Q3 2022 News Corp Earnings Call
<unk> between the customer basis of Dow Jones at Opus, we see very strong cross sell and upsell potential using the vast WSJ IPG and market watch audiences as a premium pool for customer leads.
Subscriber growth at Dow Jones remained robust with WSJ digital only subscribers crossing 3 million this quarter expanding at a robust 16% right.
It'll only subscriptions across all Dow Jones consumer sites increased by 19%, which also reflects the consolidation of IBD and early success in new bundled offerings.
Digital advertising Virgin, 21%, marking the seventh consecutive quarter of double digit percent growth, notably print advertising has actually expanded for four consecutive quarters in double digits, while the conflict in Ukraine had a short term impact on advertising given that certain advertisers did not want juxtaposition with wall cover.
<unk> overall trends remained favorable the imposition of sanctions and expansion of watch list underscore the value of the Dow Jones risk and compliance business, which continued its unbroken streak of rapid growth in Q3, when it recorded the 27th straight quarter of double digit increases.
And on Ukraine, we are deeply appreciative of the professionalism of our journalists and their support teams in covering the tragic conflict and bringing understanding to readers around the world.
At digital real estate services, both revenues and segment EBITDA continued to expand at a healthy rate revenues at <unk> grew a robust 30% following a surge in listing value and also benefited from the integration of mortgage choice, which obviously provides another means of monetizing our valuable.
Leads.
In the U S. The real estate market is in the midst of flux with historically low inventories and rising interest rates home prices generally have continued to rise there is much variation depending on the location while rents are increasing at a double digit rate.
Affordability and supply, which are obviously related remain issues for first time buyers, who also facing escalation as mortgage rates.
By historical standards rights remain relatively low.
And flow of market forces is not unusual and we believe the opportunity for realtor Dot com and used call has never been greater as the Digitization of the property market continues at pace and current trends are likely to expedite that evolution.
Our product innovation has accelerated our scale has increased and we are in the early days of venturing into relevant adjacencies with large addressable markets.
Despite the shifting market conditions move posted revenue growth in the third quarter and I aim to be the digital marketplace for consumers and the industry is clearly paying dividends as our average monthly unique users exceeded $100 million in March.
For the past two years third quarter revenues at the digital real estate services segment have increased by 59%, which gives a measure of both the growth and the opportunity there.
Past two years have been remarkable for book publishing with third quarter revenues rising 5%. This year, which means that there has been a 25% increase since the third quarter of fiscal 2020 and this in an industry that some observers had presumed to be mature we expect sales to continue at significantly higher.
Levels than before the pandemic.
Unsurprisingly EBITDA for the segment was challenged including by supply chain cost increases for paper printing and distribution. We expect these near term disruptions to abate over time. We also expect continuing success from both new releases and bolstered backlist, which was enhanced by the acquisition of the <unk>.
Mifflin Harcourt books, <unk> Media Division.
Successful releases included.
Best selling memoir by former Attorney General Bill Bock, one damn thing after another red handed by Peter Schweitzer, and the Paris apartment by Lucy Foley.
Given the public's abiding appetite for reading Harper Collins is certainly well positioned for future success. We are excited about finding may the new book by Viola Davis released late last month, and we anticipate a surge in interest in our Lord of the rings franchise for which we now have global English language rights give.
Advertising outpaced print it.
It is also notable that the sudden dot com the brand extension of the.
The Sun in the U S market increased page views in Q3 by over 260% year over year to $500 million.
With yields significantly improving.
P. As Morgan's much anticipated program launched on April 25th and it more than exceeded expectations and reach across the UK. The U S and Australia. Thanks to the power of our platforms. The pivotal partnership with Fox News and the quality of the programming not only does talk teevee plan to be abroad sure sure diverse views.
News and lively discussion it offers a new opportunity to leverage our strong brands talented people and premium video content in the UK and around the world.
And subscription video services the third quarter saw continued progress in reshaping the Foxtel group as a growth oriented subscription business with continued success and streaming stable revenues and solid cash generation, notably Keyuan binge, both surged into quarter and are now reaching record numbers of subscribers.
