FISCAL 2023 FIRST QUARTER KEY FINANCIAL
HIGHLIGHTS
- Revenues in the quarter were $2.48 billion, a 1% decrease
compared to $2.50 billion in the prior year, driven by a $153
million, or 6%, negative impact from foreign currency fluctuations
and lower Book Publishing segment revenues. Adjusted Revenues
increased 3%
- Net income in the quarter was $66 million compared to $267
million in the prior year
- Total Segment EBITDA in the quarter was $350 million
compared to $410 million in the prior year
- In the quarter, reported EPS were $0.07 compared to $0.33 in
the prior year – Adjusted EPS were $0.12 compared to $0.23 in the
prior year
- Dow Jones segment revenues and Segment EBITDA grew 16% and
19%, respectively, benefiting from recent acquisitions, continued
strong growth in digital-only subscriptions, a 7th consecutive
quarter of year-over-year advertising revenue growth and sustained
momentum in its Risk & Compliance products
- REA Group’s residential business continued to benefit from
price increases, favorable depth penetration and product mix, and
growth in national listings
- At the Subscription Video Services segment, Foxtel saw its
streaming revenues from Kayo and BINGE continue to offset broadcast
revenue declines
News Corporation (“News Corp” or the “Company”) (Nasdaq: NWS,
NWSA; ASX: NWS, NWSLV) today reported financial results for the
three months ended September 30, 2022.
Commenting on the results, Chief Executive Robert Thomson
said:
“While the macro environment is patently more volatile, the
results highlight the resilience of News Corp and the potential for
sustained growth and increased profitability.
Headline revenues were down one percent to $2.5 billion, but the
decline was obviously a consequence of foreign currency
fluctuations. On an adjusted basis, our revenues grew a healthy
three percent, building on the robust results from last year.
Profitability for the quarter was $350 million, down 15 percent,
although that reflects the forex headwinds and a fundamental reset
by Amazon of its book inventory levels and warehouse footprint. We
view neither factor as reflective of core business conditions or of
our long-term potential.
Dow Jones posted its best first quarter results since its
acquisition with revenues rising 16 percent and Segment EBITDA an
even more impressive 19 percent, benefiting from the successful
integration of OPIS and Chemical Market Analytics, strong digital
advertising growth, record digital subscriptions and continued
momentum at Risk & Compliance.
News Corp is building on a sturdy base. We have reported record
profitability in each of the last two fiscal years and bolstered
our fortunes through savvy investments and by streamlining the cost
base.”
FIRST QUARTER RESULTS
The Company reported fiscal 2023 first quarter total revenues of
$2.48 billion, a 1% decrease compared to $2.50 billion in the prior
year period. The decline was primarily due to a $153 million, or
6%, negative impact from foreign currency fluctuations and lower
revenues at the Book Publishing segment due to lower physical book
sales from Amazon, partially offset by higher Dow Jones segment
revenues, which includes the acquisitions of OPIS and Chemical
Market Analytics (“CMA”). Adjusted Revenues (which excludes the
foreign currency impact, acquisitions and divestitures as defined
in Note 2) increased 3%.
Net income for the quarter was $66 million, a 75% decline
compared to $267 million in the prior year, primarily due to lower
Other, net and lower Total Segment EBITDA, as discussed below,
partially offset by lower tax expense.
The Company reported first quarter Total Segment EBITDA of $350
million, a 15% decline compared to $410 million in the prior year,
primarily due to an increase in costs, partly due to inflationary
pressures, lower revenues, as discussed above, and a $23 million,
or 6%, negative impact from foreign currency fluctuations. Adjusted
Total Segment EBITDA (as defined in Note 2) decreased 13%.
Net income per share attributable to News Corporation
stockholders was $0.07 as compared to $0.33 in the prior year.
Adjusted EPS (as defined in Note 3) were $0.12 compared to $0.23
in the prior year.
