Q4 2020 News Corp Earnings Call
[music].
Welcome to the news Corp, fourth quarter fiscal Twentytwenty conference.
Today's conference is being recorded media will be on the listen only basis.
I would like to turn the conference over to Mike Florin Senior Vice President and head of Investor Relations. Please go ahead.
Thank you very much Nicole.
Good morning, welcome to news Corp's fiscal fourth quarter 2020 earnings call. We issue our earnings press release about an hour ago and smell posted on our website at news Corp. Dot com on the culture Roberts Nelson Chief Executive and Susan <unk>, Cho, Chief Financial Officer, well be what some prepared remarks, and then we'll be happy to take questions from the investment community.
This call May include certain forward looking information with respect to new sports business and strategy 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.
Conditions, and GAAP to non-GAAP reconciliations of such measures.
Found in our earnings release with that I'll pass it 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 never been could lead change businesses and our businesses in expediting pre existing digital trends in challenging established practices and prompting necessary introspection that work habits and the workplace itself.
There's been much agility and adaptation that news cool.
Asked majority of our employees across the world has been working overtime and the resilience of the company's culture has been a cool component and continuity without doubt digitalization has accelerated I'd without.
All of that businesses have been affected and responded the customary ingenuity.
I would like to express my sincere thanks to each of our employees and their families.
Responded promptly some intelligently then so hopefully to these testing circumstances.
Evidence of that response was seen in the fourth quarter with virtually all of that business is prudently reduce cost sometimes painfully to ensure that tiger robust enough to cope with volatility and disruption.
Preserving cash is a priority and it is worth noting that our cash balance increased in the last quarter by half a dozen $29 million to over 1.5 billion as of June 30.
Revenue comparisons are obviously made complex by the size of news America marketing and unruly plus the consequence of coated but our adjusted revenue for the quarter declined by 13%, obviously, the net income and Aes were affected by non cash impairments, primarily at our UK industrial businesses and soon.
And we'll be able to provide more details momentarily.
Our adjusted total segment EBITDA declined by almost 10%.
This is particularly significant.
That's somewhat historically I think is cool.
Regular listeners will recall that we pledged to simplify the company and make the results more transparent.
The style of news America marketing and on really certainly simplified the structure and in the quest for transparency beginning this quarter, we are presenting Dow Jones as a separate segments.
This will highlight what we believe a two incontrovertible facts, the substantial and growing value of that company and its superior profit profile and prospects to those of the New York times in what has been a difficult year from any 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 segment, which will include our strategy and titles many of which I know digital largely the times the Sun Sunday times as well as top sport and Virgin radio It may be cold EEZE media, but obviously the segment is increasingly digital in personality.
And virtually all about Masstige had record audiences during the year.
Journalistic performed admirably in providing crucial insights to read as during the call. Good crosses delivering accurate information and analysis and providing an antidote conspiracy theories and noxious noncitizens proliferating elsewhere on the with.
We are continuing to focus on acquiring digital subscribers and audience well rightsizing our businesses to be digital first which is necessarily resulting in significant cost reductions.
The closure in Australia as many of our story print additions and the emphasis on digital was further evidence of our willingness to be decisive I didnt typical moment.
We are very proud about traditions, and we will always invest in the very best journalism, but the format is less important than the function and we firmly believe that the digital reincarnation of these toggles written shore a profitable future and eight continuing role in that can be there.
We are also constantly restlessly reviewing our portfolio with a view to ensuring that we had the optimum asset mix.
All of our executives understand that these are testing 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 the second 100% of his bonus answers and produce you haven't done which I'll skip a general counsel as well with me on this call have also voluntarily.
Given up a meaningful chunk of their bugs.
All understand the importance of a stringent cost strategy. So we have launched 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 statement yields from Australia, and giant vine up from the UK in tandem with L.C.G., the global head of HR and see if in other words Susan.
The early indications are that the shared service program should be able to appreciably reduce our costs and we expect it to have materially positive impact on our bottom line.
We will always emphasize integrity and creativity, but era, you're lucky 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 businesses will certainly be enhanced this is not an ephemeral project, but one that we believe we'll have a fundamental impact on the way, we do business and.
In our earnings.
One other trend is all ready, having an appreciable impact on earnings the change in terms of trade with the digital platforms.
Those of you watch the congressional testimony last week by the Tech Titans would have noticed overall the political understanding of the issues.
Lastly, improve.
There is also true in Brussels, London, and Australia, where the Triple C has just introduced a drop off to mandatory code of content.