<unk> plans to implement a price increase as it benefits from its scale platform and high quality production, which is driving record ratings at the start of the season Goodbye, the NRL and the I F L.
We're all total paying streaming subs reached nearly $2.6 million up 62%.
We remain pleased with Fox tells turnaround and have a great optimism about it's near and long term future. We are continuing to explore all options for foxtel to maximize its value, while watching closely or relevant developments in the financial markets.
Through the first three quarters of fiscal year 2022, New score is well on track for its most profitable years in separation clearly besting last year's record results.
Success is building Unsuccess, we will relentlessly continued to drive outperformance in the quest for enhanced returns for our investors complacency smugness and hubris and not words at Ava February .
<unk> is a company transformed more intensely digital more intelligently global with strong growth in our core markets and much unrealized potential.
Macroeconomic challenges affect all businesses, whether that be the supply chain corrosive inflation or febrile currency markets, but our resilience adaptability and ingenuity with stress tested by the pandemic and led to record revenues and profits.
We understandably are optimistic about the use of head.
For more granularity about I quarterly performance I now hand, you over to the Adroit Susan village here.
Thank you Robert.
2022 headquarter total revenues for approximately $2.5 billion up 7%, reflecting strong Christ across our core pillars digital real estate services and gouging, which includes benefits from a recent acquisition and are continuing shifts particular across the company.
Titled taken in <unk> with $358 million higher than the prior year by 20% and as Robert mentioned, not the highest state quarter titles segment apricot on record preparation, reflecting how ongoing microphone cough.
Those results came despite approximately $50 million, one time costs related to the eyepiece transaction, which closed on February the 28, and a 68 million dollar negative impacts on current headwinds.
Excluding acquisitions currency fluctuations and other options described similar relief adjusted revenues and adjusted titles segment, EBITDA by 6% and 25% respectively.
Posted EPS for 14 cents compared to 13 in the Pi yeah.
Earnings per share in the quarter with 16 cents compared to 90% in the prior year.
Moving onto the results for the individual reporting segments, starting with digital real estate services.
Segment revenues were $460 million, an increase of 19% compared to the prior year.
The results include the contribution from the acquisition of mortgage choice as well as the negative impacts from foreign currency fluctuations on and adjusted basis segment revenues increased 14% said.
Segment, EBITDA, right, 17% $237 million or up 18% on any justice basis like.
Like the second course at the driver of segment EBITDA improvement with Rei will segment EBITDA contribution from my foot flat compared to the prior year.
And these revenues were $170 million similar to last quarter and up 5% a year.
37% revenue growth in the prior year and is now approximately 44% higher than pre pandemic levels in the third quarter of fiscal 2020.
For the quarter real estate revenues grew 7% and accounted for 85% of total revenue.
Prof optimization within the call agent business home price appreciation and the resulting fly through to conditions within the referral model together with higher advertising help to offset limited inventory impacting by fleet volumes and transaction volumes.
So Sarah offerings accounted for approximately 28% of total revenues up three percentage points compared to the prior year and what's the biggest driver of year over year revenue growth this quarter.
Based on our internal metrics Realtors average monthly unique pieces with $95 million in Q3, reaching $100 million in March while unique he uses within three per cent in your <unk>. They are still 40% above pre pandemic levels in the third quarter of fiscal 2020.
Like the second quarter revenue growth was partially offset by the divestiture of top produce three notch, which negatively impacted revenues by approximately two percentage points.
Lethal games and of course, it was sequentially higher than the second quarter. However, they declined 22% compared to the prior year impacted by lower new listings in the recent rise in mortgage right.
The team remains focused on driving audience Christ scaling the core real estate business and investing in and growing adjacent businesses, while keeping a watchful eye on the macro environment.
Alright, I had another very strong course with revenues rising 70% year on year under reported basis to $246 million, which includes associate million dollar contribution from the mortgage choice acquisition.
