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," "should" 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 business, financial condition or results of operations, the Company's strategy and strategic initiatives, including potential acquisitions, investments and dispositions, 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, 2022 , as filed with theSecurities and Exchange Commission (the "SEC") onAugust 12, 2022 (the "2022 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 2022 Form 10-K.
INTRODUCTION
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 2023 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, 2022 and 2021. 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, 2022 and 2021, as well as a discussion of the Company's financial arrangements and outstanding commitments, both firm and contingent, that existed as ofDecember 31, 2022 .
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 --------------------------------------------------------------------------------
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Exchange ("ASX") (ASX: REA). REA Group advertises property and property-related
services on its websites and mobile apps, including Australia's leading
residential, commercial and share property websites, realestate.com.au,
realcommercial.com.au and Flatmates.com.au , property.com.au and property portals
in India . 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 the U.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, ReadyConnect ConciergeSM. Move
also offers online tools and services to do-it-yourself landlords and tenants.
•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 the
Foxtel 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. Its Foxtel pay-TV service provides approximately 200 live
channels and video on demand covering sports, general entertainment, movies,
documentaries, music, children's programming and news. Foxtel and the Group's
Kayo Sports streaming service offer the leading sports programming content in
Australia , with broadcast rights to live sporting events including: National
Rugby League , Australian Football League , Cricket Australia and various
motorsports programming. The Foxtel Group's other streaming services include
BINGE, its entertainment streaming service, and Foxtel Now, a streaming service
that provides access across Foxtel's live and on-demand content.
ANC operates the SKY NEWS network, Australia's 24-hour multi-channel,
multi-platform news service. ANC channels are distributed throughout Australia
and New Zealand and available on Foxtel 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-The Dow Jones segment consists of Dow 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, mobile
apps, newsletters, magazines, proprietary databases, live journalism, video and
podcasts. The Dow Jones segment's products, which target individual consumers
and enterprise customers, include The Wall Street Journal , Barron's,
MarketWatch, Investor's Business Daily , Factiva, Dow Jones Risk & Compliance,
Dow Jones Newswires and OPIS.
•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 , Mariner, HarperCollins Children's
Books , Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson , and
publishes works by well-known authors such as Harper Lee , George Orwell, Agatha
Christie and Zora 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,
News UK and the New York Post and includes, among other publications, The
Australian, The Daily Telegraph , Herald Sun , The Courier Mail and The Advertiser
in Australia and The Times , The Sunday Times, The Sun and The Sun on Sunday in
the U.K. This segment also includes Wireless Group , operator of talkSPORT, the
leading sports radio network in the U.K. , the Company's recently launched TalkTV
and Storyful , a social media content agency.
•Other-The Other segment consists primarily of general corporate overhead
expenses, costs related to the
Other Business Developments
Acquisition of OPIS
InFebruary 2022 , the Company acquired theOil Price Information Service business and related assets ("OPIS") from S&P Global Inc. ("S&P") and IHS Markit Ltd. for$1.15 billion in cash, subject to customary purchase price adjustments. OPIS is a 28 --------------------------------------------------------------------------------
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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 enablesDow Jones to become a leading provider of energy and renewables information and furthers its goal of building the leading global business news and information platform for professionals. OPIS is a subsidiary ofDow Jones , and its results are included in theDow Jones segment.
Acquisition of Base Chemicals
InJune 2022 , the Company acquired the Base Chemicals (rebranded Chemical Market Analytics, "CMA") business from S&P for$295 million in cash, subject to customary purchase price adjustments. CMA provides pricing data, insights, analysis and forecasting for key base chemicals through its leading Market Advisory and World Analysis services. The acquisition enablesDow Jones to become a leading provider of base chemicals information and furthers its goal of building the leading global business news and information platform for professionals. CMA is operated byDow Jones , and its results are included in theDow Jones segment. Acquisition of UpNest InJune 2022 , the Company acquiredUpNest, Inc. ("UpNest") for closing cash consideration of$45 million , subject to customary purchase price adjustments, and up to$15 million in future cash consideration based upon the achievement of certain performance objectives over the next two years. UpNest is a real estate agent marketplace that matches home sellers and buyers with top local agents who compete for their business. The UpNest acquisition helps Realtor.com® further expand its services and support for home sellers and listing agents and brokers. UpNest is a subsidiary of Move, and its results are included within theDigital Real Estate Services segment.
Exploration of Potential Combination with FOX Corporation ("FOX")
InOctober 2022 , the Company announced that its Board of Directors (the "Board of Directors"), following the receipt of letters fromK. Rupert Murdoch and theMurdoch Family Trust , had formed a special committee of independent and disinterested members of the Board of Directors (the "Special Committee") to begin exploring a potential combination withFOX (the "Potential Transaction"). InJanuary 2023 , the Board of Directors received a letter fromMr. Murdoch withdrawing the proposal to explore the Potential Transaction. As a result of the letter, the Special Committee has been dissolved.
Potential Disposition of Move
In
Russian and Ukrainian conflict
The Company has taken steps to ensure the safety of its journalists and other personnel inUkraine andRussia and will continue to monitor the situation in the region and provide support, as needed, to affected employees. The Company has extremely limited operations in, or direct exposure to,Russia orUkraine , and the conflict has not had a material impact on its business, financial condition, or results of operations to date. However, the conflict has broadened inflationary pressures and a further escalation or expansion of its scope or the related economic disruption could impact the Company's supply chain, further exacerbate inflation and other macroeconomic trends and have an adverse effect on its results of operations.
Announced Headcount Reduction
In response to the macroeconomic challenges facing many of the Company's businesses, the Company expects to continue to implement cost savings initiatives, including an expected 5% headcount reduction or around 1,250 positions, this calendar year. While it is still evaluating the cost savings opportunity from this action, the Company expects this to generate an annualized cost savings of at least$130 million . The Company expects the charges related to this action to pay back in a year.
