Q4 2020 News Corp Earnings Call
Welcome to the news Corp, fourth quarter fiscal Twentytwenty conference.
Today's conference is being recorded.
Media will be on the listen only basis then at this time I would like to turn the conference over to Mike Swartz Senior Vice President and head of Investor Relations. Please go ahead.
Thank you very much Nicole.
Welcome to news Corp's fiscal fourth quarter 2020 earnings call. We show our earnings press release about an hour ago now posted on our website at news Corp. Dot com on the call to your Robert Thompson, Chief Executive and Susan <unk> Cho Chief Financial Officer.
But what some prepared remarks, and then we'll be happy to take questions from the investment community. This column includes certain forward looking information with respect to new sports businesses.
Actual results could differ materially from what is sad news corp's form 10-K, and form 10-Q filings identify risks and uncertainties that could cause actual results to differ and contain cautionary statements regarding forward looking information.
Additionally, this call will include certain non-GAAP financial measurements, such as total segment EBITDA adjusted segment EBITDA and adjusted EPS.
The nations and GAAP to non-GAAP reconciliations of such measures.
In our earnings release with that I'll pass over to Robert Thompson for some opening comments.
Thank you Mike.
Let me say initially that I trust on the cool annual families are faring well. These are certainly complex times and there are few have not been touched in some manner.
The Corona virus has your if I could lead change businesses and our businesses in expediting pre existing digital trends in challenging established practices and in prompting necessary introspection that work habits and the workplace itself.
It's always been much agility and adaptation at news cool.
The majority of our employees across the world has been working overtime and the resilience of the company's culture has been a cool component in continuity without.
Hi, Jason has accelerated.
All of that businesses have been affected and responded with customary ingenuity.
I would like to express my sincere thanks to each of our employees and their families.
Responded so probably so intelligently and so easily to these testing circumstances.
It incident response was seen in the fourth quarter when virtually all of that business is prudently reduce cost sometimes painfully to ensure that they were robust enough to cause volatility and disruption.
Preserving cash was a priority and it is worth noting that our cash balance increased in the last quarter by $29 million towards a 1.5 billion as of June.
Revenue comparisons obviously made complex by the size of news America, marketing and unruly plus the consequences.
But our adjusted revenue for the quarter declined by 13% obviously, the net income aes were affected by non cash impairments, primarily UK and just try and businesses and Susan will be able to provide more details momentarily.
Just a total segment EBITDA declined by a modest 10%.
This is particularly significant.
Somewhat historically I think it's cool.
Regular listeners will recall, the we have pledged to simplify the company and make the results more transparent.
The style at news America, marketing and unruly certainly simplified the structure.
In the questions. The transparency beginning this quarter, we are presenting Dow Jones as a separate segments.
This will highlight what we believe two incontrovertible sites, the substantially and growing value of that company and its superior profit profile and prospects to those are the New York times in what has been a difficult for many media companies Dow Jones reported a 13% increase in segment EBITDA based.
On the strength of its professional information business and to the preeminence The Wall Street Journal.
Other global Mastheads and digital information properties gathered in the news media segments, which will include our strategy and titles many of which I know digital Monday the times the Sun. The Sunday times, just want to talk sport and Virgin radio It may be called news media, but obviously the segment is increasingly digital in personality.
And virtually all of that must it's had record audiences during the year.
Your next to performed admirably in providing crucial insights to read as Jimmy indicated crisis, delivering accurate information and analysis.
Adding an antidote conspiracy theories and noxious nonsense bullets, writing elsewhere on the web.
We are continuing to focus on acquiring digital subscribers and audience well watch sizing up businesses to be digital first which is necessarily resulting in significant cost reductions.
See closure in the strike many about storied print additions and the emphasis on digital was further evidence of our willingness to be decisive I didn't typical moment.
We are very proud about traditions, and we will always invest in the very best journalism.
The format is less important than the function and we firmly believe that the digital reincarnation of these toggles written sure a profitable future and continuing role in that community.
We are also constantly restlessly reviewing our portfolio. We did you to ensuring that we had the optimum asset mix.
All of our executives understand that these interesting times and many about executives around our businesses internationally have volunteered hefty cuts that bonuses, which form a large part of their compensation executive chairman has taken a 100% if he is behind us and Susan per New Chairman, Doug Just general counsel here with me on this call have also voluntarily.
Given up a meaningful chunk of their bonus.
All understand the importance of the stringent cost strategy. So we have launched a genuinely meaningful shared service program that we believe will transform the company by centralizing many about functions.
The mission is being led by two of them as talented executives Damian Hills from Australia, and Jane Fonda from the UK in China them with our CTO, the global head of HR and see if.
Other words Susan.
The early indications are that the shared service program should be able to appreciably reduce costs and we expect it to have materially positive impact on our bottom line.
We will always emphasize integrity and creativity.
Our ability to prioritize imperative projects will be enhanced by the program.
We expect our technology platforms to be the best in class at the lowest available price and the overall level of cooperation coordination among our businesses will certainly be enhanced this is not and assemble project, but one that we believe we'll have a fundamental impact on the way, we do business and.
Now earnings.
One other trend is all ready, having an appreciable impact on earnings the changed tens of trade with the digital platforms.
Those of you watch the congressional testimony last week by the Tech Tartans would have no just overall the political understanding of the issues has vastly improved [noise].
There is also true in Brussels, London, and Australia, where the Triple C has just introduced a draft mandatory kind of content.