I recommend that anyone seeking enlightenment, Google benign Rod Sims and read a few of these recent interviews Mr seems chairs the ISO persists.
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.
When you school, which has been pursuing this issue for well over a decade. This favorable outcome would simply not have been possible without the leadership a grid, but look a little and the support of a board, which back advocacy, even when useful often stood alone but shoot of the principle of a pre.
And then for premium content.
No for the numbers at the New Dow Jones segment revenues improved in fiscal year, Twentytwenty and profitability was up 13% as I'd mentioned.
That $236 million Dow Jones food segment fully a segment EBITDA was the highest since separation as where margins digital revenues surpassed $1 billion in fiscal 2000 for the first time.
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, and 51% for the parents groups.
Okay, and watched finance, which saw it 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 'cause 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 gives you 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 marketing spend.
Even with the pandemic impact digital advertising at Dow Jones was 4% higher for the.
Full year revenues for the professional information business rose, 7% year idea, driven by risk and compliance which surged 20%.
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 flow of actionable intelligence is complemented by thoughtful analysis and compelling news feeds right growing audience of clients.
We contend that the all digital risk and compliance business is a highly undervalued part of <unk> highly undervalued company given the revenue trajectory.
Still expanding market and the necessity for companies and individuals to have an order trial of 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 border Dow Jones performed five it up.
The journal is Bose.
Most trusted general newspaper in the U.S.. According to the Reuters institution, and the world's leading business use provider and that bossed, well heeled well informed audience provides an opportunity to up sell value added lucrative business products to serve a specialist.
Here are a few metrics comparing the two companies for the quarter.
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.
Toms declined by 6%.
John EBITDA margins, what 15.7%.
About three percentage points higher than the New York Times.
And this time of coated Dow Jones revenue decline moderated at a higher right in the New York times at 4% versus down at a 7% for the times.
No John Cobot 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 versus 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 at which Dow Jones, Chief executive outlets and other Dow Jones executive and myself will give you more granular explanation of the company's extraordinary potential I had an opportunity.
For you to inherited.
The news media segment of course had a challenging year and we took prompt measures to confront those challenges.
These included the aforementioned styles of damage on really as well as immediate cost reductions and the launch.
Strategic shared service project in Australia, Apart from my driving publications Vigilantly. We also sold our investment in new Strien associated press newswire.
And unfortunately implemented hundreds redundancies.
The end of the relationship with IP was both necessary and you start as I've said this was founded in not in 35 by city.
Digital subscriptions across news Corp, Australia rose, 25% to nearly 650000 by the 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.
The Sun's online audience expanded markedly during the year included with the launch of the U.S. addition entirely to the Sun reported a 133 million unique users globally in June for one month, which exposed on it reflects our expansion in the U.S. importantly, the sun remains as the leading use Brandon.
UK According to PEMCO.
The sheer scale about collected ridge should not be underestimated in the U.S., the new post digital network reach.
Hundred 77 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 I'd months as we increased copper prices has benefited from AD revenue for our expanding digital readership and reduce the cost price. We can now see a clear path to profitability for the past.
[noise] book publishing despite the borrow vicissitudes, which included the newest shutdown of U.S. physical stores profitability was up in Q4.
This is a testament to the resourcefulness of the team at Harpercollins, which moved quickly to bolster supply chains and emphasize E books and online sales. These actions allowed us to make the most of changes in reading behavior during dependent.
As we had indicated on previous calls the second half of the fiscal year at Harpercollins was more propitious than the first half which segment EBITDA improvement in both Q3 and Q4 among the titles the performed well with the latest installment of Joanna gains how to successful Magnolia Teibel series Dutch has spy and traction.
The one that on beef up by Catherine Applegate and wells with parents by David Williams.
Looking ahead to fiscal 21 were already eagerly anticipating the release of Tiger Woods autobiography, and expect strong results from the upcoming launch agenda behavior is everything beautiful in its time, we're certainly pleased by the fairly performance of Daniel Silva is 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 share drilled for release next Tuesday.
In digital real estate services already eyes traffic and lead volume of rebounded in the wake of the shutdown in Australia with record audiences in June and a dramatic increase in uses potentially interested in the house mood.
There is simply no doubt that the code the crisis as prompted many families to consider their housing circumstances and that ultra low interest rates has made a move more possible.
We noted similar trends in the U.S. It Realty Dot com and we saw a significant improvement in profitability at move which runs the realty dotcom site in the fourth quarter and for the years at home.
