News Corporation Reports Fourth Quarter and Full Year Results for Fiscal 2019

FISCAL 2019 FULL YEAR KEY FINANCIAL HIGHLIGHTS

  • Revenues were $10.07 billion, a 12% increase compared to $9.02 billion in the prior year, reflecting the consolidation of Foxtel for the full year and growth at the Digital Real Estate Services segment
  • Net income of $228 million compared to a net loss of ($1.44) billion in the prior year
  • Total Segment EBITDA was $1.24 billion compared to $1.07 billion in the prior year
  • Reported diluted EPS were $0.26 compared to ($2.60) in the prior year – Adjusted EPS were $0.46 compared to $0.44 in the prior year
  • The Wall Street Journal subscribers reached a record of 2.6 million with digital-only subscribers accounting for approximately 69% of the total subscriber base
  • Book Publishing reported record Segment EBITDA, helped by successful front-list titles, strong backlist and continued expansion of downloadable audiobook sales
  • Strengthened the Digital Real Estate Services segment through strategic investments including the acquisitions of Opcity and Hometrack Australia
  • Subscribers for Foxtel’s over-the-top services grew over 90% since the beginning of the calendar year with approximately 777,000 paid OTT subscribers, including approximately 331,000 paid subscribers at Kayo
  • Announced the strategic review of News America Marketing

NEW YORK–(BUSINESS WIRE)–News Corporation (“News Corp” or the “Company”) (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV) today reported financial results for the three months and fiscal year ended June 30, 2019.

Commenting on the results, Chief Executive Robert Thomson said:

“News Corp completed Fiscal 2019 robustly, with revenues rising 12 percent and profitability 16 percent higher compared to the prior year, reflecting the consolidation of Foxtel, strength in digital real estate and substantial progress in the successful digital transformation of our news businesses.

We are acutely focused on simplifying the structure of the company and making clear the full value of the sum of our parts. To that end, we recently announced a strategic review of News America Marketing, including a sale of the business; we have received material interest and the process is progressing well.

Significantly, we posted higher Segment EBITDA at our News and Information Services segment, thanks to a rapid rise in digital paid subscribers, particularly at Dow Jones. The Wall Street Journal recorded a notable increase in digital-only subscribers, who now account for over 69 percent of the total subscriber base. The Risk & Compliance business is also flourishing, with revenue expanding 24 percent, the fourth consecutive year of growth well above 20 percent.

For the Digital Real Estate Services segment, both REA and realtor.com® strengthened their competitive positions through strategic acquisitions and product enhancements, despite headwinds in housing markets. We note with interest the recent signs of improvement in the U.S. housing environment, with lead volume improving, record traffic to realtor.com® and an uptick in pending home sales.

At Foxtel, paying subscribers for the Kayo sports streaming service more than doubled between the third and fourth quarters to 331,000, while average churn among sports subscribers to the Foxtel broadcast service actually fell during the same period. Clearly, Kayo is adding significantly to the total number of sports viewers in Australia prepared to pay for premium content.”

FULL YEAR RESULTS

The Company reported fiscal 2019 full year total revenues of $10.07 billion, a 12% increase compared to $9.02 billion in the prior year period, reflecting the impact from the consolidation of Foxtel’s results following the combination of Foxtel and FOX SPORTS Australia (the “Transaction”) into a new company in the fourth quarter of fiscal 2018 and growth in the Digital Real Estate Services segment. The growth was partially offset by a $311 million negative impact from foreign currency fluctuations, lower print advertising and News America Marketing revenues at the News and Information Services segment, and $72 million of lower revenues as a result of the adoption of the new revenue recognition standard. Adjusted Revenues (which exclude the foreign currency impact, acquisitions and divestitures as defined in Note 1) increased 1%.

Net income for the full year was $228 million as compared to a net loss of ($1.44) billion in the prior year. The improvement was primarily driven by the absence of the non-cash impairment charges and write-downs of $1.2 billion recognized in fiscal 2018, higher Other, net, lower tax expense and higher Total Segment EBITDA, as discussed below. The improvement was partially offset by higher depreciation and amortization expense and higher interest expense.

Total Segment EBITDA for the full year was $1.24 billion, a 16% increase compared to $1.07 billion in the prior year, driven by the consolidation of Foxtel’s results and higher contribution from the News and Information Services and Book Publishing segments. Adjusted Total Segment EBITDA (as defined in Note 1) increased 4%.

