News Corporation (NWSA Quick QuoteNWSA - Free Report) reported sturdy second-quarter fiscal 2022 results with both the top and the bottom lines improving year over year and surpassing the Zacks Consensus Estimate. The company witnessed strength primarily across Digital Real Estate Services, Dow Jones and Book Publishing segments. A surge in profitability was noticed in the News Media segment due to a revival in the advertising market. Meanwhile, Foxtel’s total streaming subscribers grew substantially.

Management remained optimistic about its acquisitions of the Oil Price Information Service and Base Chemicals businesses that are likely to enhance Dow Jones’ information services business. News Corporation has expanded its multi-year global agreement with Apple. The deal will help generate subscriptions and advertising revenues for news sites worldwide.

Shares of this Zacks Rank #3 (Hold) company have increased 5.8% in the past year against the industry’s decline of 26%.

Quarterly Details

News Corporation delivered adjusted quarterly earnings of 44 cents a share. The bottom-line figure beat the Zacks Consensus Estimate of 16 cents and showcased a sharp improvement from adjusted earnings of 34 cents reported in the year-ago period.

Total revenues of $2,717 million surpassed the Zacks Consensus Estimate of $2,584 million. The top line grew 13% from the prior-year quarter’s levels, primarily reflecting growth in real estate and advertising as well as recent buyouts. Adjusted revenues rose 8%.

Total segment EBITDA climbed 18% year over year to $586 million, thanks to higher revenues. This was partly offset by increased costs across all operating segments, including the impact of recent buyouts. Adjusted total segment EBITDA advanced 16%.

Segment Details

Revenues at the Digital Real Estate Services segment increased 35% year over year to $456 million, backed by a strong performance at Move and REA Group, as well as the acquisition of Mortgage Choice and REA India (rebranded from Elara). Adjusted segment revenues increased 22%, while adjusted EBITDA rose 29%.

Revenues in Move rose 9% to $169 million owing to increased real-estate revenues. Real Estate revenues, which contributed 86% to total Move revenues, improved 13% 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 grew 6% year over year to 85 million.

Revenues at REA Group jumped 56% to $287 million, buoyed by increased financial services and higher Australian residential revenues. The metric gained from the buyout of REA India that contributed to the tune of $10 million.

The Subscription Video Services segment’s revenues were $498 million, down 3% year over year. Increased revenues from Kayo and BINGE, were more than offset by fewer residential broadcast subscribers and lower commercial subscription revenues primarily due to the ongoing pandemic. Adjusted segment revenues fell 3%, while adjusted EBITDA slumped 31%.

Foxtel Group's streaming subscription revenues accounted for roughly 19% of the total circulation and subscription revenues. Foxtel’s total closing paid subscribers were more than 3.9 million as of Dec 31, 2021, reflecting an increase of 19% 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 13% from 17.5% in the prior year. Broadcast ARPU grew 3% year over year to A$82 (US$60).

Revenues at the Dow Jones segment rose 14% year over year to $508 million on account of increased advertising revenues, growth in circulation and subscription revenues, and $18 million contribution from the buyout of Investor’s Business Daily (IBD). The segment’s digital revenues contributed 72% to total revenues. Adjusted segment revenues increased 10%, while adjusted EBITDA rose 29%.

Circulation and subscription revenues improved 12% during the quarter under discussion. Circulation revenues rose 13%, driven by a consistent strength in digital-only subscriptions and the acquisition of IBD. Professional information business revenues jumped 9% on an increase in Risk & Compliance products and modest growth in Newswires. Digital circulation revenues represented 67% of circulation revenues.

Advertising revenues increased 23%, primarily owing to an 18% rise in digital advertising revenues and a 29% surge in print advertising revenues. Digital advertising represented nearly 56% of the total advertising revenues in the reported quarter.

During the quarter, the overall average subscriptions to Dow Jones’ consumer products reached more than 4.7 million, up 17% from the prior-year quarter’s level. This includes 126,000 IBD subscriptions. Digital-only subscriptions rose 23%. Subscriptions to The Wall Street Journal rose 12% to more than 3.6 million average subscriptions. Digital-only subscriptions to The Wall Street Journal increased 19% to more than 2.9 million average subscriptions and accounted for 81% of the total Wall Street Journal subscriptions.

The Book Publishing segment reported revenues worth $617 million, up 13% year over year. Growth in revenues was driven by robust consumption trends due to higher frontlist sales in General books and a $50 million contribution from the buyout of Houghton Mifflin Harcourt’s Books and Media segment (“HMH”). The growth was also driven by the U.K. division and the Christian books category, partly offset by a drop in sales of Children’s books. Digital sales rose 8% year over year, gaining from an increase in downloadable audiobooks, and accounted for 17% of Consumer revenues. Adjusted segment revenues increased 4%, while adjusted EBITDA declined 7%.

Revenues in the News Media segment jumped 11% year over year to $638 million in the reported quarter. This includes a 1% favorable impact from foreign currency fluctuations. The segment’s revenues gained from sustained recovery in the advertising market from pandemic-induced softness in the prior year and increased circulation and subscription revenues. Within the segment, revenues at News Corp Australia and News UK rose 14% and 7%, respectively. Adjusted revenues for the segment climbed 10%, while adjusted EBITDA soared 65%.

Circulation and subscription revenues improved 9%, backed by digital subscriber growth, cover price increases, rise in content licensing revenues and a positive impact from foreign currency movements. This was partly offset by a fall in print volumes.

Advertising revenues climbed 17% on improvement in digital advertising across businesses, recovery of print advertising at News UK and gains from currency fluctuations.

Digital revenues contributed 34% to the News Media segment revenues compared with 31% in the year-ago quarter. The same accounted for 32% of the combined revenues of the newspaper mastheads. As of Dec 31, 2021, The Times and Sunday Times closing digital subscribers were 399,000. The metric at the News Corp Australia was 909,000. The Sun’s digital offering reached nearly 163 million global monthly unique users in December 2021, while New York Post’s digital network attained about 160 million monthly unique users in the same month.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $2,184 million, borrowings of $1,968 million and stockholders’ equity of $8,383 million, excluding non-controlling interest of $964 million.

Net cash provided by operating activities amounted to $430 million during the six-month period ended Dec 31, 2021. The company incurred capital expenditures of $208 million in the said period. Free cash flow available to News Corporation was $144 million in the six-month period.

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