News Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended June 30, 2021 (the underlying year ended June 27); comparative period is FY2020. This is an annual report, not a 2020 fourth-quarter filing.
Business context
News Corp is a global media and information-services company with six reporting segments: Digital Real Estate Services, Subscription Video Services, Dow Jones, Book Publishing, News Media and Other. Its businesses include REA Group, realtor.com, Foxtel, The Wall Street Journal, HarperCollins and major Australian and U.K. news brands.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $9.358 billion | $9.008 billion |
| Net income (loss) | $389 million | $(1.545) billion |
| Net income (loss) attributable to News Corp shareholders | $330 million; diluted EPS $0.56 | $(1.269) billion; diluted EPS $(2.16) |
| Total Segment EBITDA (non-GAAP) | $1.273 billion | $1.013 billion |
| Net cash from operating activities | $1.237 billion | $780 million |
| Capital expenditures | $390 million | $438 million |
| Free cash flow available to News Corp (non-GAAP) | $731 million | $180 million |
| Cash and cash equivalents at year-end | $2.236 billion | $1.517 billion |
| Total borrowings, including finance leases | $2.313 billion | $1.259 billion |
Segment EBITDA was about 13.6% of revenue, versus 11.2% in FY2020; this is a derived, non-GAAP measure, not GAAP operating margin. FY2021 results include a $143 million gain in “Other, net,” primarily reflecting equity-security remeasurement gains and other items. The company paid $0.20 per share in dividends during FY2021 and had an undrawn $750 million corporate revolving credit facility. Management said available liquidity was expected to cover needs for at least 12 months. Some foreign cash is not readily accessible, including $128 million held by separately listed REA Group.
Segments and changes versus FY2020
- Digital Real Estate Services: Revenue $1.393 billion, up 31%; Segment EBITDA $514 million, up 49%. Growth reflected stronger real-estate activity and lead volumes at Move and REA Group, along with acquisitions and favorable currency effects.
- Subscription Video Services: Revenue $2.072 billion, up 10%; Segment EBITDA $359 million, up 11%. Streaming revenue, especially Kayo and BINGE, increased, while residential broadcast subscribers declined. Broadcast churn rose to 17.3% from 15.3%.
- Dow Jones: Revenue $1.702 billion, up 7%; Segment EBITDA $332 million, up 41%. Average daily digital-only WSJ subscriptions reached 2.722 million, up 21%; digital revenue was 72% of segment revenue versus 67%.
- Book Publishing: Revenue $1.985 billion, up 19%; Segment EBITDA $303 million, up 42%, supported by strong title sales, digital growth and the HMH Books & Media acquisition. Digital sales were about 22% of consumer revenue.
- News Media: Revenue $2.205 billion, down 21%, largely due to the prior-year sale of News America Marketing and ongoing print-advertising pressure. Segment EBITDA was nearly unchanged at $52 million versus $53 million.
Consolidated revenue rose 4%, with a reported $513 million favorable currency impact. Advertising revenue fell 27% overall, reflecting the News America Marketing divestiture, COVID-related market weakness and print declines. The return to net income chiefly reflects the absence of FY2020’s $1.690 billion non-cash impairment charges, particularly at Foxtel and News America Marketing; it should not be read as a comparable improvement in recurring earnings alone.
Capital allocation, outlook and risks
- FY2021 acquisitions included HMH Books & Media for $349 million, Investor’s Business Daily for $275 million and Mortgage Choice for approximately $183 million; total cash used for acquisitions was $886 million. The company also acquired control of Elara and Avail.
- News Corp issued $1 billion of 3.875% senior notes due 2029. Foxtel’s external facilities were extended to May 2024; REA Group had a $314 million bridge-facility balance due July 2022 and expected to refinance it in the first half of FY2022.
- Management expected FY2022 capital expenditures to increase by approximately $100 million, subject to currency movements, partly for technology and Foxtel IP-enabled set-top boxes. The filing says News Corp does not ordinarily provide operating-results projections and gives no consolidated earnings guidance.
- Subsequent events: REA Group exchanged its Malaysia and Thailand businesses for an 18% interest in PropertyGuru; News Corp agreed to acquire OPIS for $1.15 billion in cash, subject to conditions, with an expected FY2022 second-quarter close.
- Key risks include continued shifts from print and traditional pay-TV, advertising cyclicality, sports-rights costs and subscriber losses, COVID-19 and economic uncertainty, foreign-exchange exposure, cybersecurity and privacy regulation, and litigation. The company reported $2.022 billion of sports-programming commitments and $8.110 billion of total listed commitments and contractual obligations.
- Legal matters include U.K. Newspaper Matters, for which the company accrued approximately $47 million and recorded a $55 million indemnification receivable from FOX, and HarperCollins antitrust class actions. The Valassis litigation was settled in July 2021. Other contingencies may have outcomes the company could not estimate.
The FY2021 annual goodwill and indefinite-lived intangible-asset review found no impairment; goodwill was $4.653 billion. The FY2020 comparison included substantial write-downs. Management and the auditor concluded internal control over financial reporting was effective; the audit firm gave unqualified opinions on the financial statements and controls, excluding recently acquired businesses from the control assessment.
Important facts for investors to verify
- Whether digital real-estate, Dow Jones subscription and book-publishing growth persists, and whether Foxtel’s streaming growth offsets broadcast subscriber declines and higher sports costs.
- How much of the revenue and EBITDA improvement reflects currency movements, acquisitions, one-time gains and cost actions rather than ongoing organic performance.
- Funding, refinancing and returns from the OPIS agreement and recent acquisitions, alongside FY2022 capital spending and debt maturities.
- Exposure to sports-rights commitments, Foxtel covenant requirements, deferred consideration and other contractual obligations.
- Potential outcomes and indemnification recoveries for U.K. Newspaper Matters, HarperCollins litigation and other legal or tax contingencies.