Diluted net income per share available to News Corporation stockholders was $0.26 as compared to net loss per share of ($2.60) in the prior year.

Adjusted EPS (as defined in Note 3) were $0.46 compared to $0.44 in the prior year.

FOURTH QUARTER RESULTS

The Company reported fiscal 2019 fourth quarter total revenues of $2.47 billion, an 8% decline compared to $2.69 billion in the prior year period, primarily due to the $105 million negative impact from foreign currency fluctuations, lower revenues at the Book Publishing segment, which includes the absence of the one-time contribution from the sublicensing agreement for J.R.R. Tolkien’s The Lord of the Rings trilogy, lower broadcast subscriber revenues at the Subscription Video Services segment, lower advertising revenues at the News and Information Services segment and $18 million of lower revenues as a result of the adoption of the new revenue recognition standard. Adjusted Revenues decreased 5%.

Net loss for the quarter was ($42) million as compared to a net loss of ($355) million in the prior year. The improvement was mainly due to the absence of the write-off of the FOX SPORTS Australia channel distribution agreement (the “FSA channel distribution agreement”) intangible asset of $317 million in the prior year, which was reflected in Other, net, and lower tax expense. The improvement was partially offset by lower Total Segment EBITDA and higher impairment and restructuring charges.

Total Segment EBITDA for the quarter was $269 million, a 14% decrease compared to $314 million in the prior year, reflecting lower revenues, as discussed above, and higher costs associated with continued investment in Opcity in the Digital Real Estate Services segment. The decline was partially offset by cost reductions at the News and Information Services segment. Adjusted Total Segment EBITDA decreased 8%.

Net loss per share available to News Corporation stockholders was ($0.09) as compared to ($0.64) in the prior year.

Adjusted EPS were $0.07 compared to $0.08 in the prior year.

SEGMENT REVIEW

 

 

 

 

For the three months ended

 

For the fiscal years ended

 

 

 

 

June 30,

 

June 30,

 

 

 

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

 

 

 

(in millions)

 

Better/

(Worse)

 

(in millions)

 

Better/

(Worse)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

News and Information Services

 

$

1,227

 

$

1,294

 

(5)%

 

$

4,956

 

$

5,119

 

(3)%

 

 

Subscription Video Services

 

 

536

 

 

610

 

(12)%

 

 

2,202

 

 

1,004

 

**

 

 

Book Publishing

 

 

419

 

 

490

 

(14)%

 

 

1,754

 

 

1,758

 

 

 

Digital Real Estate Services

 

 

283

 

 

299

 

(5)%

 

 

1,159

 

 

1,141

 

2%

 

 

Other

 

 

1

 

 

 

**

 

 

3

 

 

2

 

50%

Total Revenues

 

$

2,466

 

$

2,693

 

(8)%

 

$

10,074

 

$

9,024

 

12%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

News and Information Services

 

$

108

 

$

95

 

14%

 

$

417

 

$

397

 

5%

 

 

Subscription Video Services(a)

 

 

85

 

 

97

 

(12)%

 

 

380

 

 

173

 

**

 

 

Book Publishing

 

 

44

 

 

72

 

(39)%

 

 

253

 

 

239

 

6%

 

 

Digital Real Estate Services

 

 

84

 

 

99

 

(15)%

 

 

384

 

 

401

 

(4)%

 

 

Other(b)

 

 

(52)

 

 

(49)

 

(6)%

 

 

(190)

 

 

(139)

 

(37)%

Total Segment EBITDA

 

$

269

 

$

314

 

(14)%

 

$

1,244

 

$

1,071

 

16%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

** – Not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (a)  

Subscription Video Services Segment EBITDA for the three months and fiscal year ended June 30, 2018 included transaction related costs of $12 million and $17 million, respectively, associated with the Transaction.

 (b)  

Other Segment EBITDA for the fiscal year ended June 30, 2018 included a $46 million benefit from the reversal of certain previously accrued net liabilities for the U.K. Newspaper Matters as a result of an agreement reached with the relevant tax authority related to certain employment taxes.