I recommend that anyone seeking enlightenment, Google the nine Rod Sims and read a few of these recent interviews Mr seems just the eye to persist.
It is fair to say without revealing details that we are deep in discussion with these companies and at the ecosystem has absolutely began to evolve.
Would you schools, which has been pursuing this issue for well over a decade. This favorable outcome would simply not have been possible without the leadership a rip it unlock on metal and the support of a board, which backed advocacy even when useful often stood alone the shoot of the principle of a pre.
I'm in for premium content.
No for the numbers at the New Star Jones segment revenues improved in fiscal year, Twentytwenty and profitability was up 13% as I'd mentioned.
$236 million Dow Jones food segment.
Segment EBITDA was the highest since separation as when margins digital revenues surpassed $1 billion in fiscal 2000 for the first time and represented 66% of total revenues rising to 70% for the fourth quarter.
We saw strong circulation volume growth with digital only subscriptions, increasing 23% year over year for the Wall Street Journal in Q4.
51% for the Barron's groups.
Okay Watch finance website reported the highest annual revenue numbers in the brands history, making it the third year in a row of record breaking results.
Equally impressive unique users more than doubled to 62 million in the month of June.
In contrast to most cases it affected media sites digital advertising was down only 7% in the quarter and the general shift towards digital as a source of revenue continues with that segment, representing 54% of advertising revenues in the quarter.
We expect that digital will continue to outpace prudent given we are seeing robust digital advertising, despite the social and commercial volatility that has prompted many companies to be cautious in marketing spend.
Even with the pandemic impact digital advertising at Dow Jones was 4% higher for the year.
Full year revenues for the professional information business rose, 7% year idea driven by risk and compliance which said.
<unk> percent.
We remain particularly excited by the prospects for our risk and compliance business given the intensification of regulatory scrutiny around the world as we have notices on this call in the past, who among you does not want to minimize risk and maximize compliance.
We are expanding our risk related product lines, enhancing our software and ensuring that the increased flows actionable intelligence is complemented by thoughtful analysis and compelling news feeds dry growing audience of clients.
We contend that the all digital risk and compliance business is a highly undervalued pod of highly undervalued company given the revenue trajectory.
Still expanding market and the necessity for companies and individuals to have an audit trail off compliance.
The creation of the Dow Jones segment allows us to make a direct comparison with the New York Times and most important measures the Wall Street Journal and the broader Dow Jones performed five into.
The journal is Bose.
The most trusted general newspaper in the U.S., According to Reuters institution, and the world's leading business use provider and that boss well heeled well informed audience provides an opportunity to up sell value added lucrative business products to serve a specialist Nate.
Here are a few metrics comparing the two companies for the quarter.
[noise] Dow Jones segment EBITDA of $60 million was higher than in New York times, having benefited from the stability about vibrant professional information business well Dow Jones segment, EBITDA expanded by 13% year over year, New York times declined by 6%.
Now John's EBITDA margins were 15.7% about three percentage points higher than the New York Times.
And this time of coated Dow Jones revenue decline moderated at Hyatt right in the New York times at 4% versus down another 7% for the times.
No Jones code that affected advertising revenue declined at a much lower right in the times, thanks, largely to significant outperformance in digital advertising, which was down just 7% at Dow Jones. So this is down 32% at the New York Times in fact, Dow Jones generated more title AD dollars than the New York Times.
We feel strongly that we should explain the virtues of Dow Jones to shareholders and potential shareholders. So you will have an investor day in mid September, which Dow Jones, Chief Executive M. outlets.
Other Dow Jones executive and myself will give you a more granular explanation of the company's extraordinary potential I had an opportunity for you to interrogate.
The news media segment of course had a challenging yet and we took prompt measures to confront those challenges.
These included the aforementioned styles of diamond unruly as well as immediate cost reductions and the launch.
Strategic shed said this project.
Apart from migrating publications digital only we also sold our investment in the Australian associated press newswire, and unfortunately implemented hundreds of redundancies.
And the relationship with IP was buys necessary and historic as the said this was founded in not in 35 by so Keith metals digital subscriptions across new scores try the rose 25% to nearly 650000 body ended the fiscal year. Meanwhile, at news UK the times in the Sunday times paid subscribers.
Rose to 336000, an increase of 11% year idea and benefited from a focus on attracting premium subscribers with the concomitant improvement in retention rights.
SUNS online audience expanded markedly during the year, including with the launch of the U.S. addition in church are the Sun reported a 133 million unique users globally in June for one month, which exposed on it reflects expansion in the U.S. importantly, the Sun remains the leading use brand in UK.
Hi, According to Pancha.
The she has scaled back collective reach should not be underestimated.
In the U.S., the new post digital network reached 177 million monthly unique users during the fourth quarter.
It has long been known that the post has been lossmaking, but those losses have fallen dramatically in the past 18 months as we increased copper prices and benefited from AD revenue for our expanding digital readership and reduce the cost base. We can now see a clear path to profitability for the path.
[noise] book publishing despite the borrow vicissitudes, which included the nearest shutdown.
You asked physical stores profitability was up in Q4.
This is a testament to the resourcefulness or the team at Harpercollins, which moved quickly to bolster supply chains and emphasize E books in online sales. These actions allowed us to make the most of changes in reading behavior during dependency.