See Note 3-Acquisitions in the accompanying Consolidated Financial Statements for further discussion of the acquisitions discussed above.
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RESULTS OF OPERATIONS
Results of Operations-For the three and six months ended
The following table sets forth the Company's operating results for the three and six months endedDecember 31, 2022 as compared to the three and six months endedDecember 31, 2021 . For the three months ended December 31, For the six months ended December 31, % 2022 2021 Change % Change 2022 2021 Change Change (in millions, except %) Better/(Worse) Better/(Worse) Revenues: Circulation and subscription$ 1,085 $ 1,072 $ 13 1 %$ 2,196 $ 2,149 $ 47 2 % Advertising 464 519 (55) (11) % 870 924 (54) (6) % Consumer 512 594 (82) (14) % 979 1,118 (139) (12) % Real estate 301 352 (51) (14) % 624 672 (48) (7) % Other 159 180 (21) (12) % 330 356 (26) (7) % Total Revenues 2,521 2,717 (196) (7) % 4,999 5,219 (220) (4) % Operating expenses (1,294) (1,279) (15) (1) % (2,567) (2,523) (44) (2) % Selling, general and administrative (818) (852) 34 4 % (1,673) (1,700) 27 2 % Depreciation and amortization (174) (168) (6) (4) % (353) (333) (20) (6) % Impairment and restructuring charges (19) (23) 4 17 % (40) (45) 5 11 % Equity losses of affiliates (29) (6) (23) ** (33) (6) (27) ** Interest expense, net (26) (21) (5) (24) % (53) (43) (10) (23) % Other, net (6) (7) 1 14 % (24) 130 (154) ** Income before income tax expense 155 361 (206) (57) % 256 699 (443) (63) % Income tax expense (61) (99) 38 38 % (96) (170) 74 44 % Net income 94 262 (168) (64) % 160 529 (369) (70) % Less: Net income attributable to noncontrolling interests (27) (27) - - % (53) (98) 45 46 % Net income attributable to News Corporation stockholders$ 67 $ 235 $ (168) (71) % $ 107$ 431 $ (324) (75) % ** not meaningful Revenues- Revenues decreased$196 million , or 7%, and$220 million , or 4%, for the three and six months endedDecember 31, 2022 , respectively, as compared to the corresponding periods of fiscal 2022. The revenue decrease for the three months endedDecember 31, 2022 was primarily driven by decreases at theBook Publishing segment due to lower print and digital book sales in the U.S. market due to slowing consumer demand industry-wide, difficult frontlist comparisons and some logistical constraints at Amazon, at theDigital Real Estate Services segment due to lower real estate revenues atMove and REA Group, the negative impact of foreign currency fluctuations and lower financial services revenue at REA Group and at the News Media and Subscription Video Services segments primarily due to the negative impacts of foreign currency fluctuations. The decreases were partially offset by higher revenues at theDow Jones segment primarily due to the acquisitions of OPIS and CMA. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$171 million , or 6%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. The revenue decrease for the six months endedDecember 31, 2022 was driven by the decrease at theBook Publishing segment, primarily due to lower print and digital book sales in the U.S. market due to slowing consumer demand industry-wide, difficult frontlist comparisons and the impact of Amazon's reset of its inventory levels and rightsizing of its warehouse footprint, the negative impacts of foreign currency fluctuations at the News Media and Subscription Video Services segments and the decrease at theDigital Real Estate Services segment driven by the negative impact of foreign currency fluctuations, lower real estate revenues at Move and lower financial services revenue at REA Group. These decreases were partially offset by higher revenues at theDow Jones segment primarily due to the acquisitions of OPIS and CMA. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$324 million , or 6%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. 30 --------------------------------------------------------------------------------
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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
The increase in operating expenses for the three months endedDecember 31, 2022 was primarily driven by higher expenses at theDow Jones segment due to the impact from recent acquisitions and higher employee costs and at the News Media segment due to higher costs for TalkTV and other digital investments, primarily at News Corp Australia, and the$21 million impact of higher pricing on newsprint costs, partially offset by the positive impact of foreign currency fluctuations and cost savings initiatives. The increases were partially offset by lower operating expenses at the Subscription Video Services segment due to the positive impact of foreign currency fluctuations, partially offset by higher sports and entertainment programming rights costs, and at theBook Publishing segment primarily due to the positive impact of foreign currency fluctuations, as higher manufacturing, freight and distribution costs were largely offset by the impact of lower sales volumes. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in an Operating expense decrease of$84 million , or 7%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. The increase in operating expenses for the six months endedDecember 31, 2022 was primarily driven by higher expenses at theDow Jones segment due to the impact from recent acquisitions and higher employee costs and at the News Media segment primarily due to higher costs for TalkTV and other digital investments, primarily at News Corp Australia, and the$41 million impact of higher pricing on newsprint costs, partially offset by the positive impact of foreign currency fluctuations and cost savings initiatives. The increases were partially offset by lower operating expenses at theSubscription Video Services and Book Publishing segments driven by the positive impacts of foreign currency fluctuations and the impact of lower sales volumes at theBook Publishing segment. Those positive impacts were partially offset by higher sports and entertainment programming rights costs at the Subscription Video Services segment and higher manufacturing, freight and distribution costs at theBook Publishing segment. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in an Operating expense decrease of$158 million , or 6%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022.
