News Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended June 30, 2022 (53 weeks; financial statements use the June 30 date for convenience and the fiscal year ended July 3). Comparisons are with FY2021, a 52-week year. This is an annual filing, not a standalone fourth-quarter report. News Corp is a diversified media and information services company operating across digital real estate, subscription video, news and information, and book publishing.
Financial performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $10.385 billion | $9.358 billion | +11% |
| Income before tax | $812 million | $450 million | +80% |
| Net income | $760 million | $389 million | +95% |
| Net income attributable to News Corp stockholders | $623 million | $330 million | +89% |
| Diluted earnings per share | $1.05 | $0.56 | +$0.49 |
| Segment EBITDA (non-GAAP) | $1.669 billion | $1.273 billion | +31% |
| Cash from operating activities | $1.354 billion | $1.237 billion | +$117 million |
| Capital expenditures | $499 million | $390 million | +$109 million |
Segment EBITDA was about 16.1% of revenue, versus 13.6% in FY2021. This is a non-GAAP measure, not a substitute for GAAP earnings or cash flow. The filing does not present a consolidated operating margin as a headline metric. Effective tax rate was 6%, compared with 14%; FY2022 benefited from valuation-allowance releases, including $149 million related to certain foreign deferred tax assets.
Cash flow and liquidity: Cash and cash equivalents were $1.822 billion at June 30, 2022, down from $2.236 billion. Investing activities used $2.076 billion, including $1.501 billion for acquisitions; financing activities provided $404 million. Free cash flow available to News Corporation, a non-GAAP measure, was $663 million, down from $731 million, reflecting higher capital spending and REA Group free cash flow, partly offset by improved operating cash flow and higher REA dividends.
Debt: Consolidated borrowings were $3.069 billion, including $293 million classified as current; cash less borrowings implies approximately $1.247 billion of net debt. The filing states that subsidiary borrowings of Foxtel and REA Group are non-recourse to News Corp. News Corp itself had $1.979 billion of borrowings and $750 million available under an undrawn revolving facility. The company reported covenant compliance at year-end.
Segments and material changes
| Segment | FY2022 revenue | FY2022 Segment EBITDA | Year-over-year context |
|---|---|---|---|
| Digital Real Estate Services | $1.741 billion | $574 million | Revenue +25%; EBITDA +12%, supported by REA Group and acquisitions. Move lead volumes fell 23%. |
| Subscription Video Services | $2.026 billion | $360 million | Revenue -2%; EBITDA approximately flat. Streaming growth was offset by fewer residential broadcast subscribers and currency effects. |
| Dow Jones | $2.004 billion | $433 million | Revenue +18%; EBITDA +30%, supported by subscriptions, advertising and IBD/OPIS acquisitions. |
| Book Publishing | $2.191 billion | $306 million | Revenue +10%; EBITDA +1%; higher sales were largely offset by manufacturing, freight and inflationary costs. |
| News Media | $2.423 billion | $217 million | Revenue +10%; EBITDA increased from $52 million, amid improved advertising and circulation/subscription revenue. |
| Other | — | $(221) million | Primarily corporate overhead, U.K. Newspaper Matters and cost-reduction costs. |
Consolidated revenue growth reflected higher real estate, Dow Jones, News Media and book publishing revenues, including contributions from acquisitions. The 53rd week added approximately $110 million of revenue. Foreign exchange reduced revenue by $161 million. News Corp stockholder net income rose partly due to higher Segment EBITDA, lower restructuring and impairment charges, and reduced equity-affiliate losses; higher interest expense and lower “Other, net” were offsets.
Outlook, risks and unusual items
- Outlook: Management does not ordinarily provide projections of future operating results. It expected inflation, higher interest rates and real estate market conditions to pressure real estate leads, transactions and adjacent businesses in the near term; book printing and freight costs were also expected to remain pressured. No quantified guidance is provided.
- Acquisitions and financing: FY2022 acquisitions included OPIS for $1.15 billion, Chemical Market Analytics for $295 million and UpNest for approximately $45 million at closing, plus contingent consideration. News Corp issued $500 million of 5.125% senior notes due 2032 and borrowed $500 million under a term loan facility. Acquisition accounting for OPIS and CMA was preliminary at filing.
- Streaming transition: Foxtel streaming subscribers increased, while broadcast residential subscribers declined to 1.481 million from 1.651 million. Foxtel planned to migrate broadcast subscribers to satellite or internet delivery by June 2023. Programming rights costs, supplier dependence and execution of that transition remain relevant risks.
- Macroeconomic and operating risks: The filing highlights inflation, interest rates, supply-chain and labor constraints, currency movements, advertising cyclicality, declining print trends, competition from digital platforms, and real estate market weakness. The Ukraine conflict had not materially affected results to date but contributed to inflationary pressures; advertising saw an immaterial short-term decline in the third quarter.
- Cybersecurity: News Corp disclosed a persistent cyberattack discovered in January 2022; its investigation indicated possible foreign government involvement and that data was taken. The company said, to its knowledge, customer and financial data systems were not affected, the attack was contained, and expected investigation/remediation expenses were not material.
- Legal matters: The company accrued approximately $56 million for U.K. Newspaper Matters and recorded a related $63 million receivable from FOX. Insignia litigation settled in July 2022; Valassis litigation had settled in FY2021. HarperCollins is defending antitrust class-action claims. Outcomes of pending matters are uncertain.
- Other notable items: FY2022 included $94 million of restructuring charges and $15 million of non-cash fixed-asset impairment charges related to certain U.S. printing facilities. The annual goodwill and indefinite-lived intangible impairment test found no impairment. The company repurchased $183 million of stock and paid $0.20 per share in dividends during FY2022; a further $0.10-per-share semiannual dividend was declared in August 2022.
Most important facts for investors to verify
- How much of revenue and EBITDA growth reflects organic performance versus acquisitions, the extra fiscal week, currency and one-time gains?
- Whether digital real estate growth and Foxtel streaming gains can offset declining real estate leads and broadcast subscribers amid weaker market conditions.
- Whether higher book production, freight, labor, programming and interest costs will compress margins or cash generation.
- The cash, debt and contingent consideration impacts of acquisitions, and the availability and terms of subsidiary-level borrowing capacity.
- Developments in the cyberattack investigation, U.K. Newspaper Matters, HarperCollins litigation and related indemnification receivable.
- Key valuation and tax assumptions: goodwill and intangible assets totaled $7.840 billion; deferred tax assets carried a $1.588 billion valuation allowance.