SEGMENT REVIEW
For the three months ended
September 30,
2022
2021
% Change
(in millions)
Better/
(Worse)
Revenues:
Digital Real Estate Services
$
421
$
426
(1
) %
Subscription Video Services
502
510
(2
) %
Dow Jones
515
444
16
%
Book Publishing
487
546
(11
) %
News Media
553
576
(4
) %
Other
—
—
—
%
Total Revenues
$
2,478
$
2,502
(1
) %
Segment EBITDA:
Digital Real Estate Services
$
119
$
138
(14
) %
Subscription Video Services
111
114
(3
) %
Dow Jones
113
95
19
%
Book Publishing
39
85
(54
) %
News Media
18
34
(47
) %
Other
(50
)
(56
)
11
%
Total Segment EBITDA
$
350
$
410
(15
) %
Digital Real Estate Services
Revenues in the quarter decreased $5 million, or 1%, compared to
the prior year, reflecting a $20 million, or 5%, negative impact
from foreign currency fluctuations. Segment EBITDA in the quarter
decreased $19 million, or 14%, compared to the prior year,
primarily due to a $9 million, or 7%, negative impact from foreign
currency fluctuations and higher employee and marketing costs
related to strategic investments at both Move and REA Group,
partially offset by lower broker commissions at REA Group. Adjusted
Revenues and Adjusted Segment EBITDA (as defined in Note 2)
increased 3% and declined 7%, respectively.
In the quarter, revenues at REA Group increased $6 million, or
2%, to $252 million, driven by higher Australian residential
revenues due to price increases, the contribution from Premiere
Plus, increased depth penetration and growth in national listings.
The growth was partially offset by a $20 million, or 9%, negative
impact from foreign currency fluctuations and lower financial
services revenues due to declines in settlement activity.
Australian national residential buy listing volumes in the quarter
increased 5% compared to the prior year, with listings in Melbourne
up 12% and Sydney up 5%, partly due to a number of state lockdowns
in the prior year.
Move’s revenues in the quarter decreased $11 million, or 6%, to
$169 million, primarily as a result of lower real estate revenues,
partially offset by higher advertising revenues. Real estate
revenues, which represented 84% of total Move revenues, decreased
$14 million, or 9%, driven by the impact of the macroeconomic
environment, including higher household interest rates, on the
housing market which has led to lower lead and transaction volumes.
Revenues from the traditional lead generation product and the
referral model, which includes the ReadyConnect Concierge℠ product,
decreased due to these factors, partially offset by continued
improvements in yield at Connections℠ Plus and higher home prices.
The decline was also partially offset by higher sell-through of the
Market VIP℠ product, a hybrid offering. The referral model
generated 30% of total Move revenues in the quarter compared to 32%
in the prior year. Based on Move’s internal data, average monthly
unique users of Realtor.com®’s web and mobile sites for the fiscal
first quarter declined 11% year-over-year to 86 million. Lead
volume declined 32%.
Subscription Video Services
Revenues of $502 million in the quarter decreased $8 million, or
2%, compared with the prior year, primarily due to a $40 million,
or 8%, negative impact from foreign currency fluctuations. Adjusted
Revenues of $542 million increased 6% compared to the prior year,
improving from the prior quarter rate. Higher revenues from Kayo
and BINGE, higher commercial revenues and an increase in
advertising revenues were partially offset by the impact from fewer
residential broadcast subscribers. Foxtel Group streaming
subscription revenues represented approximately 25% of total
circulation and subscription revenues in the quarter, as compared
to 19% in the prior year.
As of September 30, 2022, Foxtel’s total closing paid
subscribers were nearly 4.5 million, a 16% increase compared to the
prior year, primarily due to the growth in BINGE and Kayo
subscribers, partially offset by lower residential broadcast
subscribers. Broadcast subscriber churn in the quarter increased
slightly to 14.2% from 14.0% in the prior year. Broadcast ARPU for
the quarter increased 1% year-over-year to A$83 (US$57).