Selling, general and administrative- Selling, general and administrative
decreased
The decrease in selling, general and administrative for the three months endedDecember 31, 2022 was driven by lower expenses at theDigital Real Estate Services , Subscription Video Services,News Media and Book Publishing segments, primarily driven by the positive impacts of foreign currency fluctuations, partially offset by increased expenses at the Other segment due to higher equity-based compensation costs largely related to stock price performance and$6 million of one-time costs related to the professional fees incurred by the Special Committee and the Company in connection with evaluating the proposal from theMurdoch Family Trust and at theDow Jones segment due to the impact of recent acquisitions and higher employee costs. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a Selling, general and administrative decrease of$57 million , or 7%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. The decrease in selling, general and administrative for the six months endedDecember 31, 2022 was driven by lower expenses at theBook Publishing segment due to lower employee costs and the positive impact of foreign currency fluctuations, and at the Subscription Video Services, News Media andDigital Real Estate Services segments, primarily due to the positive impacts of foreign currency fluctuations, partially offset by higher expenses at theDow Jones segment due to the impact of recent acquisitions and higher employee costs and at the Other segment due to higher equity-based compensation costs largely related to stock price performance and$6 million of one-time costs related to the professional fees incurred by the Special Committee and the Company in connection with evaluating the proposal from theMurdoch Family Trust . The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a Selling, general and administrative decrease of$113 million , or 7%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. Depreciation and amortization- Depreciation and amortization expense increased$6 million , or 4%, and$20 million , or 6%, for the three and six months endedDecember 31, 2022 , respectively, as compared to the corresponding periods of fiscal 2022, primarily driven by higher amortization expense resulting from the Company's recent acquisitions. The impact of foreign 31 --------------------------------------------------------------------------------
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currency fluctuations of theU.S. dollar against local currencies resulted in a depreciation and amortization expense decrease of$12 million , or 7%, and$21 million , or 6%, for the three and six months endedDecember 31, 2022 , respectively, as compared to the corresponding periods of fiscal 2022. Impairment and restructuring charges- During the three and six months endedDecember 31, 2022 , the Company recorded restructuring charges of$19 million and$40 million , respectively. During the three and six months endedDecember 31, 2021 , the Company recorded restructuring charges of$23 million and$45 million , respectively. See Note 4-Restructuring Programs in the accompanying Consolidated Financial Statements. Equity losses of affiliates- Equity losses of affiliates increased by$23 million and$27 million for the three and six months endedDecember 31, 2022 , respectively, as compared to the corresponding periods of fiscal 2022, primarily due to losses from an investment in a newly launched Australian sports wagering venture. See Note 5-Investments in the accompanying Consolidated Financial Statements. Interest expense, net- Interest expense, net increased by$5 million and$10 million for the three and six months endedDecember 31, 2022 , respectively, as compared to the corresponding periods of fiscal 2022, primarily driven by the issuance of$500 million of senior notes due 2032 in the third quarter of fiscal 2022 (the "2022 Senior Notes") and the incurrence of$500 million in loans under a new unsecured term loan A credit facility (the "Term A Facility" and the loans under the Term A Facility are collectively referred to as "Term A Loans") inMarch 2022 . See Note 6-Borrowings in the accompanying Consolidated Financial Statements. Other, net- Other, net improved by$1 million , or 14%, and decreased by$154 million for the three and six months endedDecember 31, 2022 , respectively, as compared to the corresponding periods of fiscal 2022. The decline in the six month period was primarily due to the absence of REA Group's gain on disposition of its entities inMalaysia andThailand recognized in the first quarter of fiscal 2022. See Note 13-Additional Financial Information in the accompanying Consolidated Financial Statements. Income tax expense- For the three months endedDecember 31, 2022 , the Company recorded income tax expense of$61 million on pre-tax income of$155 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 valuation allowances recorded against tax benefits in certain businesses. For the six months endedDecember 31, 2022 , the Company recorded income tax expense of$96 million on pre-tax income of$256 million , resulting in an effective tax rate that is higher than theU.S. statutory tax rate. The tax rate was impacted by foreign operations which are subject to higher tax rates and by valuation allowances recorded against tax benefits in certain businesses. 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 by changes in valuation allowances, offset by the lower tax impact related to the acquisition of an 18% interest in PropertyGuru. 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. See Note 11-Income Taxes in the accompanying Consolidated Financial Statements.
Net income-Net income for the three and six months ended
Net income for the three months ended
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Net income for the six months endedDecember 31, 2022 decreased by$369 million , or 70%, as compared to the corresponding period of fiscal 2022, primarily driven by lower Total Segment EBITDA and Other, net and higher losses from equity affiliates, partially offset by lower income tax expense. Net income attributable to noncontrolling interests-Net income attributable to noncontrolling interests was flat and decreased by$45 million , or 46%, for the three and six months endedDecember 31, 2022 , respectively, as compared to the corresponding periods of fiscal 2022. The decrease in the six month period was primarily driven by lower earnings at REA Group due to the absence of the$107 million gain from the disposition of its entities inMalaysia andThailand recognized in the first quarter of fiscal 2022.
