News Corporation — Form 10-Q Summary
Business context and reporting period. News Corp is a diversified media and information-services company operating in digital real estate, subscription video, Dow Jones, book publishing and news media. This unaudited report covers the three and six months ended December 31, 2023, the second quarter and first half of fiscal 2024, compared with the corresponding prior-year periods.
Financial performance
| Metric | Three months ended Dec. 31, 2023 | Prior year | Six months ended Dec. 31, 2023 | Prior year |
|---|---|---|---|---|
| Revenue | $2.586 billion | $2.521 billion | $5.085 billion | $4.999 billion |
| Income before tax | $277 million | $155 million | $372 million | $256 million |
| Net income | $183 million | $94 million | $241 million | $160 million |
| Net income attributable to News Corp stockholders | $156 million | $67 million | $186 million | $107 million |
| Diluted EPS | $0.27 | $0.12 | $0.32 | $0.18 |
| Segment EBITDA (non-GAAP) | $473 million | $409 million | $837 million | $759 million |
| Cash from operating activities | Not separately reported for the quarter | $305 million | $161 million |
Revenue and segment trends. Quarterly revenue rose 3%; first-half revenue rose 2%. Dow Jones and Book Publishing grew in both periods, while Digital Real Estate Services benefited from REA Group and was partly offset by weaker Move results. News Media revenue declined, principally on lower advertising. Subscription Video Services revenue was slightly higher for the quarter but lower for the half year.
Profitability and unusual items. Segment EBITDA increased 16% for the quarter and 10% for the half year. Book Publishing EBITDA rose 67% in both periods; Dow Jones also improved. Subscription Video Services EBITDA fell 14% in the quarter and 15% in the half year, reflecting higher sports rights costs and $10 million of Hubbl launch costs. News Media EBITDA declined 12% and 14%, respectively. The filing attributes higher net income principally to improved segment EBITDA, lower equity-affiliate losses and higher Other, net in the quarter; higher taxes partly offset those improvements. Other, net included a $13 million quarterly gain from remeasurement of equity securities.
Fiscal 2024 first-half charges included $22 million of non-cash impairment related to proposed U.K. printing-operation changes and $27 million of restructuring charges. The company reported $106 million of cash restructuring charges through December 31 for its announced 5% headcount-reduction initiative.
Cash, liquidity and debt
- Operating cash flow was $305 million for the first half, versus $161 million. Capital expenditures were $236 million, versus $217 million.
- Free cash flow, a non-GAAP measure, was $69 million, compared with negative $56 million. Free cash flow available to News Corp was negative $21 million, compared with negative $102 million; this measure excludes REA Group cash flow except dividends received.
- Cash and cash equivalents were $1.724 billion at December 31, down from $1.833 billion at June 30, 2023. Current assets were $4.003 billion and current liabilities $2.784 billion.
- Total borrowings were approximately $3.042 billion, including $58 million current and $2.984 billion long-term. Consolidated debt includes Foxtel and REA debt that is non-recourse to News Corp. Cash less reported borrowings was approximately $1.318 billion before considering restrictions and subsidiary debt structure.
- News Corp had $750 million of undrawn revolving-facility capacity; Foxtel and REA also reported undrawn commitments. Management said cash, expected operating cash flow and access to credit markets are expected to meet liquidity needs for at least 12 months, including debt repayment, while noting financing access depends on performance, ratings and market conditions.
- First-half financing included refinancing at Foxtel and REA. The company repurchased $56 million of shares and paid $85 million in dividends. In February 2024, the board declared a further $0.10-per-share semi-annual dividend, payable April 10, 2024.
Outlook, commentary and risks
The company does not ordinarily provide projections of future operating results; no numerical earnings or revenue guidance is provided in this filing. Management expects at least $160 million of annualized gross savings from cost initiatives, with the majority expected to be reflected in fiscal 2024. The proposed combination of certain News UK and DMG Media printing operations remains subject to regulatory approval; the operations remain separate pending approval.
Key disclosed pressures include a weak U.S. housing market and higher interest rates affecting Move, declining advertising and platform-related traffic at some news properties, contractual increases in sports programming costs, and currency and tax exposures. Tax expense was higher than the U.S. statutory rate, partly because of foreign tax rates and valuation allowances. The company was in compliance with debt covenants at December 31. It reported no material changes to the risk factors in its 2023 Form 10-K.
Legal matters include ongoing U.K. newspaper claims; News Corp accrued approximately $81 million and recorded an approximately $89 million receivable for expected FOX indemnification, while the ultimate cost remains uncertain. HarperCollins continues to defend publisher-related antitrust litigation; one case was dismissed with prejudice in August 2023. The company states it cannot estimate potential losses for certain contingencies.
Important facts for investors to verify
- Whether REA Group growth continues to offset Move’s housing-market weakness, and how U.S. housing conditions affect Move leads and transactions.
- Whether News Media advertising and digital traffic stabilize, and whether the proposed U.K. printing joint venture receives regulatory approval.
- Progress toward the $160 million annualized gross cost-savings target, including implementation costs and realized net savings.
- Cash generation, capital expenditure requirements and the distinction between consolidated liquidity and cash held by separately listed REA Group.
- Debt refinancing terms, interest costs, covenant headroom and the non-recourse status of Foxtel and REA borrowings.
- Developments in U.K. newspaper claims, HarperCollins litigation, tax audits and valuation allowances.