NEWS CORPORATION This document, including the following discussion and analysis, contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. The words "expect," "will," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this discussion and analysis and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, trends affecting the Company's financial condition or results of operations, the Company's strategy and strategic initiatives and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth under the heading "Risk Factors" in Part I, Item 1A. inNews Corporation's Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 , as filed with theSecurities and Exchange Commission (the "SEC") onAugust 10, 2021 (the "2021 Form 10-K"), and as may be updated in this and other subsequent Quarterly Reports on Form 10-Q. The Company does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review this document and the other documents filed by the Company with theSEC . This section should be read together with the unaudited consolidated financial statements ofNews Corporation and related notes set forth elsewhere herein and the audited consolidated financial statements ofNews Corporation and related notes set forth in the 2021 Form 10-K. INTRODUCTIONNews Corporation (together with its subsidiaries, "News Corporation ," "News Corp ," the "Company," "we," or "us") is a global diversified media and information services company comprised of businesses across a range of media, including: digital real estate services, subscription video services inAustralia , news and information services and book publishing. The unaudited consolidated financial statements are referred to herein as the "Consolidated Financial Statements." The consolidated statements of operations are referred to herein as the "Statements of Operations." The consolidated balance sheets are referred to herein as the "Balance Sheets." The consolidated statements of cash flows are referred to herein as the "Statements of Cash Flows." The Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles inthe United States of America ("GAAP"). Management's discussion and analysis of financial condition and results of operations is intended to help provide an understanding of the Company's financial condition, changes in financial condition and results of operations. This discussion is organized as follows: •Overview of the Company's Businesses-This section provides a general description of the Company's businesses, as well as developments that occurred to date during fiscal 2022 that the Company believes are important in understanding its results of operations and financial condition or to disclose known trends. •Results of Operations-This section provides an analysis of the Company's results of operations for the three and six months endedDecember 31, 2021 and 2020. This analysis is presented on both a consolidated basis and a segment basis. Supplemental revenue information is also included for reporting units within certain segments and is presented on a gross basis, before eliminations in consolidation. In addition, a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed. •Liquidity and Capital Resources-This section provides an analysis of the Company's cash flows for the six months endedDecember 31, 2021 and 2020, as well as a discussion of the Company's financial arrangements and outstanding commitments, both firm and contingent, that existed as ofDecember 31, 2021 . OVERVIEW OF THE COMPANY'S BUSINESSES The Company manages and reports its businesses in the following six segments: •Digital Real Estate Services-The Digital Real Estate Services segment consists of the Company's 61.4% interest in REA Group and 80% interest in Move. The remaining 20% interest in Move is held by REA Group. REA Group is a market-leading digital media business specializing in property and is listed on theAustralian Securities 27 -------------------------------------------------------------------------------- Table of Contents Exchange ("ASX") (ASX: REA). REA Group advertises property and property-related services on its websites and mobile apps, includingAustralia's leading residential, commercial and share property websites, realestate.com.au, realcommercial.com.au andFlatmates.com.au , and property portals inIndia . In addition, REA Group provides property-related data to the financial sector and financial services through an end-to-end digital property search and financing experience and a mortgage broking offering. Move is a leading provider of digital real estate services in theU.S. and primarily operates realtor.com®, a premier real estate information, advertising and services platform. Move offers real estate advertising solutions to agents and brokers, including its ConnectionsSM Plus, Market VIPSM and AdvantageSM Pro products as well as its referral-based service, Ready Connect Concierge. Move also offers online tools and services to do-it-yourself landlords and tenants, as well as professional software and services products. •Subscription Video Services-The Company's Subscription Video Services segment provides sports, entertainment and news services to pay-TV and streaming subscribers and other commercial licensees, primarily via cable, satellite and internet distribution, and consists of (i) the Company's 65% interest in theFoxtel Group (with the remaining 35% interest held by Telstra, an ASX-listed telecommunications company) and (ii)Australian News Channel ("ANC").The Foxtel Group is the largest Australian-based subscription television provider, with nearly 200 channels covering sports, general entertainment, movies, documentaries, music, children's programming and news.Foxtel and theKayo Sports streaming service offer the leading sports programming content inAustralia , with broadcast rights to live sporting events including:National Rugby League ,Australian Football League ,Cricket Australia and various motorsports programming.The Foxtel Group also operates BINGE, its on-demand entertainment streaming service, and Foxtel Now, a streaming service that provides access acrossFoxtel's live and on-demand content. InOctober 2021 , theFoxtel Group launched Flash, a news aggregation streaming service. ANC operates the SKY NEWS network,Australia's 24-hour multi-channel, multi-platform news service. ANC channels are distributed throughoutAustralia and New Zealand and available onFoxtel and Sky Network Television NZ. ANC also owns and operates the international Australia Channel IPTV service and offers content across a variety of digital media platforms, including web, mobile and third-party providers. •Dow Jones-TheDow Jones segment consists ofDow Jones , a global provider of news and business information, which distributes its content and data through a variety of media channels including newspapers, newswires, websites, applications, or apps, for mobile devices, tablets and e-book readers, newsletters, magazines, proprietary databases, live journalism, video and podcasts. TheDow Jones segment's products, which target individual consumers and enterprise customers, includeThe Wall Street Journal , Factiva,Dow Jones Risk & Compliance, Dow Jones Newswires, Barron's, MarketWatch andInvestor's Business Daily . •Book Publishing-The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 17 countries and particular strengths in general fiction, nonfiction, children's and religious publishing. HarperCollins owns more than 120 branded publishing imprints, including Harper,William Morrow ,HarperCollins Children's Books , Avon, Harlequin and Christian publishersZondervan andThomas Nelson , and publishes works by well-known authors such asHarper Lee , George Orwell,Agatha Christie andZora Neale Hurston , as well as global author brands including J.R.R. Tolkien,C.S. Lewis ,Daniel Silva ,Karin Slaughter and Dr.Martin Luther King , Jr. It is also home to many beloved children's books and authors and a significant Christian publishing business. •News Media-The News Media segment consists primarily of News Corp Australia, NewsUK and theNew York Post and includes, among other publications, The Australian,The Daily Telegraph ,Herald Sun ,The Courier Mail and The Advertiser inAustralia and TheTimes , The Sunday Times,The Sun andThe Sun on Sunday in theU.K. This segment also includesWireless Group , operator of talkSPORT, the leading sports radio network in theU.K. , andStoryful , a social media content agency. •Other-The Other segment consists primarily of general corporate overhead expenses, costs related to theU.K. Newspaper Matters (as defined in Note 10-Commitments and Contingencies to the Consolidated Financial Statements) and transformation costs associated with the Company's ongoing cost reduction initiatives. Other Business Developments Agreement to acquire Base Chemicals InDecember 2021 , the Company entered into an agreement to acquire the Base Chemicals business ("Base Chemicals") from S&P Global Inc. ("S&P") and IHS Markit Ltd. ("IHS") for$295 million in cash, subject to customary purchase price 28 -------------------------------------------------------------------------------- Table of Contents adjustments. Base Chemicals provides pricing data, insights, analysis and forecasting for key base chemicals through its leading Market Advisory and World Analysis services. The acquisition will complement the Company's planned acquisition of OPIS (as defined below) and enableDow Jones to further expand into new customer segments and bolster its plans to create a new energy, chemicals and renewables vertical to deliver valuable and trusted specialized content. Base Chemicals will be a subsidiary ofDow Jones , and its results will be included in theDow Jones segment. The acquisition is subject to customary closing conditions, including regulatory approvals and the consummation of the S&P and IHS merger. Closing is expected in the second half of fiscal 2022. Share Repurchase Program OnSeptember 22, 2021 , the Company announced a new stock repurchase program authorizing the Company to purchase up to$1 billion in the aggregate of its outstanding Class A Common Stock and Class B Common Stock (the "Repurchase Program"). The Repurchase Program replaces the Company's$500 million Class A Common Stock repurchase program approved by the Company's Board of Directors (the "Board of Directors") inMay 2013 . The manner, timing, number and share price of any repurchases will be determined by the Company at its discretion and will depend upon such factors as the market price of the stock, general market conditions, applicable securities laws, alternative investment opportunities and other factors. The Repurchase Program has no time limit and may be modified, suspended or discontinued at any time. See Note 7-Equity in the accompanying Consolidated Financial Statements. REA Group sale ofMalaysia andThailand businesses InAugust 2021 , REA Group acquired an 18% interest (16.6% on a diluted basis) inPropertyGuru Pte. Ltd. ("PropertyGuru"), a leading digital property technology company operating marketplaces inSoutheast