News Corp. (NWSA) Q3 Earnings Miss, Revenues Up 7% Y/Y

News Corporation NWSA reported third-quarter fiscal 2022 results, wherein the top line beat the Zacks Consensus Estimate, but the bottom line fell short of the same. Impressively, both revenues and earnings showcased an improvement from the year-ago period. The company witnessed strength primarily across Digital Real Estate Services, Dow Jones and Book Publishing segments. The News Media segment continued to gain from the revival in the advertising market, new content licensing revenues and solid digital subscriber gains. Meanwhile, Foxtel’s total paid streaming subscribers grew substantially.

Quarterly Details

News Corporation delivered adjusted quarterly earnings of 16 cents a share. The bottom-line figure missed the Zacks Consensus Estimate of 19 cents but improved sharply from adjusted earnings of 9 cents reported in the year-ago period.

Total revenues of $2,492 million surpassed the Zacks Consensus Estimate of $2,488 million and grew 7% from the prior-year quarter’s levels. Foreign currency fluctuations had a 3% negative impact on revenues. Adjusted revenues rose 6%.

Total segment EBITDA climbed 20% year over year to $358 million, thanks to higher revenues. This was partly offset by increased costs at the Dow Jones, Digital Real Estate Services and Book Publishing segments, which reflects the impact of recent buyouts, including $15 million of transaction costs related to the acquisition of Oil Price Information Service (“OPIS”). Foreign currency fluctuations had a 6% negative impact on total segment EBITDA. Adjusted total segment EBITDA advanced 25%.

News Corporation Price, Consensus and EPS Surprise

News Corporation Price, Consensus and EPS Surprise

News Corporation price-consensus-eps-surprise-chart | News Corporation Quote

Segment Details

Revenues at the Digital Real Estate Services segment increased 19% year over year to $416 million, driven by a strong performance at Move and REA Group, as well as the acquisition of Mortgage Choice, partly offset by a 4% negative impact from foreign currency fluctuations. Adjusted segment revenues increased 14%.

Revenues in Move rose 5% to $170 million, owing to increased real-estate revenues. Real Estate revenues, which contributed 85% to total Move revenues, improved 7% on strength in the referral model and the traditional lead generation product. The referral model generated 28% of the overall Move revenues. Move’s internal data shows that average monthly unique users of realtor.com’s web and mobile sites fell 3% year over year to 95 million.

Revenues at REA Group jumped 30% to $246 million, buoyed by increased financial services and higher Australian residential revenues.

The Subscription Video Services segment’s revenues were $494 million, down 6% year over year. Increased revenues from Kayo and BINGE, as well as higher advertising revenues, were partly offset by fewer residential broadcast subscribers. Foreign currency fluctuations adversely impacted the segment revenues by 7%. Adjusted segment revenues rose marginally by 1%.

Foxtel Group's streaming subscription revenues accounted for roughly 20% of the total circulation and subscription revenues. Foxtel’s total closing paid subscribers were more than 4.3 million as of Mar 31, 2022, reflecting an increase of 23% year over year. The upside can be attributed to an increase in BINGE and Kayo subscribers, partly offset by lower residential broadcast subscribers. Broadcast subscriber churn improved to 14.3% from 20.1% in the prior year. Broadcast ARPU grew 2% year over year to A$82 (US$59).

Revenues at the Dow Jones segment rose 16% year over year to $487 million on account of increased advertising revenues, growth in circulation and subscription revenues, a $20 million contribution from the buyout of Investor’s Business Daily (“IBD”) and $10 million contributions from the acquisition of OPIS. The segment’s digital revenues contributed 76% to total revenues. Adjusted segment revenues increased 9%.

Circulation and subscription revenues improved 15% during the quarter under discussion. Circulation revenues rose 16%, driven by a consistent strength in digital-only subscriptions at The Wall Street Journal and the acquisition of IBD. Professional information business revenues jumped 13%, mainly driven by the OPIS acquisition and a 12% increase in Risk & Compliance products, partly offset by negative foreign currency fluctuations. Digital circulation revenues represented 68% of circulation revenues.

Advertising revenues increased 20%, primarily owing to a 21% rise in digital advertising revenues and an 18% surge in print advertising revenues. Digital advertising accounted for nearly 62% of the total advertising revenues in the reported quarter.

During the quarter, the overall average subscriptions to Dow Jones’ consumer products reached more than 4.8 million, up 14% from the prior-year quarter’s level. This includes 122,000 IBD subscriptions. Digital-only subscriptions to Dow Jones’ consumer products rose 19%. Subscriptions to The Wall Street Journal jumped 10% to more than 3.7 million average subscriptions. Digital-only subscriptions to The Wall Street Journal increased 16% to more than 3 million average subscriptions and accounted for 82% of the total Wall Street Journal subscriptions.

The Book Publishing segment reported revenues of $515 million, up 5% year over year. Growth in revenues was driven by robust frontlist sales in General books and a $35 million contribution from the buyout of Houghton Mifflin Harcourt’s Books and Media segment (“HMH”). This was partly offset by lower sales of the series of Bridgerton titles by Julia Quinn, lower sales of Children’s and foreign language books, and the negative impact of foreign currency fluctuations. Digital sales decreased 6% year over year due to lower e-book sales and made up 23% of Consumer revenues. Adjusted segment revenues fell 1%.

Revenues in the News Media segment jumped 5% year over year to $580 million in the reported quarter. The segment’s revenues gained from sustained recovery in the advertising market and increased circulation and subscription revenues, partly offset by adverse foreign currency fluctuations. Within the segment, revenues at News Corp Australia and News UK rose 2% and 4%, respectively. Adjusted revenues for the segment climbed 10%.

Circulation and subscription revenues improved 5%, backed by digital subscriber growth, cover price increases and a rise in content licensing revenues. This was partly negated by a fall in print volumes and a negative impact from foreign currency movements.

Advertising revenues climbed 9% on improvement in digital advertising across the businesses and the recovery of print advertising at News UK, partly offset by negative foreign currency fluctuations.

Digital revenues contributed 35% to the News Media segment revenues compared with 30% in the year-ago quarter. The same accounted for 32% of the combined revenues of the newspaper mastheads. As of Mar 31, 2022, The Times and Sunday Times closing digital subscribers were 421,000. The same at the News Corp Australia was 946,000. The Sun’s digital offering reached nearly 171 million global monthly unique users in March 2022, while New York Post’s digital network attained about 155 million monthly unique users in the same month.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $1,865 million, borrowings of $2,496 million and stockholders’ equity of $8,425 million, excluding non-controlling interest of $991 million.

Net cash provided by operating activities amounted to $1,030 million during the nine-month period ended Mar 31, 2022. The company incurred capital expenditures of $315 million in the said period. Free cash flow available to News Corporation was $618 million.

Shares of this Zacks Rank #3 (Hold) company have fallen 18% in the past six months compared with the industry’s decline of 28.9%.

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