The new leadership team at move 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 develop calm and that really dot com will provide a flow potential subscriptions for the WSJ and Barents.
Also in Australia at Foxtel emphasis on streaming has brought a leap in new customers for Buckeye. The sports streaming says and binge entertainment offering which has just launched as of August full chaos, showing great resilience had 590000 subscribers, including 48000 trailers.
Well binge at 217000 subscribers, which includes 185000 paying just a short time after its formal launch.
Both services are making the most of our existing rights without incurring extra content expenses and us certainly expanding the reach of Foxtel, which has now approach the new record number of total subscribers. Following an acceleration in July just this week, we crossed the 1 million MTT paying subscriber them up setting a new record. Thanks.
Our expanded screening strategy.
While there are certainly seasonality to carry out given the share drilling of the popular with the sports. We are reassured that so many subscribers have returned to the service so promptly and particularly encouraged by the early Russian subscribers at binge.
Our past 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 have strong 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 Pref professionalism passion and compassion throughout these most difficult times.
Our reporters and opinion writers around the world have provided a profoundly important service and many of our employees have contributor to that communities through philanthropic service in recent months and now for more granular detail and customary inside Susan.
Thank you up it before talking throughout fiscal 2000 results I would like to recap on the actions we've taken punchy to better position. These copel long term success with a focus on increasing shareholder value and transparency.
Firstly the company has taken significant action on our cost base publishing business history has been significantly restructured the 112 with our regional and community markets transitioning to digital closed.
The cost basis, total has being restructured with savings across programming and support function.
But increasing HCT scale in a low cost space, especially position to success and I would like to reiterate that we have no plans to provide additional funding.
Digital real estate businesses have also been collecting reducing head count to confront the challenges of kind of at 19.
In addition, we took quick and decisive actions to reduce opex and capex in fourth quarter.
Thanks for chasing bifurcated year on year, and total costs decreasing 21% year on year, partially due to talk to fix the primarily James good cost management.
It looks like close to finalizing our savings opportunities for global shared services across the company as we look to leverage our global scale Energy's tip location.
These collective actions resulted in a 7% reduction in headcount dishy across the businesses, excluding the Nan and I'm really sales.
Secondly, Dow Jones results. So now reported as a separate segment, which financial highlights performance and provides a more complete comparison, but it's Pete.
The business, so record subscriptions and achieved growth in both revenue and EBITDA for the year.
Thirdly, we are taking tangible steps to stabilize and usually for news media segment your digital subscriber growth.
Price increases and aggressive cost targets, which will be further enhanced by our global shared service initiative.
In relation to liquidity the only getting stations, we have a rush out non 100% subsidiaries foxtel and ARIA and data nonrecourse to use cold.
Finally, as cost what else simplification assets, we continue to reshape east coast portfolio. The sheet, we could divestments at news America marketing and unruly.
With that as a backdrop I will now discuss felt like 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 in early Mike.
Total segment EBITDA was 195 million down 28%. This is the price.
Excluding the divestment of men acquisitions currency fluctuations and the other options disclosed now released adjusted revenues fell 15% and adjusted total segment EBITDA decreased 10% as Grayson segment EBITDA at the Dow Jones publishing and subscription video services segment outweighed by the negative in.
Pat described at 19.
No best estimate for the revenue impact of type of 19 for the quarter was negative $350 million fishing percent together with a negative impact on total segment EBITDA estimated to be between 40.
55 million well, 15% to 20%.
For the quarter, we reported a net loss per share of 67 cents as compared to a rough tissue nine cents in the prior year. The loss includes 292 million of non cash impairment charges, primarily related to fix deficit in the UK and strain.
Adjusted earnings per share would make it heat tracing from the core shot compared to positive seven say in the prior year.
Moving onto the quarterly results for the individual reporting segments, starting with Dow Jones.
For you to the quarter with $381 million down 4% compared to prior year with digital revenues accounting for a record 71% total revenues this quarter.
Circulation revenues rose, 2% Chichi robust growth in digital circulation revenues, partially offset by lower print circulation revenues, which were impacted by the declining newsstand sales and pure amenity copies primarily related to type at 19.
As Robert mentioned, Dow Jones, again achieved record subscriptions in the quarter and sought an acceleration in year over year growth compared to the prior quarter Dow Jones average subscription for the quarter for almost 3.8 million, 15% from the prior year of that digital only subscriptions, but 2.8 million up 20% year over year.
