Better/ (Worse)
Revenues:
Digital Real Estate Services
$
290
$
272
7
%
Subscription Video Services
496
514
(4
)%
Dow Jones(a)
386
382
1
%
Book Publishing
458
405
13
%
News Media(a)
487
767
(37
)%
Other
—
—
—
%
Total Revenues
$
2,117
$
2,340
(10
)%
Segment EBITDA:
Digital Real Estate Services
$
119
$
82
45
%
Subscription Video Services
78
81
(4
)%
Dow Jones
72
49
47
%
Book Publishing
71
49
45
%
News Media
(22
)
7
**
Other
(50
)
(47
)
(6
)%
Total Segment EBITDA
$
268
$
221
21
%
** Not meaningful
(a)
In the fourth quarter of fiscal
2020, the Company revised the composition of its reportable
segments to present the Dow Jones business as a separate segment.
Previously, the financial information for this segment was
aggregated with the businesses within the News Media segment and,
together, formed the News and Information Services segment. All
prior periods have been revised to reflect the new segment
presentation.
Digital Real Estate Services
Revenues in the quarter increased $18 million, or 7%, compared
to the prior year, including a $6 million, or 3%, positive impact
from foreign currency fluctuations. Segment EBITDA in the quarter
increased $37 million, or 45%, compared to the prior year,
primarily due to $28 million of higher contribution from Move, the
deferral of marketing costs and a positive impact of $3 million, or
4%, from foreign currency fluctuations. Adjusted Revenues and
Adjusted Segment EBITDA (as defined in Note 2) increased 4% and
40%, respectively.
Move’s revenues in the quarter increased $15 million, or 12%, to
$138 million, primarily as a result of higher real estate revenues.
Real estate revenues, which represented 81% of total Move revenues,
grew $13 million, or 13%, due to strength in the referral model,
driven by an over 40% increase in average monthly lead volume and
higher average home values. Revenues from the referral model in the
quarter represented approximately 30% of total Move revenues.
Revenues from the traditional lead generation product declined
modestly, which was an improvement from the prior quarter trend, as
strong demand from agents 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 first quarter
grew 26% year-over-year to 90 million, with a record 92 million
unique users in August.
In the quarter, revenues at REA Group increased $3 million, or
2%, to $152 million, primarily driven by a $6 million, or 4%,
positive impact from foreign currency fluctuations. The modest
revenue declines in the developer, commercial and Asian businesses
were offset by modest growth in residential revenues and an
increase in financial services revenues. Australian national
residential listing volumes in the quarter declined 2% compared to
the prior year, driven by the continued impact from COVID-19
restrictions, particularly in Victoria.
Subscription Video Services
Revenues in the quarter decreased $18 million, or 4%, compared
with the prior year, including a $20 million, or 3%, positive
impact from foreign currency fluctuations. The revenue decline was
driven by the impact from fewer residential broadcast subscribers
and a $14 million, or 3%, negative impact from lower commercial
subscription revenues resulting from the ongoing restrictions on
pubs, clubs and other commercial venues due to COVID-19, partially
offset by higher revenues from OTT products. Adjusted Revenues
decreased 7% compared to the prior year.
As of September 30, 2020, Foxtel’s total closing paid
subscribers were 3.287 million, a 7% increase compared to the prior
year, primarily due to the growth in subscribers at Kayo and the
launch of Binge, partially offset by lower residential and
commercial broadcast subscribers. 2.055 million of the total
closing subscribers were residential and commercial broadcast
subscribers, and the remaining 1.232 million consisted of Kayo,
Foxtel Now and Binge subscribers. As of September 30, 2020, there
were 681,000 Kayo subscribers (644,000 paying), compared to 430,000
subscribers (364,000 paying) in the prior year. As of September 30,
2020, there were 310,000 Foxtel Now subscribers (298,000 paying),
compared to 385,000 subscribers (375,000 paying) in the prior year.
Binge, which launched in May, had 321,000 (290,000 paying)
subscribers as of September 30, 2020.
Broadcast subscriber churn in the quarter increased slightly to
14.6% from 14.4% in the prior year. Broadcast ARPU for the quarter
increased 1% to A$79 (US$56).