As we had indicated on previous calls the second half of the fiscal year Topicals was more propitious than the first half segment EBIT dollar improvement in both Q3 Q4, among the titles that performed well with the latest installment of Joanna gains highly successful Magnolia tribal series Dutch has spy and touch it.
The one that on default by Catherine NGO Guide and wells was parent by David Wallace.
Looking ahead to fiscal 21 were already eagerly anticipating the release of Tiger Woods autobiography, and expect strong results from the upcoming launch agenda Bush acres everything beautiful when it's time.
We're certainly pleased by the early performance of Daniels silvers the order.
Ben Shapiro's had to destroy America, and three easy steps and we expect from Lebron James first children's book I promise scheduled for release next Tuesday.
In digital real estate services ARIA is traffic and lead volume have rebounded in the wake of the shutdown in Australia with record audiences in June and dramatic increase in use is potentially interested in the house move.
There is simply no doubt that the kozik crisis as prompted many families to consider their housing circumstances that ultra low interest rates has made a move more possible.
We noted similar trends in the U.S. it real to dotcom and we saw a significant improvement in profitability at move which runs the real to dotcom site in the fourth quarter and for the year as a whole.
The new leadership team. It moves is working closely with the Dow Jones executive team as the combined audience and lucrative demographic of the two sites in the U.S. is a hefty 124 million based on Comscore statistics as of June.
We are confident that the Dow Jones sites will provide a flow potential buyers for real to dot com and that really dot com will provide a flow potential subscriptions for the WSJ embarrass.
Also in Australia at Foxtel emphasis on streaming has brought a leap in new customers, who buys case, the sports streaming service and binge Entertainment offerings, which has just launched as of August full chaos, showing great resilience had 590000 subscribers, including 48000 Trollope.
Well binge had 217000 subscribers, which includes 185000 paying just a short time after its formal launch.
Both services are making the most of our existing riots without incurring extra content expenses and certainly expanding the reach of Foxtel, which has now approached a new record number of total subscribers. Following an acceleration in July just this week, we crossed the 1 billion MTT paying subscriber mark setting a new record. Thanks.
Our expanded streaming strategy.
While there is certainly seasonality decay given to share drilling of the popular with the sports. We are reassured that so many subscribers have returned to the service. So promptly I'm, particularly encouraged by the early Russian subscribers at binge.
Our post acquisition of cricket rights means that we are well positioned when the Indian cricket teams arrives in Australia later this year.
When I last call you will recall that I insisted that there would be a reset of sports prices and in the midst of this you start in season that has absolutely come to pass.
While negotiations with some sports continue deals already completed will reduce the cost of sports rights at Foxtel by at least $180 million Australian dollars over the next three years as compared to the prior contracted value. This reset we'll have a positive long term impact on foxtels profit.
Stability.
No doubt the events of the first half of calendar year Twentytwenty will remain resident in our memories.
I'm, particularly proud of the performance of all those who work at New school for showing press professionalism passion and compassion throughout these most difficult times.
Our reported an opinion writers around the world.
Hi, good a profoundly important service.
Many of our employees have contributor to that communities through philanthropic service in recent months I know more granular detail and customary inside Susan.
Thank you up it before talking throughout fiscal 20 results I would like to recap on the actions. We've taken this past year, they should position us for long term success with a focus on increasing shareholder value and transparency.
Additionally, the company has taken significant action on our cost base, a publishing business industry has been significantly restructured with 112 regional and community markets transitioning to digital closed the cost basis total has being restructured with savings across programming and support functions.
Creasing, HCT scale, and a low cost space, especially position to success and I would watch reiterate that we have no plans to provide additional funding.
Our digital real estate businesses have also been correct, giving reducing head count to confront the challenges of codes at 19.
In addition, we took quick and decisive actions to reduce opex and capex in the fourth quarter.
Picks reducing by said year on year, and total costs decreasing 21% year on year, partially due to divestments and it shakes, but primarily due to cost management [noise].
It looks like close to finalizing savings opportunities for global shared services across the company as we look to leverage our global scale and reduce cheap location.
These collective actions resulted in a 7% reduction in headcount dishy across the businesses, excluding the NAND and I'm really sales.
Secondly, Dow Jones results and now reported as a separate segment, which bears a highlight its performance and provides a more complete comparison with its Pete.
The business, so recalled subscriptions and achieved grossing both revenue and EBITDA for the yes.
Thirdly, we are taking tangible steps to stabilize our newly formed news media segment through digital subscriber growth.
Price increases and aggressive cost targets, which would be further enhance bio global shared service initiative.
In relation to liquidity the only getting stations, we have a rush out non 100% subsidiaries folks tell an r. and d. the nonrecourse to needs.
Finally, as possible they'll simplification efforts, we continue to reshape news corp's portfolio does she with the divestments of news America marketing and unruly.
With that as a backdrop I will now discuss sell latest financial results.
Fiscal Twentytwenty fourth quarter total revenues were approximately 1.9 billion down 22% versus the prior year, reflecting the impacts of climate 19, and the divestment of News America marketing early my.
Total segment EBITDA was 195 million down 28%. This is the price.
Excluding the divestment of Nan acquisitions currency fluctuations and the other options disclosed in our release adjusted revenues fell 15% and adjusted total segment EBITDA decreased 10% as Grayson segment EBITDA at the Dow Jones publishing and subscription video services segments was outweighed by the negative in.
Hi, good 19.
Our best estimate for the revenue impact of type of 19 for the quarter was negative $330 million associated to send together with a negative impact on total segment EBITDA estimated to be between 40 to 55 million well, 15% to 20%.
