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News Corporation (NWSA) Q4 Earnings Top, Advertising Revenues Rise

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News Corporation (NWSA - Free Report) reported sturdy fourth-quarter fiscal 2021 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. Quarterly results reflect the company’s prudent strategic efforts, which include the ongoing digital transformation of the business as well as investments in the Digital Real Estate Services, Dow Jones and Book Publishing segments. Management agreed to purchase OPIS to reinforce the company’s Dow Jones’ Professional Information Business. OPIS is a major data and analytics provider of energy and commodities markets.

Fiscal 2021 has been the most profitable year since the new News Corporation was founded in 2013. This diversified media and information services company is also witnessing a rapid expansion at Move. Management saw impressive results at Move and robust traffic at realtor.com as well as a record number of digital subscriptions, strong profits at HarperCollins and the largest profit at Dow Jones since its acquisition in 2007.

News Corporation also witnessed record subscriber growth at Foxtel, paid streaming subscribers of which reached above 2 million at the end of June. This shows significant growth of 155% year over year. Additionally, recovery in the advertising market in both print and digital from last year’s adverse impacts of COVID-19 aided results.

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Shares of this currently Zacks Rank #3 (Hold) company have gained 14.5% in the past six months against the industry’s decline of 17.4%.

 

Quarterly Details

News Corporation delivered adjusted earnings of 16 cents per share in the fiscal fourth quarter. The bottom-line results beat the Zacks Consensus Estimate of 11 cents and reversed the adjusted loss of 3 cents reported in the year-ago quarter.

Total revenues of $2,492 million surpassed the Zacks Consensus Estimate of $2,168 million. The top line grew 30% from the prior-year quarter’s levels, driven by an 11% favorable impact from foreign currency fluctuations as well as solid growth in the Digital Real Estate Services, Book Publishing and Dow Jones segments. Higher advertising revenues at all divisions owing to the recovery of the advertising market from the pandemic woes and increased subscription revenues at the Subscription Video Services segment buoyed by Foxtel’s streaming products also led to the upside. Adjusted revenues rose 20% too.

Total segment EBITDA was $210 million, up 8% from the prior-year quarter’s level. The year-over-year upside resulted from improved revenues and a $28-million (or 15%) worth favorable foreign currency impacts. These were partially offset by higher costs at the segments including elevated sports rights and production costs at Foxtel, rise in employee costs, increased marketing expenses, the absence of pandemic cost savings in the year-ago period and $11 million of one-off costs at Foxtel. Adjusted total segment EBITDA increased 26% to $235 million.

News Corporation Price and Consensus

 

News Corporation Price and Consensus

News Corporation price-consensus-chart | News Corporation Quote

Segment Details

Revenues at the Digital Real Estate Services segment increased 74% year over year to $413 million, backed by a strong performance at Move and REA Group, and a 15% positive impact from foreign currency fluctuations. Adjusted revenues in the segment increased 59% while adjusted EBITDA surged 99%.

Revenues in Move went up 68% to $186 million owing to higher real estate revenues. Real Estate revenues, which contributed 85% to total Move revenues, improved 77% on strength in the referral model and the traditional lead generation product. Also, increased average monthly lead volume led to the upside. Move’s internal data shows that average monthly unique users of realtor.com’s web and mobile sites in the fourth quarter improved 32% to 106 million.

Revenues in REA Group rallied 79% year over year to $227 million, driven by increased Australian residential depth revenues, a 27% positive impact from foreign currency fluctuations, contributions from the acquisition of Elara and growth in developer revenues.

The Subscription Video Services segment’s revenues were $542 million, up 33% year over year including a 21% gain from foreign currency fluctuations. Increased revenues from Foxtel’s streaming products as well as the recovery of commercial subscription and advertising revenues from the negative pandemic impacts of 2020 also led to the upside. Adjusted revenues in the segment rose 12% while adjusted EBITDA decreased 46%.