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 ended
For the three months ended For the six months ended
December 31, December 31,
2022 2021 2022 2021
(in millions)
Net income $ 94 $ 262 $ 160 $ 529
Add:
Income tax expense 61 99 96 170
Other, net 6 7 24 (130)
Interest expense, net 26 21 53 43
Equity losses of affiliates 29 6 33 6
Impairment and restructuring charges 19 23 40 45
Depreciation and amortization 174 168 353 333
Total Segment EBITDA $ 409 $ 586 $ 759 $ 996
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The following tables set forth the Company's Revenues and Segment EBITDA by reportable segment for the three and six months endedDecember 31, 2022 and 2021: For the three months ended December 31, 2022 2021 Segment Segment (in millions) Revenues EBITDA Revenues EBITDA Digital Real Estate Services$ 386 $ 128 $ 456 $ 178 Subscription Video Services 462 90 498 86 Dow Jones 563 139 508 144 Book Publishing 531 51 617 107 News Media 579 59 638 111 Other - (58) - (40) Total$ 2,521 $ 409 $ 2,717 $ 586 For the six months ended December 31, 2022 2021 Segment Segment (in millions) Revenues EBITDA Revenues EBITDA Digital Real Estate Services$ 807 $ 247 $ 882 $ 316 Subscription Video Services 964 201 1,008 200 Dow Jones 1,078 252 952 239 Book Publishing 1,018 90 1,163 192 News Media 1,132 77 1,214 145 Other - (108) - (96) Total$ 4,999 $ 759 $ 5,219 $ 996
For the three months ended December 31, For the six months ended December 31,
2022 2021 Change % Change 2022 2021 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Circulation and subscription
- % $ 6 $ 6 $ - - %
Advertising 33 33 - - % 68 66 2 3 %
Real estate 301 352 (51) (14) % 624 672 (48) (7) %
Other 49 68 (19) (28) % 109 138 (29) (21) %
Total Revenues 386 456 (70) (15) % 807 882 (75) (9) %
Operating expenses (51) (51) - - % (108) (107) (1) (1) %
Selling, general and
administrative (207) (227) 20 9 % (452) (459) 7 2 %
Segment EBITDA $ 128 $ 178 $ (50) (28) % $ 247 $ 316 $ (69) (22) %
For the three months ended December 31, 2022 , revenues at the Digital Real
Estate Services segment decreased $70 million , or 15%, as compared to the
corresponding period of fiscal 2022. At REA Group, revenues decreased $47
million , or 16%, to $240 million for the three months ended December 31, 2022
from $287 million in the corresponding period of fiscal 2022, primarily due to
the $26 million negative impact of foreign currency fluctuations, lower
financial services revenue driven by lower settlements and lower Australian
residential revenues due to a decrease in national listings. The decreases were
partially offset by price increases, increased depth penetration for Australian
residential and commercial products, increased penetration of Premiere Plus and
higher revenues at REA India . Revenues at Move decreased $23 million , or 14%, to
$146 million for the three months ended December 31, 2022 from $169 million in
the corresponding period of fiscal 2022, primarily driven by the impact of the
macroeconomic environment on the housing market, including higher interest
rates. The market downturn resulted in lower lead volumes, which decreased 37%,
and lower transaction volumes. Revenues from the referral model, which includes
the ReadyConnect Concierge? product, and the traditional lead generation product
decreased due to these factors.
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Revenues from the referral model generated approximately 27% of total Move
revenues for the three months ended
For the three months endedDecember 31, 2022 , Segment EBITDA at theDigital Real Estate Services segment decreased$50 million , or 28%, as compared to the corresponding period of fiscal 2022, mainly driven by the lower revenues discussed above and the$13 million , or 7%, negative impact of foreign currency fluctuations, partially offset by lower broker commissions at REA Group. For the six months endedDecember 31, 2022 , revenues at theDigital Real Estate Services segment decreased$75 million , or 9%, as compared to the corresponding period of fiscal 2022. Revenues at REA Group decreased$41 million , or 8%, to$492 million for the six months endedDecember 31, 2022 from$533 million in the corresponding period of fiscal 2022 due to the$46 million negative impact of foreign currency fluctuations. Higher revenues due to price increases, increased depth penetration for Australian residential and commercial products and increased penetration of Premiere Plus and higher revenues at REAIndia were partially offset by the impact of lower national listings on residential products and a decrease in financial services revenue driven by lower settlements. Revenues at Move decreased$34 million , or 10%, to$315 million for the six months endedDecember 31, 2022 from$349 million in the corresponding period of fiscal 2022, primarily driven by the impact of the macroeconomic environment on the housing market, including higher interest rates. The market downturn resulted in lower lead volumes, which decreased 34%, and lower transaction volumes. Revenues from the referral model, which includes the ReadyConnect Concierge? product, and the traditional lead generation product decreased due to these factors. Revenues from the referral model generated approximately 29% of total Move revenues for the six months endedDecember 31, 2022 as compared to approximately 32% in the corresponding period of fiscal 2022. For the six months endedDecember 31, 2022 , Segment EBITDA at theDigital Real Estate Services segment decreased$69 million , or 22%, as compared to the corresponding period of fiscal 2022, primarily due to the lower revenues discussed above, the$22 million , or 7%, negative impact of foreign currency fluctuations and higher employee and marketing costs related to strategic investments at bothMove and REA Group, partially offset by lower broker commissions at REA Group.
Subscription Video Services (19% of the Company's consolidated revenues in both
the six months ended
For the three months ended December 31, For the six months ended December 31,
2022 2021 Change % Change 2022 2021 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Circulation and subscription
(6) %$ 830 $ 873 $ (43) (5) % Advertising 47 55 (8) (15) % 111 114 (3) (3) % Other 10 10 - - % 23 21 2 10 % Total Revenues 462 498 (36) (7) % 964 1,008 (44) (4) % Operating expenses (292) (312) 20 6 % (598) (621) 23 4 % Selling, general and administrative (80) (100) 20 20 % (165) (187) 22 12 % Segment EBITDA$ 90 $ 86 $ 4 5 %$ 201 $ 200 $ 1 1 % For the three months endedDecember 31, 2022 , revenues at the Subscription Video Services segment decreased$36 million , or 7%, as compared to the corresponding period of fiscal 2022 due to the negative impact of foreign currency fluctuations. The$32 million increase in streaming revenues, primarily due to increased volume and pricing at Kayo and BINGE, and the$9 million increase in commercial subscription revenues due to the absence of COVID-19 related restrictions imposed in fiscal 2022 more than offset lower residential subscription revenues resulting from fewer residential broadcast subscribers and lower advertising revenues.Foxtel Group streaming subscription revenues represented approximately 26% of total circulation and subscription revenues for the three months endedDecember 31, 2022 as compared to 19% in the corresponding period of fiscal 2022. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$52 million , or 10%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022.
For the three months ended
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programming rights and production costs due to contractual increases and enhanced digital rights and higher entertainment programming rights costs due to the availability of content.