For the quarter, we reported a net loss per share of 67 cents as compared to a net loss per share at nine cents in the prior year. The loss includes 292 million of noncash impairment charges, primarily related to successes in the UK and Australia.
Adjusted earnings per share would negative three cents in the quarter compared to positive seven sand in the prior year.
Moving onto the quarterly results for the individual reporting segments, starting with Dow Jones.
We used for the quarter with $381 million down 4% compared to the prior year with digital revenues accounting for a record 71% total revenues this quarter. So.
Circulation revenues rose, 2% due to robust growth in digital circulation revenues, partially offset by lower print circulation revenues, which were impacted by the declining newsstand sales and fewer amenity copies primarily related to type of 19.
As Robert mentioned, Dow Jones again achieved record subscriptions in the core shop and saw an acceleration in year over year growth compared to the prior quarter Dow Jones every subscriptions for the quarter will almost 3.8 million, 15% from the prior year and hope that digital only subscriptions with 2.8 million, 20% year over year.
For the Wall Street Journal they were approximately 3 million total subscription for the core <unk>, 15% from the prior year digital only subscriptions growing 23% to more than 2.2 million improving from the 15% year over year growth rate in the prior calls huh.
To frame the improvement we added 203000 more Street journal digital only subscriptions this quarter compared to 112000 in the third quarter and 43000 in the prior year.
Revenues from Dow Jones professional information business rose, 6% year over year slightly higher than the third quarter rate driven by 14% revenue growth at risk and compliance.
System expectations risk and compliance revenues reached approximately $160 million to see school twentytwenty.
As we mentioned last quarter advertising revenues, which accounted for only 19% of revenues. This quarter were impacted by close at 19 and declined 28% to $71 million.
Well the first time digital advertising revenue was greater than print accounting for 54% social advertising revenues for the quarter.
Digital advertising revenues fell 7% helped by strong growth in programmatic well print advertising was down 43%, which included the impact from the cancellation of live event.
Totally unique visitors across Dow Jones digital platforms more than doubled in the quarter versus the prior year.
The adjusted segment EBITDA for the quarter rose, 13% to $60 million.
Turning to all the new segment news media, which primarily includes and use of stray it usually try and the New York Post and the news America marketing and unruly companies prior to their disposal.
Revenues for the quarter was $490 million down 41% versus the prior year all of which the impact from the divestment of news America marketing accounted for about half of the total revenue decline on an adjusted basis, which excludes man unruly and the other items mentioned in our lease revenues declined 22%.
Advertising revenue, so 58 cents on a reported basis of which $179 million sushi, 6% at the decline was from the sale of News America marketing and the rest of the decline was driven by the negative impact from kind of at 19 weaknesses in the print advertising market at a $20 million, 4% negative impact relates.
To the suspension assertion community titles in Australia.
Advertising revenues at news UK fell 46% on reported basis and 45% in local currency relatively consistent with our April commentary with lower print trends, partially offset by strong digital advertising growth at the some.
[noise] performance was similar in Australia advertising down, 46% on reported basis and 42% in local currency, which includes the negative impact related to the suspension assertion community titles.
Circulation and subscription revenues declined 9% impacted by lower newsstand sales related to type of 19, partially offset by strong digital paid subscriber growth and couple of price increases in Australia.
Segment EBITDA for the quarter was a loss of $44 million down $95 million from the prior year.
The divestment of news America marketing accounted for 43 million of the year over year decline.
So included in the results are approximately $8 million of additional costs related to the decommissioning of print operations in Australia.
It is important Tonight, we do not expect is to be the new normal and we're taking significant and decisive steps to improve the trajectory of the segment, including fashion monetizing outgrowing global audience and further cost reductions.
These include leveraging existing content.
Incremental licensing revenues, we believe that we have very well positioned to benefit from incremental licensing revenues as early as this fiscal year, which would have a meaningful impact on EBITDA.
Our biggest source of revenues in the news media segment is now circulation and subscription we expect continued growth digital subscriptions and we will be looking at cover and subscription process to help offset print advertising declines.
Our global shared service initiative, which we expect to centralize many of our back office functions and removed application. We also continue to work on newsroom transformation and the ongoing review about printing side and office space.
We have reduced out total head count within the segment by 12% in fiscal Twentytwenty, which will lower our cost base going forward and we expect additional reductions in she school 2021.
[noise] the impact was quite good 19 remains uncertain and we do expect continued advertising challenges. However, we will continue to focus on the digital transformation at the segment new ways to monetize our content and can do you should take aggressive cost finishes as we look to provide stable outlook.
At the digital real estate services segment revenues decreased 16% to 238 million, primarily due to a declining listings in Australia and the U.S. related to tell you that 19 and associated customer support meshes on an adjusted basis revenues declined 13%.
Segment, EBITDA fell 10% to $71 million.05 on an adjusted basis.
Our acreage revenues fell, 21%, primarily reflecting effects lower developer revenues and a 14% decline in residential listing volumes for the course huh.
Oh, sorry, I saw improvement seen listings as the quarter progressed with 11% listing volume growth in June combined with record traffic.
The volume growth was partly related to easy a year on you can parishes, which included the impact from the federal election in the prior year.
Please refer to our earnings release any conference call immediately following this call for more details.