Asia , in exchange for all shares of REA Group's entities inMalaysia andThailand . The transaction was completed after REA Group entered into an agreement to sell its 27% interest in its existing venture with 99.co. The transaction created a leading digital real estate services company inSoutheast Asia and new opportunities for collaboration and access to a deeper pool of expertise, technology and investment in the region. REA Group received one seat on the board of directors of PropertyGuru as part of the transaction. Agreement to acquire OPIS InJuly 2021 , the Company entered into an agreement to acquire theOil Price Information Service business and related assets ("OPIS") from S&P and IHS for$1.15 billion in cash, subject to customary purchase price adjustments. OPIS is a global industry standard for benchmark and reference pricing and news and analytics for the oil, natural gas liquids and biofuels industries. The business also provides pricing and news and analytics for the coal, mining and metals end markets and insights and analytics in renewables and carbon pricing. The acquisition will enableDow Jones to become a leading provider of energy and renewables information and further its goal of building the leading global business news and information platform for professionals. OPIS will be a subsidiary ofDow Jones , and its results will be included in theDow Jones segment. The acquisition is subject to customary closing conditions, including regulatory approvals and the consummation of the S&P and IHS merger. Closing is expected in the second half of fiscal 2022. Acquisition of Mortgage Choice InJune 2021 , REA Group acquiredMortgage Choice Limited ("Mortgage Choice") for approximatelyA$244 million in cash (approximately$183 million based on exchange rates as of the closing date), funded by an increase in REA Group's debt facilities. Control was transferred and the acquisition became effective and binding on Mortgage Choice shareholders onJune 18, 2021 upon court approval. Mortgage Choice is a leading Australian mortgage broking business, and the acquisition complements REA Group's existing Smartline broker footprint and accelerates REA Group's financial services strategy to establish a leading mortgage broking business with national scale. Mortgage Choice is a subsidiary of REA Group and its results are included in theDigital Real Estate Services segment. Acquisition ofHMH Books & Media In May 2021 , the Company acquired the Books & Media segment of Houghton Mifflin Harcourt ("HMH Books & Media ") for$349 million in cash.HMH Books & Media publishes renowned and awarded children's, young adult, fiction, non-fiction, culinary and reference titles. The acquisition adds an extensive and successful backlist, a strong frontlist in the lifestyle and children's segments and a productions business that provides opportunities to expand HarperCollins's intellectual property across different formats.HMH Books & Media is a subsidiary of HarperCollins and its results are included in theBook Publishing segment. 29 -------------------------------------------------------------------------------- Table of Contents Acquisition ofInvestor's Business Daily InMay 2021 , the Company acquiredInvestor's Business Daily ("IBD") for$275 million in cash. IBD is a digital-first financial news and research business with unique investing content, analytical products and educational resources, including the Investors.com website. The acquisition expandsDow Jones's offerings with the addition of proprietary data and tools to help professional and retail investors identify top-performing stocks. IBD is operated byDow Jones , and its results are included within theDow Jones segment. RESULTS OF OPERATIONS Results of Operations-For the three and six months endedDecember 31, 2021 versus the three and six months endedDecember 31, 2020 The following table sets forth the Company's operating results for the three and six months endedDecember 31, 2021 as compared to the three and six months endedDecember 31, 2020 . For the three months ended December 31, For the six months ended December 31, % 2021 2020 Change % Change 2021 2020 Change Change (in millions, except %) Better/(Worse) Better/(Worse) Revenues:
Circulation and subscription
42 4 %$ 2,149 $ 2,032 $ 117 6 % Advertising 519 448 71 16 % 924 780 144 18 % Consumer 594 523 71 14 % 1,118 964 154 16 % Real estate 352 281 71 25 % 672 516 156 30 % Other 180 132 48 36 % 356 239 117 49 % Total Revenues 2,717 2,414 303 13 % 5,219 4,531 688 15 % Operating expenses (1,279) (1,198) (81) (7) % (2,523) (2,362) (161) (7) % Selling, general and administrative (852) (719) (133) (18) % (1,700) (1,404) (296) (21) % Depreciation and amortization (168) (167) (1) (1) % (333) (331) (2) (1) % Impairment and restructuring charges (23) (23) - - % (45) (63) 18 29 % Equity losses of affiliates (6) (3) (3) (100) % (6) (4) (2) (50) % Interest expense, net (21) (12) (9) (75) % (43) (20) (23) ** Other, net (7) 54 (61) ** 130 71 59 83 % Income before income tax expense 361 346 15 4 % 699 418 281 67 Income tax expense (99) (85) (14) (16) % (170) (110) (60) (55) % Net income 262 261 1 - % 529 308 221 72 % Less: Net income attributable to noncontrolling interests (27) (30) 3 10 % (98) (43) (55) ** Net income attributable to News Corporation stockholders$ 235 $ 231 $ 4 2 %$ 431 $ 265 $ 166 63 % ** not meaningful Revenues- Revenues increased$303 million , or 13%, and$688 million , or 15%, for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. The revenue increase for the three months endedDecember 31, 2021 was driven by increases at theDigital Real Estate Services segment primarily due to higher real estate revenues and the acquisition of Mortgage Choice, at theBook Publishing segment primarily due to the acquisition ofHMH Books and Media, at the News Media segment primarily due to higher advertising and circulation and subscription revenues and at theDow Jones segment primarily due to higher advertising revenues, higher circulation and subscription revenues and the acquisition of IBD. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue increase of$6 million , or 1%, for the three months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. The revenue increase for the six months endedDecember 31, 2021 was driven by increases at theDigital Real Estate Services segment primarily due to higher real estate revenues and the acquisition of Mortgage Choice, at theBook Publishing segment primarily due to the acquisition ofHMH Books and Media, at the News Media segment primarily due to higher advertising and 30 -------------------------------------------------------------------------------- Table of Contents circulation and subscription revenues and at theDow Jones segment primarily due to higher advertising revenues, higher circulation and subscription revenues and the acquisition of IBD. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue increase of$63 million , or 1%, for the six months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. The Company calculates the impact of foreign currency fluctuations for businesses reporting in currencies other than theU.S. dollar by multiplying the results for each quarter in the current period by the difference between the average exchange rate for that quarter and the average exchange rate in effect during the corresponding quarter of the prior year and totaling the impact for all quarters in the current period. Operating expenses- Operating expenses increased$81 million , or 7%, and$161 million , or 7%, for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. The increase in operating expenses for the three months endedDecember 31, 2021 was primarily driven by higher expenses at theBook Publishing segment due to the acquisition ofHMH Books and Media, higher costs related to increased sales volumes and the mix of titles and increased manufacturing and freight costs exacerbated by supply chain pressures. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in an Operating expense increase of$3 million for the three months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. The increase in operating expenses for the six months endedDecember 31, 2021 was primarily driven by higher expenses at theBook Publishing segment due to the acquisition ofHMH Books and Media, higher costs related to increased sales volumes and the mix of titles and increased manufacturing and freight costs exacerbated by supply chain pressures, at the News Media segment driven by the$15 million negative impact of foreign currency fluctuations and at theDigital Real Estate Services segment due to higher employee costs at Move. The Company has generally observed an increasingly competitive labor market which has led to higher compensation and hiring costs for attracting and retaining highly qualified employees across its businesses and is expected to impact the Company's cost base in the near term. The increased expenses were partially offset by lower expenses at the Subscription Video Services segment, primarily due to the absence of$56 million of additional sports programming rights and production costs recognized in the prior year that were deferred from fiscal 2020 due to the coronavirus pandemic ("COVID-19"), which was partially offset by increased sports programming rights costs due to the timing of noncomparable events in the current year. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in an Operating expense increase of$30 million , or 1%, for the six months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. Selling, general and administrative- Selling, general and administrative increased$133 million , or 18%, and$296 million , or 21%, for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. The increase in selling, general and administrative for the three months endedDecember 31, 2021 was primarily driven by increased expenses at theDigital Real Estate Services segment due to the acquisitions of Mortgage Choice andElara (which was rebranded to REAIndia ), higher employee costs at bothMove and REA Group and increased marketing expense at Move. The increase was also driven by theDow Jones segment due to the acquisition of IBD and higher professional services fees, by increased marketing and technology costs at the Subscription Video Services segment, by higher costs at the News Media segment due to increased revenues and by the acquisition ofHMH Books and Media. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a Selling, general and administrative increase of$2 million for the three months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. The increase in selling, general and administrative for the six months endedDecember 31, 2021 was primarily driven by increased expenses at theDigital Real Estate Services segment due to the acquisitions of Mortgage Choice and REAIndia , higher employee costs at bothMove and REA Group and increased marketing expense at Move. The increase was also driven by theDow Jones segment due to the acquisition of IBD, higher professional services fees and increased employee costs, by higher costs at the News Media segment due to the adverse$10 million impact of foreign currency fluctuations and increased revenues, by increased marketing and technology costs at the Subscription Video Services segment and by the acquisition ofHMH Books and Media. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a Selling, general and administrative increase of$21 million , or 1%, for the six months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. Depreciation and amortization- Depreciation and amortization expense increased$1 million , or 1%, and$2 million , or 1%, for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. 31 -------------------------------------------------------------------------------- Table of Contents The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a depreciation and amortization expense increase of nil and$3 million , or 1%, for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. Impairment and restructuring charges- During the three and six months endedDecember 31, 2021 , the Company recorded restructuring charges of$23 million and$45 million , respectively. During the three and six months endedDecember 31, 2020 , the Company recorded restructuring charges of$23 million and$63 million , respectively. See Note 4-Restructuring Programs in the accompanying Consolidated Financial Statements. Equity losses of affiliates- Equity losses of affiliates increased by$3 million and$2 million for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. See Note 5-Investments in the accompanying Consolidated Financial Statements. Interest expense, net- Interest expense, net increased by$9 million and$23 million for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021, primarily driven by the issuance of$1 billion of senior notes in the fourth quarter of fiscal 2021 (the "2021 Senior Notes"). Other, net- Other, net decreased by$61 million and increased by$59 million for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. See Note 13-Additional Financial Information in the accompanying Consolidated Financial Statements. Income tax expense- For the three months endedDecember 31, 2021 , the Company recorded income tax expense of$99 million on pre-tax income of$361 million , resulting in an effective tax rate that was higher than theU.S. statutory tax rate. The tax rate was impacted by foreign operations which are subject to higher tax rates and by changes in valuation allowances. For the six months endedDecember 31, 2021 , the Company recorded income tax expense of$170 million on pre-tax income of$699 million , resulting in an effective tax rate that was higher than theU.S. statutory tax rate. The tax rate was impacted by foreign operations which are subject to higher tax rates and changes in valuation allowances, offset by the lower tax impact related to the acquisition of an 18% interest in PropertyGuru. For the three months endedDecember 31, 2020 , the Company recorded income tax expense of$85 million on pre-tax income of$346 million , resulting in an effective tax rate that was higher than theU.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact of foreign operations which are subject to higher tax rates, offset by a remeasurement of deferred taxes in theU.K. For the six months endedDecember 31, 2020 , the Company recorded income tax expense of$110 million on pre-tax income of$418 million , resulting in an effective tax rate that was higher than theU.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact of foreign operations which are subject to higher tax rates, offset by a remeasurement of deferred taxes in theU.K. Management assesses available evidence to determine whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets. Based on management's assessment of available evidence, it has been determined that it is more likely than not that deferred tax assets in certain foreign jurisdictions may not be realized and therefore, a valuation allowance has been established against those tax assets. Net income- Net income for the three and six months endedDecember 31, 2021 was$262 million and$529 million , respectively, compared to net income of$261 million and$308 million for the corresponding periods of fiscal 2021. Net income for the three months endedDecember 31, 2021 increased by$1 million as compared to the corresponding period of fiscal 2021, primarily driven by higher Total Segment EBITDA, largely offset by lower Other, net, higher tax expense and higher interest expense. Net income for the six months endedDecember 31, 2021 increased by$221 million as compared to the corresponding period of fiscal 2021, primarily driven by higher Total Segment EBITDA and higher Other, net, partially offset by higher tax expense and higher interest expense. 32 -------------------------------------------------------------------------------- Table of Contents Net income attributable to noncontrolling interests- Net income attributable to noncontrolling interests decreased by$3 million , or 10%, and increased by$55 million for the three and six months endedDecember 31, 2021 , respectively, as compared to the corresponding periods of fiscal 2021. The increase for the six months endedDecember 31, 2021 was primarily driven by increased earnings at REA Group, which included the$107 million gain from the disposition of its entities inMalaysia andThailand . Segment Analysis Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses. Segment EBITDA does not include: depreciation and amortization, impairment and restructuring charges, equity losses of affiliates, interest (expense) income, net, other, net and income tax (expense) benefit. Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of Segment EBITDA. Segment EBITDA is the primary measure used by the Company's chief operating decision maker to evaluate the performance of, and allocate resources within, the Company's businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company's business segments and its enterprise value against historical data and competitors' data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences). Total Segment EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net income (loss), cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements and excludes items, such as depreciation and amortization and impairment and restructuring charges, which are significant components in assessing the Company's financial performance. The Company believes that the presentation of Total Segment EBITDA provides useful information regarding the Company's operations and other factors that affect the Company's reported results. Specifically, the Company believes that by excluding certain one-time or non-cash items such as impairment and restructuring charges and depreciation and amortization, as well as potential distortions between periods caused by factors such as financing and capital structures and changes in tax positions or regimes, the Company provides users of its consolidated financial statements with insight into both its core operations as well as the factors that affect reported results between periods but which the Company believes are not representative of its core business. As a result, users of the Company's consolidated financial statements are better able to evaluate changes in the core operating results of the Company across different periods. The following table reconciles Net income to Total Segment EBITDA for the three and six months endedDecember 31, 2021 and 2020: For the three months ended For the six months ended December 31, December 31, 2021 2020 2021 2020 (in millions) Net income$ 262 $ 261 $ 529 $ 308 Add: Income tax expense 99 85 170 110 Other, net 7 (54) (130) (71) Interest expense, net 21 12 43 20 Equity losses of affiliates 6 3 6 4 Impairment and restructuring charges 23 23 45 63 Depreciation and amortization 168 167 333 331 Total Segment EBITDA$ 586 $ 497 $ 996 $ 765 33
-------------------------------------------------------------------------------- Table of Contents The following tables set forth the Company's Revenues and Segment EBITDA by reportable segment for the three and six months endedDecember 31, 2021 and 2020: For the three months ended December 31, 2021 2020 Segment Segment (in millions) Revenues EBITDA Revenues EBITDA Digital Real Estate Services$ 456 $ 178 $ 339 $ 142 Subscription Video Services 498 86 511 124 Dow Jones 508 144 446 109 Book Publishing 617 107 544 104 News Media 638 111 573 66 Other - (40) 1 (48) Total$ 2,717 $ 586 $ 2,414 $ 497 For the six months ended December 31, 2021 2020 Segment Segment (in millions) Revenues EBITDA Revenues EBITDA Digital Real Estate Services$ 882 $ 316 $ 629 $ 261 Subscription Video Services 1,008 200 1,007 202 Dow Jones 952 239 832 181 Book Publishing 1,163 192 1,002 175 News Media 1,214 145 1,060 44 Other - (96) 1 (98) Total$ 5,219 $ 996 $ 4,531 $ 765
For the three months ended December 31, For the six months ended December 31,
2021 2020 Change % Change 2021 2020 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Circulation and subscription $ 3 $ 8 $ (5) (63) % $ 6 $ 16 $ (10) (63) %
Advertising 33 30 3 10 % 66 58 8 14 %
Real estate 352 281 71 25 % 672 516 156 30 %
Other 68 20 48 ** 138 39 99 **
Total Revenues 456 339 117 35 % 882 629 253 40 %
Operating expenses (51) (45) (6) (13) % (107) (88) (19) (22) %
Selling, general and
administrative (227) (152) (75) (49) % (459) (280) (179) (64) %
Segment EBITDA $ 178 $ 142 $ 36 25 % $ 316 $ 261 $ 55 21 %
** not meaningful
For the three months ended December 31, 2021 , revenues at the Digital Real
Estate Services segment increased $117 million , or 35%, as compared to the
corresponding period of fiscal 2021. At REA Group, revenues increased $103
million , or 56%, to $287 million for the three months ended December 31, 2021
from $184 million in the corresponding period of fiscal 2021, primarily due to
the $41 million contribution from the acquisition of Mortgage Choice in the
fourth quarter of fiscal 2021, an increase in Australian residential depth
revenue driven by price increases and strong national listings and the $10
million impact from the acquisition of REA India . Revenues at Move increased $14
million , or 9%, to $169 million for the three months ended December 31, 2021
from $155 million in the corresponding period of fiscal 2021, primarily driven
by higher real estate revenues. The traditional lead generation product
benefited from higher contribution from Market VIP, a hybrid product offering,
and increased yield. The referral model benefited from higher average home
values and referral fees, partially offset by lower transaction volume, and
generated approximately 32% of total Move revenues. These increases were
partially offset
34
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Table of Contents
by the $4 million impact from the sale of Top Producer in the third quarter of
fiscal 2021. Lead volumes declined 9% for the three months ended December 31,
2021 as compared to the corresponding period of fiscal 2021.