For the six months endedDecember 31, 2022 , revenues at the Subscription Video Services segment decreased$44 million , or 4%, as compared to the corresponding period of fiscal 2022 due to the negative impact of foreign currency fluctuations. The$63 million increase in streaming revenues, primarily due to increased volume and pricing at Kayo and BINGE, and the$23 million increase in commercial subscription revenues due to the absence of COVID-19 related restrictions imposed in fiscal 2022 more than offset lower residential subscription revenues resulting from fewer residential broadcast subscribers.Foxtel Group streaming subscription revenues represented approximately 26% of total circulation and subscription revenues for the six months endedDecember 31, 2022 as compared to 19% in the corresponding period of fiscal 2022. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$92 million , or 9%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. For the six months endedDecember 31, 2022 , Segment EBITDA increased$1 million , or 1%, as compared to the corresponding period of fiscal 2022, including the$19 million , or 9%, negative impact of foreign currency fluctuations. The revenue drivers discussed above and lower transmission costs were partially offset by higher sports programming rights and production costs due to contractual increases, enhanced digital rights and the timing of sporting events, primarily motorsports, and higher entertainment programming rights costs due to the availability of content.
The following tables provide information regarding certain key performance
indicators for the
As of December 31,
2022 2021
(in 000's)
Broadcast Subscribers
Residential(a) 1,401 1,564
Commercial(b) 230 218
Streaming Subscribers (Total (Paid))(c)
Kayo 1,136 (1,126 paid) 1,031 (1,013 paid)
BINGE 1,439 (1,375 paid) 1,037 (928 paid)
Foxtel Now 183 (177 paid) 219 (211 paid)
Total Subscribers (Total (Paid))(d) 4,414 (4,329 paid) 4,075 (3,937 paid)
For the three months ended December 31, For the six months ended December 31,
2022 2021 2022 2021
Broadcast ARPU(e) A$83 (US$55 ) A$82 (US$60 ) A$83 (US$56 ) A$82 (US$60 )
Broadcast Subscriber Churn(f) 12.9% 13.0% 13.6% 13.5%
(a) Subscribing households throughoutAustralia as ofDecember 31, 2022 and 2021. (b) Commercial subscribers throughoutAustralia as ofDecember 31, 2022 and 2021. Commercial subscribers are calculated as residential equivalent business units and are derived by dividing total recurring revenue from these subscribers by an estimated average Broadcast ARPU which is held constant through the year. (c) Total and Paid subscribers for the applicable streaming service as ofDecember 31, 2022 and 2021. Paid subscribers excludes customers receiving service for no charge under certain new subscriber promotions. (d) Total subscribers consists ofFoxtel Group's broadcast and streaming services listed above and its news aggregation streaming service. (e) Average monthly broadcast residential subscription revenue per user (excludingOptus ) (Broadcast ARPU) for the three and six months endedDecember 31, 2022 and 2021. (f) Broadcast residential subscriber churn rate (excludingOptus ) (Broadcast Subscriber Churn) for the three and six months endedDecember 31, 2022 and 2021. Broadcast subscriber churn represents the number of residential subscribers whose service is disconnected, expressed as a percentage of the average total number of residential subscribers, presented on an annual basis. 36 --------------------------------------------------------------------------------
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For the three months ended December 31, For the six months ended December 31,
2022 2021 Change % Change 2022 2021 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Circulation and subscription
17 %$ 831 $ 705 $ 126 18 % Advertising 131 141 (10) (7) % 225 231 (6) (3) % Other 15 11 4 36 % 22 16 6 38 % Total Revenues 563 508 55 11 % 1,078 952 126 13 % Operating expenses (240) (196) (44) (22) % (470) (392) (78) (20) % Selling, general and administrative (184) (168) (16) (10) % (356) (321) (35) (11) % Segment EBITDA$ 139 $ 144 $ (5) (3) %$ 252 $ 239 $ 13 5 % For the three months endedDecember 31, 2022 , revenues at theDow Jones segment increased$55 million , or 11%, as compared to the corresponding period of fiscal 2022, primarily due to higher circulation and subscription revenues driven by the$36 million and$18 million impacts from the acquisitions of OPIS and CMA in the third and fourth quarters of fiscal 2022, respectively. Digital revenues at theDow Jones segment represented 76% of total revenues for the three months endedDecember 31, 2022 , as compared to 72% in the corresponding period of fiscal 2022. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$6 million , or 1%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. For the six months endedDecember 31, 2022 , revenues at theDow Jones segment increased$126 million , or 13%, as compared to the corresponding period of fiscal 2022, primarily due to higher circulation and subscription revenues mainly driven by the$70 million and$36 million impacts from the acquisitions of OPIS and CMA in the third and fourth quarters of fiscal 2022, respectively. Digital revenues at theDow Jones segment represented 77% of total revenues for the six months endedDecember 31, 2022 , as compared to 73% in the corresponding period of fiscal 2022. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$15 million , or 2%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022.
Circulation and subscription revenues
For the three months ended December 31, For the six months ended December 31,
2022 2021 Change % Change 2022 2021 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Circulation and subscription
revenues:
Circulation and other $ 231 $ 228 $ 3 1 % $ 466 $ 449 $ 17 4 %
Professional information
business 186 128 58 45 % 365 256 109 43 %
Total circulation and
subscription revenues $ 417 $ 356 $ 61 17 % $ 831 $ 705 $ 126 18 %
Circulation and subscription revenues increased $61 million , or 17%, during the
three months ended December 31, 2022 as compared to the corresponding period of
fiscal 2022. Professional information business revenues increased $58 million ,
or 45%, primarily driven by the acquisitions of OPIS and CMA and the $7 million
increase in Risk & Compliance revenues. Circulation and other revenues increased
$3 million , or 1%, driven by growth in digital-only subscriptions, primarily at
The Wall Street Journal , partially offset by print circulation declines. Digital
revenues represented 69% of circulation revenue for the three months ended
December 31, 2022 , as compared to 67% in the corresponding period of fiscal
2022.