MIEFE revenues declined 10% to 100 $211 million with real estate revenues down 5%. However, the decline in real estate revenues was almost entirely due to an estimation fish $8 million impact relation to the customer billing relief initiative.
These all say still being impacted by the transition to the affair model given the longer time period by which revenues are recognized.
Despite the transition we remain very confident in the long term growth potential of the referral model, including upside through incremental ancillary services.
Similar to our <unk>, we're also seeing record traffic it real tough with June achieving 86 million monthly unique users up 18% year over year combined with a greater than 50% year on year, increasing coal real estate lead volumes in June.
Despite the revenue impacts from kind of at 19, suffice to quarterly and full year meet increased its contribution to segment EBITDA year on year benefiting from the restructuring if the organization, including the integration of the teams at real time cities.
Turning to the subscription video services segment revenues for the quarter was $407 million down 24%. This is $536 million in the prior year, which included a negative 5% impact from FX.
The revenue decline was driven by fewer residential subscribers a reduction in commercial subscribe is related to the suspension of feeling due to the closing of losses venues and a declining advertising revenue.
[noise] approximately half of the year over year revenue decline quarter was due to commission and advertising revenues, which we believe was mostly a function of the impact from Cape at 19.
Foxtels closing paid subscriber base was approximately 2.8 million as of June. So she is down 12%, which reflects the declining conventional subscribers, which felt 86000 from 264000 in the prior year, primarily as I said associated with 19 restrictions.
We expect improvement as license commercial venues begin to reopen although timing you still uncertain given the recent spikes infections in Victoria.
Fox till now subscribers will also impacted but do you see code year ago comparison as the prior you benefited from the final season of game of trains but.
The number was stable sequentially.
Pleasingly, we saw a significant declining fuel cost Chen down to 13.2% compared to 14.7% in the prior year, which was the lowest in seven courses. The improvement was supported by the implementation of several private 19 mitigation measures, including opening up content Tees and offer extensions and favorable impacts.
A slowdown in Telstra it'd be a migration activity broke cost ARPU was relatively stable at a strange 78.
Segment EBITDA in the quarter with $104 million up 24% from the prior year driven by lower.
<unk> expenses declined about 145 million, which includes approximately 70 million of lowest sports rights costs, primarily related to the suspension of large sport.
Results include one month of expense related to the NRL, an ISO and the majority of the deferred sports cost will be recognized in fiscal 2021.
Discusses the in the outlook commentary.
Alex talked also benefited from lower entertainment costs from renegotiated affiliate, an output deals lower transmission costs and lower overheads to staff reductions.
As Robert mentioned, we're pleased with the resilience of any early progress and level of engagements at binge Foxtels New entertainment streaming says we look forward to building tells expanding OTI t. subscriber base in the year ahead.
During the quarter folks to also accelerated its cost transformation plans for the business, reducing its head count by approximately 17%. This action together with other operational efficiencies and content renegotiations will help.
In a better positioned longer 10.
[noise] publishing Harpercollins had a strong wholesale with revenues down 3% to 407 million and segment EBITDA up 9% to 47 million, despite significant bricks and mortar store closures, which was a financial performance and we had anticipated.
We saw the strongest digital growth in recent years, the total digital sales up 26% to represent 29% of consumer revenues.
With the sheltering place orders related to type at 19 E book sales return to robust growth, increasing 31% year over year with downloadable audio books also growing at a healthy 17%. Despite an initial deep due to the fully individuals commuting to work.
As Robert noted Harpercollins benefited from a strong release slate, which included Joe any gains Magnolia type of volume two and a great performance from our children's Division.
[noise] I would now like to talk about some themes in the upcoming Coursa forecasting remains challenging so I will discuss the trends we've seen in July.
At digital real estate services as noted in their release July you buy listings are yeah were up 16%. However, residential revenue growth is expected to be offset by reduction in development projects listing declines in conventional an Asian businesses and the recent government restrictions in Victoria.
Please refer to our press release some more details.
Real estate is facing low industrywide real estate transactions, but encouragingly lead volume and unique uses remains strong similar to June.
[noise] in subscription video services advertising in July improved modestly, but the return of live sports, we expect gradual recovery of commercial subscribers, but timing will largely be dictated by government restrictions and the broader impacts from private 19.
Broadcast Chinese modestly high office as the prior year and the fourth quarter.
On sports costs, assuming no further disruption of play we will recognize approximately $55 million $78 million of additional sports programming rights called the majority of which is related to the NRL an ISO rights costs that would just said from fiscal twentytwenty to fiscal Twentytwenty, one due to the temporary sports suspension.
We expect at least 100 million or straight at $160 million of overall savings next if the increase in sports costs for the full year fiscal Twentytwenty one as a result at the cost out initiatives taken during fiscal Twentytwenty.
[noise] at Dow Jones subscription trends in July continued to be strong we dive a 25% growth and digital only subscriptions at the Wall Street Journal advertising trends improved modestly in July.
Digital up very strongly.
In book publishing similar to the fourth quarter Harpercollins continued to see strong growing online sales in July retail stores, a slightly reopening, albeit luckily at a reduced foot traffic and continued risk from any recurrence of coated.
A new media, we continue to expect advertising and single copy sales revenues to be adversely affected you Chicago 19.
Advertising revenues in July at the newspaper locked it in this segment declined 25% to 50% intellectual compared to the prior year.
As a reminder, advertising revenues in the prior year included the results from News America marketing.
