Q1 2022 News Corp Earnings Call
Good day and welcome to the News Corp, first quarter fiscal 2022 Conference call Today's conference is being recorded.
<unk> will be on a listen only basis at this time I would like to turn the conference over to Mike Florin Senior Vice President and head of Investor Relations you may begin sir thank.
Thank you very much Bobby Hello, everyone and welcome to news Corp's fiscal first quarter of 2022 earnings call. We issued our earnings press release about 30 minutes ago, and it's now posted on our website at Newscorp Dot com on the call today are Robert Thomson, Chief Executive and Susan Penuche out Chief Financial Officer will open with some prepared remarks and ill be happy to.
Take questions from the investment community. This call will include certain forward looking information with respect to news corp's business and strategy.
Results could differ materially from what is said news Corps 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 definitions and GAAP to non-GAAP reconciliations of such measures can be found in our earnings release with that I'll pass over to Robert Thomson for some opening comments.
Thank you Mike.
We were unsure about share dislocation at the time of the separation from Fox, We now have confidence in our performance our resilience our ability to generate cash for our investors and our potential.
Bolstering our confidence is the fact that <unk> recent acquisitions are exceeding our expectations in our core segments are thriving we.
Now have an optionality across the businesses and significantly more flexibility in our ability to return capital to our investors.
One noteworthy sign of that Optionality is our ability to capitalize on the patent success of the Fox tells streaming strategy, which was highlighted during the foxtail strategy day, we have been working through the potential permutations and will continue to provide updates as appropriate in the meantime, it is worth noting that.
<unk> video services segment, EBITDA rose, a rather healthy 46% in the first quarter.
As for our campaign to hold Big digital accountable clearly there had been pronounced in profound developments in recent times. We are pleased with the agreements we have reached and the work that has progressed on revaluing content, but we have always regarded the digital AD market as a separate issue and the release of an Unredacted <unk>.
By the Texas Attorney General last month has highlighted the extent of the problem. The manipulative language was deeply concerning we are obviously, considering our position on this important matter and want to ensure that in the future. The edmar properly recognize the value of our audience and of our inventory.
Now turning to the first quarter Dow Jones recorded a 15% increase in revenues compared to the same quarter last year with segment EBITDA surging, 32% that profitability was a record for the first quarter.
Revenue at risk and compliance grew 26%, meaning that we have had 25 consecutive quarters of double digit growth overall, the professional information business experienced a solid 13% increase in revenues and that should expand when we complete the acquisition of Opus, which is expected.
Those early next calendar year.
Okay and never took on access your balance sheet risks or chased what appear to us to be very low margin returns.
It appears healer now finally understands what we always news too new to be true that said.
As an open platform, we do see opportunities to be a market place for the industry, including I buy such as open door, providing them with the same kind of dependable and trusted information that agents and consumers alike have values.
In Australia or.
I had a remarkable first quarter with revenues burgeoning 62% that is correct 62%.
Australia has slowly been emancipated from severe lockdowns and access to homes for sale has been limited. So we believe that positive market conditions will likely continue as the country returns to assemblage of normalcy. When harbinger is that site traffic was strong in Q1 with 129 million average Ville.
That's up 13% year over year that is essentially an average of five visits for every person in the country.
That book business is thriving and even more so with the successful integration of HMH. Excluding the 50 million dollar contribute contribution of HMH book sales have reset in the post pandemic period to around 22% higher than the same period in 2019.
There has been a resurgence of interest in printed books as the tactile itchy and tell us manic quality is increasingly important at a time when many people have screened fatigue.
We saw notable success in Q1 with the Bridgeton series, the authoritarian moment by Ben Shapiro and a cellist by Daniel Silva in the months ahead, we have high hopes for the pioneer woman cooks Super easy by Ray Drummond, the storyteller by Dave Grohl and gangster Granny strikes again by David Williams.
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In subscription video services, the first quarter built on the significant progress made in F y 21.
Our newest businesses on a more profitable path.
Despite the success of Lockdowns, our Australian business is fairing, well showing significant improvement in profitability. Thanks to cost cost initiatives and rising digital advertising revenues and used masthead subscriptions, which improved to 850000 up 24% year over year.
News U K performed admirably, particularly in advertising, both digital and print and in subscriptions the times and Sunday times contributed meaningfully to profits and their digital paid subscriptions have now reached 380000.
Wireless our radio network increased its revenue and profit contribution with exclusive football broadcasts drawing large audiences and increased advertising wireless reported record reach of 6 million unique.
Listeners per week. According to the most recent rage out survey.
Our broadcast expertise is assisting our other media properties in the U K and will complement talk TV, which is scheduled to launch in the early months of 2022 with piers Morgan, taking a global role across our broadcast and use properties. We believe talk TV will be contemporary low cost and high impact.
In the U S. The New York post once Legendarily Lossmaking is now contributing to segment profitability and is an increasingly important voice in the national political debate it.
<unk> Digital network reached 151 million unique users in September almost half of the U S population according to Google analytics.