As of September 30,
2022
2021
(in 000's)
Broadcast Subscribers
Residential
1,439
1,605
Commercial
219
162
Streaming Subscribers (Total (Paid))
Kayo
1,270 (1,259 paid
)
1,079 (1,058 paid
)
BINGE
1,451 (1,342 paid
)
885 (802 paid
)
Foxtel Now
197 (191 paid
)
239 (227 paid
)
Total Subscribers, including Flash (Total
(Paid))
4,605 (4,465 paid
)
3,970 (3,854 paid
)
Segment EBITDA in the quarter decreased $3 million, or 3%,
compared with the prior year, reflecting a $9 million, or 8%,
negative impact from foreign currency fluctuations. The decline
also reflects higher sports programming rights costs, driven by the
timing of sports events, notably in motorsports, and contractual
increases, as well as higher marketing costs at BINGE. Adjusted
Segment EBITDA increased 5%.
Dow Jones
Revenues in the quarter increased $71 million, or 16%, compared
to the prior year, which includes $34 million and $18 million
contributions from the acquisitions of OPIS and CMA, respectively.
Adjusted Revenues at the Dow Jones segment increased 6% compared to
the prior year, primarily due to the growth in circulation and
subscription revenues from continued digital subscription gains and
growth in Risk & Compliance products, as well as higher digital
advertising revenues. Digital revenues at Dow Jones in the quarter
represented 79% of total revenues compared to 75% in the prior
year.
Circulation and subscription revenues increased $65 million, or
19%, which includes the contributions from the acquisitions of OPIS
and CMA. Circulation revenue grew 5%, reflecting the continued
strong growth in digital-only subscriptions at The Wall Street
Journal. Professional information business revenues grew 40%,
primarily driven by the acquisitions of OPIS and CMA and growth in
Risk & Compliance products, partially offset by negative
foreign currency fluctuations. Revenues from the Risk &
Compliance products grew 6%, which includes a 10% negative impact
from foreign currency fluctuations. Digital circulation revenues
accounted for 68% of circulation revenues for the quarter, compared
to 66% in the prior year.
During the first quarter, total average subscriptions to Dow
Jones’ consumer products reached over 4.9 million, an 8% increase
compared to the prior year. Digital-only subscriptions to Dow
Jones’ consumer products grew 13%. Total subscriptions to The Wall
Street Journal grew 8% compared to the prior year, to nearly 3.8
million average subscriptions in the quarter. Digital-only
subscriptions to The Wall Street Journal grew 13% to over 3.1
million average subscriptions in the quarter, and represented 84%
of total Wall Street Journal subscriptions.
For the three months ended
September 30,
2022
2021
% Change
(in thousands, except %)
Better/(Worse)
The Wall Street Journal
Digital-only subscriptions
3,157
2,803
13
%
Total subscriptions
3,778
3,509
8
%
Barron’s Group
Digital-only subscriptions
862
723
19
%
Total subscriptions
1,040
935
11
%
Total Consumer
Digital-only subscriptions
4,099
3,626
13
%
Total subscriptions
4,922
4,572
8
%
Advertising revenues increased $4 million, or 4%, primarily due
to 11% growth in digital advertising revenues, driven by higher
average yields, partially offset by a 6% decline in print
advertising revenues. Digital advertising accounted for 65% of
total advertising revenues in the quarter, compared to 61% in the
prior year.
Segment EBITDA for the quarter increased $18 million, or 19%,
primarily due to a $19 million combined contribution from the
acquisitions of OPIS and CMA. Higher revenues were partially offset
by higher costs related to the acquisitions and higher employee
costs. Adjusted Segment EBITDA decreased 1%.
Book Publishing
Revenues in the quarter decreased $59 million, or 11%, compared
to the prior year, primarily due to lower physical book sales due
to Amazon’s reset of its inventory levels and rightsizing of its
warehouse footprint which resulted in lower order volume and higher
returns, despite consumer sales data remaining consistent with
prior quarters. The decline also reflects a $22 million, or 4%,
negative impact from foreign currency fluctuations. Key titles in
the quarter included Portrait of an Unknown Woman by Daniel Silva,
Live Wire: Long-Winded Short Stories by Kelly Ripa and Breaking
History by Jared Kushner. Adjusted Revenues decreased 7%. Digital
sales increased 1% compared to the prior year due to higher sales
of downloadable audiobooks, partially offset by lower e-book sales.