News and Information Services

Full Year Segment Results

Fiscal 2019 full year revenues declined $163 million, or 3%, compared to the prior year, including the $154 million, or 3%, negative impact from foreign currency fluctuations. Within the segment, Dow Jones revenues grew 3%, while revenues at News UK declined 4% and revenues at News Corp Australia and News America Marketing both declined 6%. Adjusted Revenues for the segment were flat compared to the prior year.

Advertising revenues declined 7% compared to the prior year, reflecting weakness in the print advertising market, a $74 million, or 3%, negative impact from foreign currency fluctuations and lower revenues at News America Marketing. Circulation and subscription revenues increased 1% compared to the prior year, reflecting continued strength at Dow Jones, partially offset by a $61 million, or 2%, negative impact from foreign currency fluctuations. Other revenues increased 3% compared to the prior year, primarily due to the $38 million net benefit related to News UK’s exit of the gaming partnership with Tabcorp for Sun Bets.

Full year Segment EBITDA increased $20 million, or 5%, as compared to the prior year, primarily due to higher contribution from Dow Jones and News Corp Australia. The improvement was partially offset by the lower revenues discussed above. Adjusted Segment EBITDA (as defined in Note 1) increased 7% compared to the prior year.

Fourth Quarter Segment Results

Revenues in the quarter decreased $67 million, or 5%, compared to the prior year, reflecting a $40 million, or 3%, negative impact from foreign currency fluctuations. Within the segment, Dow Jones revenues grew 4%, while revenues at News America Marketing declined 6%. News Corp Australia and News UK declined 7% and 10%, respectively, primarily driven by foreign currency headwinds. Adjusted Revenues for the segment were 2% lower compared to the prior year.

Advertising revenues declined 8% compared to the prior year, of which $18 million, or 2%, was related to the negative impact from foreign currency fluctuations. The remainder of the decline was driven by weakness in the print advertising market and lower home delivered revenues, which include free-standing insert products, at News America Marketing, partially offset by growth in digital advertising revenues. Advertising revenues at Dow Jones were flat in the quarter as growth in digital advertising offset the decline in print advertising. Digital revenues represented 40% of total Dow Jones advertising revenues in the quarter.

Circulation and subscription revenues were flat compared to the prior year, including a $17 million, or 3%, negative impact from foreign currency fluctuations. Circulation and subscription revenues again benefited from a healthy contribution from Dow Jones, which again saw a 7% increase in its circulation revenues, reflecting digital paid subscriber growth of 14% and subscription price increases at The Wall Street Journal, as well as the continued growth in its Risk & Compliance products. Dow Jones’ consumer products reached approximately 3.3 million total subscribers, reflecting a 9% increase compared to the prior year. Cover price increases at other mastheads also contributed to the results. These increases were partially offset by lower print volume in the U.K. and Australia.

Segment EBITDA increased $13 million in the quarter, or 14%, as compared to the prior year, primarily due to higher contribution from News America Marketing, as well as continued cost reductions across the businesses. The growth was partially offset by lower revenues, as mentioned above. Adjusted Segment EBITDA increased 17% compared to the prior year.

Digital revenues represented 33% of News and Information Services segment revenues in the quarter, compared to 30% in the prior year. For the quarter, digital revenues for Dow Jones and the newspaper mastheads represented 37% of their combined revenues, and at Dow Jones, digital accounted for 55% of its circulation revenues. Digital subscribers and users across key properties within the News and Information Services segment are summarized below:

  • The Wall Street Journal average daily digital subscribers in the three months ended June 30, 2019 were 1,818,000, compared to 1,590,000 in the prior year (Source: Internal data)
  • Closing digital subscribers at News Corp Australia’s mastheads as of June 30, 2019 were 517,300, compared to 415,600 in the prior year (Source: Internal data)
  • The Times and Sunday Times closing digital subscribers as of June 30, 2019 were 304,000, compared to 256,000 in the prior year (Source: Internal data)
  • The Sun’s digital offering reached approximately 113 million global monthly unique users in June 2019 (Source: Google Analytics; prior year comparable statistic unavailable due to source change)

Subscription Video Services

Full Year Segment Results

Revenues and Segment EBITDA for fiscal 2019 increased $1.20 billion and $207 million, respectively, compared to the prior year, primarily due to the consolidation of Foxtel’s results for the full year. Adjusted Revenues and Adjusted Segment EBITDA, which exclude the impact of foreign currency fluctuations, acquisitions and divestitures, declined 2% and 19%, respectively.