Real declining circulation volumes, but July improved the lows experienced early in the fourth quarter, particularly for the weekend type is pleasingly. We have continued to see strong digital subscriber growth at these trade mosfets and at the times and the Sunday Times, and we will continue to focus on cost transformation to mitigate the revenue headwinds.
Capex for the year is expected to be approximately $400 million compared to $434 million in fiscal twentytwenty subject to foreign currency fluctuations.
We will be monitoring these numbers very closely throughout the I will take necessary actions to reduce this amount as needed.
And as a reminder, we have a strong balance sheet, we'd like to 1.5 billion of cash and access to a 750 million dollar revolving credit facility.
The Cape at 19 crisis has presented challenges across all about businesses and we have very plays with the action that business is taken to ensure they are well positioned to withstand the ongoing volatility as we move through the next 12 months with that let me hand, it over to the operations secure night.
Thank you.
Ladies and gentlemen, if he'd like to ask a question at this time. Please press star and then one on your Touchtone phone.
If you are using a speaker phone it might be necessary to pick up your hand Saturday press your mute function the signal can reach our equipment.
And that is star and then one.
Well take first question from Kent with Goldman Sachs.
Good morning, Robert Susan just two for me on on the cost program for Brookdale. So just around 100 million to open saving so talking to next year does not have all the sports what type things that you think you can get across the various codes in that number and they all consultant and then how should we be thinking about the Kosovo binge on and the launch of your from your order.
Hey platform into 21, and then secondly, just around the simplification agenda should we be thinking about.
Oh, three this crisis or how do we think about the next steps from here it seems like a book to watch.
Going about previously.
Just.
Hi, This is Robert I'll take the simplification question first.
Discussion of the continuing crisis and it must be actually can say, we've appointed a global head of digital real estate Tracy Fellows, formerly the head of R&D I, that's given us a much more focused international approach an intensified the dialogue and sharing between real through an RF energy.
And as you can see.
We are constantly reviewing our portfolio, we sold amplified the digital education business, we sold a local papers in the U.S. well ahead of the present downturn.
Sorted out and simplified the ownership of Foxtel, We've sold news America marketing, we sold on royalty was close to print editions of regional community papers in Australia, and these will actually help me the loss changes that we make.
And can just in relation to the cost programs. So the hundred million net number.
Yes. It does include it's made up the sports cost increase so that's approximately $65 million and sorry, we have affected the savings into that number and when we think about the Archie ti costs in relation to be engine case again that number is net of any investment that we would expect to see within nice products largely clearly.
Cutting because we scale.
Content.
But they just a couple of months Susan's comments, we are indeed, please with one how quickly the.
Subscription growth has picked up but after the target interruption and secondly.
The early numbers.
She entertainment streaming service, particularly encouraging.
Thank you can Nicole take our next question.
Well take our next question from Entcho Raykovski with credit Suisse.
[noise] [noise] closers, and Oh got couple as well.
And just around the fortune.
Yeah.
Hi that impact, which you flagged for the quarter.
Just wanted to clarify that we take into account over the benefits of walls fault blocks cost save cost for the quarter such a good bicycling mumble.
Or is it happens, perhaps in Washington, but.
Sorry, I missed it separately took out just interesting to what extent <unk> right.
In future years.
Secondly.
Advertising train.
Cost of the quarters seem to get sloppy with John obviously very strong performance.
And as a whole, but if I look at advertising I think it was tracking that 20% Daddy nypro.
20, I presented the quota.
Okay.
So just interested in it.
Anything specific which must be dropping that.
So just in relation to the first question. So the theme packs in relation to capabilities national the potential.
Oh and revenue.
Impacts that we could see across the business.
Yes. It does include the impact from from talk so in relation to going forward clearly, we'll have a double up of costs for a period of two lumps in the next financial year in relation to socks off with us.
So as I've outlined but the over arching and underlying cost base will decrease notwithstanding that we expect to see that we didn't sports rights as well as right across the organization.
That's in relation to the first question.
Maybe if you could just repeat the second question [laughter] quite lengthy [laughter] Oh.
Yes, sorry, so things that can be.
While the collection was that in April.
A lot set of results you mentioned that revenue.
Revenue was down 20%.
John.
Seems to have gotten or would it be with 26 of the calls so it looks like the trends.
Deteriorated I look at the underlying market that same sort of actually gotten better. So just wondering whether there's anything specific.
Dow Jones, which Bob Malecky driving that.
And John.
You saw in particular was the.
Onset of the kind of the crisis in my mind was a tough months.
June was better on July better again.
So we are in particular seeing a.
Strong digital advertising clearly as in many countries around the world print is affected but generally speaking the trend has been positive since my.
Thank you thank.
Okay.
Thanks, Joe and Nicole we'll take our next question. Please.
Next question comes from Alexia Quadrani with JP Morgan.
Okay. Thank you my question actually following up on that your comments on digital advertising trends that downtown.
That hit us partly outperform some of your peers.
Yes is it the verticals you or if there's any time and why you think you're relatively doing quite well digital advertising side, and then just sort of staying on data.
The here Mark you can tell us about the the a strong digital subscriber growth we're seeing at the Wall Street Journal, how much but you think it's driven by the elevated due cycle and sort of or promotional strategy might happen clay.
[noise] Felicia I think it's.
Fair to say that Dow Jones is unique and media property. It's.
Clearly got both a consumer business in professional business and the to complement each other.
And that helps us certainly with subscriptions, but also in terms of contracts with potential advertisers.