For the Wall Street Journal, they were approximately 3 million total subscription for the quarter up 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 quarter.
To find the improvement we added 203000 Wall 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 consistent with our expectations risk and compliance revenues reached approximately $160 million for the fiscal Twentytwenty.
As we mentioned last quarter advertising revenues, which accounted for only 19% of revenues. This quarter were impacted by credit at 19 and declined 28% to $71 million.
Well the first time digital advertising revenue was greater than print accounting for 54% total 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. This is the prior year.
The adjusted segment EBITDA for the quarter rose, 13% to $60 million.
Turning to other new segment news media, which primarily includes music stray it usually try and the New York placed and the news America marketing and unruly companies price at their disposal.
Revenues for the quarter over $490 million down 41% versus the prior year of which the impact from the divestment at News America marketing accounted for half of the total revenue decline on an adjusted basis, which excludes man unruly and the other items mentioned in our release revenues declined 22%.
Advertising revenue fell 58 cents on a reported basis of which $179 million, 36% at the decline, which from the sale of news America marketing and the rest of the decline was driven by the negative impact from private 19 weaknesses in the print advertising market and a $20 million, 4% negative impact relates.
To the suspension system can be and she talks with industry.
Advertising revenues at news UK fell 46% on reported basis and 45% in local currency relatively consistent with our April COMETRIQ with lower print trends, partially offset by strong digital advertising growth at the from.
[noise] performance is similar in Australia with advertising down 46% on reported basis and 42% in local currency, which includes the negative impact related to the suspension assessing 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 with 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 also included in the results are cluck approximately $8 million of additional costs related to the decommissioning it print operations and strike.
It's important to note that we do not expected to be the new normal and we're taking significant and decisive steps to improve the trajectory of the segment, including better monetizing outgrowing global audience and further cost reductions.
These include leveraging existing content.
Incremental licensing revenue, we believe that we have very well positioned to benefit from incremental licensing revenues as early as this fiscal year, which should 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 Catawba and subscription process to help offset print advertising decline.
Our global shared service initiative, which we expect to centralize many about back office functions ever Maeve keep location. We also continue to work on newsroom transformation and the ongoing review about printing side and office space.
We have reduced outplacement head count within the segment by 12% in fiscal Twentytwenty, which will lower our cost base going forward and we expect additional reductions in fiscal 2021.
[noise] theme kind of Crazy 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 continues to take aggressive cost initiatives as we look to provide a more stable outlook.
At the digital real estate services segment revenues decreased 60% to 238 million, primarily due to a declining listing in Australia and the U.S. related to play that 19 and associated customer support matches on an adjusted basis revenues declined 15%.
Segment, EBITDA fell 10% to $71 million.05 on an adjusted basis.
Sorry, I group revenue fell, 21%, primarily reflecting FX lower developer revenues and a 14% decline in residential listing volumes for the course huh.
Ari ISO improvements in listings as the quarter progressed with 11% listing volume growth in chain combined with record traffic.
The volume growth was partly related to easy a year on year comparisons, 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 from will Daytona.
Net revenues declined 10% to 100 $211 million with real estate revenues down 5%.
However, the decline in real estate revenues with almost entirely due to an estimation $50 million impact related to the customer billing relief initiative.
Please also still being impacted by the transition to their 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 a third federal mogul, including upside true incremental ancillary services.
Similar to area. We also see record traffic it real tough with junior achieving 86 million monthly unique users up 18% year, the combined with a greater than 50% year on year increase in coal real estate lead volumes in chain.
Despite the revenue impacts from kind of at 19 to both the quota and full year need increased its contribution to segment EBITDA year on year benefiting from the restructuring if the open ization, including the integration of the teams that real to help city.
Turning to the subscription video services segment revenues for the course of $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 subscribers related to the suspension appealing to each of the closing of losses venue and the declining advertising revenue.
[noise] approximately half of the year over year revenue decline quarter with future condition and advertising revenues, which we believe was mostly a function of the impact from Cape at 19.
Foxtel closing paid subscriber base was approximately 2.8 million as of June. So she is down 12%, which reflects the decline in conventional subscribers, which felt 86000 from 264000 in the prior year, primarily as I said associated because not take restrictions.
We expect improvement as lots of national venues to get into reopened well they tiny still uncertain given the recent spikes infections in Victoria.
Foxtel now subscribed this will also impacted by difficult year ago comparison as the prior you benefited from the final season of guidance trying.
But number was stable sequentially.