On a pro forma basis, reflecting the Transaction, segment revenues for fiscal 2019 declined $342 million, or 13%, compared with the prior year, of which $181 million, or 7%, was due to the negative impact from foreign currency fluctuations. The remainder of the revenue decline was driven by the impact from lower broadcast subscribers and changes in the subscriber package mix, partially offset by higher revenues from Foxtel Now and Kayo.

Segment EBITDA for fiscal 2019 decreased $165 million, or 30%, compared with pro forma Segment EBITDA for the prior year, primarily due to the lower revenues discussed above, $95 million of higher sports programming and production costs, mainly related to Cricket Australia and National Rugby League rights, as well as higher marketing costs related to the launch of Kayo. The decline was partially offset by the $150 million positive impact on expenses from foreign currency fluctuations and lower entertainment programming and non-programming costs.

Fourth Quarter Segment Results

Revenues in the quarter decreased $74 million, or 12%, compared to the prior year, of which $44 million, or 7%, was due to the negative impact from foreign currency fluctuations. The remainder of the revenue decline was primarily due to lower broadcast subscribers and changes in the subscriber package mix, partially offset by higher revenues from Foxtel Now and Kayo. Adjusted Revenues for the segment decreased 5% compared to the prior year.

As of June 30, 2019, Foxtel’s total closing subscribers were 3.144 million, which was 12% higher than the prior year, primarily due to the launch of Kayo, subscriber growth at Foxtel Now and the inclusion of commercial subscribers of FOX SPORTS Australia beginning in the first quarter of fiscal 2019, partially offset by lower broadcast subscribers. Approximately 2.4 million of the total closing subscribers were broadcast and commercial subscribers, and the remainder consisted of Foxtel Now and Kayo subscribers. Following its launch in November 2018, Kayo grew over 8 months to reach 382,000 subscribers, of which around 331,000 were paying subscribers as of June 30, 2019. Foxtel Now totaled 460,000 subscribers as of June 30, 2019, of which approximately 446,000 were paying subscribers, up 32% compared to the prior year. Broadcast subscriber churn in the quarter was 14.7% compared to 12.5% in the prior year, reflecting the impact of the price increase implemented in October as well as increased volume of churn from lower-value customers who were on a no-contract basis. Broadcast ARPU for the quarter declined 1% compared to the prior year to more than A$78 (US$55).

Segment EBITDA in the quarter decreased $12 million, or 12%, compared with the prior year, primarily due to the lower revenues discussed above, $20 million of higher sports programming costs, primarily related to Cricket Australia, higher marketing costs related to Kayo and the $8 million negative impact from foreign currency fluctuations. The declines were partially offset by the absence of $12 million of transaction costs from the prior year related to the Transaction and lower entertainment programming costs. Adjusted Segment EBITDA declined 19% compared to the prior year.

Book Publishing

Full Year Segment Results

Fiscal 2019 full year revenues were flat compared to the prior year, as higher sales in the Christian, general and children’s books categories were offset by $65 million of lower revenues as a result of the adoption of the new revenue recognition standard, the absence of $28 million of revenues from The Lord of the Rings trilogy sublicensing agreement in the prior year and the $27 million negative impact from foreign currency fluctuations. Titles to highlight in the fiscal year are Girl, Wash Your Face and Girl, Stop Apologizing by Rachel Hollis, The Subtle Art of Not Giving a F*ck by Mark Manson and Homebody by Joanna Gaines. Digital sales increased 7% compared to the prior year, driven by the growth in downloadable audiobook sales, and represented 20% of Consumer revenues for the year. Segment EBITDA increased $14 million, or 6%, from the prior year primarily due to the mix of titles.

Fourth Quarter Segment Results

Revenues in the quarter declined $71 million, or 14%, compared to the prior year, primarily due to the absence of $28 million of revenues from The Lord of the Rings trilogy sublicensing agreement in the prior year, lower sales of Magnolia Table by Joanna Gaines compared to the prior year period and $18 million of lower revenues as a result of the adoption of the new revenue recognition standard. The decline was partially offset by the success of new releases such as Everything is F*cked by Mark Manson and The World’s Worst Teachers by David Walliams. Digital sales increased 1% compared to the prior year, driven by the growth in downloadable audiobook sales, and represented 22% of Consumer revenues for the quarter. Segment EBITDA for the quarter declined $28 million, or 39%, from the prior year due to the lower revenues noted above.