Segment EBITDA in the quarter decreased $3 million, or 4%,
compared with the prior year, primarily due to lower revenues as
discussed above, partially offset by lower entertainment
programming costs and lower other operating costs. The $36 million
(A$51 million) negative impact related to the deferral of sports
programming rights and production costs from the fourth quarter of
fiscal 2020 into fiscal 2021 as a result of the suspension of
sporting events due to COVID-19 was partially offset by the savings
from renegotiated sports rights. Adjusted Segment EBITDA decreased
9%.
Dow Jones
Revenues in the quarter increased $4 million, or 1%, compared to
the prior year, primarily due to growth in circulation and
subscription revenues, partially offset by lower print advertising
revenues. Digital revenues at Dow Jones in the quarter represented
73% of total revenues compared to 65% in the prior year.
Circulation and subscription revenues increased $22 million, or
8%, primarily due to an increase in circulation revenues and higher
revenues from content licensing partnerships. Circulation revenue
grew 7%, 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 2%, driven by 16% growth in Risk & Compliance
products, partially offset by the decline in revenues from News
Alerts & Data products. Digital circulation revenues accounted
for 63% of circulation revenues for the quarter, compared to 56% in
the prior year. During the quarter, total subscriptions to Dow
Jones’ consumer products reached 3.88 million, an 18% increase
compared to the prior year, of which digital-only subscriptions
grew 29%. Subscriptions to The Wall Street Journal grew 19%
compared to the prior year, to 3.10 million average subscriptions
in the quarter. Digital-only subscriptions to The Wall Street
Journal grew 27% to more than 2.35 million average subscriptions in
the quarter, and represented 76% of its total subscriptions.
Advertising revenue decreased $14 million, or 17%, primarily due
to a 39% decline in print advertising revenues, driven by general
market weakness and lower volume across The Wall Street Journal and
Barron’s due to COVID-19, partially offset by a 14% increase in
digital advertising revenues. Digital advertising accounted for 57%
of total advertising revenues in the quarter, compared to 42% in
the prior year.
Segment EBITDA for the quarter increased $23 million, or 47%,
primarily due to lower costs related to lower print volume and
other discretionary cost savings as a result of COVID-19, as well
as higher revenues, as discussed above.
Book Publishing
Revenues in the quarter increased $53 million, or 13%, compared
to the prior year, reflecting a $4 million, or 1%, positive impact
from foreign currency fluctuations. The revenue growth was
primarily due to higher sales in General books with the success of
titles such as The Order by Daniel Silva, The Guest List by Lucy
Foley and How to Destroy America in Three Easy Steps by Ben
Shapiro, as well as growth in Children’s books, driven by higher
backlist sales across various titles. Adjusted Revenues increased
10%. Digital sales increased 20% compared to the prior year, driven
by growth in both e-book and downloadable audiobook sales. Digital
sales represented 23% of Consumer revenues for the quarter. Segment
EBITDA for the quarter increased $22 million, or 45%, compared to
the prior year, primarily due to the higher revenues discussed
above. Adjusted Segment EBITDA increased 41%.
News Media
Revenues in the quarter decreased $280 million, or 37%, as
compared to the prior year, including a $19 million, or 2%,
positive impact from foreign currency fluctuations. The decline was
primarily driven by a $200 million, or 26%, impact from the
divestiture of News America Marketing in May 2020. The decline also
reflects the $35 million, or 5%, 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 20% and 8%, respectively. Adjusted Revenues
for the segment decreased 16% compared to the prior year.
Circulation and subscription revenues increased $1 million
compared to the prior year, primarily due to digital subscriber
growth, a $10 million, or 4%, positive impact from foreign currency
fluctuations and price increases, offset by lower single-copy sales
revenue, primarily at News UK, as a result of COVID-19.
Advertising revenues decreased $262 million, or 59%, compared to
the prior year, reflecting a $200 million, or 45%, negative impact
from the divestiture of News America Marketing. The remainder of
the decline was driven by continued weakness in the advertising
market, exacerbated by COVID-19, and a $29 million, or 7%, negative
impact related to the closure or transition to digital of certain
regional and community newspapers in Australia, partially offset by
a $7 million, or 1%, positive impact from foreign currency
fluctuations.