Circulation and subscription revenues increased $126 million , or 18%, during the
six months ended December 31, 2022 as compared to the corresponding period of
fiscal 2022. Professional information business revenues increased $109 million ,
or 43%, primarily driven by the acquisitions of OPIS and CMA and the $10 million
increase in Risk & Compliance revenues. Circulation and other revenues increased
$17 million , or 4%, driven by growth in digital-only subscriptions, primarily at
The
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The following table summarizes average daily consumer subscriptions during the three months endedDecember 31, 2022 and 2021 for select publications and for all consumer subscription products.(a) For
the three months ended
2022 2021 Change % Change
(in thousands, except %) Better/(Worse)
The Wall Street Journal
Digital-only subscriptions(c) 3,167 2,918 249 9 %
Total subscriptions 3,780 3,618 162 4 %
Barron's Group(d)
Digital-only subscriptions(c) 894 757 137 18 %
Total subscriptions 1,062 963 99 10 %
Total Consumer(e)
Digital-only subscriptions(c) 4,139 3,774 365 10 %
Total subscriptions 4,943 4,707 236 5 %
(a)Based on internal data for the periods from October 3, 2022 through January
1, 2023 and September 27, 2021 through December 26, 2021 , respectively, with
independent verification procedures performed by PricewaterhouseCoopers LLP UK .
(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 of The Wall Street Journal , Barron's Group and
Investor's Business Daily .
Advertising revenues
Advertising revenues decreased$10 million , or 7%, during the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022, mainly driven by the$8 million decrease in print advertising revenues primarily at The Wall Street Journal due to lower advertising spend within the technology and finance sectors. Digital advertising represented 59% of advertising revenue for the three months endedDecember 31, 2022 , as compared to 56% in the corresponding period of fiscal 2022. Advertising revenues decreased$6 million , or 3%, during the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022, driven by the$10 million decrease in print advertising revenues primarily at The Wall Street Journal due to lower advertising spend within the technology and finance sectors, partially offset by the$4 million increase in digital advertising revenues due to higher average yields. Digital advertising represented 61% of advertising revenue for the six months endedDecember 31, 2022 , as compared to 58% in the corresponding period of fiscal 2022.
Segment EBITDA
For the three months endedDecember 31, 2022 , Segment EBITDA at theDow Jones segment decreased$5 million , or 3%, as compared to the corresponding period of fiscal 2022, including$12 million and$6 million contributions from the acquisitions of OPIS and CMA, respectively, primarily due to increased employee and marketing costs, partially offset by the increased revenues discussed above.
For the six months ended
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of OPIS and CMA, respectively, primarily due to the increase in revenues discussed above, partially offset by increased employee and marketing costs.
For the three months ended December 31, For the six months ended December 31,
2022 2021 Change % Change 2022 2021 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Consumer $ 512 $ 594 $ (82) (14) % $ 979 $ 1,118 $ (139) (12) %
Other 19 23 (4) (17) % 39 45 (6) (13) %
Total Revenues 531 617 (86) (14) % 1,018 1,163 (145) (12) %
Operating expenses (392) (411) 19 5 % (758) (778) 20 3 %
Selling, general and
administrative (88) (99) 11 11 % (170) (193) 23 12 %
Segment EBITDA $ 51 $ 107 $ (56) (52) % $ 90 $ 192 $ (102) (53) %
For the three months ended December 31, 2022 , revenues at the Book Publishing
segment decreased $86 million , or 14%, as compared to the corresponding period
of fiscal 2022, driven by lower print and digital book sales primarily in the
U.S. market due to slowing consumer demand industry-wide, difficult frontlist
comparisons, the negative impact of foreign currency fluctuations and some
logistical constraints at Amazon. Softness in consumer demand is expected to
continue in the near-term. Digital sales decreased by 7% as compared to the
corresponding period of fiscal 2022 driven by lower e-book sales. Digital sales
represented approximately 19% of consumer revenues, as compared to 17% in the
corresponding period of fiscal 2022, and backlist sales represented
approximately 57% of total revenues during the three months ended December 31,
2022 . The impact of foreign currency fluctuations of the U.S. dollar against
local currencies resulted in a revenue decrease of $22 million , or 4%, for
the three months ended December 31, 2022 as compared to the corresponding period
of fiscal 2022.
For the three months ended December 31, 2022 , Segment EBITDA at the Book
Publishing segment decreased $56 million , or 52%, as compared to the
corresponding period of fiscal 2022, primarily due to the lower revenues
discussed above and higher manufacturing, freight and distribution costs related
to ongoing supply chain, inventory and inflationary pressures, partially offset
by lower costs due to lower sales volumes and lower employee costs. These supply
chain, inventory and inflationary pressures are expected to continue to impact
the business in the near term. To mitigate these pressures, the Company has
implemented price increases, will reduce headcount and continue to evaluate its
cost base.
For the six months ended December 31, 2022 , revenues at the Book Publishing
segment decreased $145 million , or 12%, as compared to the corresponding period
of fiscal 2022, primarily driven by lower print and digital book sales primarily
in the U.S. market due to slowing consumer demand industry-wide, difficult
frontlist comparisons, Amazon's reset of its inventory levels and rightsizing of
its warehouse footprint, which negatively impacted print book sales, and the
negative impact of foreign currency fluctuations. Digital sales decreased by 3%
as compared to the corresponding period of fiscal 2022 due to lower e-book
sales, partially offset by growth in downloadable audiobooks. Digital sales
represented approximately 21% of consumer revenues, as compared to 19% in the
corresponding period of fiscal 2022, and backlist sales represented
approximately 61% of total revenues during the six months ended December 31,
2022 . The impact of foreign currency fluctuations of the U.S. dollar against
local currencies resulted in a revenue decrease of $44 million , or 3%, for
the six months ended December 31, 2022 as compared to the corresponding period
of fiscal 2022.
For the six months ended December 31, 2022 , Segment EBITDA at the Book
Publishing segment decreased $102 million , or 53%, as compared to the
corresponding period of fiscal 2022, primarily due to the lower revenues
discussed above and higher manufacturing, freight and distribution costs related
to ongoing supply chain, inventory and inflationary pressures, partially offset
by lower costs due to lower sales volumes and lower employee costs.