Alrighty I enjoyed another quarter of favorable trends, including an 11% increase in Australia, and residential and you by lifting with Sydney up 14% and Nelson up 8% to spot lapping tough comparison.
Alright, I also benefit from higher yields increased penetration and favorable product mix financial services benefited from an increasing settlements as well as the integration of mortgage choice and the team continues to interface with the launch of Premier plus in March and in <unk> offering that to live with additional marketing features to listing.
Please refer to <unk> earnings release and their confidence following this call for more details.
Turning to the subscription video services segment revenues for the quarter were $494 million relatively stable from the second quarter and down approximately 6% compared to the price on a reported basis choose a foreign currency headwinds on and adjusted basis revenues rose, 1%, a strong improvement from the second quarter right.
Minus three per cent.
Streaming revenues now accounts for 20% of circulation and subscription revenues. So notable.
Notable acceleration in the gross right from the second quarter.
Total clients pay subscribed as <unk> reached $4.3 million at quarter end up 23% year over year.
I will subscribe is including Tieless, what I have a $4.5 million.
Here are the increase was driven by higher <unk> subscribers, partially offset by the expected decline in residential protests subscribers commercial subscriptions rise modestly I for the <unk> help by the <unk> of Lockdown restrictions.
Total streaming subscribe is reached over $2.7 million with paying subscribe is up 62% from the prior year and 421000 sequentially to approximately $2.6 million.
Streaming subscribed has reached 59% of <unk> total paid subscriber base.
Benefited from the return of the winter sports cards until record early writings with total subscribe as I have a $1.2 million.
<unk> 38000 page subscribe as we're editing the quarter a notable acceleration from the second quarter, taking pay subscribe is too I have a $1.1 million.
Similar to Kai binge had a strong quarter increasingly total subscribe is too I have a 1.3 million paying subscribers increase to I have a $1.2 million up 135% from the prior year.
<unk> added 284000 paid subscribers in the quarter. The most quarterly edition since the launch of the service in 2020.
Finches growth continued to be chosen by the depth and diversity of content library and the popularity of new shows such as Love Me a pinch original before you and the walking dead.
Foxtel ended the quarter with over 1.5 million residential broadcast subscribers down approximately 11% with the rate of decline stable versus the second quarter <unk>.
Commercial subscribe has ended the quarter 240000, and increasing by sequentially and your eyes a year.
Retaining high value customers remains the focus for broadcast subscribers, which has led to changing presents with chain, reducing Oh, my six percentage points here in the quarter to 14.3%, which reflects eight consecutive months of year over your chin reduction.
<unk> rose by 2% to 82 Australian dollars.
Segment, EBITDA and of course $79 million with them, 13% versus the prior year driven by higher programming costs, partly due to increased availability of entertainment content as well as modestly high marketing investment and streaming.
Tough control remains a key focus of <unk> and we continue to expect <unk> to be flat versus the prior year in local currency, which is helping to underpin strong cashed generation.
The fourth quarter segment, EBITDA will face more favorable price comparison.
Moving onto Dow Jones.
<unk> continued its strong performance in the quarter with revenues of $487 million up 16% compared to the prior year with digital revenues accounting for 76% of total revenues this quarter up two percentage points from last year.
Results for the quarter include IBD and one month of recently acquired ipads.
Circulation and subscription revenues increased 15%, including 16% circulation revenue growth, primarily reflecting the acquisition of IBD and continued strong volume games and digital only subscriptions.
Digital only net add sit down James 167000 subscribers, including 118000 at the Wall Street Journal the highest quarterly edition this fiscal year.
Professional information business revenues rose, 13% and accounted for 29% of revenues.
Revenue growth from risk and compliance increased 12%, despite its 3% negative foreign exchange impact driven by the higher entry right at the beginning of the year and strong growth across the Americas, Europe and Asia.
Oh piss accounted for approximately $10 million of revenues in the quarter.
As a reminder of the business day $129 million of revenues and its last full year with very strong margin and with revenues almost all recurring and digital.
