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News Corporation NWSA reported sturdy first-quarter fiscal 2022 results with both the top and the bottom line increasing year over year and surpassing the Zacks Consensus Estimate.
Revenues grew across all the company’s segments. The company, which shares space with Gannett GCI and New York Times NYT, continues to make prudent strategic efforts including digital expansion as well as investments in the Digital Real Estate Services, Dow Jones and Book Publishing segments. Dow Jones has generated highest quarterly revenues and profitability since its acquisition. Foxtel’s streaming products reached 2.1 million paid subscribers
Shares of this currently Zacks Rank #3 (Hold) company have surged 30.6% in the year-to-date period compared with the industry’s growth of 7.6%.
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News Corporation delivered adjusted earnings of 23 cents per share in the fiscal first quarter. The bottom-line figure beat the Zacks Consensus Estimate of 13 cents and showcased a sharp improvement from adjusted earnings of 8 cents reported in the year-ago quarter.
Total revenues of $2,502 million surpassed the Zacks Consensus Estimate of $2,302 million. The top line grew 18% from the prior-year quarter’s levels, backed by a robust performance across key divisions, gains from the underlying businesses and recent acquisitions, and a 3% positive impact from foreign currency fluctuations. Adjusted revenues also rose 10%.
Total segment EBITDA was $410 million, up 53% from the prior-year quarter’s level. The year-over-year upside resulted from improved revenues and reduced costs at the Subscription Video Services unit and $11-million favorable foreign currency impacts. These were somewhat offset by higher costs at the Digital Real Estate Services, Book Publishing and Dow Jones divisions, partly owing to the recent acquisitions. Adjusted total segment EBITDA increased 47% to $395 million.
Revenues at the Digital Real Estate Services segment increased 47% year over year to $426 million, backed by a strong performance at Move and REA Group, a $43-million contribution from the Mortgage Choice buyout, an $8-million gain from the acquisition of REA India (rebranded from Elara) and a $7-million or a 3% favorable impact from foreign currency translations. Adjusted revenues in the segment increased 29% while adjusted EBITDA rose 21%.
Revenues in Move went up 30% to $180 million owing to increased real-estate revenues. Real Estate revenues, which contributed 87% to total Move revenues, improved 39% on strength in the referral model and the traditional lead generation product. The referral model generated nearly 32% of the overall Move revenues. Move’s internal data shows that average monthly unique users of realtor.com’s web and mobile sites in the first quarter grew 7% to 97 million. Growth was partly offset by an unfavorable impact from the divestiture of Top Producer. Lead volume fell 18% on tough year-over-year comparison and a seasonal shift in home buying.
Revenues in REA Group jumped 62% year over year to $246 million, buoyed by increased financial services and higher Australian residential revenues. The metric also gained from the buyout of REA India and a-$7 million or 3% positive impact from foreign currency fluctuations.
The Subscription Video Services segment’s revenues were $510 million, up 3% year over year including a 3% gain from foreign currency fluctuations. Increased revenues from Kayo and BINGE, and higher advertising revenues were mitigated by fewer residential broadcast subscribers and an unfavorable impact from decreased commercial subscription revenues. Adjusted revenues in the segment were flat year over year while adjusted EBITDA increased 42%.
Foxtel Group streaming subscription revenues accounted for roughly 19% of the total circulation and subscription revenues. Foxtel’s total closing paid subscribers were 3.9 million as of Sep 30, 2021, reflecting a rise of 17% year over year. The upside resulted from increased BINGE and Kay subscribers, partly offset by lower residential and commercial broadcast subscribers. Broadcast subscriber churn rose to 14% in the quarter under review compared with 14.6% in the prior-year quarter. Broadcast ARPU inched up 4% to A$82 (US$60).
Revenues at the Dow Jones segment rose 15% year over year to $444 million, mainly on increased circulation, subscription and advertising revenues along with gains from the buyout of Investor’s Business Daily (IBD). The segment’s digital revenues contributed 75% to total revenues compared with 73% in the prior-year quarter. Adjusted revenues also increased 9% while adjusted EBITDA rose 24%.
Circulation and subscription revenues improved 12% during the quarter under review. Circulation revenues rose 13%, driven by a consistent strength in digital-only subscriptions and contributions from the acquisition of IBD. Professional information business revenues jumped 13% on increases in Risk & Compliance products and modest growth in Factiva and Newswires. Digital circulation revenues represented 66% of circulation revenues compared with 63% in the year-ago quarter.
Advertising revenues increased 29%, mainly owing to a 38% surge in digital advertising revenues and a 17% rise in print advertising revenues. Digital advertising represented nearly 61% of the total advertising revenues in the reported quarter.
During the quarter, the overall average subscriptions to Dow Jones’ consumer products touched 4.6 million average subscriptions, up 18% from the prior-year quarter’s level. This also includes more than 128,000 IBD subscriptions. Digital-only subscriptions rose 24%. Subscriptions to The Wall Street Journal rose 13% to more than 3.5 million average subscriptions. Digital-only subscriptions to The Wall Street Journal increased 19% to more than 2.8 million average subscriptions in the reported quarter and accounted for 80% of the total subscriptions.
The Book Publishing segment reported revenues worth $546 million, up 19% year over year including a 1% gain from foreign currency exchange rates. Revenue growth was driven by higher consumption trends and contributions from the buyout of Houghton Mifflin Harcourt’s Books and Media segment (HMH). Strong sales in the U.K., and in the Christian and General books categories including The Cellist by Daniel Silva, the series of Bridgerton titles by Julia Quinn and Vanderbilt: The Rise and Fall of an American Dynasty by Anderson Cooper, also contributed to the upside. Digital sales rose 5% year over year and accounted for 21% of Consumer revenues in the reported quarter. Adjusted revenues increased 7% while adjusted EBITDA rose 10%.
Revenues in the News Media segment jumped 18% year over year to $576 million in the reported quarter. This includes a 5% favorable impact from foreign currency fluctuations. The segment’s revenue improvement was on the back of increased circulation and subscription revenues as well as the recovery of the advertising market. Within the segment, revenues at News Corp Australia and News UK rose 14% and 18% each. Adjusted revenues for the segment climbed 13% while adjusted EBITDA increased $52 million.
Circulation and subscription revenues improved 16%, backed by growth in digital subscribers, cover price rises, increased content licensing revenues and a positive impact from foreign currency movements. Advertising revenues climbed 21% year over year on improvement in digital advertising across businesses, recovery of print advertising at News UK and gains from currency fluctuations. The upside was somewhat offset by lower print advertising in Australia on persistent weakness in the print advertising market, exacerbated by the recent pandemic-led restrictions in the key states.
Digital revenues contributed 33% to the News Media segment revenues compared with 28% in the year-ago quarter. The same accounted for 30% of the combined revenues of the newspaper mastheads. As of Sep 30, 2021, The Times and Sunday Times closing digital subscribers were 380,000. The metric at the News Corp Australia’s mastheads was 897,000. The Sun’s digital offering reached nearly 133 million global monthly unique users in September 2021 while New York Post’s digital network touched about 151 million monthly unique users in the same month.
Other Financial Aspects
News Corporation ended the quarter with cash and cash equivalents of $2,100 million, borrowings of $1,964 million and stockholders’ equity of $8,210 million excluding a non-controlling interest of $938 million.
Net cash provided by operating activities amounted to $68 million during the reported quarter. Capital expenditures amounted to $101 million in the reported quarter. Free cash flow available to News Corporation was a negative $25 million.
The company paid out a dividend of $27 million in the quarter. Management also announced a $1-billion stock repurchase program.
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