In the quarter, Segment EBITDA decreased $29 million compared to
the prior year, reflecting lower revenues, as discussed above, and
the absence of a net $12 million contribution due to the
divestitures of News America Marketing and Unruly, partially offset
by higher cost savings across the businesses.
Digital revenues represented 28% of News Media segment revenues
in the quarter, compared to 19% in the prior year. For the quarter,
digital revenues at the newspaper mastheads represented 25% of
their combined revenues. 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 September 30, 2020 were 685,200, compared to 542,400 in the
prior year (Source: Internal data)
- The Times and Sunday Times closing digital subscribers as of
September 30, 2020 were 337,000, compared to 312,000 in the prior
year (Source: Internal data)
- The Sun’s digital offering reached 140 million global monthly
unique users in September 2020, compared to 129 million in the
prior year (Source: Google Analytics)
- New York Post’s digital network reached 144 million unique
users in September 2020, compared to 107 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 three months ended
September 30,
2020
2019
(in millions)
Net cash provided by operating
activities
$
155
$
27
Less: Capital expenditures
(93
)
(117
)
62
(90
)
Less: REA Group free cash flow
(29
)
(28
)
Plus: Cash dividends received from REA
Group
32
35
Free cash flow available to News
Corporation
$
65
$
(83
)
Net cash provided by operating activities of $155 million for
the three months ended September 30, 2020 was $128 million higher
than $27 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 three months
ended September 30, 2020 was $65 million compared to $(83) 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 three months ended September 30, 2020 were $51 million,
compared to $66 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
Subsequent Events
In October 2020, REA Group entered into a binding agreement to
increase its ownership interest in Elara Technologies Pte. Ltd.
(“Elara”). REA Group currently holds a 13.5% interest and on
completion, is expected to have a shareholding of between 47.2% and
61.1% and hold five of nine seats on Elara’s Board of Directors.
The total consideration for the transaction at the REA Group level
is expected to be between $50 million to $70 million, with $34.5
million to be paid in cash and the remainder in newly-issued REA
Group shares. In connection with the transaction, News Corp will
also increase its interest in Elara to 38.9% for a cash payment of
$34.5 million. On a consolidated basis, News Corp is expected to
hold an 86.1% to 100% combined interest in Elara upon completion.
The transaction, which remains subject to confirmatory due
diligence and the renegotiation of key management employment
contracts, is anticipated to be completed in the second quarter of
fiscal 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
5:00pm EST on November 5, 2020. To listen to the call, please visit
http://investors.newscorp.com.
Annual Meeting of Stockholders
News Corporation’s 2020 Annual Meeting of Stockholders will be
held exclusively via live webcast on Wednesday, November 18, 2020,
beginning at 3:00 p.m. (Eastern Standard Time). The webcast can be
accessed at www.virtualshareholdermeeting.com/NWS2020. A replay
will be available at the same location for a period of time
following the meeting.
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, 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
September 30,
2020
2019
Revenues:
Circulation and subscription
$
1,002
$
995
Advertising
332
608
Consumer
441
387
Real estate
235
218
Other
107
132
Total Revenues
2,117
2,340
Operating expenses
(1,164
)
(1,338
)
Selling, general and administrative
(685
)
(781
)
Depreciation and amortization
(164
)
(162
)
Impairment and restructuring charges
(40
)
(297
)
Equity losses of affiliates
(1
)
(2
)
Interest (expense) income, net
(8
)
4
Other, net
17
4
Income (loss) before income tax (expense)
