News Corp Q2 Earnings Call Highlights

News Corp (ASX: NWS) shares rallied to a fresh all-time high on Wednesday after reporting better-than-expected Q2 earnings.

Q2 Earnings Summary

• Revenue up 4.8% to $2.23 billion (3.2% ahead of consensus)

• EBITDA up 19.5% to $478 million (12% ahead of consensus)

• NPAT up 24.3% to $189 million (14.2% ahead of consensus)

• EPS up 22.2% to 33 cents (13.3% ahead of consensus)

Earnings Call Highlights

The below topics have been answered by CEO Robert Thomson and CFO Lavanya Chandrashekhar.

Foxtel deal: “We took a significant step towards simplification with the agreement to sell Foxtel to DAZN … for a total enterprise value of $3.4 billion, or approximately seven times Foxtel’s fiscal 2024 EBITDA. Upon closing, Foxtel’s outstanding shareholder loans will be repaid in full, including $574 million to News Corp, while its third-party debt will be transferred with the business.”

Shareholder return initiatives: “The sale of Foxtel should have a meaningful impact on our balance sheet … In the wake of this important deal, we were delighted that both S&P Global and Moody’s upgraded our credit rating to investment grade.”

REA performance: “At REA, the success story continues as the company achieved a quarterly record in revenue while extending its audience leadership … Listing volumes rose 4%, with yield growth at 14%.”

News media conditions and advertising performance/outlook: “At News Media, revenue fell a modest 2% to $570 million, but segment EBITDA grew an impressive 30% to $74 million … Overall ad trends moderated, while The Times posted its largest quarterly net additions of paid digital subscriptions in two years.”

Book publishing performance: “Book Publishing reported yet another exceptional quarter, with revenue expanding 8% to $595 million and segment EBITDA surging 19% to $101 million. Margins improved thanks to buoyant sales of backlist books and a particularly noteworthy 13% increase in audio revenue.”

AI partnerships: “We certainly lead the way in providing priceless content for Generative AI and remain vigilant in our pursuit of degenerative AI and abuses of our intellectual property. We are pleased with our partnership with OpenAI.”

Legal disputes: “Our legal action against the perplexing Perplexity is underway, and we look forward with relish to document discovery.”

Macroeconomic trends: “We are seeing a tangible increase in business confidence here in the US since the election … This should lead to less superfluous, gratuitous regulation, greater capital formation, increased opportunities for all Americans.”

Analyst Q&A Highlights

Foxtel Deal & Strategic Review

• “The Foxtel deal itself should reinforce the sense that we are constantly reviewing our portfolio and that deal is eloquent testimony that we don’t just review, we act decisively.”

• “I’m sure you’re aware that our shares have risen more than 26% over the past six months.”

Dow Jones Earnings Growth Acceleration

• “The Dow Jones circulation trends, the total subs were up 9% at around 5.9 million. Digital only up 13%.”

• “The Dow Jones team is generally confident that the phasing of subscribers from discounted entry-level offers to more standard pricing is proceeding well, and we will see that reflected in ensuing months.”

• “Digital circ revenues were up 8%, and the Dow Jones team is generally confident that the phasing of subscribers from discounted entry-level offers to more standard pricing is proceeding well.”

Spotify Partnership & Consumer Behavior

• “Audio overall was 13% higher. And dare I say, even e-books were 6% higher after a couple of years of relatively sluggish sales.”

• “I think what we are seeing is a change in consumer behavior and adaptation by both Spotify and Audible for that increased audience. And dare I say, we are the beneficiaries of that.”

Use of Foxtel Sale Proceeds & CapEx

• “We have $1 billion buyback provision in place. And you can see from our disclosures that that buyback is well underway.”

• “In last fiscal year, we returned 70% of our available free cash flow through the buyback.”

• “The upgrades to investment grade by both Moody’s and S&P Global in recent days reflect that reality.”

Revenue & Margin Outlook for Dow Jones & REA

• “The margin at Dow Jones rose from 27.9% to 29% and has every reason to believe in coming months and quarters and years, dare I say, that as PIB takes a larger share of revenue, that margin will continue to expand.”

• “81% of our revenues [are] being generated through digital compared to 78% last year.”

• “Backlist share rose from 60% to 61% of total sales in the most recent quarter. That backlist is a platform for future growth.”

Further Structural Optimization at News Corp

• “Foxtel deal itself is hard evidence that our consideration of the appropriate structure does not end with that significant decision.”

• “Seller-related revenues, new homes, and rentals, all of which have been a focus of investment by Damian and the team, rose 51% in the quarter compared to a year earlier.”

Dow Jones Investment & Growth Expectations

• “We see two areas of potential improvement from the Dow Jones team. One, we’re coming into the period of higher sales, and secondly, we are also seeing that the dynamic pricing system adopted by the team is starting to bring us benefits.”

Dow Jones Margin Expansion & Factiva Impact

• “Factiva had more than a 300-basis point impact on revenue. And so you can kind of do the math there on what that may have impacted from a margin perspective.”

• “We will continue to be disciplined on cost. We will continue to work towards improving profitability and really focus on monetizing all the subscriptions that we added last year.”

This article was generated with the support of AI and reviewed by an editor.