Digital sales represented 23% of Consumer revenues for the quarter
compared to 21% in the prior year. Backlist sales represented
approximately 65% of total revenues in the quarter.
Segment EBITDA for the quarter decreased $46 million, or 54%,
compared to the prior year, driven by lower orders from Amazon, as
discussed above, higher manufacturing and freight costs due to the
impact from ongoing supply chain and inflationary pressures and a
$3 million, or 3%, negative impact from foreign currency
fluctuations, partially offset by lower costs due to lower sales
volume and lower employee costs. The supply chain and inflationary
pressures are expected to continue to impact the business in the
near term but at a more moderate rate. Adjusted Segment EBITDA
decreased 51%.
News Media
Revenues in the quarter decreased $23 million, or 4%, as
compared to the prior year, driven by a $62 million, or 11%,
negative impact from foreign currency fluctuations, partially
offset by higher circulation and subscription revenues and higher
advertising revenues in constant currency. Within the segment,
revenues at News Corp Australia and News UK increased 1% and
decreased 9%, respectively, as both were impacted by negative
foreign currency fluctuations. The New York Post also saw higher
revenues in the quarter. Adjusted Revenues for the segment
increased 6% compared to the prior year.
Circulation and subscription revenues decreased $16 million, or
6%, compared to the prior year, primarily due to a $32 million, or
12%, negative impact from foreign currency fluctuations and lower
print volume. The decline was partially offset by cover price
increases, higher content licensing revenues and digital subscriber
growth.
Advertising revenues decreased $10 million, or 4%, compared to
the prior year, primarily due to a $22 million, or 9%, negative
impact from foreign currency fluctuations, lower print advertising
at News UK and lower revenues at Wireless Group, partly due to the
absence of the Euro 2020, which occurred in the prior year period.
The decline was partially offset by growth in digital advertising,
primarily at News UK (mainly at The Sun), and the recovery of print
advertising at News Corp Australia.
In the quarter, Segment EBITDA decreased $16 million, or 47%,
compared to the prior year, reflecting lower revenues, as discussed
above, and a $2 million, or 6%, negative impact from foreign
currency fluctuations. The decline was also due to over $20 million
of higher costs related to TalkTV and other digital investments,
higher newsprint, production and distribution costs across the
businesses and higher employee costs, partially offset by cost
saving initiatives. The positive contributions from News Corp
Australia and the New York Post were more than offset by the
negative contributions from News UK and Wireless Group and negative
foreign currency fluctuations. Adjusted Segment EBITDA decreased
44%.
Digital revenues represented 36% of News Media segment revenues
in the quarter, compared to 33% in the prior year, and represented
33% of the combined revenues of the newspaper mastheads. Digital
subscribers and users across key properties within the News Media
segment are summarized below:
- Closing digital subscribers at News Corp Australia as of
September 30, 2022 were 1,012,000 (929,000 for news mastheads),
compared to 897,000 (850,000 for news mastheads) in the prior year
(Source: Internal data)
- The Times and Sunday Times closing digital subscribers,
including the Times Literary Supplement, as of September 30, 2022
were 468,000, compared to 380,000 in the prior year (Source:
Internal data)
- New York Post’s digital network reached 151 million unique
users in September 2022, compared to 151 million in the prior year
(Source: Google Analytics)
CASH FLOW
The following table presents a reconciliation of net cash (used
in) provided by operating activities to free cash flow and free
cash flow available to News Corporation:
For the three months ended
September 30,
2022
2021
(in millions)
Net cash (used in) provided by operating
activities
$
(31
)
$
68
Less: Capital expenditures
(104
)
(101
)
Free cash flow
(135
)
(33
)
Less: REA Group free cash flow
(37
)
(35
)
Plus: Cash dividends received from REA
Group
50
43
Free cash flow available to News
Corporation
$
(122
)
$
(25
)
Net cash used in operating activities of $31 million for the
three months ended September 30, 2022 was $99 million lower than
net cash provided by operating activities of $68 million in the
prior year, primarily due to lower Total Segment EBITDA, as noted
above, higher working capital and higher interest payments,
partially offset by lower restructuring payments.