In terms of a subscription funnel, we certainly have some continuing sites into growth potential for subscription Wall Street Journal, Susan mentioned, but the trend in July has again been positive and also the Barnes group, where subs rise, 49% in Q4, two compared to a year earlier.
What we just haven't John's is a continuing funnel a potential clients coming in through market Watts, which as you guys to the free financial you saw it at market, Washington, Q4 traffic rose 143%.
A mock watches it can easily graduate to be a wall Street journal subscriber who can become a barron's subscribe to it can become a subscribing to our high and financial information intelligence in the professional information does it division.
And it's it's really unique opportunity, we have a digital daisy chain and each product in the China is high yielding.
And just in relation to the actual advertising question what was driving the digital growth. So we actually did see much stronger than expected performance in programmatic largely as a consequence of increased volumes and we had higher display cpms and just in relation to I guess, how competitors with less exposed to luxury.
The timing so we had more dependency on tech finance space age they and that's been driving.
Thank you. Thank you Alexia Nicole we'll take our next question. Please.
Our next question comes from Craig Huber Huber Research partners.
Yes, Hi, My first question.
You mentioned, Susan that you guys took a 212 year baskets.
Smaller papers down in Australia to shut them down or transition to digital well just wondering what percentage of revenues to that represents held their steroid newspapers first question.
Okay fine.
What does so in relation to Q4, it was about $20 million.
In Q4, given we close them down sort of midway through the course, so we don't disclose obviously the the full number of revenue set up at 20 million should give you a god.
<unk> bid for Q Okay.
My other question or maybe a request of was very happy to see you guys are breaking out the Dow Jones numbers the revenue.
Obviously, the the Dol here the detailed obviously did for the fourth quarter and if it this year over year ago fourth quarter for four years, well I was wondering would it be possible would you seriously consider doing it for all three quarter. So we would have it for all the course of making sure we estimate it but to be very helpful to you on this far to take one more step here.
Plus 5% just put together for the three course, they put out an 8-K or something is that fair to ask you.
Oh, Craig I think we're going to 'em have any investor day in September, which Robert mentioned, and so certainly be able to do that at the Investor Day fleet.
Okay. Thank you. Thank you very much a course be great. Thank you.
Thanks, Thanks, Craig Nicole we'll take our next question. Please.
They're mcleish from M.S. Kim He has our next question.
Great. Thanks, I, just don't just a very basic one for me just Christopher Susan if that's okay. Just on the been subscriber numbers.
Susan.
I would imagine obviously telstra is quite quite important for driving goes you just said its confirm whether ending with Telstra, it's going to paid subscriber or so.
As a non paid subscriber in those focus push them course numbers you disclose thanks.
If.
It's tough true.
Providing the sales channel yes, we do include those numbers within the binge numbers yet.
Yes, I can consider but.
With that coming up paying so what you're pulling up paying subscriber.
Correct.
Thanks, Thank you.
Thank you Frazier.
Nicole take our next question please.
Next question comes from Alan Gould Loop capital.
Thank you and I want to second to think some breaking out the Dow Jones data Robert.
Notice at New York Times dropped to Apple News I was wondering if you can help us frame of how how we should think about how big the opportunity could be of getting paid premium payments for premium content.
[noise], it's a really good question for us. It's that's been a beneficial experience. If you look at the Wall Street Journal, It's really two papers in one by the general New service.
Business specific new service in in that sense. There are a lot of potential rate as I'm potential subscribers, who doesn't understand the quality of the general news coverage the politics the economics.
The last dollar weakens section the magazine I'm sure. Your regular rate are you understand what I'm talking about and so that.
Apple News partnership allows us to focus on that tier of content and bring in.
Significantly due audience that we would have to graduate to up a pipe WSJ subscription overtime and as it is genuinely different audience.
It's it's actually.
Of light.
More women than men.
For the Wall Street Journal itself, it's more men and women, it's a younger demographic and it is obviously a source of potential subscribes rose.
Thanks Alan.
Go ahead out yeah. If you just stop when we when we think of just broader than just Apple well look at the whole the whole digital universe and getting paid premium con getting paid for your premium content, how should we frame that how should we be thinking about what the potential is there.
Well, one way of framing it would lead to think of it as a contemporary equivalent boats carriage fees.
The all read trends.
Full broadcasters.
Because it does no doubt that these deals.
We'll add up.
What's public as the deal we have with.
If I spoke to the deal we have.
With.
Apple and of course, the this is payments for content and that much of that money drops to the bottom line and it's also fair to say that negotiations.
Moving on with other companies.
The other regions I talked go into detail at the moment because we're in the midst of some books, but when you combine these deals are having a significant impact on revenue and on profitability and it's frankly true for for old media companies. So if any executives of other media companies would like to say News Corps Commission Czech Wood.
How did receive up to maybe a source of revenue.
Thank you Alan Nicole we'll take our next question. Please.
Next question comes from Brian.
Stock.
Hi, Good morning, I, just a quick question the new pipe in the news media Division.
He thankfully to look.
Core to cope with the volume or will they love thinking even before.
No. It was because at the Covidien talked for the quarter clearly a very disruptive course huh.
For that segment.
And also Brian does get Youve, helping them numbers taken out so it's it's not a locks luck comparison.
What I would say is essentially the breaking out of Dow Jones is doing two things. It is it is providing more scoot scrutiny generally for each of those segments doubt Johnson news media scrutiny has to be a good thing.