benefit
72
(232
)
Income tax (expense) benefit
(25
)
21
Net income (loss)
47
(211
)
Less: Net income attributable to
noncontrolling interests
(13
)
(16
)
Net income (loss) attributable to News
Corporation stockholders
$
34
$
(227
)
Weighted average shares outstanding:
Basic
590
587
Diluted
591
587
Net income (loss) attributable to News
Corporation stockholders per share:
Basic
$
0.06
$
(0.39
)
Diluted
$
0.06
$
(0.39
)
NEWS CORPORATION
CONSOLIDATED BALANCE
SHEETS
(Unaudited; in
millions)
As of September 30, 2020
As of June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
1,539
$
1,517
Receivables, net
1,240
1,203
Inventory, net
203
348
Other current assets
453
393
Total current assets
3,435
3,461
Non-current assets:
Investments
314
297
Property, plant and equipment, net
2,225
2,256
Operating lease right-of-use assets
1,048
1,061
Intangible assets, net
1,869
1,864
Goodwill
3,997
3,951
Deferred income tax assets
337
332
Other non-current assets
1,175
1,039
Total assets
$
14,400
$
14,261
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
322
$
351
Accrued expenses
1,060
1,019
Deferred revenue
409
398
Current borrowings
78
76
Other current liabilities
869
838
Total current liabilities
2,738
2,682
Non-current liabilities:
Borrowings
1,206
1,183
Retirement benefit obligations
260
277
Deferred income tax liabilities
263
258
Operating lease liabilities
1,135
1,146
Other non-current liabilities
344
326
Commitments and contingencies
Equity:
Class A common stock
4
4
Class B common stock
2
2
Additional paid-in capital
12,075
12,148
Accumulated deficit
(3,207
)
(3,241
)
Accumulated other comprehensive loss
(1,235
)
(1,331
)
Total News Corporation stockholders'
equity
7,639
7,582
Noncontrolling interests
815
807
Total equity
8,454
8,389
Total liabilities and equity
$
14,400
$
14,261
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited; in
millions)
For the three months ended
September 30,
2020
2019
Operating activities:
Net income (loss)
$
47
$
(211
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
164
162
Operating lease expense
32
43
Equity losses of affiliates
1
2
Cash distributions received from
affiliates
4
2
Impairment charges
—
273
Other, net
(17
)
(4
)
Deferred income taxes and taxes
payable
10
(45
)
Change in operating assets and
liabilities, net of acquisitions:
Receivables and other assets
(46
)
(1,551
)
Inventories, net
2
(72
)
Accounts payable and other liabilities
(42
)
1,428
Net cash provided by operating
activities
155
27
Investing activities:
Capital expenditures
(93
)
(117
)
Acquisitions, net of cash acquired
(1
)
—
Investments in equity affiliates and
other
(7
)
(5
)
Proceeds from property, plant and
equipment and other asset dispositions
2
3
Other, net
3
1
Net cash used in investing activities
(96
)
(118
)
Financing activities:
Borrowings
123
199
Repayment of borrowings
(119
)
(290
)
Dividends paid
(20
)
(22
)
Other, net
(34
)
18
Net cash used in financing activities
(50
)
(95
)
Net change in cash and cash
equivalents
9
(186
)
Cash and cash equivalents, beginning of
period
1,517
1,643
Exchange movement on opening cash
balance
13
(16
)
Cash and cash equivalents, end of
period
$
1,539
$
1,441
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 table reconciles net income
(loss) to Total Segment EBITDA for the three months ended September
30, 2020 and 2019.
For the three months ended
September 30,
2020
2019
Change
% Change
(in millions)
Net income (loss)
$
47
$
(211
)
$
258
**
Add:
Income tax expense (benefit)
25
(21
)
46
**
Other, net
(17
)
(4
)
(13
)
**
Interest expense (income), net
8
(4
)
12
**
Equity losses of affiliates
1
2
(1
)
(50
)%
Impairment and restructuring charges
40
297
(257
)
(87
)%
Depreciation and amortization
164
162
2
1
%
Total Segment EBITDA
$
268
$
221
$
47
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 table reconciles reported revenues and reported
Total Segment EBITDA to Adjusted Revenues and Adjusted Total
Segment EBITDA for the three months ended September 30, 2020 and
2019.