For the three months ended December 31, 2021 , Segment EBITDA at the Digital Real
Estate Services segment increased $36 million , or 25%, as compared to the
corresponding period of fiscal 2021, primarily driven by the $37 million higher
contribution from REA Group mainly driven by the higher revenues discussed
above, partially offset by higher employee costs at both Move and REA Group, $6
million of higher marketing costs at Move and the $3 million negative impact
from the acquisition of REA India .
For the six months ended December 31, 2021 , revenues at the Digital Real Estate
Services segment increased $253 million , or 40%, as compared to the
corresponding period of fiscal 2021. Revenues at REA Group increased $197
million , or 59%, to $533 million for the six months ended December 31, 2021 from
$336 million in the corresponding period of fiscal 2021, primarily due to the
$84 million contribution from the acquisition of Mortgage Choice in the fourth
quarter of fiscal 2021, an increase in Australian residential depth revenue
driven by higher national listings and price increases, an $18 million increase
from the acquisition of REA India in the second quarter of fiscal 2021 and the
$7 million positive impact of foreign currency fluctuations. Revenues at Move
increased $56 million , or 19%, to $349 million for the six months ended
December 31, 2021 from $293 million in the corresponding period of fiscal 2021,
primarily driven by higher real estate revenues. The traditional lead generation
product benefited from increased yield. The referral model benefited from higher
average home values and transaction volume and generated approximately 32% of
total Move revenues. These increases were partially offset by the $9 million
impact from the sale of Top Producer in the third quarter of fiscal 2021. Lead
volumes declined 14% for the six months ended December 31, 2021 as compared to
the corresponding period of fiscal 2021.
For the six months ended December 31, 2021 , Segment EBITDA at the Digital Real
Estate Services segment increased $55 million , or 21%, as compared to the
corresponding period of fiscal 2021. The increase was primarily driven by the
$62 million higher contribution from REA Group, including a $3 million
contribution from the acquisition of Mortgage Choice, mainly driven by the
higher revenues discussed above and the $3 million positive impact of foreign
currency fluctuations, partially offset by higher employee costs at Move and REA
Group, $25 million of higher marketing costs at Move and the $9 million negative
impact from the acquisition of REA India .
Subscription Video Services (19% and 22% of the Company's consolidated revenues
in the six months ended December 31, 2021 and 2020, respectively)
For the three months ended December 31, For the six months ended December 31,
2021 2020 Change % Change 2021 2020 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Circulation and subscription $ 433 $ 446 $ (13) (3) % $ 873 $ 883 $ (10) (1) %
Advertising 55 55 - - % 114 105 9 9 %
Other 10 10 - - % 21 19 2 11 %
Total Revenues 498 511 (13) (3) % 1,008 1,007 1 - %
Operating expenses (312) (305) (7) (2) % (621) (638) 17 3 %
Selling, general and
administrative (100) (82) (18) (22) % (187) (167) (20) (12) %
Segment EBITDA $ 86 $ 124 $ (38) (31) % $ 200 $ 202 $ (2) (1) %
For the three months ended December 31, 2021 , revenues at the Subscription Video
Services segment decreased $13 million , or 3%, as compared to the corresponding
period of fiscal 2021, primarily due to lower residential subscription revenues
resulting from fewer residential broadcast subscribers and the $4 million
decline in commercial subscription revenues due to recent COVID-19 related
restrictions within certain states in Australia , partially offset by the $23
million increase in streaming revenues, primarily from Kayo and BINGE. Foxtel
Group streaming subscription revenues represented approximately 19% of total
circulation and subscription revenues for three months ended December 31, 2021 .
For the three months ended December 31, 2021 , Segment EBITDA decreased $38
million , or 31%, as compared to the corresponding period of fiscal 2021,
primarily due to higher investment spending on streaming products, mainly in
marketing, higher technology costs and the lower revenues discussed above.
Segment EBITDA was also impacted by higher sports programming rights costs due
to the timing of noncomparable events, mainly motorsports and cricket, as the
$20 million of additional sports programming rights and production costs
recognized in the prior year period related to deferrals from the fourth quarter
of fiscal 2020 due to COVID-19 were offset by lower costs from renegotiated
sports rights.
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For the six months ended December 31, 2021 , revenues at the Subscription Video
Services segment increased $1 million as compared to the corresponding period of
fiscal 2021, as the $52 million increase in streaming revenues, primarily from
Kayo and BINGE, the positive impact of foreign currency fluctuations and higher
advertising revenues were offset by lower residential subscription revenues
resulting from fewer residential broadcast subscribers and the $8 million
decline in commercial subscription revenues due to recent COVID-19 related
restrictions within certain states in Australia . Foxtel Group streaming
subscription revenues represented approximately 19% of total circulation and
subscription revenues for six months ended December 31, 2021 . The impact of
foreign currency fluctuations of the U.S. dollar against local currencies
resulted in a revenue increase of $16 million , or 1%, for the six months
ended December 31, 2021 as compared to the corresponding period of fiscal 2021.
For the six months ended December 31, 2021 , Segment EBITDA decreased $2 million ,
or 1%, as compared to the corresponding period of fiscal 2021, primarily due to
higher investment spending on streaming products, mainly in marketing, higher
technology costs and higher sports programming rights costs in the current
period due to the timing of noncomparable events, mainly motorsports and
cricket, partially offset by the absence of $56 million of additional sports
programming rights and production costs recognized in the prior year period that
were deferred from the fourth quarter of fiscal 2020 due to COVID-19.
