Q1 2021 News Corp Earnings Call
Excuse me, ladies and gentlemen, thank you for your patience and holding the conference will begin in approximately two minutes again. Thank you for your patience and holding the conference will begin in approximately two minutes.
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Actual results could differ materially from what it said newscorp form 10-K, and form 10-Q filings identify risks and uncertainties that could cause actual results to differ and contained cautionary statements regarding forward looking information. Additionally, this call will include certain non-GAAP financial measurements, such as total segment EBITDA adjust.
Did segment EBITDA and adjusted EPS, the definitions and gap to non-GAAP reconciliations of such measures can be found in our earnings release with that I'll pass it over to Robert Thompson for some opening comments.
Thank you Mike.
And which we have made significant acquisitions in particular digital real estate and book publishing.
We are also benefiting from al strategy to simplify the company, allowing us to focus on the segments that have the greatest growth potential as well as ensuring that we are resolutely, reducing shed cost around the company.
We are determined to provide greater transparency for investors and the presentation of Dow Jones as a separate segment was integral to that continuing process.
Similar to the specialists.
Accelerating digital circulation and digital advertising growth and continued expansion at risk and compliance. These compensated for not unexpected decline in print advertising low the total AD decline was not as much as that of other publishers as a result, Dow Jones segment EBITDA grew 47.
Percent year over year.
Did a mix of the creativity of the commissioning along with disciplined diligent cost control.
We haven't bookstores restock their shelves with compelling Harper Collins tons and overall digital styles in Q1 route 20% compared to the prior year continuing a trend that was evident in queue for a physical 20 direct to consumer revenues rose almost 38% year over year and the I can read book club.
The children nearly quadrupled its membership since February two more than 95000 monthly active uses as a quarter and.
Applied in Queens, and we are actively exploring options for the Bronx print plant sought for which there has been considerable interest.
This decision involved much agonising as the Bronx plant and its talented committed stuff have played an important role in the history of the company and the U S newspaper industry, They're Sterling efforts will resonate for many decades to come as the masthead continue their migration to digital and a rapidly changing made her involved.
Very strong growth at the digital real estate services, Dow Jones and book publishing segments.
At over 40%.
[laughter], we saw material growth in the performance based referral model, which accounted for approximately 30% of total move revenues in the quarter benefiting from the growth in lead volume higher home prices and real estate transaction closes.
I have mentioned in the past there is a delay in recognizing the revenue from the referral model due to the timing of transaction closes, which in addition to natural real estate seasonal patents can lead to some volatility quarter to quarter as we shift more leads to that model.
These results are very encouraging as we further progress towards increasing our addressable market through the integration of key ancillary services like our rocket mortgage partnership.
Segment, EBITDA declined 4% to $78 million and declined 9% on an adjusted basis total costs declined approximately 3% or $15 million with a $16 million or 4% adverse impact due to currency fluctuations.
Underlying savings with $31 million or 50 million Australian dollars. These savings came despite an increasing sports rights and production costs, partly due to the $36 million or $51 million Australian dollar impact from the timing of some sporting events deferred deferred from the fourth quarter.
Foxtel also benefited in the quarter from lower entertainment programming costs as well as declines in transmission and overhead expenses as we see the flow through from the cost actions taken last year.
Advertising revenues again exceeded print advertising revenues accounting for 57% of total advertising and increased 14% benefiting from growth in direct display programmatic and sponsored links revenue.
Interestingly, we sold digital revenue growth in every industry category print and other advertising fell 39% and more modest improvement from the fourth quarter Rice.
Dow Jones segment EBITDA for the quarter rose, 47% to $72 million with margins expanding to almost 19% and up almost six percentage points versus the prior year overall.
Overall cost for the segment declined approximately 6%, which combined with the topline growth led to the material margin expansion this quarter.
At book Publishing Harpercollins had a very strong quarter building on the momentum from the fourth quarter with revenues up 13% year over year to $458 million and segment EBITDA up 45% to $71 million.