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News Media (23% and 24% of the Company's consolidated revenues in the six months
ended
For the three months ended December 31, For the six months ended December 31,
2022 2021 Change % Change 2022 2021 Change % Change
(in millions, except %) Better/(Worse) Better/(Worse)
Revenues:
Circulation and subscription
(7) %$ 529 $ 565 $ (36) (6) % Advertising 253 290 (37) (13) % 466 513 (47) (9) % Other 66 68 (2) (3) % 137 136 1 1 % Total Revenues 579 638 (59) (9) % 1,132 1,214 (82) (7) % Operating expenses (319) (309) (10) (3) % (633) (625) (8) (1) % Selling, general and administrative (201) (218) 17 8 % (422) (444) 22 5 % Segment EBITDA$ 59 $ 111 $ (52) (47) %$ 77 $ 145 $ (68) (47) % Revenues at the News Media segment decreased$59 million , or 9%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. Advertising revenues decreased$37 million as compared to the corresponding period of fiscal 2022, primarily driven by the$27 million negative impact of foreign currency fluctuations and lower print advertising revenues, partially offset by digital advertising growth at NewsUK , mainly atThe Sun , andWireless Group . Circulation and subscription revenues decreased$20 million as compared to the corresponding period of fiscal 2022, primarily driven by the$31 million negative impact of foreign currency fluctuations, as the decline in print volumes was more than offset by cover price increases and digital subscriber growth across key mastheads. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$65 million , or 10%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. Segment EBITDA at the News Media segment decreased by$52 million , or 47%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022, including the$5 million , or 5%, negative impact of foreign currency fluctuations, primarily due to the lower revenues discussed above, approximately$22 million of higher costs related to TalkTV and other digital investments, primarily at News Corp Australia, the$21 million impact of higher pricing on newsprint costs and higher employee and marketing costs, partially offset by cost savings initiatives. Newsprint, production and distribution costs are expected to be higher in fiscal 2023 than the prior year due to supply chain and inflationary pressures, partially offset by the Company's continued transition to digital products. Revenues at the News Media segment decreased$82 million , or 7%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. Advertising revenues decreased$47 million as compared to the corresponding period of fiscal 2022, driven by the$49 million negative impact of foreign currency fluctuations. Digital advertising growth, primarily atNews UK and Wireless Group , and print advertising growth at News Corp Australia were largely offset by the decline in print advertising at NewsUK . Circulation and subscription revenues decreased$36 million as compared to the corresponding period of fiscal 2022, driven by the$63 million negative impact of foreign currency fluctuations, as cover price increases, digital subscriber growth across key mastheads and higher content licensing revenues, primarily at News Corp Australia, were partially offset by print volume declines. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$127 million , or 11%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. Segment EBITDA at the News Media segment decreased by$68 million , or 47%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022, including the$7 million , or 5%, negative impact of foreign currency fluctuations, primarily due to the lower revenues discussed above, approximately$50 million of higher costs related to TalkTV and other digital investments, primarily at News Corp Australia, the$41 million impact of higher pricing on newsprint costs and higher employee and marketing costs, partially offset by cost savings initiatives.
News Corp Australia
Revenues were$252 million for the three months endedDecember 31, 2022 , a decrease of$36 million , or 13%, compared to revenues of$288 million in the corresponding period of fiscal 2022. Advertising revenues decreased$18 million driven by the$12 million negative impact of foreign currency fluctuations and lower print and digital advertising. Circulation and subscription revenues decreased$10 million due to the$11 million negative impact of foreign currency fluctuations and print volume declines, partially offset by cover price increases and digital subscriber growth. The impact of foreign currency 40 --------------------------------------------------------------------------------
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fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$26 million , or 10%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. Revenues were$507 million for the six months endedDecember 31, 2022 , a decrease of$34 million , or 6%, compared to revenues of$541 million in the corresponding period of fiscal 2022. Circulation and subscription revenues decreased$16 million due to the$20 million negative impact of foreign currency fluctuations and print volume declines, partially offset by cover price increases, digital subscriber growth and higher content licensing revenues. Advertising revenues decreased$15 million due to the$20 million negative impact of foreign currency fluctuations, partially offset by higher print advertising revenues, as the first quarter of fiscal 2022 was impacted by COVID-19 related restrictions within certain states. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$46 million , or 8%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022.
News
Revenues were$238 million for the three months endedDecember 31, 2022 , a decrease of$25 million , or 10%, as compared to revenues of$263 million in the corresponding period of fiscal 2022. Advertising revenues decreased$12 million , primarily driven by the$10 million negative impact of foreign currency fluctuations and lower print advertising revenues, partially offset by higher digital advertising revenues, mainly atThe Sun . Circulation and subscription revenues decreased$10 million due to the$20 million negative impact of foreign currency fluctuations and print volume declines, partially offset by cover price increases and higher digital subscribers. The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$33 million , or 13%, for the three months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022. Revenues were$459 million for the six months endedDecember 31, 2022 , a decrease of$48 million , or 9%, as compared to revenues of$507 million in the corresponding period of fiscal 2022. Circulation and subscription revenues decreased$21 million due to the$43 million negative impact of foreign currency fluctuations and print volume declines, partially offset by cover price increases. Advertising revenues decreased$19 million due to the$19 million negative impact of foreign currency fluctuations and lower print advertising revenues, partially offset by higher digital advertising revenues, mainly atThe Sun . The impact of foreign currency fluctuations of theU.S. dollar against local currencies resulted in a revenue decrease of$70 million , or 13%, for the six months endedDecember 31, 2022 as compared to the corresponding period of fiscal 2022.