Free cash flow in the three months ended September 30, 2022 was
$(135) million compared to $(33) million in the prior year. Free
cash flow available to News Corporation in the three months ended
September 30, 2022 was $(122) million compared to $(25) million in
the prior year period. The decrease in both free cash flow and free
cash flow available to News Corporation was primarily due to lower
cash provided by operating activities, as mentioned above. Foxtel’s
capital expenditures for the three months ended September 30, 2022
were $40 million compared to $48 million in the prior year.
Free cash flow and free cash flow available to News Corporation
are non-GAAP financial measures. Free cash flow is defined as net
cash provided by operating activities, less capital expenditures,
and free cash flow available to News Corporation is defined as free
cash flow, less REA Group free cash flow, plus cash dividends
received from REA Group.
The Company believes free cash flow provides useful information
to management and investors about the Company’s liquidity and cash
flow trends. The Company believes free cash flow available to News
Corporation, which adjusts free cash flow to exclude REA Group’s
free cash flow and include dividends received from REA Group,
provides management and investors 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 both free cash flow and free cash
flow available to News Corporation is that they do not represent
the total increase or decrease in the cash balance for the period.
Management compensates for the limitation of free cash flow and
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
Exploration of Potential Combination with Fox Corporation
(“Fox”)
In October 2022, the Company announced that its Board of
Directors (the “Board”), following the receipt of letters from K.
Rupert Murdoch and the Murdoch Family Trust, has formed a special
committee of independent and disinterested members of the Board
(the “Special Committee”) to begin exploring a potential
combination with Fox (the “Potential Transaction”). The letters
indicated that Mr. Murdoch and the Murdoch Family Trust will not
vote in favor of a transaction unless it is both recommended by the
Special Committee and approved by a majority vote of the shares
held by non-affiliated stockholders entitled to vote. The Special
Committee, in consultation with its independent financial and legal
advisors, will evaluate the Potential Transaction. The Special
Committee has not made any determination with respect to the
Potential Transaction, and there can be no certainty that the
Company will engage in the Potential Transaction. Neither the
Company nor the Special Committee intends to disclose further
developments regarding the Special Committee’s work until it deems
such disclosure is appropriate or required.
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, free cash flow 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
5:00 p.m. EST on November 8, 2022. To listen to the call, please
visit http://investors.newscorp.com.
Annual Meeting of Stockholders
News Corporation’s 2022 Annual Meeting of Stockholders will be
held exclusively via live webcast on Tuesday, November 15, 2022,
beginning at 10:00 a.m. EST. The webcast can be accessed at
www.virtualshareholdermeeting.com/NWS2022. 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, the Company’s strategy and strategic initiatives,
including potential acquisitions, investments and dispositions, the
exploration of a potential combination with Fox Corporation 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, uncertainties and other
factors described in the Company’s filings with the Securities and
Exchange Commission. More detailed information about 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,
2022
2021
Revenues:
Circulation and subscription
$
1,111
$
1,077
Advertising
406
405
Consumer
467
524
Real estate
323
320
Other
171
176
Total Revenues
2,478
2,502
Operating expenses
(1,273
)
(1,244
)
Selling, general and administrative
(855
)
(848
)
Depreciation and amortization