Advertising revenues, which accounted for 21% of revenues. This quarter remained very strong growing 20% to $102 million to spot difficult price comparison did.
Digital advertising revenues rose, 21% in the quarter on top of 30% growth in the third quarter of the prior year and accounted for 62% of total advertising revenues.
We continue to stay strong yield improvement lit by direct display and for particular strength in the finance and technology categories.
Print advertising continued to surprise on the upside with icing percent growth year over year, partly due to <unk>, but also to you to strength and the technology category.
Dow Jones segment EBITDA for the quarter rose 7%.
$8 million following growth of 61% in the third quarter of the prior year.
As mentioned earlier included in the quarter is approximately $58 million of one time transaction costs related to the acquisition.
Excluding the contribution from <unk> currency fluctuations and other items disclosed in the release adjusted revenues and adjusted segment EBITDA for the quarter rose, 9% and 16% respectively.
Over the last few weeks, we have received questions from investors about how exposure to the war in Ukraine across.
Across the company <unk> exposure to the region is at Dow Jones the region accounts for the minimum amount of Dow Jones is gross revenues will <unk> <unk> <unk> and so far the impact from close accounts and we'll cancel the contract is immaterial.
We are also beginning to see opportunities and risks incompliant submerged due to increased sanctions and regulatory requirements.
At publishing Harper Collins posted 5% revenue growth $515 million and segment EBITDA fell 16% to $67 million. However consumption levels continue to remind materially above pre pandemic levels.
Current quarter results were impacted by the ongoing global supply chain and inflationary pressures on price and manufacturing call as well as very difficult comparisons with the prior year, which benefited from Ohio backwards performance driven by the Bridgeton series by Julia Quinn.
The Brigid in theory still performed well this quarter, but revenue contribution was down approximately $14 million versus the prior year.
As flagged during I lost earnings Cole was there an increasing manufacturing call, partly due to supply chain issues, including higher inbound international price and fuel prices.
Digital tiles declined 6% this quarter and accounted for 23% of consumer style, which was almost entirely explained by the low appreciated style, which did particularly well in the April fool that last year and also contributed to the strong match and performance in the prior year.
Hi, Jen H continue to perform according to plan for the quarter H M heightened contributed to $35 million in revenues and $3 million in segment EBITDA and remains on track to deliver $20 million in annualized cost synergies.
Turning to news media the momentum any segment continued during the quarter revenues for $580 million up 5% versus the prior year, which included $25 million or approximately five percentage points of negative impact you to currency headwinds.
Underlying Christ right in local currency with similar to the second quarter, we again for improvement in advertising as well as strong growth in circulation and subscription revenues.
Benefited by the contribution from a recent content licensing revenue.
Within the segment revenues at <unk> unusual K increased 2% and 4% respectively Wireless group and the New York Post also continue to show strong top line growth.
Adjusted revenues for the segment increased 10% compared to the prior year.
Circulation and subscription revenues rose, 5% benefiting from strong digital subscriber growth incremental revenues from the platform agreements and cover price increases car.
Currency headwinds negatively impacted circulation and subscription revenues by $12 million, a four percentage points.
Advertising revenues increased 9% compared to the prior year with strengthened digital across all that came off too most notably at the Sun, which more than doubled digital advertising revenues versus the prior year.
Currency negatively impacted advertising revenues by $10 million or five percentage points.
Segment, EBITDA is $39 million increase $31 million compared to the prior year, reflecting the higher revenues margins improved two of my 7% from 1% last year.
Results were partially impacted by hiring assessment related to talk T V and marketing support for new digital product offerings at News Corp, Australia.
I would know what to talk about some teams for the upcoming quarter.
We remain encouraged without strong you to date results and that we have already delivered record profitability separation for the company at the end of Q3.
But we are clearly mindful of the lack of visibility from the ongoing impacts of the pandemic the broader macroeconomic impacts from the war in Ukraine, and the cost impacts from continued supply chain and inflationary pressures, particularly input publishing and I'm afterwards, together with wage inflation and talent retention across the company.