Digital advertising revenue was 28% higher compared to the same quarter last year and print advertising increased 62% recovering from the COVID-19 related lows of last year.
The company built on its momentum from last fiscal in the first quarter and we remain optimistic about growth prospects going forward clearly there are macroeconomic pressures affecting certain companies, but our increasingly digital orientation has bolstered our ability to weather the pandemic.
And deal with the economic uncertainty in some of our markets. We are confident in our employees confident in our businesses and very confident in our prospects and now for further detail.
For further details and invaluable insight I cede the floor to Susan Panocha. Thanks.
Thank you Robert.
As Robert mentioned strong operating momentum that made last you say successful has continued into our first fiscal quarter results.
<unk> 2022 first quarter total revenues were over $2 5 billion up 18% not by higher revenue growth across all our key segments, notably at digital real estate services.
Total segment EBITDA was $410 million up 53% versus the prior year is the highest quarterly growth rate since 2017, despite the challenges from the Lockdowns in Australia in comparing against 21% title segment EBITDA growth in the prior year.
Billion dollars or four percentage points.
With home prices at record highs and supply limited lead volumes fell approximately 18% compared to over 40% gross lost cheat opiate weed leads still around 15% higher than prepandemic levels incur.
Encouragingly, new listings are up from the recent lows and we have seen moderation of lethal you've declines in September and October.
Reising remains robust given strong agent demand.
[laughter], Alright, I had an exceptional quarter with revenues rising 62% year over year to $246 million, including a $7 million or 3% positive impact from currency fluctuations.
Results benefited from $43 million a contribution from the mortgage choice acquisition and $8 million from the consolidation of Alara, which is being rebranded to Rei India.
The underlying performance was very encouraging with Australia, and residential revenue growth driven by an increasing debt penetration price increase and favorable product mix.
The revenue growth was also driven by an 11% increasing you buy listings, despite lockdowns across multiple states, including restrictions on physical inspections in Melbourne.
Melvin listings rose, 79% will Sydney fell 7% financial services also benefited from highest settlements in submissions.
Please refer to <unk> earnings release and their conference call. Following this call for more details.
Turning to the subscription video services segment revenues for the quarter with $510 million up 3% versus the prior year benefiting from highest strict streaming revenues and the modest benefit from positive currency fluctuations, partially offset by lower broadcast in commercials subscription revenues on and adjusted basis revenue.
Use with flat.
Total closing paid subscribers across Foxtel reached nearly 3.9 million as at quarter end up 17% year over year with total subscribe as including childless approximately 4 million. The increase was driven by continued growth in pipe streaming subscribe is partially offset by a decline in broadcast subscribers and commercial subscriptions.
Which were exacerbated by the impact of the Lockdowns in Australia.
Moving on to Dow Jones, Dow Jones delivered revenue of $444 million up 15% compared to the prior year with digital revenues accounting for 75% of total revenues this quarter up two percentage points from the prior year.
Adjusted revenues, which notably excludes the impact of IPD rose, 9% as Robert mentioned, both revenues and profitability with a highest first quarter results since its acquisition.
Circulation and subscription revenues increased 12%, including 13% circulation revenue growth, primarily reflecting the acquisition of IBD and a continued strong volume gains in digital only subscriptions.
Dow Jones subscriptions to its consumer products increased to an average of approximately $4 6 million in the quarter up 18% from the prior year off that over $3 6 million with digital only subscriptions up 24% year over year, while they day accounted for 100000 digital only subscriptions and 128000.
In total subscriptions.
Professional information business revenues rose, 13% accelerating from the prior quarter revenue growth from risk and compliance increased 26% driven by a higher entry rate and strong growth across the Americas, Europe and Asia.
This quarter benefited from a rebound in Christian publishing, which was more exposed to the closure of retail stores in the prior year and higher sales in the U K General book saw healthy growth benefiting from new releases, coupled with higher back with sales from the Bridgeton series by Julia Quinn.
Digital sales rose, 5% this quarter and accounted for 21% of consumer sales. The <unk> represented 62% of revenues up two percentage points from last year underscoring the importance of the steady high margin revenue stream and a key factor behind the acquisition of H M. H.
H M. H integration continues to progress well and is in the process of being integrated into a full in print structure within Harper Collins, we remain on track with our savings target of $20 million to be delivered within the first two years overall heightened <unk> contributed $50 million in revenue and $6 million in segment EBITDA This quarter.
Turning to news media revenues for the quarter were $576 million up 18% versus the prior year benefiting from the continued recovery in the advertising market strong growth in circulation and subscription revenues and a $25 million or 5% positive impact from foreign currency fluctuations.
Wage inflation on talent and retention.
Digital real estate services, a stray and residential listings for October rose, 16% and we are encouraged that restrictions on physical inspections, notably Melbourne have eased at move we continue to see strong yield improvement despite the need to him challenge on lead volume given the ongoing supply issues.
Like the first quarter, we expect to continue to reinvesting move as we drive the coal business and expand into relevant adjacencies.
