News Corporation — FY2023 Form 10-K Summary
Reporting period: The filing is an annual report for the fiscal year ended June 30, 2023 (the fiscal year ended July 2, 2023), not a standalone 2022 Q4 report. FY2023 comprised 52 weeks; FY2022 comprised 53 weeks. Unless stated otherwise, financial amounts are in U.S. dollars.
Business context
News Corp is a diversified media and information services company operating in digital real estate, subscription video, business information, book publishing and news media. Its six reporting segments are Digital Real Estate Services, Subscription Video Services, Dow Jones, Book Publishing, News Media and Other.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $9.879 billion | $10.385 billion | Down 5% |
| Segment EBITDA (non-GAAP) | $1.420 billion | $1.669 billion | Down 15% |
| Income before tax | $330 million | $812 million | Down 59% |
| Net income | $187 million | $760 million | Down 75% |
| Net income attributable to News Corp shareholders | $149 million | $623 million | Down 76% |
| Diluted EPS | $0.26 | $1.05 | Down |
| Operating cash flow | $1.092 billion | $1.354 billion | Down $262 million |
| Free cash flow (non-GAAP) | $593 million | $855 million | Down $262 million |
| Free cash flow available to News Corp (non-GAAP) | $450 million | $663 million | Down $213 million |
Calculated from reported figures, Segment EBITDA was approximately 14.4% of revenue versus 16.1% in FY2022; net margin was approximately 1.9% versus 7.3%. These are simple ratios, not company-reported GAAP margin measures. The effective tax rate rose to 43% from 6%.
Revenue was affected by the absence of FY2022’s 53rd week (about $110 million) and unfavorable currency movements (about $494 million). Digital revenues were approximately 50% of total revenue.
Segment results
| Segment | FY2023 revenue | FY2023 Segment EBITDA | Change in EBITDA vs. FY2022 |
|---|---|---|---|
| Digital Real Estate Services | $1.539 billion | $457 million | Down 20% |
| Subscription Video Services | $1.942 billion | $347 million | Down 4% |
| Dow Jones | $2.153 billion | $494 million | Up 14% |
| Book Publishing | $1.979 billion | $167 million | Down 45% |
| News Media | $2.266 billion | $156 million | Down 28% |
| Other | — | $(201) million | Improved from $(221) million |
Dow Jones growth reflected the OPIS and Chemical Market Analytics acquisitions. Digital Real Estate Services was pressured by weaker housing activity: Move revenue fell 15%, with lead volumes down 29%. At Foxtel, streaming revenue increased, while residential broadcast subscribers declined. Book Publishing faced lower consumer demand and weaker frontlist sales. News Media was affected by weaker advertising, currency movements and higher newsprint costs.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $1.833 billion at June 30, 2023, including $173 million held by separately listed REA Group and not readily accessible without a dividend declaration.
- Reported consolidated borrowings were approximately $2.967 billion, including $27 million current and $2.940 billion long-term. News Corp itself had $1.978 billion of borrowings and $750 million of undrawn revolving capacity. Foxtel and REA subsidiary debt is non-recourse to News Corp.
- Cash from operations less capital expenditures was $593 million. Capital expenditures were $499 million. Cash flows used in investing activities were $574 million; financing activities used $501 million.
- The company repurchased $243 million of shares in FY2023 and paid $0.20 per share in dividends. The remaining authorization under its $1 billion repurchase program was about $577 million at year-end.
- Management stated that cash, operating cash generation and available financing were expected to meet liquidity needs for at least the next 12 months, including debt repayment, while noting that future market access is not assured.
Outlook, commentary and material risks
- The company does not ordinarily provide projections of future operating results. It expected the bulk of annualized gross savings from its announced workforce reduction to be reflected in FY2024: approximately 1,250 positions, or 5% of headcount, with expected annualized gross savings of at least $160 million once completed. The estimate was still being evaluated.
- Management said book-publishing supply-chain, inventory and inflationary pressures were expected to moderate in FY2024, while paper prices were expected to remain elevated. The real estate business anticipated continued near-term pressure from interest rates and inflation.
- FY2023 included $125 million of restructuring charges and $25 million of impairment charges on indefinite-lived intangibles. Separately, the company recorded an approximately $81 million non-cash write-down of REA Group’s PropertyGuru investment within equity losses of affiliates. Cash restructuring charges associated with the announced headcount reduction were approximately $80 million.
- Major risks include economic weakness and inflation, real estate market contraction, advertising volatility, subscriber and circulation declines, competition and changing distribution technology, rising sports-rights and programming costs, paper and freight costs, foreign exchange exposure, cybersecurity and privacy regulation, and possible impairment of goodwill, investments or other assets.
- Legal matters remain uncertain. The company accrued approximately $110 million for U.K. Newspaper Matters and recorded an approximately $115 million receivable from FOX for indemnification; additional claims and ultimate outcomes cannot be reliably estimated. HarperCollins is defending antitrust class actions, and the company reports other ongoing tax and legal matters.
- After year-end, Foxtel entered into an agreement for a new A$1.2 billion credit facility to refinance specified facilities and notes, subject to customary closing conditions. The company also declared a $0.10-per-share semi-annual dividend in August 2023.
Important facts for investors to verify
- Reconcile the sharp decline in net income with the 43% effective tax rate, equity-affiliate losses, impairments and restructuring costs; distinguish these items from underlying segment performance.
- Track whether the announced cost savings are achieved and assess implementation costs and any further workforce reductions.
- Monitor Move’s housing-market exposure and lead volumes, as well as Foxtel’s streaming growth, broadcast subscriber trends and refinancing completion and terms.
- Assess whether Dow Jones subscription and professional-information growth can continue to offset advertising weakness and the contribution from acquisitions.
- Review cash available to the parent separately from cash held at REA Group, and monitor debt maturities, leverage covenants and subsidiary-level borrowing.
- Follow the U.K. Newspaper Matters, FOX indemnification recoveries, HarperCollins litigation and other contingencies for changes in estimated exposure.
- Consider comparability adjustments: FY2022 had an extra week, and currency movements materially reduced FY2023 reported revenue.