We expect face challenges to continue in the short term.
Digital real estate services, Australia, and residential new by lifting for April declined 8% impacted by the timing of the <unk> and in fact I holidays.
Alright, I anticipate gross right slope as it cycles strong prior periods listening volumes, which grew 54% in the fourth quarter of last year at potential impacts around the upcoming federal election in my <unk>.
Please refer to Rei, some more specific outlook commentary.
Move to spot tougher comparisons and the macro environment. We continue to stay strong yields we expect to continue to reinvesting move as we drive the coal business and expand into relevant adjacencies, particularly in new homes and rentals.
Similar to last year, we expect investments in the second half.
In subscription video services, we remind pleased with the performance of the streaming products and the ongoing focus on broadcast off who insurance.
As mentioned earlier, we expect full year costing local currency to be relatively flat surface. The price and we expect improvement in profitability in the fourth quarter against the prior year.
At Dow Jones overall revenue trends across the business remain strong we do expect the rite of advertising growth to be impacted next quarter by a more difficult prior year comparison, which full advertising growth by 45%.
Excluding the impact from acquisitions, we expect the right of course gross to be higher than the third quarter as we continue to invest to drive consumers subscription and enhance our professional information business offerings and as Robert mentioned, we expect to close the face chemicals acquisition in June .
Publishing we expect another quarter, a strong front list releases and supply chain and inflationary pressures to persist.
News media overall advertising trains remain favorable, albeit recognizing that visibility is limited we continue to expect incremental annual revenues from the recent platform agreements with the majority if that allocated to news media week.
We expect incremental costs of at least $20 million in relation to productive investments across the businesses, including talk T V in the fourth quarter.
On the other segment weeks that Cox in the second half to be slightly higher than the first half due to the phasing of course, but lower than the prior year.
Finally note that this fiscal year. He's on a 53 week basis and will include an extra week of financial results I would also like to note that similar to the third quarter. We do expect foreign exchange headwinds to continue given the current spot right to the stray and <unk> and <unk> compared to the prior year.
With that let me hand, it over to the operation So kuenheim.
Okay.
Gentlemen, if you like.
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[noise], we'll take our first question from the teacher.
Credit Suisse. Please go ahead.
Hi, Robert Hi, Susan.
<unk>.
I can just making two questions. Please.
This one is on move I appreciate the comments.
And you just might around the fourth quarter.
The comfort, particularly difficult we've I think it was 68% revenue crossing the <unk>.
Can you talk about what the yield benefit you might expect to see in that fourth quarter and could you conceivably see revenue cross we didn't move given that dot com that's.
That's the first question and secondly.
Have a question on the price of the buy back.
By my Couch you've done.
<unk> 150 <unk>.
Sorry.
And <unk> <unk>.
G C space Skype to accelerate that particularly if you think there is value on offer in the current shape Ross and could we see that in the coming months. Thank you.
Well, thank you enjoy it.
About a move and this is a little of interest to you bye bye.
Give your forecast with a quarter bitch, obviously enough.
<unk> had been in decline in G three or fewer houses there'll be fewer leaves are the beauty of the referral modal is it we're focused on the quality quantity.
But Mike from each of those leaves by offering real dismal purposeful purchases quantum.
Quantity of course matters with quality.
The model of we've been building in recent years.
Real estate revenues rose even in this difficult market, but by 7% and as you said that's all at 43% growth. In these are included last year.
Still 11% harder in 2020.
An existing home sales and.
21.
50 per cent higher than 29 G.
Another thing to watch in coming months and quarters.
<unk>, but with the origination being more important than refinancing which is dominated over the past few years. The mortgage companies were more focused on serving preexisting preapproved customers.
Refinancing and rapid decline ulee's will be relatively more valuable and we will shortly you extract that value.
So just in relation to the buy back your numbers with accurate that is what we have for today and you will have noticed from that that we've been buying back at a relatively steady right. Since we announced <unk> lost <unk>, we haven't given a time frame in relation to the execution of that side effects, but as always we will continue to look at the reinvestment.