Pleasingly, we saw a significant declining pull cost Chen down to 13.2% compared to 14.7% in the prior year, which was the lowest in seven courses the improvement in the supported by the implementation of several private 19 mitigation measures, including opening up content cheese and offer extension and favorable impacts.
From a slowdown in Telstra Nbn migration activity.
Broke cough up it was relatively stable I just tried those 78.
Segment EBITDA in the quarter with $104 million up 24% from the prior year driven by lower.
Total expenses declined about 145 million, which includes approximately 17, new in of lowest sports rights costs, primarily related to the suspension of large sport.
Results include one month of expense related to the NRL, an eye itself and the majority of the to should sports cost would be recognized in fiscal Twentytwenty one.
I will discuss this to the in the outlook commentary.
Folks don't 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 China, and the early progress and level of engagements opinions Foxtels New Entertainment strain says we look forward to building on Fox tells expanding Oh Teekay subscriber base in the year ahead.
During the quarter Fox to also accelerated its cost transformation plans for the business for gcs headcount by approximately 17%. This action together with other operational efficiencies and content renegotiations will help so in a better position longer Chen.
[noise] textbook publishing Harpercollins had a strong culture with revenues down only 3% to 407 million and segment EBITDA up 9% to 47 million, despite significant bricks and mortar store closures, which was a financial performance than we had anticipated.
We saw the strongest digital growth in recent years total teaching sales up 26% represent 29% of consumer revenue.
With the sheltering place orders related to type at 1980 exiles retentive 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 condition to work.
As Robert noted Harpercollins benefited from strong release slate, which included Joanna gang Magnolia type of volume two and a great performance from our children's Division.
I would now like to talk about some things 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 ARIA were up 16%. However, residential revenue growth is expected to be offset by reduction in development projects listing declines in conventional and Asia businesses and the recent government restrictions in Victoria.
Please refer to our press release for more details.
We also is facing low industrywide real estate transaction, but encouragingly lead volume and unique cases remain strong similar to change.
[noise] in subscription video services advertising in July improved modestly, but the return of live sports, we expect gradual recovery of commissions subscribers, but timing will largely be dictated by government restrictions and the broader impact from private non chain.
Broadcast charities modestly high office as the prior year and the fourth quarter.
On sports cost machining nice further disruption to play we will recognize approximately $55 million of 78 million Aussie dollars of additional sports programming lots called the majority of which is related to the NRL, an ISO rights costs that with the fed from fiscal Twentytwenty to fiscal Twentytwenty, one due to the temporary sports suspension highway.
We expect at least 100 million worth stray a $160 billion an overall savings next with the increase in sports cost for the full year fiscal Twentytwenty one as a result at the cost out initiatives taken during fiscal 2020.
[noise] at Dow Jones subscription trends in July continued to be strong, we'd like to 25% growth and digital only subscriptions at the Wall Street Journal advertising trends improved modestly in July, but with digital up very strongly.
In the publishing similar to the fourth quarter Harpercollins continue 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.
Good news media, we continue to expect advertising and single copy sales person used to be adversely affected you should cobot 19.
Advertising revenues in July at the newspaper markets in the 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.
Overall decline in circulation volumes the July improve the Lloyds experienced early in the fourth quarter, particularly for the weekend tightly pleasingly. We have continued to see strong digital subscriber growth at these trademarks kids and at the times understands I time, and we will continue to focus on cost transformation to mitigate the revenue headwind.
Capex for the year is expected to be approximately $400 million compared to $434 million and 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 1.5 billion of cash and access to a $750 million revolving credit facility.
The credit 19 crisis has presented challenges across all about businesses and we're very pleased with the action that our businesses are taken to ensure they are well positioned to withstand the ongoing volatility as we move through the next 12 months.
That let me hand, it over to the operation a secure night.
Thank you.
Ladies and gentlemen, if you'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 that might be necessary to pick up your handset or de press your mute function the signal can reach our equipment.
And that is star and then one.
Well take a first question from katana with Goldman Sachs.
Good morning, Robert Susan just two for me on on the cost program for folks. So they're just around those 100 million goals and saving so talking through next year does that have all the sports what savings that you think you can get.
The various codes in that number and they all confirmed and then how should we be thinking about the cost of binge and the launch of your from your order to pay platform into 21, and then secondly, just around the simplification agenda should we be thinking that roughly on hold through this crisis or how do we think about the next steps from here it seems like Fox swap cozy fabric.
About previously.
Just.
