Business context and reporting period
News Corporation is a diversified media and information-services company operating in digital real estate, subscription video, business news and information, book publishing, and news media. This is its Form 10-Q for fiscal 2022 Q3, reported as the quarter ended March 31, 2022. The filing notes that the three- and nine-month periods actually ended March 27, 2022; the comparison periods ended March 28, 2021. The requested “2021 Q3” metadata does not match the filing period.
Financial performance and position
Amounts are in U.S. dollars; financial statement figures are in millions except per-share data.
| Metric | Three months ended March 31, 2022 | Prior-year quarter | Nine months ended March 31, 2022 | Prior-year nine months |
|---|---|---|---|---|
| Revenue | $2,492 | $2,335 | $7,711 | $6,866 |
| Net income | $104 | $96 | $633 | $404 |
| Net income attributable to News Corp stockholders | $82 | $79 | $513 | $344 |
| Diluted EPS | $0.14 | $0.13 | $0.86 | $0.58 |
| Total Segment EBITDA (non-GAAP) | $358 | $298 | $1,354 | $1,063 |
| Operating cash flow | Not presented for quarter | Not presented for quarter | $1,030 | $1,060 |
Revenue grew 7% in the quarter and 12% year to date. Segment EBITDA was about 14.4% of revenue in the quarter versus 12.8% a year earlier, and 17.6% year to date versus 15.5% (calculated from reported figures). Quarterly stockholder-attributable income increased 4%; nine-month stockholder-attributable income rose 49%.
For the nine months, investing cash outflow was $1,554, including $1,167 for acquisitions, while financing cash inflow was $174. Capital expenditures were $315. Cash declined from $2,236 at June 30, 2021 to $1,865 at March 31, 2022. Free cash flow available to News Corporation, a non-GAAP measure, decreased to $618 from $762.
At March 31, cash and cash equivalents were $1,865; total assets were $17,419 and total equity was $9,416. Borrowings were $2,802, including current borrowings of $306 and long-term borrowings of $2,496. Some subsidiary debt is non-recourse to News Corp. Current assets of $4,162 exceeded current liabilities of $3,527. Management said liquidity, including cash, operating cash generation and borrowing-market access, was expected to meet needs for at least 12 months.
Material changes versus prior comparable periods
- Growth drivers: Digital Real Estate Services, Dow Jones, Book Publishing and News Media reported higher nine-month revenue. Growth reflected acquisitions, digital subscriptions and advertising, property revenue and content licensing.
- Segment results: Nine-month EBITDA increased at News Media ($184 versus $52), Dow Jones ($327 versus $263), and Digital Real Estate Services ($453 versus $378). Subscription Video Services EBITDA declined to $279 from $293; Book Publishing edged up to $259 from $255.
- Subscription video: Nine-month segment revenue fell 2%, with lower broadcast subscriptions and foreign-exchange effects partly offset by streaming growth. Foxtel streaming subscribers increased, while residential broadcast subscribers declined.
- Costs and financing: Nine-month operating expenses rose 6% and selling, general and administrative expenses rose 15%. Interest expense increased to $68 from $32, primarily reflecting senior-note issuance.
- Cash flow: Operating cash flow decreased $30, while investing outflow increased substantially, mainly because of OPIS. The company also repurchased $125 of stock and paid $114 in dividends during the nine months.
- Non-operating gains: Nine-month “Other, net” included a $107 gain on REA Group’s Malaysia and Thailand business disposition and a $15 gain related to dilution of its PropertyGuru investment. These items supported reported earnings.
Outlook, commentary, risks and unusual items
- The company does not ordinarily provide projections of future operating results. It said it expected liquidity to cover requirements for at least the next 12 months, subject to operating performance, credit-market access, debt terms and economic conditions.
- OPIS was acquired in February 2022 for $1.15 billion in cash. The company agreed to acquire Base Chemicals for $295 million, subject to customary conditions and regulatory approvals, and expected the deal to close in fiscal 2022 Q4.
- Management cited inflation, manufacturing and freight costs, supply-chain pressures, and competitive labor-market compensation and hiring costs as near-term cost pressures. News Media expected at least $20 million of incremental Q4 fiscal 2022 costs versus the prior year for product investments, including TalkTV.
- The company reported limited direct exposure to Russia and Ukraine and no material impact to date, but warned that escalation or related disruption could affect supply chains, inflation and results.
- Restructuring charges were $67 for the nine months; the company also recorded $15 of non-cash impairment related to Dow Jones U.S. printing facilities. OPIS transaction costs included $19 year to date.
- Legal matters include U.K. newspaper claims, for which the company accrued approximately $63 and recorded a $66 receivable for expected indemnification by FOX. Other matters include Insignia antitrust litigation and HarperCollins-related publisher antitrust class actions; outcomes and potential losses were not clear or estimable in the filing. Tax examinations, including an IRS audit for fiscal 2018, may also result in adjustments.
- The company reported compliance with debt covenants at March 31, 2022 and effective disclosure controls. It reported no material change in risk factors from its prior filings.
Important facts for investors to verify
- Confirm the reporting-period cutoff: the filing is labeled March 31, 2022 but says the quarter ended March 27; reconcile this with the stated March 31 draw of the $500 Term A loan and debt/cash-flow disclosures.
- Assess how much reported growth and earnings depended on acquisitions and one-time gains, particularly OPIS, HMH Books & Media, IBD, and the REA Malaysia/Thailand disposition.
- Monitor streaming subscriber monetization and broadcast subscriber declines, digital real-estate lead volumes, and the durability of advertising and subscription growth.
- Track inflation, supply-chain, freight and labor costs against segment margins, as well as planned TalkTV and other product-investment spending.
- Review debt maturities, subsidiary non-recourse borrowings, facility covenant headroom, and access to cash held at separately listed REA Group.
- Follow legal and tax contingencies, including the U.K. Newspaper Matters indemnification and unresolved antitrust claims; the filing does not provide a clear estimate of potential additional losses.