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 ofDecember 31, 2022 , the Company's cash and cash equivalents were$1.3 billion . The Company also has available borrowing capacity under its new revolving credit facility (the "Revolving Facility") 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 ofDecember 31, 2022 , the Company's consolidated assets included$740 million in cash and cash equivalents that were held by its foreign subsidiaries. Of this amount,$97 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 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. 41 --------------------------------------------------------------------------------
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Issuer Purchases of
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 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. As ofDecember 31, 2022 , the remaining authorized amount under the Repurchase Program was approximately$643 million . Stock repurchases commenced onNovember 9, 2021 . During the three and six months endedDecember 31, 2022 , the Company repurchased and subsequently retired 1.9 million and 6.9 million shares, respectively, of Class A Common Stock for approximately$31 million and$115 million , respectively, and 1.0 million and 3.5 million shares, respectively, of Class B Common Stock for approximately$16 million and$59 million , respectively. During the three and six months endedDecember 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 . See Note 7-Equity in the accompanying Consolidated Financial Statements.
Dividends
InAugust 2022 , 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. The dividend was paid onOctober 12, 2022 to stockholders of record as ofSeptember 14, 2022 . 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
Net cash provided by operating activities for the six months ended
For the six months ended
Net cash provided by operating activities decreased by$269 million for the six months endedDecember 31, 2022 as compared to the six months endedDecember 31, 2021 . The decrease was primarily due to lower Total Segment EBITDA and higher working capital, partially offset by lower restructuring and tax payments.
Net cash used in investing activities for the six months ended
For the six months ended
Net cash used in investing activities increased by$88 million for the six months endedDecember 31, 2022 , as compared to the six months endedDecember 31, 2021 . During the six months endedDecember 31, 2022 , the Company used$217 million of cash for capital expenditures, of which$84 million related toFoxtel , and$107 million for investments and acquisitions. During the six months endedDecember 31, 2021 , the Company used$208 million of cash for capital expenditures, of which$89 million related toFoxtel , and$67 million for investments and acquisitions.
Net cash used in financing activities for the six months ended
For the six months ended
Net cash used in financing activities increased by$114 million for the six months endedDecember 31, 2022 , as compared to the six months endedDecember 31, 2021 . During the six months endedDecember 31, 2022 , the Company had$462 million of borrowing repayments, primarily related toFoxtel's U.S. private placement senior unsecured notes that matured inJuly 2022 , 42 --------------------------------------------------------------------------------
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$178 million of stock repurchases of outstanding Class A and ClassB Common Stock under the Repurchase Program and dividend payments of$89 million toNews Corporation stockholders and REA Group minority stockholders. The net cash used in financing activities was partially offset by new borrowings of$407 million related toFoxtel . During the six months endedDecember 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 toNews 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.
Reconciliation of Free Cash Flow and Free Cash Flow Available to
Free cash flow and free cash flow available toNews Corporation are non-GAAP financial measures. Free cash flow is defined as net cash provided by operating activities, less capital expenditures, and free cash flow available toNews Corporation is defined as free cash flow, less REA Group free cash flow, plus cash dividends received from REA Group. Free cash flow and free cash flow available toNews 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 and free cash flow available toNews 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 believes free cash flow provides useful information to management and investors about the Company's liquidity and cash flow trends. The Company believes free cash flow available toNews Corporation , which adjusts free cash flow to exclude REA Group's free cash flow and include dividends received from REA Group, provides management and investors 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 inAustralia 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 toNews 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 both free cash flow and free cash flow available toNews Corporation is that they do not represent the total increase or decrease in the cash balance for the period. Management compensates for the limitation of free cash flow and free cash flow available toNews 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 and free cash flow available toNews Corporation : For the six months ended December 31, 2022 2021 (in millions) Net cash provided by operating activities $ 161$ 430 Less: Capital expenditures (217) (208) Free cash flow (56) 222 Less: REA Group free cash flow (96)
(121)
Plus: Cash dividends received from REA Group 50
43
Free cash flow available to News Corporation $ (102)
Free cash flow in the six months ended
Free cash flow available to
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Borrowings
As ofDecember 31, 2022 , 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$3.0 billion , including the current portion. 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.
News Corp Borrowings
As ofDecember 31, 2022 , the Company had (i) borrowings of$1,980 million , consisting of its outstanding 2021 Senior Notes, 2022 Senior Notes and Term A Loans and (ii)$750 million of undrawn commitments available under the Revolving Facility. Foxtel Group Borrowings As ofDecember 31, 2022 , theFoxtel Debt Group had (i) borrowings of approximately$774 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$134 million available under the 2017 Working Capital Facility and 2019 Credit Facility. During the three months endedSeptember 30, 2022 , theFoxtel Group repaid itsU.S. private placement senior unsecured notes that matured inJuly 2022 using capacity under the 2019 Credit Facility. In addition to third-party indebtedness, theFoxtel Debt Group has related party indebtedness, includingA$700 million of outstanding principal of shareholder loans andA$200 million of available shareholder facilities from the Company. The shareholder loans bear 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 bears 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 with Telstra which can be used to finance cable transmission costs due to Telstra. The Telstra Facility bears 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 of
All of the Company's borrowings contain customary representations, covenants and
events of default. The Company was in compliance with all such covenants
at
See Note 6-Borrowings in the accompanying Consolidated Financial Statements for
further details regarding the Company's outstanding debt, including additional
information about interest rates, maturities and covenants 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 operations.
In December 2022 , the Company extended the lease at 1211 Avenue of the Americas
in New York, New York through fiscal 2042. The location houses the Company's
corporate headquarters as well as the executive and editorial offices for Dow
Jones
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and the
During September andDecember 2022 , the Company amended and extended certain sports programming rights agreements. As a result, the Company has presented its commitments associated with its sports programming rights in the table below. As of December 31, 2022 Payments Due by Period Less than 1 More than 5 Total year 1-3 years 3-5 years years (in millions) Sports programming rights 3,959 499 1,038 1,036 1,386
The Company's remaining commitments as of
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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