Hi look its Robert I'll take the simplification question first simplification of the continuing process and it must be actually can say, we've appointed a global head of digital real estate Tracy Fellows, formerly the head of our yard and that's given us a much more focused international approach an intensified the dialogue.
Sharing between real scenario.
And as you can see.
We are constantly reviewing our portfolio, we sold amplify the digital education business, we sold out local prices in the U.S. well ahead of the president downturn.
We sorted out and simplified the ownership of Foxtel or we've sold news America marketing we sold.
All the we've closed to print editions of bust regional community pipe is in Australia, and these will actually help me to loss trends that we Mike.
And Ken just in relation to the cost programs. So the 100 million net number yes. It does include it's made up of sports cost increase so that's approximately $55 million and sorry, we have affected the savings into that number and when we think about the RTT cough in relation to be engine chaotic again.
Numbers nature of any investment that we would expect to see within those products are largely clearly with the marketing because we scale given we've got the content.
But that's just a couple of months Susan's comments, we are indeed place with one how quickly the.
Subscription growth has picked up but tell Ya study.
Interruption and secondly.
The early numbers.
And usually entertainment streaming service, particularly encouraging.
Thank you Nicole Thank our next question.
Well take our next question from Entcho Raykovski with credit Suisse.
Oh.
[noise], all along with cost savings.
A couple of no first one just on the 14th swap and maybe kind of impact, which you flagged for the quarter.
Just wanted to clarify which takes into account some of the probably the benefits of walls fault blocks costs that you've seen over the call for the quarter.
Bicycle or.
Or just happen, perhaps why snapback.
That makes it quite high standard checkers into account just interested in to what extent <unk> right.
In future years.
And then just secondly.
That's good talking train positive call since the quarter same can get sloppy with John I mean, obviously very strong performance.
With the whole, but if I look at advertising I think it was tracking that 20% Danny Nypro, then down 20, I entered the quarter Bakken crude I'm just interested in it whether they want anything specific we cannot be dropping not.
So just in relation to the first question sort of the theme packs in relation to kind of it is net of all the potential [noise] cost and revenue impacts that we could see across the business.
Yes. It does include the impact from from folks out 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.
12 outlined but the over arching and underlying cost price decrease notwithstanding that we expect to see that within 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, it's quite lengthy Oh.
Yeah, So sorry, so take your question.
While the collection walk in April.
Set of results you mentioned that revenue was down hole AD revenue was down 20 years here, Michael Gallo John's seems to have gotten a little bit with standpoint here at the same sort of course outside the plot the trends.
Has deteriorated.
I look at the underlying market that same said actually gotten better. So just wondering whether there's anything specific.
Yeah, John which multi multi driving that.
And just what you saw in particular was the.
Onset for the kind of the crisis in my mind was a tough month.
June was better.
Log that should again [laughter].
We are in particular seeing.
Strong digital advertising clearly as in many countries around the world print is affected by but generally speaking the trend has been positive since my.
Thank you thank.
Okay.
Thanks, Nicole we'll take our next question please.
Our next question comes from Alexia Quadrani with JP Morgan.
Hi, Thank you know my question actually following up on that.
Comments on digital advertising trends that downtown.
How about partly outlook on some of your parents.
I'm curious if it is it the vertical you or with any color you get on why you think you're relatively doing quite well.
Hi, I'm.
I'm, just sort of bang on data.
Sure Mark you can tell us about the he asked strong digital subscriber growth within the Wall Street Journal, how much that you think it's driven by the elevated cycle and sort of or promotional strategy you might happen play.
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Alicia I mean, it's.
Fair to say that.
Dow Jones is unique media property it's.
Clearly got both a consumer business in the professional business and the to complement each other and that helps us certainly with subscriptions, but also in terms of contracts with potential appetizers.
So.
In terms of subscription funnel, we certainly have some continuing sites and the growth potential for subscription with Wall Street Journal, Susan mentioned, but the trend in July has again been positive and also the Barnes group web subs rise, 49% in Q4, two compared to a year earlier when you what we have.
Hi, good John's is continuing funnel a potential clients coming in through market Watts, which actually goes to the free financial you saw it at market watching Q4 traffic rose 143%.
A market watches it can easily graduate to be I will say journal subscribe. It can become a darn subscribe to it can become a subscriber too high and financial information intelligence in the professional information disease Division.
And it's it's really unique opportunity, we have a digital daisy chain and each product in the China is high yield it.