The following tables provide information regarding certain key performance
indicators for the Foxtel Group , the primary reporting unit within the
Subscription Video Services segment, as of and for the three and six months
ended December 31, 2021 and 2020 (see the Company's 2021 Form 10-K for further
detail regarding these performance indicators):
As of December 31,
2021 2020
(in 000's)
Broadcast Subscribers
Residential(a) 1,564 1,783
Commercial(b) 218 218
Streaming Subscribers (Total (Paid))(c)
Kayo 1,031 (1,013 paid) 648 (624 paid)
BINGE 1,037 (928 paid) 468 (431 paid)
Foxtel Now 219 (211 paid) 265 (258 paid)
Total Subscribers (Total (Paid))(d) 4,075 (3,937 paid) 3,382 (3,314 paid)
For the three months ended December 31, For the six months ended December 31,
2021 2020 2021 2020
Broadcast ARPU(e) A$82 (US$60 ) A$80 (US$58 ) A$82 (US$60 ) A$79 (US$57 )
Broadcast Subscriber Churn(f) 13.0% 17.5% 13.5% 16.0%
(a) Subscribing households throughoutAustralia as ofDecember 31, 2021 and 2020. (b) Commercial subscribers throughoutAustralia as ofDecember 31, 2021 and 2020. Commercial subscribers are calculated as residential equivalent business units and are derived by dividing total recurring revenue from these subscribers by an estimated average Broadcast ARPU which is held constant through the year. (c) Total and Paid subscribers for the applicable streaming service as ofDecember 31, 2021 and 2020. Paid subscribers excludes customers receiving service for no charge under certain new subscriber promotions. (d) Total subscribers consists ofFoxtel's broadcast and streaming services listed above, and, as ofDecember 31, 2021 , Flash. (e) Average monthly broadcast residential subscription revenue per user (excludingOptus ) (Broadcast ARPU) for the three and six months endedDecember 31, 2021 and 2020. (f) Broadcast residential subscriber churn rate (excludingOptus ) (Broadcast Subscriber Churn) for the three and six months endedDecember 31, 2021 and 2020. Broadcast subscriber churn represents the number of cable and satellite residential subscribers whose service is disconnected, expressed as a percentage of the average total number of cable and satellite residential subscribers, presented on an annual basis. 36 -------------------------------------------------------------------------------- Table of ContentsDow Jones (18% of the Company's consolidated revenues in both the six months endedDecember 31, 2021 and 2020) For the three months ended December 31, For the six months ended December 31, 2021 2020 Change % Change 2021 2020 Change % Change (in millions, except %) Better/(Worse) Better/(Worse) Revenues: Circulation and subscription$ 356 $ 319 $ 37 12 %$ 705 $ 630 $ 75 12 % Advertising 141 115 26 23 % 231 185 46 25 % Other 11 12 (1) (8) % 16 17 (1) (6) % Total Revenues 508 446 62 14 % 952 832 120 14 % Operating expenses (196) (199) 3 2 % (392) (384) (8) (2) % Selling, general and administrative (168) (138) (30) (22) % (321) (267) (54) (20) % Segment EBITDA$ 144 $ 109 $ 35 32 %$ 239 $ 181 $ 58 32 % For the three months endedDecember 31, 2021 , revenues at theDow Jones segment increased$62 million , or 14%, as compared to the corresponding period of fiscal 2021, primarily driven by higher advertising revenues, the increase in circulation and subscription revenues and the$18 million impact from the acquisition of IBD. Digital revenues at theDow Jones segment represented 72% of total revenues for the three months endedDecember 31, 2021 , as compared to 70% in the corresponding period of fiscal 2021. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$1 million for the three months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. For the six months endedDecember 31, 2021 , revenues at theDow Jones segment increased$120 million , or 14%, as compared to the corresponding period of fiscal 2021, primarily driven by higher advertising revenues, the increase in circulation and subscription revenues and the$38 million impact from the acquisition of IBD. Digital revenues at theDow Jones segment represented 73% of total revenues for the six months endedDecember 31, 2021 , as compared to 71% in the corresponding period of fiscal 2021. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue increase of$1 million for the six months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. Circulation and subscription revenues For the three months ended December 31, For the six months ended December 31, 2021 2020 Change % Change 2021 2020 Change % Change (in millions, except %) Better/(Worse) Better/(Worse) Circulation and subscription revenues: Circulation and other$ 228 $ 202 $ 26 13 %$ 449 $ 400 $ 49 12 % Professional information business 128 117 11 9 % 256 230 26 11 % Total circulation and subscription revenues$ 356 $ 319 $ 37 12 %$ 705 $ 630 $ 75 12 % Circulation and subscription revenues increased$37 million , or 12%, during the three months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. Circulation and other revenues increased$26 million , or 13%, primarily driven by the$16 million impact from the acquisition of IBD in the fourth quarter of fiscal 2021 and growth in digital-only subscriptions atThe Wall Street Journal and Barron's Group. Digital revenues represented 67% of circulation revenue for the three months endedDecember 31, 2021 , as compared to 63% in the corresponding period of fiscal 2021. Professional information business revenues increased$11 million , or 9%, primarily driven by an increase of$8 million in Risk & Compliance revenues. Circulation and subscription revenues increased$75 million , or 12%, during the six months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. Circulation and other revenues increased$49 million , or 12%, primarily driven by the$34 million impact from the acquisition of IBD in the fourth quarter of fiscal 2021 and growth in digital-only subscriptions atThe Wall Street Journal and Barron's Group. Digital revenues represented 67% of circulation revenue for the six months endedDecember 31, 2021 , as compared to 63% in the corresponding period of fiscal 2021. Professional information business revenues increased$26 million , or 11%, primarily driven by an increase of$19 million in Risk & Compliance revenues. 37 -------------------------------------------------------------------------------- Table of Contents The following table summarizes average daily consumer subscriptions during the three months endedDecember 31, 2021 and 2020 for select publications and for all consumer subscription products.(a) For
the three months ended
2021 2020 Change % Change
(in thousands, except %) Better/(Worse)
The Wall Street Journal
Digital-only subscriptions(c) 2,918 2,462 456 19 %
Total subscriptions 3,618 3,224 394 12 %
Barron's Group(d)
Digital-only subscriptions(c) 757 599 158 26 %
Total subscriptions 963 809 154 19 %
Total Consumer(e)
Digital-only subscriptions(c) 3,774 3,061 713 23 %
Total subscriptions 4,707 4,033 674 17 %
________________________
(a)Based on internal data for the periods fromSeptember 27, 2021 throughDecember 26, 2021 andSeptember 28, 2020 throughDecember 27, 2020 , respectively, with independent verification procedures over global total sales and subscriptions provided by PricewaterhouseCoopers LLPUK . (b)Subscriptions include individual consumer subscriptions, as well as subscriptions purchased by companies, schools, businesses and associations for use by their respective employees, students, customers or members. Subscriptions exclude single-copy sales and copies purchased by hotels, airlines and other businesses for limited distribution or access to customers. (c)For some publications, including The Wall Street Journal and Barron's,Dow Jones sells bundled print and digital products. For bundles that provide access to both print and digital products every day of the week, only one unit is reported each day and is designated as a print subscription. For bundled products that provide access to the print product only on specified days and full digital access, one print subscription is reported for each day that a print copy is served and one digital subscription is reported for each remaining day of the week. (d)Barron's Group consists of Barron's, MarketWatch,Financial News and Private Equity News . (e)Total Consumer consists ofThe Wall Street Journal , Barron's Group and, for the three months endedDecember 31, 2021 ,Investor's Business Daily . Advertising revenues Advertising revenues increased$26 million , or 23%, during the three months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021, primarily driven by the$14 million increase in print advertising revenues due to the ongoing recovery from COVID-19 and the$12 million increase in digital advertising revenues driven by higher yield. Digital advertising represented 56% of advertising revenue for the three months endedDecember 31, 2021 , as compared to 58% in the corresponding period of fiscal 2021. Advertising revenues increased$46 million , or 25%, during the six months endedDecember 31, 2021 as compared to the corresponding period of fiscal 2021. Digital advertising revenues increased by$27 million , driven by higher yield, and represented 58% of advertising revenue in both the six months endedDecember 31, 2021 and 2020. The increase in advertising revenues was also due to the$19 million increase in print advertising revenues driven by the ongoing recovery from COVID-19. Segment EBITDA For the three months endedDecember 31, 2021 , Segment EBITDA at theDow Jones segment increased$35 million , or 32%, as compared to the corresponding period of fiscal 2021, including a$4 million contribution from the acquisition of IBD, primarily due to the increase in revenues discussed above, partially offset by higher professional services fees. For the six months endedDecember 31, 2021 , Segment EBITDA at theDow Jones segment increased$58 million , or 32%, as compared to the corresponding period of fiscal 2021, including a$10 million contribution from the acquisition of IBD, primarily due to the increase in revenues discussed above, partially offset by higher professional services fees and increased employee costs. 38 --------------------------------------------------------------------------------
Table of
For the three months ended December 31 , For the six months ended
2021 2020 Change % Change 2021 2020 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Consumer $ 594 $ 523 $ 71 14 % $ 1,118 $ 964 $ 154 16 %
Other 23 21 2 10 % 45 38 7 18 %
Total Revenues 617 544 73 13 % 1,163 1,002 161 16 %
Operating expenses (411) (347) (64) (18) % (778) (651) (127) (20) %
Selling, general and
administrative (99) (93) (6) (6) % (193) (176) (17) (10) %
Segment EBITDA $ 107 $ 104 $ 3 3 % $ 192 $ 175 $ 17 10 %
For the three months ended December 31, 2021 , revenues at the Book Publishing
segment increased $73 million , or 13%, as compared to the corresponding period
of fiscal 2021, primarily driven by the $50 million contribution from the
acquisition of HMH Books and Media in the fourth quarter of fiscal 2021 and
higher revenues in the General Books category, which benefited from the releases
of Twelve and a Half by Gary Vaynerchuk , The Pioneer Woman Cooks: Super Easy! by
Ree Drummond and The Storyteller by Dave Grohl . The increase was also driven by
increased book sales in the U.K. and increased Christian Publishing sales driven
by the ongoing recovery of certain distribution channels from COVID-19,
partially offset by lower Children's Group sales. Digital sales increased by 8%
as compared to the corresponding period of fiscal 2021 due to growth in
downloadable audiobooks. Digital sales represented approximately 17% of consumer
revenues during the three months ended December 31, 2021 . The impact of foreign
currency fluctuations of the U.S. dollar against local currencies resulted in a
revenue increase of $1 million for the three months ended December 31, 2021 as
compared to the corresponding period of fiscal 2021.