Revenue growth was driven by general trade and the children's books as well as modest revenue contribution from the Egmont acquisition in the UK adjusted revenues and adjusted segment EBITDA grew 10% and 41% respectively.
We saw strong digital growth with digital.
Sales up 20% year over year to represent 23% of consumer revenues up from 22%.
E book sales increased 18% year over year with gains in all genres, while downloadable audio books increased 26% year over year.
As Robert noted at Harpercollins benefited from a strong release slate, which included Daniel Silvas the older Lucy Foley's. The guest list then shapiro's how to destroy America and three easy steps Jenna Bush hike is everything beautiful in time as well as Lebron James I promise in children's books.
Okay, well news, Australia declined fishy, 5% or 38% in local currency, which includes the $29 million negative impact or 20% related to the regional and community titles.
Advertising revenues at the New York Post increased 6%, which includes 22% digital advertising growth.
Segment EBITDA for the quarter with a loss of $22 million compared to a positive $7 million in the pri or a decline of $29 million. The results reflect lower revenues and the absence of a net $12 million contribution from used American marketing and unruly, partially offset by higher cost savings across the businesses.
I would now like to talk about some of the same as in the upcoming quarter Needless to say forecasting continues to remain challenging.
Digital real estate services as <unk> I should national residential listings in Australia for October without 1% to the Pri with increases in Melvyn in Sydney.
Alrighty I has also agreed to take a controlling interest in India's Alara technologies and as a result, we expect to fully consolidate their results assuming completion on November 30th please refer to Rei's press release, some more details at realtor, we remain very encouraged by traffic and laid volumes, we are planning higher reinvestment spending the Q1.
Given out focus on extending into adjacencies and growing the addressable market.
In subscription video services with the conclusion of the strays two T. One winter football season's the I F L and N. R. L. We expect to see seasonality and K I subscribe the numbers as we transition to the summer sports most notably cricket four Q2, we expect about $18 million or 26 million Australian dollars a sports.
What's that would've said you to COVID-19, but expect offsetting savings due to the ongoing benefit of the cost reduction measures taken in queue full lost G and the continued cost focus within the business.
At Dow Jones overall, you over your trend stuff similar including strong digital advertising growth as we look to the rest of the we expect modus reinvestment in the business as we focus on driving revenue growth through subscriptions any risk in compliance.
In book publishing as Robert mentioned, the key titles in the second quarter include reach almonds frontier Follies and run to Ben's the greatest Sacred we have continued to see high online styles.
When we should be thinking about that and then secondly, just more broadly you've obviously seen the allowed ROE investment come through.
But just interested in your thoughts around how.
You should be capitalizing on your balance sheet strength, which obviously have been progressing the simplification agenda and then trying to realize the value of the sum of the parts in the current environment just.
Okay.
Fair to say real has truly been renovated I remember there was skeptics at the time of the acquisition. The nice size you wondered whether we could transform a company that frankly had seen better days, while the best days are clearly ahead.
We've used down editorial expertise and reach the power of our media platforms and a relentless focus on the needs of customers to improve user experience and that's showing up in the returns.
For us the challenge as you indicated to get the blend rides between continuing expansion.
And contemporary returns I mean, obviously due to the savvy leadership of David Dr. on tries it fell as we have had a massive increase in margin and we have an elasticity there, but we believe that we're at the early stage of the exponential expansion of that business.
Beyond us it will also be a beneficiary of advocacy to change the digital landscape, whether it be through digital AD yields all algorithm transparency and so it will be eminently efficacious for a realtor Ferrari I for our business in Asia Asia and now for our operations in India now.
As for structure, the most important way of maximizing real estate properties value is to ensure that they are the fastest growing most lucrative most innovative sites in the world truly digital in orientation and shall I say not weighed down by bricks and mortar and unsold inventory or the need to renovate a kitchen.