Revenues
Total Segment EBITDA
For the three months ended
September 30,
For the three months ended
September 30,
2020
2019
Difference
2020
2019
Difference
(in millions)
(in millions)
As reported
$
2,117
$
2,340
$
(223
)
$
268
$
221
$
47
Impact of acquisitions
(10
)
—
(10
)
(1
)
—
(1
)
Impact of divestitures
—
(210
)
210
—
(11
)
11
Impact of foreign currency
fluctuations
(50
)
—
(50
)
(8
)
—
(8
)
Net impact of U.K. Newspaper Matters
—
—
—
2
2
—
As adjusted
$
2,057
$
2,130
$
(73
)
$
261
$
212
$
49
Foreign Exchange Rates
Average foreign exchange rates used in the calculation of the
impact of foreign currency fluctuations for the three months ended
September 30, 2020 and 2019 are as follows:
For the three months ended
September 30,
2020
2019
U.S. Dollar per Australian Dollar
$
0.71
$
0.69
U.S. Dollar per British Pound Sterling
$
1.29
$
1.23
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three months ended September 30, 2020 and 2019 are as follows:
For the three months ended
September 30,
2020
2019
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
Digital Real Estate Services
$
284
$
272
4
%
Subscription Video Services
476
514
(7
)%
Dow Jones
385
382
1
%
Book Publishing
445
405
10
%
News Media
467
557
(16
)%
Other
—
—
—
%
Adjusted Total Revenues
$
2,057
$
2,130
(3
)%
Adjusted Segment EBITDA:
Digital Real Estate Services
$
116
$
83
40
%
Subscription Video Services
74
81
(9
)%
Dow Jones
72
49
47
%
Book Publishing
69
49
41
%
News Media
(22
)
(5
)
**
Other
(48
)
(45
)
(7
)%
Adjusted Total Segment EBITDA
$
261
$
212
23
%
** - Not meaningful
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 September 30, 2020 and
2019.
For the three months ended
September 30, 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
$
290
$
—
$
—
$
(6
)
$
—
$
284
Subscription Video Services
496
—
—
(20
)
—
476
Dow Jones
386
—
—
(1
)
—
385
Book Publishing
458
(9
)
—
(4
)
—
445
News Media
487
(1
)
—
(19
)
—
467
Other
—
—
—
—
—
—
Total Revenues
$
2,117
$
(10
)
$
—
$
(50
)
$
—
$
2,057
Segment EBITDA:
Digital Real Estate Services
$
119
$
—
$
—
$
(3
)
$
—
$
116
Subscription Video Services
78
—
—
(4
)
—
74
Dow Jones
72
—
—
—
—
72
Book Publishing
71
(1
)
—
(1
)
—
69
News Media
(22
)
—
—
—
—
(22
)
Other
(50
)
—
—
—
2
(48
)
Total Segment EBITDA
$
268
$
(1
)
$
—
$
(8
)
$
2
$
261
For the three months ended
September 30, 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
$
272
$
—
$
—
$
—
$
—
$
272
Subscription Video Services
514
—
—
—
—
514
Dow Jones
382
—
—
—
—
382
Book Publishing
405
—
—
—
—
405
News Media
767
—
(210
)
—
—
557
Other
—
—
—
—
—
—
Total Revenues
$
2,340
$
—
$
(210
)
$
—
$
—
$
2,130
Segment EBITDA:
Digital Real Estate Services
$
82
$
—
$
1
$
—
$
—
$
83
Subscription Video Services
81
—
—
—
—
81
Dow Jones
49
—
—
—
—
49
Book Publishing
49
—
—
—
—
49
News Media
7
—
(12
)
—
—
(5
)
Other
(47
)
—
—
—
2
(45
)
Total Segment EBITDA
$
221
$
—
$
(11
)
$
—
$
2
$
212
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 table reconciles 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 months ended September
30, 2020 and 2019.
For the three months ended
September 30, 2020
For the three months ended
September 30, 2019
(in millions, except per share data)
Net income attributable to
stockholders
EPS
Net (loss) income attributable to
stockholders
EPS
Net income (loss)
$
47
$
(211
)
Less: Net income attributable to
noncontrolling interests
(13
)
(16
)
Net income (loss) attributable to News
Corporation stockholders
$
34
$
0.06
$
(227
)
$
(0.39
)
U.K. Newspaper Matters
2
—
2
—
Impairment and restructuring
charges(a)
40
0.07
297
0.50
Other, net
(17
)
(0.03
)
(4
)
—
Tax impact on items above
(10
)
(0.02
)
(41
)
(0.07
)
Impact of noncontrolling interest on items
above
(1
)
—
(1
)
—
As adjusted
$
48
$
0.08
$
26
$
0.04
(a)
During the three months ended
September 30, 2019, the Company recognized $273 million of non-cash
impairment charges, primarily at News America Marketing.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105006169/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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