For the three months ended December 31, 2021 , Segment EBITDA at the Book
Publishing segment increased $3 million , or 3%, as compared to the corresponding
period of fiscal 2021, including a $10 million contribution from the acquisition
of HMH Books and Media, primarily due to the higher revenues discussed above,
partially offset by higher costs related to increased sales volumes and the mix
of titles and increased manufacturing and freight costs exacerbated by supply
chain pressures. These supply chain pressures are expected to continue to impact
the business in the near term.
For the six months ended December 31, 2021 , revenues at the Book Publishing
segment increased $161 million , or 16%, as compared to the corresponding period
of fiscal 2021, primarily driven by the $100 million contribution from the
acquisition of HMH Books and Media in the fourth quarter of fiscal 2021, higher
revenues in the General Books category, which benefited from the releases of
Twelve and a Half by Gary Vaynerchuk , The Pioneer Woman Cooks: Super Easy! by
Ree Drummond and The Storyteller by Dave Grohl , increased book sales in the U.K.
and increased Christian Publishing sales driven by the ongoing recovery of
certain distribution channels from COVID-19. Digital sales increased by 6% as
compared to the corresponding period of fiscal 2021 due to growth in both
downloadable audiobooks and e-books. Digital sales represented approximately 19%
of consumer revenues during the six months ended December 31, 2021 . The impact
of foreign currency fluctuations of the U.S. dollar against local currencies
resulted in a revenue increase of $8 million , or 1%, for the six months
ended December 31, 2021 as compared to the corresponding period of fiscal 2021.
For the six months ended December 31, 2021 , Segment EBITDA at the Book
Publishing segment increased $17 million , or 10%, as compared to the
corresponding period of fiscal 2021, including a $16 million contribution from
the acquisition of HMH Books and Media, primarily due to the higher revenues
discussed above, partially offset by higher costs related to increased sales
volumes and the mix of titles and increased manufacturing and freight costs
exacerbated by supply chain pressures.
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News Media (24% of the Company's consolidated revenues in both the six months
ended December 31, 2021 and 2020)
For the three months ended December 31, For the six months ended December 31,
2021 2020 Change % Change 2021 2020 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Circulation and subscription $ 280 $ 257 $ 23 9 % $ 565 $ 503 $ 62 12 %
Advertising 290 248 42 17 % 513 432 81 19 %
Other 68 68 - - % 136 125 11 9 %
Total Revenues 638 573 65 11 % 1,214 1,060 154 15 %
Operating expenses (309) (302) (7) (2) % (625) (601) (24) (4) %
Selling, general and
administrative (218) (205) (13) (6) % (444) (415) (29) (7) %
Segment EBITDA $ 111 $ 66 $ 45 68 % $ 145 $ 44 $ 101 **
** not meaningful
Revenues at the News Media segment increased $65 million , or 11%, for the three
months ended December 31, 2021 as compared to the corresponding period of fiscal
2021. Advertising revenues increased $42 million as compared to the
corresponding period of fiscal 2021, driven by digital advertising growth across
key mastheads and print advertising growth, primarily at News UK . Circulation
and subscription revenues increased $23 million as compared to the corresponding
period of fiscal 2021, primarily due to higher content licensing revenues,
mainly at News Corp Australia, digital subscriber growth across key mastheads
and cover price increases, partially offset by print volume declines. The impact
of foreign currency fluctuations of the U.S. dollar against local currencies
resulted in a revenue increase of $6 million , or 1%, for the three months ended
December 31, 2021 as compared to the corresponding period of fiscal 2021.
Segment EBITDA at the News Media segment improved by $45 million , or 68%, for
the three months ended December 31, 2021 as compared to the corresponding period
of fiscal 2021, primarily due to higher contributions from News Corp Australia
of $35 million and News UK of $6 million mainly driven by the higher revenues
described above, as well as increased contributions from the New York Post and
Wireless Group , partially offset by costs associated with News UK's TV project.
Revenues at the News Media segment increased $154 million , or 15%, for the six
months ended December 31, 2021 as compared to the corresponding period of fiscal
2021. Advertising revenues increased $81 million as compared to the
corresponding period of fiscal 2021, driven by digital advertising growth across
key mastheads, print advertising growth at News UK , the $11 million positive
impact of foreign currency fluctuations and higher revenues at Wireless Group .
Circulation and subscription revenues increased $62 million as compared to the
corresponding period of fiscal 2021, driven by higher content licensing
revenues, primarily at News Corp Australia, digital subscriber growth across key
mastheads, the $16 million positive impact of foreign currency fluctuations and
cover price increases, partially offset by print volume declines. Other revenues
for the six months ended December 31, 2021 increased $11 million as compared to
the corresponding period of fiscal 2021, primarily driven by increased revenues
at News Corp Australia, partially offset by lower revenues at News UK . The
impact of foreign currency fluctuations of the U.S. dollar against local
currencies resulted in a revenue increase of $31 million , or 3%, for the six
months ended December 31, 2021 as compared to the corresponding period of fiscal
2021.
Segment EBITDA at the News Media segment improved by $101 million for the six
months ended December 31, 2021 as compared to the corresponding period of fiscal
2021, primarily due to higher contributions from News Corp Australia of $61
million and News UK of $33 million mainly driven by the higher revenues
described above, as well as increased contributions from Wireless Group and the
New York Post , partially offset by costs associated with News UK's TV project.
News Corp Australia
Revenues were $288 million for the three months ended December 31, 2021 , an
increase of $36 million , or 14%, compared to revenues of $252 million in the
corresponding period of fiscal 2021. Circulation and subscription revenues
increased $14 million , primarily driven by higher content licensing revenues and
digital subscriber growth. Advertising revenues increased $13 million , primarily
due to higher digital advertising revenues driven by improved yields, higher
impressions and the ongoing recovery from COVID-19. Other revenues increased $9
million , primarily due to higher other services and third-party printing
revenues.
Revenues were $541 million for the six months ended December 31, 2021 , an
increase of $68 million , or 14%, compared to revenues of $473 million in the
corresponding period of fiscal 2021. Circulation and subscription revenues
increased
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$33 million , primarily driven by higher content licensing revenues, digital
subscriber growth and the $4 million positive impact of foreign currency
fluctuations. Advertising revenues increased $18 million , primarily due to
higher digital advertising revenues driven by higher impressions and the $3
million positive impact of foreign currency fluctuations, partially offset by
lower print advertising revenues due mainly to the negative impact of
COVID-19-related restrictions in the first quarter of fiscal 2022. Other
revenues increased $17 million , primarily due to higher third-party printing and
other services revenues.