(179
)
(165
)
Impairment and restructuring charges
(21
)
(22
)
Equity losses of affiliates
(4
)
—
Interest expense, net
(27
)
(22
)
Other, net
(18
)
137
Income before income tax expense
101
338
Income tax expense
(35
)
(71
)
Net income
66
267
Less: Net income attributable to
noncontrolling interests
(26
)
(71
)
Net income attributable to News
Corporation stockholders
$
40
$
196
Weighted average shares outstanding:
Basic
581
592
Diluted
583
594
Net income attributable to News
Corporation stockholders per share, basic and diluted
$
0.07
$
0.33
NEWS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions)
As of September 30,
2022
As of June 30,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
1,458
$
1,822
Receivables, net
1,473
1,502
Inventory, net
373
311
Other current assets
450
458
Total current assets
3,754
4,093
Non-current assets:
Investments
470
488
Property, plant and equipment, net
1,971
2,103
Operating lease right-of-use assets
841
891
Intangible assets, net
2,563
2,671
Goodwill
5,041
5,169
Deferred income tax assets
390
422
Other non-current assets
1,357
1,384
Total assets
$
16,387
$
17,221
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
348
$
411
Accrued expenses
1,101
1,236
Deferred revenue
592
604
Current borrowings
23
293
Other current liabilities
949
975
Total current liabilities
3,013
3,519
Non-current liabilities:
Borrowings
2,977
2,776
Retirement benefit obligations
152
155
Deferred income tax liabilities
167
198
Operating lease liabilities
888
947
Other non-current liabilities
462
483
Commitments and contingencies
Equity:
Class A common stock
4
4
Class B common stock
2
2
Additional paid-in capital
11,584
11,779
Accumulated deficit
(2,253
)
(2,293
)
Accumulated other comprehensive loss
(1,465
)
(1,270
)
Total News Corporation stockholders'
equity
7,872
8,222
Noncontrolling interests
856
921
Total equity
8,728
9,143
Total liabilities and equity
$
16,387
$
17,221
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
For the three months ended
September 30,
2022
2021
Operating activities:
Net income
$
66
$
267
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization
179
165
Operating lease expense
30
32
Equity losses of affiliates
4
—
Cash distributions received from
affiliates
1
4
Other, net
18
(137
)
Deferred income taxes and taxes
payable
(4
)
27
Change in operating assets and
liabilities, net of acquisitions:
Receivables and other assets
(96
)
9
Inventories, net
(61
)
(59
)
Accounts payable and other liabilities
(168
)
(240
)
Net cash (used in) provided by operating
activities
(31
)
68
Investing activities:
Capital expenditures
(104
)
(101
)
Acquisitions, net of cash acquired
(3
)
—
Investments in equity affiliates and
other
(8
)
(16
)
Proceeds from property, plant and
equipment and other asset dispositions
4
(2
)
Other, net
(19
)
24
Net cash used in investing activities
(130
)
(95
)
Financing activities:
Borrowings
328
378
Repayment of borrowings
(337
)
(383
)
Repurchase of shares
(127
)
—
Dividends paid
(31
)
(27
)
Other, net
18
(53
)
Net cash used in financing activities
(149
)
(85
)
Net change in cash and cash
equivalents
(310
)
(112
)
Cash and cash equivalents, beginning of
period
1,822
2,236
Exchange movement on opening cash
balance
(54
)
(24
)
Cash and cash equivalents, end of
period
$
1,458
$
2,100
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
to Total Segment EBITDA for the three months ended September 30,
2022 and 2021:
For the three months ended
September 30,
2022
2021
Change
% Change
(in millions)
Net income
$
66
$
267
$
(201
)
(75
) %
Add:
Income tax expense
35
71
(36
)
(51
) %
Other, net
18
(137
)
155
**
Interest expense, net
27
22
5
23
%
Equity losses of affiliates
4
—
4
**
Impairment and restructuring charges
21
22
(1
)
(5
) %
Depreciation and amortization
179
165
14
8
%
Total Segment EBITDA
$
350
$
410
$
(60
)
(15
) %
** - 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”), charges for other
significant, non-ordinary course legal or regulatory matters
(“litigation charges”) 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, 2022 and