Because where we are very confident that out news media executives will continue to transition to digital which they are certainly on the pathway to doing and and the sorts of deals that we've been discussing.
Today of themselves helpful and then.
Start yards is a uniquely undervalued.
Property in what I would argue is uniquely undervalued new school.
Maybe just just some further context. So if you look even at the year on year decline.
We're talking about the sort of the 95 million movement, probably 75% if that comes from Dan and the closure of the regional communities all the suspension at the Boston Stat and they so actually I really think focus that number does come from that and then clearly felt the impact of advertising in print circulation on that which we expect to pick up as we move through the coming yet.
Yes.
Thank you Brian Nicole we'll take our next question. Please.
Okay. Our final question will come from Andrew Levy from Macquarie.
Well thanks to the question if I could sneak in.
Right.
Excellent Robert I'll, just interested in your thoughts on the digital.
Platforms with you in the style.
Yeah on the stuck to the news maybe bargaining position.
Structure that news and support involved in works for you got.
In its current phone.
The second one is also you made reference to licensing news media content globally.
Is that a discussion around accepting goals from the digital platforms or is there a broader mandated or revenues that you think you can loss in some of the news media content.
And any thoughts.
So would be would be helpful on that line.
Susan just sorry to come back to it but just on the because it impacted the quarter, but what it correctly, you said 330 healing revenues and 40 to 58 bit.
And obviously allowed to time could cost impacts of climate.
The sporting Rotce was wondering if you could give us some color on what else is using the cost offset 'cause it carried in how we should think Bob.
Sports, you've obviously discussed what.
Sustainable or what sort of bounces back into the call spikes in 21. Thanks.
Yes.
I'll talk about just try and.
Regulations, so to the draft amounted to code of conduct which which is particularly important it's important and then in two ways one for what it declines in terms of remedies and in particular for what it defines in terms as an industry, but it's also part of a global discussion whether it be.
The consideration in Brussels, the hearings here.
Last weekend in Congress.
Because the big for digital hits, giving testimony.
And I Didnt, London and answer what you're seeing and this is crucial is thing.
Increase in content consciousness, among regulators around the world. These are no longer.
Mystifying issues the issues have been clearly defined and you saw that.
In Congress last week.
And you see that in the Triple C report.
The original digital report and now the dropped a mandatory code of conduct which.
I think is is quite a moment of itself a real internet inflection point.
And Ah this.
Essentially we are talking about carriage fees and all retrans payments for premium journalism.
And there are obviously more deals to come now some of those.
Deals will be outside of Australia, but I suspect in some ways influenced by just try and regulatory thinking what I can assure you that but not on the regulators but.
Media companies around the world and the digital platforms are watching Australia closely.
No. We've obviously been fighting this five fold for well over a decade.
And then your school board of supported the quest because it was absolutely crucial to the future of journalism newspapers to live in whatever format.
Vital to a well informed society.
[noise] or what's obvious isn't the collective understanding of the issues is passed the point that return the point of no action should always side are there are obviously regulatory changes to communist right yeah.
The commercial landscape is not yet fully formed but it will be a landscape far more hospitable to journalism entered news media and to use cool [noise].
As fuel.
A question about the licensing.
And well clearly, we're always looking for opportunities to monetize that content, but in a digital context, we have a unique comparative advantage with global properties, which often right about similar subjects. So.
Not only in.
Licensing in a traditional subscriptions and split.
I think a little bit about the segmentation of digital products products around sport products around Los though around food.
Puzzles, even so it's it's a real opportunity for us to divide up out content and in a different way monetize that content and provide compelling digital opportunities.
The potential subscribers a different price points for so different conferences.
I'll just jump in on the call sites I haven't looked at the expenses for the call. So on an adjusted basis. They were down 273 million or 14 cents. The bulk of that reduction between reported and adjusted with GE Snam and FX.
The caveat impact were predicting is about 270 or 290 odd million in order to gauge that EBITDA impact we were expecting costs to increase slightly for the core said because we did have increased revenue attached to that up a collins and talking about businesses.
And what I would say in relation to the Covidien <unk> cost is clearly there's a lot relation to follow in particularly on our last it's around the globe and we would expect to see dice scale. Obviously, it's like businesses scale back up but we have also reduced head count by 7% across the business, excluding I'm not really.
Savings that we would certainly expect a continuing to the next year.
Made significant cuts marketing, we clearly we'll have to look at what we think is an appropriate level for marketing going forward and it may never be back to the level that we had pre k. if it likewise with most companies. We've got a lot of tough comps coming through on T. any and all the discretionary spend which again when we think forward. We will review exactly what we think we needed.
Yes.
In order to continue spending within that area, we've clearly got compensation cost reductions as well as or as a result of lower bonuses and outside of the Opex impacts. We've got the cost the came through in Capex I think I mentioned that we cut that boss said year on year. So clearly as we move forward into next year, it's it's difficult to predict exactly what.
Cost basis could look like because it will depend on the revenue trends, but we are confident that there's a significant amount of recurring costs go into next year from a cost reduction perspective.
And we do actually believes that we can continue to take costs out as was mentioned.
Thank you Andrew.
Thank you Nicole.
Thank you Nicole. Thank you all for participating we look forward to speaking with you soon have a great day.
Take care.
And once again, ladies and gentlemen that concludes today's conference. We appreciate your participation today.
[noise] [noise].
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