News UK
Revenues were $263 million for the three months ended December 31, 2021 , an
increase of $18 million , or 7%, as compared to revenues of $245 million in the
corresponding period of fiscal 2021. Advertising revenues increased $18 million ,
primarily due to higher digital and print advertising revenues driven by the
ongoing recovery of the advertising market from COVID-19 and the $2 million
positive impact of foreign currency fluctuations. Circulation and subscription
revenues increased $6 million , primarily driven by digital subscriber growth,
cover price increases and the $3 million positive impact of foreign currency
fluctuations, partially offset by print volume declines. Other revenues
decreased $6 million , primarily due to lower brand partnership revenues.
Revenues were $507 million for the six months ended December 31, 2021 , an
increase of $56 million , or 12%, as compared to revenues of $451 million in the
corresponding period of fiscal 2021. Advertising revenues increased $36 million ,
primarily due to higher digital and print advertising revenues driven by the
ongoing recovery of the advertising market from COVID-19 and the $6 million
positive impact of foreign currency fluctuations. Circulation and subscription
revenues increased $23 million , primarily driven by the $12 million positive
impact of foreign currency fluctuations, digital subscriber growth and cover
price increases, partially offset by print volume declines. Other revenues
decreased $3 million , primarily due to lower brand partnership revenues.
LIQUIDITY AND CAPITAL RESOURCES
Current Financial Condition
The Company's principal source of liquidity is internally generated funds and
cash and cash equivalents on hand. As of December 31, 2021 , the Company's cash
and cash equivalents were $2.2 billion . The Company also has available borrowing
capacity under the 2019 News Corp Credit Facility (as defined below) and certain
other facilities, as described below, and expects to have access to the
worldwide credit and capital markets, subject to market conditions, in order to
issue additional debt if needed or desired. The Company currently expects these
elements of liquidity will enable it to meet its liquidity needs for at least
the next 12 months, including repayment of indebtedness. Although the Company
believes that its cash on hand and future cash from operations, together with
its access to the credit and capital markets, will provide adequate resources to
fund its operating and financing needs for at least the next 12 months, its
access to, and the availability of, financing on acceptable terms in the future
will be affected by many factors, including: (i) the financial and operational
performance of the Company and/or its operating subsidiaries, as applicable,
(ii) the Company's credit ratings and/or the credit rating of its operating
subsidiaries, as applicable, (iii) the provisions of any relevant debt
instruments, credit agreements, indentures and similar or associated documents,
(iv) the liquidity of the overall credit and capital markets and (v) the state
of the economy. There can be no assurances that the Company will continue to
have access to the credit and capital markets on acceptable terms.
As of December 31, 2021 , the Company's consolidated assets included $862 million
in cash and cash equivalents that were held by its foreign subsidiaries. Of this
amount, $141 million is cash not readily accessible by the Company as it is held
by REA Group, a majority owned but separately listed public company. REA Group
must declare a dividend in order for the Company to have access to its share of
REA Group's cash balance. The Company earns income outside the U.S. , which is
deemed to be permanently reinvested in certain foreign jurisdictions. The
Company does not currently intend to repatriate these earnings. Should the
Company require more capital in the U.S. than is generated by and/or available
to its domestic operations, the Company could elect to transfer funds held in
foreign jurisdictions. The transfer of funds from foreign jurisdictions may be
cumbersome due to local regulations, foreign exchange controls and taxes.
Additionally, the transfer of funds from foreign jurisdictions may result in
higher effective tax rates and higher cash paid for income taxes for the
Company.
The principal uses of cash that affect the Company's liquidity position include
the following: operational expenditures including employee costs, paper
purchases and programming costs; capital expenditures; income tax payments;
investments in associated entities; acquisitions; the repurchase of shares;
dividends; and the repayment of debt and related interest. In addition to the
acquisitions and dispositions disclosed elsewhere, the Company has evaluated,
and expects to continue to evaluate, possible future acquisitions and
dispositions of certain businesses. Such transactions may be material and may
involve cash, the issuance of the Company's securities or the assumption of
indebtedness.
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Issuer Purchases of Equity Securities
On September 22, 2021 , the Company announced a new stock repurchase program
authorizing the Company to purchase up to $1 billion in the aggregate of its
outstanding Class A Common Stock and Class B Common Stock (the "Repurchase
Program"). The Repurchase Program replaces the Company's $500 million Class A
Common Stock repurchase program approved by the Company's Board of Directors
(the "Board of Directors") in May 2013 . The manner, timing, number and share
price of any repurchases will be determined by the Company at its discretion and
will depend upon such factors as the market price of the stock, general market
conditions, applicable securities laws, alternative investment opportunities and
other factors. The Repurchase Program has no time limit and may be modified,
suspended or discontinued at any time. As of December 31, 2021 , the remaining
authorized amount under the Repurchase Program was approximately $954 million .
Stock repurchases commenced on November 9, 2021 , and during the three and six
months ended December 31, 2021 , the Company repurchased and subsequently retired
1.4 million shares of Class A Common Stock for approximately $31 million and 0.7
million shares of Class B Common Stock for approximately $15 million . The
Company did not purchase any of its Class A Common Stock or Class B Common Stock
during the six months ended December 31, 2020 .
Dividends
In August 2021 , the Board of Directors declared a semi-annual cash dividend of
$0.10 per share for Class A Common Stock and Class B Common Stock. This dividend
was paid on October 13, 2021 to stockholders of record as of September 15, 2021 .
The timing, declaration, amount and payment of future dividends to stockholders,
if any, is within the discretion of the Board of Directors. The Board of
Directors' decisions regarding the payment of future dividends will depend on
many factors, including the Company's financial condition, earnings, capital
requirements and debt facility covenants, other contractual restrictions, as
well as legal requirements, regulatory constraints, industry practice, market
volatility and other factors that the Board of Directors deems relevant.
Sources and Uses of Cash-For the six months ended December 31, 2021 versus the
six months ended December 31, 2020
Net cash provided by operating activities for the six months ended December 31,
2021 and 2020 was as follows (in millions):
For the six months ended December 31, 2021 2020
Net cash provided by operating activities $ 430 $ 483
Net cash provided by operating activities decreased by $53 million for the six
months ended December 31, 2021 as compared to the six months ended December 31,
2020 . The decrease was primarily due to higher working capital, driven by higher
receivables from higher revenues, higher employee bonus and equity-based
compensation payments, payments related to one-time legal settlement costs and
$21 million in higher interest payments, partially offset by higher Total
Segment EBITDA.
Net cash used in investing activities for the six months ended December 31, 2021
and 2020 was as follows (in millions):
For the six months ended December 31, 2021 2020
Net cash used in investing activities $ (249) $ (276)
Net cash used in investing activities decreased by $27 million for the six
months ended December 31, 2021 , as compared to the six months ended December 31,
2020 . During the six months ended December 31, 2021 , the Company used
$208 million of cash for capital expenditures, of which $89 million related to
Foxtel , and $67 million for investments and acquisitions.
During the six months ended December 31, 2020 , the Company used $173 million of
cash for capital expenditures, of which $79 million related to Foxtel , and
$90 million primarily for the acquisitions of REA India and Avail.
Net cash used in financing activities for the six months ended December 31, 2021
and 2020 was as follows (in millions):
For the six months ended December 31, 2021 2020
Net cash used in financing activities $ (198) $ (219)
Net cash used in financing activities decreased by $21 million for the six
months ended December 31, 2021 , as compared to the six months ended December 31,
2020 . During the six months ended December 31, 2021 , the Company repaid
$500 million of borrowings primarily related to REA Group's refinancing of its
bridge facility, made dividend payments of $86 million to News Corporation
stockholders and REA Group minority stockholders, and used $43 million to
repurchase outstanding Class A and Class B Common Stock under the Repurchase
Program. The net cash used in financing activities was partially offset by new
borrowings of $495 million primarily related to REA Group.
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During the six months ended December 31, 2020 , the Company repaid $248 million
of borrowings related to Foxtel and made dividend payments of $80 million to
News Corporation stockholders and REA Group minority stockholders. The net cash
used in financing activities for the six months ended December 31, 2020 was
partially offset by new borrowings related to Foxtel of $146 million .