And just in relation to the actual advertising question what was driving the digital growth. So we actually did say much stronger than expected performance in programmatic largely as a consequence of increased bogey and we had higher display cpms and just in relation to I guess, how competitors were less exposed to luxury and.
Timing, so we had more dependency on tech finance space age they and that's been driving performance.
Thank you. Thank you Alex you don't Nicole we'll take our next question. Please.
Our next question comes from Craig Huber with Huber Research partners.
Yes, Hi, My first question.
You mentioned seriously you guys talk with 112 your baskets.
Smaller papers down and I'll show, you shut them down or transition to digital well just wondering what percent of revenues does that represent can there be Australia newspapers first question.
Oh and firing on based on what does that answer in relation to Q4, it was about $20 million.
Impacting Q4, given me close them down sort of midway through the course, we don't disclose obviously the the full number of revenue for that but 20 million should give you a god.
In closing in mid Fortys, Okay, and my other question or maybe request was very happy to see you guys are breaking out the Dow Jones numbers the revenue.
Sure the EBITDA here the detailed obviously for the fourth quarter and did it for you this year, but for a year ago fourth quarter for the full year as 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 cores and that gets really estimated but to be very helpful to going this far to take one more step here.
5% just put together for the three core and they put out an 8-K or something is that fair to ask you.
Craig I think we're going to I'm, having investor day in September we trumpet mentioned and so certainly be able to do that at the Investor day for you.
Hey, Thank you. Thank you very much a course be great. Thank you.
Thanks, Thanks, Craig and Nicole we'll take our next question. Please.
It's our mcleish from M.S. team. He has our next question.
Great. Thanks, and just on just a very basic one can you just for Susan if that's okay. Just on the new subscriber numbers.
Susan.
I would imagine not the Telstra is quite quite important for driving growth and you just said its confirm whether anything with Telstra is going to paid subscriber or on so as a non paid subscriber in those focus push them put numbers you've disclosed thanks.
They found its telstra, providing the sales channel yes, we do include those numbers within the binge nobody's yet.
Yes, I can concerned not put.
You bet comes up paying so what you're pulling a paying subscriber.
That's correct.
Thanks, Mike.
Thank you Frazier Nicole take our next question. Please.
Next question comes from Alan Gould from loop capital.
Thank you and I want to second to thanks, I'm breaking out the Dow Jones data Robert.
I noticed in 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 being a beneficial experience in the if you look at a wall Street Journal, It's really two papers in one but the general New service.
Business specific new service.
In that sense, there are a lot of potential readers and potential subscribers, who doesnt understand the quality of the general news coverage the politics, the economics the off the lifestyle. The weekend section the magazine I'm sure. Your regular rate are you understand what I'm talking about and so that.
I will use partnership allows us to focus on that tier of content and bring in a significantly view audience that we would have to graduate chew up a pipe WSJ subscription other Tom and its it it is genuinely different audience.
Uh huh.
Actually of lives.
More women and men.
For the Wall Street Journal itself its momentum women, it's a younger demographic and it is obviously a source of potential subscribes for us.
Thanks Alan.
Go ahead on yeah, if I can just Bob when we when we think of just broader than just Apple we 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 or framing it would lead to think that as a contemporary equivalent of coverage fees.
The or Retrans.
So broadcast as well because there's no doubt that these deals.
We'll have.
What's public has to deal we have with.
If I spoke to the deal we have.
With Apple and of course, this is timing for content and much of that money drops to the bottom line and it's also fair to say that negotiations.
Going on public other companies.
And all the regions I can't go to do trial at the moment, because we're in the midst of them, but but when you combine these deals.
Having a significant impact on revenue and on profitability and it's frankly true for for all media companies. So if any executives of other media companies would like to send use core commission chip would be happy to see the tough to maybe a source of revenue.
Thank you Alan Nicole we'll take our next question. Please.
Our next question comes from Brian on from Morningstar.
Good morning, just a quick question the newspapers in the news Media Division.
They pulled into local.
June quarter cope with the wrong or were they loved thinking even before.
No it was because of the could impact for the quarter clearly a very disruptive core shop.
For that segment.
And also been does it get Youve got the NIM numbers taken out so it's it's not a lot lot comparison.
What I would say is essentially the breaking out because of Dow Jones is doing two things. It is it is providing more scoot scrutiny generally for each of those segments style. Johnson news media scrutiny has to be a good thing.
Because where we are very confident that news media executives will continue the 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.
Scott John is a uniquely undervalued.
Property in what I would argue is uniquely undervalued news cool.