<unk> and monitoring the share price.
Thank you and Joe.
We'll take our next question please.
Our next question is from cane Hannah with Goldman Sachs. Please go ahead.
Hi, guys, just two quick ones as well just tired and that cost increase you mentioned thermal color you can give us around all sorts timing and confirm that that's what I see is that what it is going to drive to improve profitability in the fourth quarter and then just news media given the inflationary pressures and that 20 million investment and you go down here is it wrong to assume.
Downing margin for that segment and in the fourth quarter.
Hi, <unk> all all my typeface. So just in relation to carry the price increase will hit I think.
So we will actually say pretty limited impact of that in Q4 since 250, an hour the ninth of May.
But we will obviously say the benefit that as we go through into the next financial year in relation to news media, what I would say about that is sweet. We obviously is seeing really strong growth within that segment of the closest a year and we are taking a balanced approach to reinvestment. So we are expecting to see profitability improve in queue for.
Subject to revenue trends in foreign currency, and how that tried and we will make sure that the revenue upside.
Will help some of the cost.
Investments that we're going to have within that.
And we will continue to focus on margin within that segment.
Thank you again, Keith we'll take our next question. Please.
We'll take our next question from David Cardiovascular with J P. Morgan. Please go ahead.
Hi, guys. This is John <unk>, David just one quick one for me I, just it's only been two months, but I thought I would just ask you about an early learning does you integrate with this acquisition and I I realize you have a significant amount of expertise inspector, particularly with.
Dow Jones, but anyway that might also affects based chemicals when it closed in next month and its potential future integration thereafter.
Yeah, we're very pleased with the first phase of integration.
Diet is early but.
Clearly enough international events with only highlighted economics commercial and political importance of energy policy and prizes.
The shift to renewables.
As in Biochemicals, essentially 100 per cent digital recurring subscription revenues and <unk> <unk> <unk> <unk>.
Premium products at premium prices and we have a very large base of potential professional customers throughout burns W. J I V G. A knock with what your audiences that.
Ice will create an ongoing funnel impossible premium subscribers for <unk>.
The policy of impacts in coming quarters and it is obviously this is a pivotal moments of Dow Jones.
Thank you John Keith we'll take our next question. Please.
Take our next question from Derek.
With Macquarie. Please go ahead.
Hello, Thanks for your time Uhm just one for me we're looking at the commercial information business are you guys doing segment.
Look up <unk> strong uhm blustery largely lawn.
So it will be cost will be all day.
So the <unk> clause effective on news was.
Swelling in terms of its go with you and your call will be totally gone to sleep.
<unk> please.
The professional information business.
Was provides unimportant service not just for the Provisionals saw it but also for a consumer journalism and fully.
Fully invested in the future of developing that news was business.
And you'll see it coming quarters or asserted received by this acquisition just how much potentially revisionism by some business actually has.
But can you think you're subscribed.
Still increasing it's up to you though.
I'm sorry.
The detail I gave us the details I will give you. Thank you.
Say that that effective of news wise is relatively stable.
Like our next question please.
Next question is from Brian hand, with Morningstar. Please go ahead.
Robert Thank you mention that in US media, you advertising revenue rather than in the UK.
Can you, please confirm that and sick and.
Does that mean in Australia, and U as print advertising revenue used you white bigger than digital advertising revenue.
Mmm no none of that is.
The second proposition is not accurate.
Advertising.
Generally has been excellent, particularly in digital and you see it from Dow Jones to to the New York Post which is he's on track as we've indicated for genuine profitability.
<unk> in charge or.
The business units Dowjones advertising up 20% <unk>, 32% <unk> unused Australia two per cent, obviously currency effected so stronger and indications are that.
Gross remains relatively robust.
Thank you, Brian Keith will take our next question. Please.
At this time, we have no further questions in the queue.
Great well. Thank you all for participating. Thank you <unk> have a wonderful day and we look forward to speaking with you soon.
Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.
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