Reconciliation of Free Cash Flow Available to News Corporation
Free cash flow available to News Corporation is a non-GAAP financial measure
defined as net cash provided by operating activities, less capital expenditures
("free cash flow"), less REA Group free cash flow, plus cash dividends received
from REA Group. Free cash flow available to News Corporation should be
considered in addition to, not as a substitute for, cash flows from operations
and other measures of financial performance reported in accordance with GAAP.
Free cash flow available to News Corporation may not be comparable to similarly
titled measures reported by other companies, since companies and investors may
differ as to what items should be included in the calculation of free cash flow.
The Company considers free cash flow available to News Corporation to provide
useful information to management and investors about the amount of cash that is
available to be used to strengthen the Company's balance sheet and for strategic
opportunities including, among others, investing in the Company's business,
strategic acquisitions, dividend payouts and repurchasing stock. The Company
believes excluding REA Group's free cash flow and including dividends received
from REA Group provides users of its consolidated financial statements with a
measure of the amount of cash flow that is readily available to the Company, as
REA Group is a separately listed public company in Australia and must declare a
dividend in order for the Company to have access to its share of REA Group's
cash balance. The Company believes free cash flow available to News Corporation
provides a more conservative view of the Company's free cash flow because this
presentation includes only that amount of cash the Company actually receives
from REA Group, which has generally been lower than the Company's unadjusted
free cash flow.
A limitation of free cash flow available to News Corporation is that it does not
represent the total increase or decrease in the cash balance for the period.
Management compensates for the limitation of free cash flow available to News
Corporation by also relying on the net change in cash and cash equivalents as
presented in the Statements of Cash Flows prepared in accordance with GAAP which
incorporate all cash movements during the period.
The following table presents a reconciliation of net cash provided by operating
activities to free cash flow available to News Corporation :
For the six months ended
December 31,
2021 2020
(in millions)
Net cash provided by operating activities $ 430 $ 483
Less: Capital expenditures (208) (173)
222 310
Less: REA Group free cash flow (121) (65)
Plus: Cash dividends received from REA Group 43
32
Free cash flow available to News Corporation $ 144
Free cash flow available toNews Corporation decreased by$133 million in the six months endedDecember 31, 2021 to$144 million from$277 million in the corresponding period of fiscal 2021, primarily due to lower net cash provided by operating activities as discussed above and higher capital expenditures, partially offset by higher dividends received from REA Group. Borrowings As ofDecember 31, 2021 , the Company, certain subsidiaries ofNXE Australia Pty Limited (the "Foxtel Group " and together with such subsidiaries, the "Foxtel Debt Group ") and REA Group and certain of its subsidiaries (REA Group and certain of its subsidiaries, the "REA Debt Group ") had total borrowings of$2.3 billion , including the current portion and finance lease liabilities. Both theFoxtel Group and REA Group are consolidated but non wholly-owned subsidiaries ofNews Corp , and their indebtedness is only guaranteed by members of theFoxtel Debt Group andREA Debt Group , respectively, and is non-recourse toNews Corp. 43 -------------------------------------------------------------------------------- Table of Contents News Corp Borrowings As ofDecember 31, 2021 , the Company had borrowings of$986 million , which consisted of the carrying value of its 2021 Senior Notes. Foxtel Group Borrowings As ofDecember 31, 2021 , theFoxtel Debt Group had (i) borrowings of approximately$905 million , including the full drawdown of its 2019 Term Loan Facility, amounts outstanding under the 2019 Credit Facility and 2017 Working Capital Facility, its outstandingU.S. private placement senior unsecured notes and amounts outstanding under the Telstra Facility (described below), and (ii) total undrawn commitments ofA$340 million available under the 2017 Working Capital Facility and 2019 Credit Facility. In addition to third-party indebtedness, theFoxtel Debt Group has related party indebtedness, includingA$900 million of outstanding shareholder loans and available facilities from the Company. The shareholder loans accrue interest at a variable rate of the Australian BBSY plus an applicable margin ranging from 6.30% to 7.75% and mature inDecember 2027 . The shareholder revolving credit facility accrues interest at a variable rate of the Australian BBSY plus an applicable margin ranging from 2.00% to 3.75%, depending on theFoxtel Debt Group's net leverage ratio, and matures inJuly 2024 . Additionally, theFoxtel Debt Group has anA$170 million subordinated shareholder loan facility agreement with Telstra which can be used to finance cable transmission costs due to Telstra. The Telstra Facility accrues interest at a variable rate of the Australian BBSY plus an applicable margin of 7.75% and matures inDecember 2027 . The Company excludes the utilization of the Telstra Facility from the Statements of Cash Flows because it is non-cash. REA Group Borrowings As ofDecember 31, 2021 , REA Group had (i) borrowings of approximately$297 million , consisting of amounts outstanding under its 2022 Credit Facility (as defined below), and (ii)A$187 million of undrawn commitments available under its 2022 Credit Facility. During the six months endedDecember 31, 2021 , REA Group completed a debt refinancing in which it repaid all amounts outstanding under its 2021 Bridge facility with the proceeds from a newA$600 million unsecured syndicated credit facility (the "2022 Credit Facility") consisting of two sub-facilities: (i) a three year,A$400 million revolving loan facility (the "2022 Credit facility - tranche 1") and (ii) a four year,A$200 million revolving loan facility (the "2022 Credit facility - tranche 2"). Borrowings under the 2022 Credit facility - tranche 1 accrue interest at a rate of the Australian BBSY plus a margin of between 1.00% and 2.10%, depending on REA Group's net leverage ratio. Borrowings under the 2022 Credit facility - tranche 2 accrue interest at a rate of the Australian BBSY plus a margin of between 1.15% and 2.25%, depending on REA Group's net leverage ratio. Both tranches carry a commitment fee of 40% of the applicable margin on any undrawn balance. The 2022 Credit Facility requires REA Group to maintain (i) a net leverage ratio of not more than 3.5 to 1.0 and (ii) an interest coverage ratio of not less than 3.0 to 1.0. News Corp Revolving Credit Facility The Company has an undrawn$750 million unsecured revolving credit facility (the "2019 News Corp Credit Facility") that can be used for general corporate purposes, which terminates onDecember 12, 2024 . Due to the discontinuation ofLondon interbank offered rates ("LIBOR") for Euro and British pound sterling ("GBP")-denominated borrowings and for certain Eurodollar Rate borrowings with a two or 12-month tenor, the Company amended the 2019 News Corp Credit Facility inNovember 2021 to (i) replace the benchmark rates for borrowings in Euro and GBP with designated benchmark rates based on the Euro Interbank Offer Rate and the Sterling Overnight Index Average, respectively, and (ii) remove the two and 12-month interest period options for the relevant Eurodollar Rate borrowings. All of the Company's borrowings contain customary representations, covenants and events of default. The Company was in compliance with all such covenants atDecember 31, 2021 . See Note 6-Borrowings in the accompanying Consolidated Financial Statements for further details regarding the Company's outstanding debt, including certain information about interest rates and maturities related to such debt arrangements. Commitments The Company has commitments under certain firm contractual arrangements ("firm commitments") to make future payments. These firm commitments secure the current and future rights to various assets and services to be used in the normal course of 44
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Table of Contents operations. The Company's commitments as ofDecember 31, 2021 have not changed significantly from the disclosures included in the 2021 Form 10-K. Contingencies The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed in Note 10 to the Consolidated Financial Statements. The outcome of these matters and claims is subject to significant uncertainty, and the Company often cannot predict what the eventual outcome of pending matters will be or the timing of the ultimate resolution of these matters. Fees, expenses, fines, penalties, judgments or settlement costs which might be incurred by the Company in connection with the various proceedings could adversely affect its results of operations and financial condition. The Company establishes an accrued liability for legal claims when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Legal fees associated with litigation and similar proceedings are expensed as incurred. The Company recognizes gain contingencies when the gain becomes realized or realizable. See Note 10-Commitments and Contingencies in the accompanying Consolidated Financial Statements. The Company's tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in the Company's tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid. However, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress, or as settlements or litigations occur.
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