All add EBITDA in the bathroom.
The benefits of that creative committed approach to.
The potential vendors to potential buyers into real realtors is paying the obvious and the results last quarter.
No we have Tracy fellows overseeing global real estate operations, and we have just consolidated our India operations through area. So there is a shape as structure emerging and more than that there is a sense of purpose and of profitability. We.
We are by many measures the world's largest as real estate company in that business has more than with stood this stress tests of recent months in fact, the recent months showed the extraordinary potential of that business.
And just in relation to the reinvestment question that you asked look we don't obviously give guidance specific guidance in relation to the cost, but broadly speaking we could probably.
Think about the cost reductions that hasn't happened this quarter in buckets, all head count.
In the past quarter to maximize profitability to take advantage of opportunities and I'm, just very proud of what Tracy and.
David in the island in Australia.
Doing at the moment in very difficult circumstances, and as I said in particular.
Particularly with the realtor doll comment numbers and show you recall the time at the acquisition, where where people wondered what we were going to do with that business and whether it had indeed.
Seen better days and it's very clear from those results last quarter that I best days are ahead.
And then just in relation to the cough question on <unk>.
Obviously, it's tricky to say exactly how we expect that they need to pan out, but what I would say is that the team has been very hypostome customer facial right will be covid related cost reductions on then we wouldn't necessarily expect to see you guys replication throughout the year, but someone can actually a real cost reductions as being a lot of work on head count and looking.
At the right balance between 10 minute reductions in reinvestment, but we would expect to see ongoing investment in that business, particularly in relation to subscribe to Christ, Michigan compliant and new products as well so very similar to the commentary around like ice on rails huh.
But we are really pleased with the ongoing focus given covid on cough and we do expect to see some advice cost saving certainly continuing as we go throughout the.
Thank you and Joe Cory we'll take our next question. Please thank.
Thank you. Our next question comes from Craig Huber with Huber Research partners.
Yes, Hi, [laughter] questions.
Questions here.
What's changed at all in the large cash balance of you guys carry every every quarter over here.
In terms of what to do with that going forward.
Oh, great we're constantly.
Instantly reviewing cash and capital allocation would that be returns directly to show how old is all share buybacks for which we have a provision as you know while the potential for.
Company It has investments either internally or externally go to transformative suffer a results and most importantly for the shareholders.
Just.
Just mentioned, we've 70 rise cost conscious around the company with the imperative of conserving preserving cash at a at a difficult time, Tom a pandemic and uncertainty and the success of that program has given us genuine optionality.
But I would certainly suggest the big.
Investments, we've made and you'll be aware of the realtor and Harlequin books approved they're worth at a time when every company is being stress tested by the crosses.
And we're proud of how those investments are fed, but particularly proud of how teams around the world have transformed does divisions and I think it's fair to say that investors and potentially business can see the momentum and the value in those investments.
Okay. Great also wanted to add another question yeah, Yeah, if I could please just real quick Uhm I guess.
It's just in the spirit of Tran.
Transparency here was the EBITDA for a realtor dot com he disclosed that was it roughly $20 million in the quarter.
And with the I mean, Craig we said with the increase in profitability was and the increase in properly was $28 million. So I think I, Susan said that that contribute the bulk of the EBITDA improvement at digital real estate.
And it was profitable.
Okay. Thank you guys.
Okay. Thanks, Greg Corey we will take our next question. Please thank you and again as a reminder, if you would like to ask a question. Please signal by pressing store one. Our next question comes from Brian hand with Morningstar.
Oh, Hi, this snapback in earnings and margins for books.
Was that nicely uhm, just natural never each from higher digital sales or the jeweler general cost cutting programme play a big role day.
[laughter].
Try it actually it it wasn't cost cutting programs within Harper Collins I'm, given that revenue growth they have actually been skylight and a coffee in accordance with.