2021:
Revenues
Total Segment EBITDA
For the three months ended
September 30,
For the three months ended
September 30,
2022
2021
Difference
2022
2021
Difference
(in millions)
(in millions)
As reported
$
2,478
$
2,502
$
(24
)
$
350
$
410
$
(60
)
Impact of acquisitions
(62
)
—
(62
)
(18
)
—
(18
)
Impact of divestitures
—
(1
)
1
—
2
(2
)
Impact of foreign currency
fluctuations
153
—
153
23
—
23
Net impact of U.K. Newspaper
Matters
—
—
—
6
2
4
As adjusted
$
2,569
$
2,501
$
68
$
361
$
414
$
(53
)
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, 2022 and 2021 are as follows:
Fiscal Year 2023
Q1
U.S. Dollar per Australian Dollar
$0.68
U.S. Dollar per British Pound Sterling
$1.17
Fiscal Year 2022
Q1
U.S. Dollar per Australian Dollar
$0.74
U.S. Dollar per British Pound Sterling
$1.38
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three months ended September 30, 2022 and 2021 are as follows:
For the three months ended
September 30,
2022
2021
% Change
(in millions)
Better/(Worse)
Adjusted Revenues:
Digital Real Estate Services
$
437
$
425
3
%
Subscription Video Services
542
510
6
%
Dow Jones
472
444
6
%
Book Publishing
508
546
(7
) %
News Media
610
576
6
%
Other
—
—
—
%
Adjusted Total Revenues
$
2,569
$
2,501
3
%
Adjusted Segment EBITDA:
Digital Real Estate Services
$
130
$
140
(7
) %
Subscription Video Services
120
114
5
%
Dow Jones
94
95
(1
) %
Book Publishing
42
85
(51
) %
News Media
19
34
(44
) %
Other
(44
)
(54
)
19
%
Adjusted Total Segment EBITDA
$
361
$
414
(13
) %
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, 2022 and
2021:
For the three months ended
September 30, 2022
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
$
421
$
(4
)
$
—
$
20
$
—
$
437
Subscription Video Services
502
—
—
40
—
542
Dow Jones
515
(52
)
—
9
—
472
Book Publishing
487
(1
)
—
22
—
508
News Media
553
(5
)
—
62
—
610
Other
—
—
—
—
—
—
Total Revenues
$
2,478
$
(62
)
$
—
$
153
$
—
$
2,569
Segment EBITDA:
Digital Real Estate Services
$
119
$
2
$
—
$
9
$
—
$
130
Subscription Video Services
111
—
—
9
—
120
Dow Jones
113
(19
)
—
—
—
94
Book Publishing
39
—
—
3
—
42
News Media
18
(1
)
—
2
—
19
Other
(50
)
—
—
—
6
(44
)
Total Segment EBITDA
$
350
$
(18
)
$
—
$
23
$
6
$
361
For the three months ended
September 30, 2021
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
$
426
$
—
$
(1
)
$
—
$
—
$
425
Subscription Video Services
510
—
—
—
—
510
Dow Jones
444
—
—
—
—
444
Book Publishing
546
—
—
—
—
546
News Media
576
—
—
—
—
576
Other
—
—
—
—
—
—
Total Revenues
$
2,502
$
—
$
(1
)
$
—
$
—
$
2,501
Segment EBITDA:
Digital Real Estate Services
$
138
$
—
$
2
$
—
$
—
$
140
Subscription Video Services
114
—
—
—
—
114
Dow Jones
95
—
—
—
—
95
Book Publishing
85
—
—
—
—
85
News Media
34
—
—
—
—
34
Other
(56
)
—
—
—
2
(54
)
Total Segment EBITDA
$
410
$
—
$
2
$
—
$
2
$
414
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, litigation
charges, 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 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, 2022 and
2021:
For the three months ended
September 30, 2022
For the three months ended
September 30, 2021
(in millions, except per share data)
Net income
attributable to
stockholders
EPS
Net income
attributable to
stockholders
EPS
Net income
$
66
$
267
Less: Net income attributable to
noncontrolling interests
(26
)
(71
)
Net income attributable to News
Corporation stockholders
$
40
$
0.07
$
196
$
0.33
U.K. Newspaper Matters
6
0.01
2
—
Impairment and restructuring charges
21
0.04
22
0.04
Other, net
18
0.03
(137
)
(0.23
)
Tax impact on items above
(15
)
(0.03
)
12
0.02
Impact of noncontrolling interest on items
above
(1
)
—
43
0.07
As adjusted
$
69
$
0.12
$
138
$
0.23
NOTE 4 – CONSTANT CURRENCY REVENUES
The Company believes that the presentation of revenues excluding
the impact of foreign currency fluctuations (“constant currency
revenues”) provides useful information regarding the performance of
the Company’s core business operations exclusive of distortions
between periods caused by 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 as described in Note 2.