The race of cost increase year on year in the first quarter was exacerbated by the COVID-19 savings initiatives in the Pri across head count and marketing, we expect more moderate year I V cost increases for the balance of the year.
[noise] and subscription video services, we remained pleased with the ongoing performance of <unk> and <unk> and the efforts to improve broadcast up who and Chen.
We do expect seasonality and <unk> given the end of <unk> winter coats, but look forward to a summer schedule with the ashes and the cricket World Cup in the second quarter cough are expected to be hiring a second quarter, most notably for entertainment and sports rights as well as some higher marketing to support the launch flush the new streaming offering overall.
And we continue to expect cost for the <unk> to be relatively stable in local currency.
At Dow Jones overall trends across the business remain strong with advertising and subscriptions growth continuing to perform well.
Input publishing overall trends remained favorable despite lapping the benefits from COVID-19, we have a strong release lineup in the second quarter, including titles from Richmond, Mitch Albom and David Williams.
News media, we continue to expect a segment to show profit improvement partially benefit from the recent content licensee revenues, we do expect some additional costs in the U K as we expand more into video content and leverage a key brands and laughed at.
[noise] Capex was modestly higher in the first quarter and we continue to expect <unk> to be up $100 million. This is the prior year.
And finally, we remain focused on driving strong and positive free cash flow generation for the with the first quarter free cash flow impacted by the timing of working capital payments with that let me hand, it over to the operator for Q&A [noise].
And here we are today, so whatever we do we will not be naive naivety is not now nitrogen.
And as Brazil.
Obviously, we had discussed ourselves getting into bricks and mortar, but we had a very clear sense of the digital priorities don't forget that we had revived renovation distinctly unfashionable realtor dot com and we bought it on the cheap net net about $700 million Watson.
What's it worth now $6 billion 7 billion, what would be worth in five years as the inevitable digital match continues $15 billion 20 billion more.
So are we.
So are we.
We've been very focused.
Diligently.
To service with vendors buyers and realtors.
As Brazil.
The idea that it was simple to find great Palmer, plus or a plateau or a plan to the idea of the prices were not variable subject to vicissitudes the idea that holding inventory was not itself costly.
Tomatoes were rather strange ideas I'm I'm not sure.
What impact.
Eventually when Zillow.
Mexico demand what type of businesses is they will have on the market, but I can talk from a macro perspective first of all very confident and realtors prospects.
Oh, sorry.
Very confident and in the U S real estate market generally.
It's a market in transition.
Laws of supply and demand still apply a process to high two things will happen Boswell start to hesitate and more sellers appear it will appear on the market as the immutable way of the world and I suspect we are very much in a moment of such transition which is good for realtor.
Bobby we'll take our next question please.
Hey, Thank you. Our next question comes from my legs, He a quadrupling with J P. Morgan.
And thank you I'm in in the news media business I was wondering if you could sort of Pontificater give us an idea of what you think the the.
The overall opportunity is even longer term from licensing fees from from type platform sort of overtime and then just a quick follow up on on Fox tail, you know with with some of the streaming platforms, yes, five players sort of launching their own platforms in Australia do you see that is incremental competition or how how should we.
Do that.
Well first of all in all news media, what you're seeing is really a transformation led but I'll change.
Isn't mentioned will there be AD revenue, which shouldn't in the UK was up 36%, Australia, 5%, Neil post 32% check revenues.
Overall up 16% in the UK 30 per cent of Fry a 9%.
You're seeing a lot of hard work done bought by our teams in.
Being very diligent about cost, but also being focused on on growth certainly the big digital deals will make a difference to all of our publications.
Frankly, or we can say given the constraints of confidentiality is it the deals mean that comfortably I have a non figures are flowing into the news companies in return for the highest quality new services and three separate continents.
The Unfortunately, we are yet to reach agreement with Facebook or the artist, formerly known as Facebook in the U K.
One of them with the with the company.
Just Nit pick question, you usually tell us [noise].
What the change is your beer and EBITDA at at Realtor Dot Com can you provide that for the quarter. Please. Thank you.
Craig I suppose simplification.
Candidly, we're constantly we're getting a structure as you know was sold quite a few companies along the way.
The local newspaper business of Dow Jones, which we presumed would struggle and that didn't date turned out to be the case, amplify which found a bit of harm use American marketing was which was less meaningful to us a sprint sales declined somewhat unruly, which is found a welcome home elsewhere with him we still have a relationship but adtec per se is for others.
Brian just in relation to your question on the content licensing, we havent given out that number apart from saying.
It was going to be into nine figures and just in relation to how that's going to be pacing over the course of the year, we would expect to grow as more products within those particular contracts launched like for instance, <unk> over here in the U S. So we would expect to see that build as we go throughout the year and we talked previously in relation to that about.
A high level allocations of it sitting between the news media segment and Dow Jones.
Thank you.
Brian.
Bobby will take our next question please.
Okay. No further questions at this time I will turn the call back over to you for any closing remarks.