The revenue Christ, but they do have clearly a different mix site is a different mix between the frontlist in the back this quarter on quarter Uhm and also it depends on the taxes Frontless lasted.
Titles that we sell so it's a combination of those are not necessarily cost you even more revenue driven this quarter.
Thank you. Thank you Brian we'll take our next question. Please Corey.
And as a final reminder, if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
We do have a follow up question from can't hand them with Goldman Sachs.
Hi, Thanks for follow up just around Fox toe just interested in.
8 million dollar increase in call from quarter and I'll tell you the point around currency, but just whether it any change in the country from the <unk> around 100 million dollar U S reduction and then just on the commercial fond of things just interested if you could talk about the revenue impact guilty. Thank you said you were working with the pumpkin clubs in the something back up to 200000, but just wondering what the.
If you could talk about a revenue impacting the quota just.
Mm no worries kinda suggest in relation to the cost it wasn't net underlying saving a 50 million Australian dollars. So I think that's important and that does include the deferral of the sports rights and they said that gives you a sense as to the scale of the reduction that we're seeing within Fox tail.
We are expecting full underlying costs to be significant for the full year. The pain is still very very focused on that but as we mentioned last time, they will be a net impact of the deferral of sports cough $78 million for the both programming and production costs included within that number but the underlying.
Savings will be significantly higher than that.
In relation to the commercial revenue impact was about 14 million is she a cultural quarter you'll.
You'll see from the subs numbers that we close at that we have picked up a considerable amount since queue for way hyping actually with the opening up with Victoria that will actually start to pick that number up again as we move forward. So they will continue to work on that as we look to build that vice back up.
And to supplement what Susan said in the context of the carbon related restrictions on on pubs clubs the impact on advertising, we're very pleased with the rapid growth so that the streaming business at Fox toe under swollen and Patrick.
But we will continue to provide the best possible experience for ascribes wherever they happen to be a U S.
Israeli United Ott's, I'll drop 67% year on year and by any standard that's a significant expansion of the customer base well foxtail broadcast <unk> actually rose at the same period and U S dollars, obviously affected by currency pot from 53 to $56.
As we've already made clear we foresee 90 to boast of Fox dealt with extra investment, which shows that the business is on a particularly positive trajectory.
Thank you can acquire we will take our next question. Please yes, and our final question comes from Greg Cooper with Huber Research partners.
Okay. Thank you just a couple of quick follow ups here on the divestiture front do you think you are largely done with that that's my first question and then secondly is there anything else Susan you'd want to call out within and Fox tail in terms of timing of costs things that are moving around.
Relate to the sports programming costs anything else, we should be aware of yours, we put a model it.
On divestiture, Luckily, where obviously constantly reviewing the portfolio, but it really one wouldn't speculate on speculation.
Oh.
Of any kind of what I would say is that <unk> and you can see from the results.
We're very proud of our teams around the world all of our employees in the way that I've come together and put together.
[noise] give us.
A quarter of results, which in the circumstances, an indication not only have the strength of the company, but have the potential of the company.
Uhm and cry just in relation to the Fox tail call. So just on phasing we had a feral of sports rights, which we question is $61 million in this quarter. We've said, we'll have another 26 million in queue to so that sort of picks up the bulk of that deferral, but then of course when you think forward to queue for you won't have cost in queue for.
In the last year in relation to sports rights, which you will have next year. So you all must have a double up with those cough as we go through this year in relation to the other cost savings the team actually did a really good job in queue for.
Of.
Looking at the cost space and getting hits out of the business, which sort of continued into the first month of this quarter. So the actual underlying cost savings that they delivered in queue for in relation to the heads and a lot of D. I ever had costs. We expect that are in play now and I will continue throughout the year.
Thank you and Corey are there any any other additional questions.
There are no further questions in queue at this time Sir.
Thank you Corey and thank you for all participating.
Well stay safe and we will talk to you soon have a great day.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
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