I think maybe just to add just from each other context. So she looked even at the year on year decline.
We're talking about the sort of the 95 million, we'd probably 75% if that comes from man and the closure to regional communities. All the suspension at the Boston Domicile actually a really big bulk of 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 in.
Thank you Brian Nicole we'll take our next question. Please.
Okay. Our final question will come from Andrew Levy from Macquarie.
Well thanks for the question if I could smoking.
So the first ones Robert I'll, just be interesting or both on the digital.
Plus homes, reviewing the stadia and particularly on the structures. The Denise maybe bargaining projects that's structure that the new support evolved in works can you got.
In the home for.
The second was also you made reference to licensing news media content globally is that a discussion around except the guidance from the digital platforms or is there a border to demand idle avenues. You think you can law firm from the news media content.
And then any on for would be would be helpful on that line.
Susan just sorry to come back to it but just on the because it impacts to the Cordlife. If I wrote it down correctly, you said 330 million revenues in 40 to 50 of EBITDA.
Well, obviously, a large chunk of cost impact you've covered.
Exporting a lot. So I was wondering if you could give us some color on what else.
Moving to close stops it for the period in how we should think Bob at some sports you've obviously discuss what.
Stable or what sort of bounces back into the call spikes in 21. Thanks.
Oh look I'll talk about the Australian.
Regulations will do the draft amended you've heard of conduct which which is particularly important it's an important.
In two ways one for what defines in terms of remedies and in particular for what it defines in terms as an industry, but it's also part of the global discussion whether it be the consideration in Brussels the hearings here.
Last weekend in Congress.
Is the big for digital heads are giving testimony.
And in London, and that's sort of what you're seeing and this is crucial is being.
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 on no the draft unless you've heard of comfort, which.
I think is quite a moment of itself a real internet inflection point.
And this.
Essentially we are talking about carriage fees and or retrans payments for premium journalism.
And there are obviously more deals to come now some of those.
Deals.
We'll be outside of Australia, but I suspect in some ways influenced by just try and regulatory thinking well I can assure you that did not on the regulators but.
Media companies around the world and the digital platforms are watching Australia closely.
No. We've obviously been caught in the spot for well over a decade.
And then you just go border supported the quest because it was absolutely crucial to the future of journalism newspapers to live within whatever format.
Total to a well informed society.
And.
What's obvious isn't the collective understanding of issues as part of the plans our return on the point of no action Chile side are there are obviously regulatory changes to comment Australia.
On the commercial landscape is not yet fully formed but it will be a landscape far more hospitable to journalism and to news media and to use cool [noise].
As fuel.
Question about the licensing of content will 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 or.
Not only in.
Licensing in a traditional subscriptions and split or seemed a little bit about the segmentation of digital products products around sport products around Los though around food around puzzles, even so it's it's a real opportunity for us to the divide up our content in a different way monetized.
Content and provide compelling digital opportunities.
The potential subscribers a different price points up for so just some conferences.
I'll just jump in on the cost side. So if I have to look at the expenses for the quarter on an adjusted basis. They were down 273 million or 14 cents. The bulk of that reduction between reported and adjusted was Chasenet NFX.
The creativity impact were predicting in about 270 odd 290 odd million in order to get you should that EBITDA impact we were expecting costs to increase slightly for the core set because we did have increased revenue at touch screens that after college and some of that businesses.
And what I would say in relation to the caveat intact cost is clearly there's a lot that are related to volume so, particularly on after its around the globe and we would expect to see dice scale. Obviously, it's like businesses scaled back up but we have also reduced head count by 7% across the business, excluding them and not really in that.
Savings that we would certainly expect to continue into the next year.
Lets make significant cuts a marketing we clearly we'll have to look at what we think is an appropriate level for marketing going forward and it might never pay back to the level that we had pretty close it likewise with most companies we've caught 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 need is a bit.
Yes.
In order to continue spending within that area is clearly got compensation cost reductions as well as or as a result of lower bonuses.
Outside of the Opex in tax we've got the cuts the controlling Capex I think I mentioned that we thought that boss said.
Year on year, So clearly as we move forward into next year, it's it's difficult to predict exactly what that cost basis does it look like because it will depend on the revenue trends that 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 believed that we can continue to take costs out as was mentioned.
Thank you Andrew.
Thank you Nicole.
Thank you Nicole. Thank you all participating we look forward to speaking with you soon have a great day.
Take care.
Once again, ladies and gentlemen couple of today's conference. We appreciate your participation today.
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