Constant currency revenues are not measures of performance under
generally accepted accounting principles and should not be
construed as substitutes for revenues as 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 to constant
currency revenues for the three months ended September 30,
2022:
Q1 Fiscal
2022
Q1 Fiscal
2023
FX impact
Q1 Fiscal
2023
constant
currency
% Change -
reported
% Change -
constant
currency
($ in millions)
Better/(Worse)
Consolidated results:
Circulation and subscription
$
1,077
$
1,111
$
(75
)
$
1,186
3
%
10
%
Advertising
405
406
(28
)
434
—
%
7
%
Consumer
524
467
(22
)
489
(11
) %
(7
) %
Real estate
320
323
(14
)
337
1
%
5
%
Other
176
171
(14
)
185
(3
) %
5
%
Total revenues
$
2,502
$
2,478
$
(153
)
$
2,631
(1
) %
5
%
Digital Real Estate Services:
Circulation and subscription
$
3
$
3
$
—
$
3
—
%
—
%
Advertising
33
35
(1
)
$
36
6
%
9
%
Real estate
320
323
(14
)
$
337
1
%
5
%
Other
70
60
(5
)
$
65
(14
) %
(7
) %
Total Digital Real Estate Services segment
revenues
$
426
$
421
$
(20
)
$
441
(1
) %
4
%
REA Group revenues
$
246
$
252
$
(20
)
$
272
2
%
11
%
Subscription Video Services:
Circulation and subscription
$
440
$
425
$
(34
)
$
459
(3
) %
4
%
Advertising
59
64
(5
)
$
69
8
%
17
%
Other
11
13
(1
)
$
14
18
%
27
%
Total Subscription Video Services segment
revenues
$
510
$
502
$
(40
)
$
542
(2
) %
6
%
Q1 Fiscal
2022
Q1 Fiscal
2023
FX impact
Q1 Fiscal
2023
constant
currency
% Change -
reported
% Change -
constant
currency
($ in millions)
Better/(Worse)
Dow Jones:
Circulation and subscription
$
349
$
414
$
(9
)
$
423
19
%
21
%
Advertising
90
94
—
$
94
4
%
4
%
Other
5
7
—
$
7
40
%
40
%
Total Dow Jones segment revenues
$
444
$
515
$
(9
)
$
524
16
%
18
%
Book Publishing:
Consumer
524
467
(22
)
$
489
(11
) %
(7
) %
Other
22
20
—
$
20
(9
) %
(9
) %
Total Book Publishing segment revenues
$
546
$
487
$
(22
)
$
509
(11
) %
(7
) %
News Media:
Circulation and subscription
$
285
$
269
$
(32
)
$
301
(6
) %
6
%
Advertising
223
213
(22
)
$
235
(4
) %
5
%
Other
68
71
(8
)
$
79
4
%
16
%
Total News Media segment revenues
$
576
$
553
$
(62
)
$
615
(4
) %
7
%
News UK
Circulation and subscription
$
145
$
134
$
(23
)
$
157
(8
) %
8
%
Advertising
68
61
(9
)
$
70
(10
) %
3
%
Other
31
26
(5
)
$
31
(16
) %
—
%
Total News UK revenues
$
244
$
221
$
(37
)
$
258
(9
) %
6
%
News Australia
Circulation and subscription
$
118
$
112
$
(9
)
$
121
(5
) %
3
%
Advertising
101
104
(8
)
$
112
3
%
11
%
Other
34
39
(3
)
$
42
15
%
24
%
Total News Australia revenues
$
253
$
255
$
(20
)
$
275
1
%
9
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108006048/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
News (NASDAQ:NWSA)
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