Digital Real Estate Services

Full Year Segment Results

Fiscal 2019 full year revenues increased $18 million, or 2%, compared to the prior year, primarily due to the continued growth at Move and REA Group, partially offset by the $56 million, or 4%, negative impact of foreign currency fluctuations and the disposal of Diakrit in July 2018. Segment EBITDA declined $17 million, or 4%, compared to the prior year, of which foreign currency fluctuations had a negative impact of $30 million, or 7%. The decline was also due in large part to higher costs associated with the acquisition of and further investment in Opcity, partially offset by the higher revenues noted above. Adjusted Revenues and Adjusted Segment EBITDA increased 6% and 11%, respectively, compared to the prior year.

In the fiscal year, revenues at REA Group increased 1% to $674 million from $666 million in the prior year, driven by an increase in Australian residential depth revenue and the acquisition of Hometrack Australia, partially offset by the negative impact from foreign currency fluctuations mentioned above and softness in listing volumes. Move’s revenues in the fiscal year increased 7% to $484 million from $452 million in the prior year, primarily due to 16% growth in its real estate revenues, including the acquisition of Opcity, partially offset by planned declines in advertising revenues.

Fourth Quarter Segment Results

Revenues in the quarter declined $16 million, or 5%, compared to the prior year, of which foreign currency fluctuations had a negative impact of $13 million, or 4%. The remainder of the decline was due to the disposal of Diakrit in July 2018. Segment EBITDA in the quarter declined $15 million, or 15%, compared to the prior year, primarily due to higher costs associated with further investment in Opcity following the acquisition and the $5 million negative impact from foreign currency fluctuations. Adjusted Revenues were flat compared to the prior year and Adjusted Segment EBITDA increased 7% compared to the prior year.

In the quarter, revenues at REA Group decreased 6% to $161 million from $172 million in the prior year, primarily due to the negative impact from foreign currency fluctuations, as mentioned above, and lower Australian residential depth revenue due to the weakness in listing volumes. The decline was partially offset by higher financial services and data revenues as a result of the adoption of the new revenue recognition standard as well as the acquisition of Hometrack Australia in June 2018.

Move’s revenues in the quarter increased 3% to $123 million from $120 million in the prior year, primarily due to 8% growth in its real estate revenues, partially offset by lower software and services revenues. The increase in real estate revenues, which represent 77% of Move’s total revenues, reflect higher yield per lead, improving lead volume and the acquisition of Opcity. Realtor.com® continued to migrate leads from its Connections Plus product to its performance-based Opcity product, as it further evolves and scales its platform. Based on Move’s internal data, average monthly unique users of realtor.com®’s web and mobile sites for the fiscal fourth quarter grew 14% year-over-year to approximately 72 million, with mobile representing more than half of all unique users.

REVIEW OF EQUITY LOSSES OF AFFILIATES

 

 

 

For the three months ended

 

For the fiscal years ended

 

 

 

June 30,

 

June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foxtel (a)

 

$

 

$

 

$

 

$

(974)

Other equity affiliates, net

 

 

(4)

 

 

(4)

 

 

(17)

 

 

(32)

 

Total equity losses of affiliates

 

$

(4)

 

$

(4)

 

$

(17)

 

$

(1,006)

 (a)  

The Company amortized nil and $49 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the three months and fiscal year ended June 30, 2018, respectively.  Such amortization is reflected in Equity losses of affiliates in the Statements of Operations.

Fiscal 2019 full year equity losses of affiliates were ($17) million compared to ($1,006) million in the prior year. During fiscal 2018, the Company recognized a $957 million non-cash write-down of its investment in Foxtel and $13 million in non-cash write-downs of certain equity method investments’ carrying values. The Company ceased accounting for Foxtel as an equity method investment and began consolidating the results of Foxtel in the fourth quarter of fiscal 2018 following completion of the Transaction in April 2018.

Equity losses of affiliates for the fourth quarter were ($4) million compared to ($4) million in the prior year.

FULL YEAR C

Contacts

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

Ilana Ozernoy

212-416-3364

iozernoy@newscorp.com

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