Foxtel’s total closing paid subscribers were 3.891 million as of Jun 30, 2021, reflecting a rise of 40% year over year. The upside resulted from increased subscribers at Kayo, and the BINGE and higher commercial subscribers, partly offset by lower residential broadcast subscribers. Broadcast subscriber churn was 17.1% in the quarter under review compared with 13.2% in the prior-year quarter. Broadcast ARPU inched up 4% to A$81 (US$63).

Revenues at the Dow Jones segment rose 18% year over year to $449 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 72% to total revenues compared with 71% in the prior-year quarter. Adjusted revenues also increased 14% while adjusted EBITDA rose 12%.

Circulation and subscription revenues improved 11% during the quarter under review including a 1% favorable impact of foreign currency fluctuations. Circulation revenues rose 12%, driven by a consistent strength in digital-only subscriptions and contributions from the acquisition of IBD. Professional information business revenues improved 11% amid growth in Risk & Compliance products. Digital circulation revenues represented 65% of circulation revenues compared with 61% in the year-ago quarter.

Advertising revenues increased 45%, mainly owing to a 53% surge in digital advertising revenues and a 36% rise in print advertising revenues. Digital advertising accounted for 56% of the total advertising revenues in the reported quarter.

During the quarter, total subscriptions to Dow Jones’ consumer products reached 4.5 million average subscriptions, reflecting an increase of 19% from the prior-year quarter’s level. This also includes more than 100,000 IBD subscriptions. Digital-only subscriptions rose 26%. Subscriptions to The Wall Street Journal rose 15% to 3.5 million average subscriptions. Digital-only subscriptions to The Wall Street Journal increased 21% to more than 2.7 million average subscriptions in the reported quarter and represented 79% of the total subscriptions.

The Book Publishing segment reported revenues worth $493 million, up 21% year over year including a 4% gain from foreign currency exchange rates. Revenue growth was driven by higher consumption trends and contributions from the buyout of HMH. Higher frontlist and backlist sales, comprising the series of Bridgerton titles by Julia Quinn and The Women of the Bible Speak by Shannon Bream, also contributed to the gains. Digital sales dipped 3% year over year and accounted for 23% of Consumer revenues for the quarter. Adjusted revenues increased 11% while adjusted EBITDA was flat year over year.

Revenues in the News Media segment jumped 21% year over year to $595 million in the reported quarter. This includes a 14% 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. This was partly offset by the adverse impacts of the sale of News America Marketing in May 2020. Within the segment, revenues at News Corp Australia and News UK soared 35% and 38% each. Adjusted revenues for the segment climbed 21% while adjusted EBITDA surged 94%.

Circulation and subscription revenues improved 26%, backed by growth in digital subscribers, price rises and a positive impact from foreign currency movements as well as gains from the recovery of print volume from the pandemic. Advertising revenues increased 15% year over year on the recovery of both the print and the digital advertising market. This upside reflected a 14% favorable impact of currency fluctuations, offset by a 28% negative impact from the divestiture of News America Marketing and a 5% adverse impact from the closure or transition of some regional and community newspapers in Australia to the digital mode.

Digital revenues contributed 32% to the News Media segment revenues compared with 24% in the year-ago quarter. The same accounted for 30% of the combined revenues of the newspaper mastheads. As of Jun 30, 2021, The Times and Sunday Times closing digital subscribers were 367,000. The metric at the News Corp Australia’s mastheads was 810,000. The Sun’s digital offering reached nearly 124 million global monthly unique users in June 2021 while New York Post’s digital network touched about 123 million average monthly unique users in the same month.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $2,236 million, borrowings of $2,285 million and shareholders’ equity of $8,211 million excluding a non-controlling interest of $935 million.

Net cash provided by operating activities amounted to $1,237 million for fiscal 2021. Capital expenditures amounted to $390 million in the fiscal year. Free cash flow available to News Corporation was $731 million.

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