News Corporation Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Gratitude and Performance: Acknowledged the efforts in securing Evan Gershkovich's release. Fourth quarter revenues grew 6% to ~$2.6 billion, profitability improved 11% to $380 million, fiscal 2024 was the second best year on record with profitability up 8% to $1.54 billion.
• Business Segments:
  • Digital Real Estate: Revenues up 21%, EBITDA up 25%, driven by REA's strong performance and Move's recovery efforts.
  • Dow Jones: Revenue up 4%, B2B growth robust, digital subscribers up 158,000 sequentially, digital advertising up 14%.
  • HarperCollins: Revenue up 15%, segment EBITDA up over 250%, digital sales up 12%, audiobooks surpassing e-books.
  • Subscription Video Services: Revenues up 1%, streaming subscribers at record high, broadcast ARPU up 6%.
  • News Media: Mixed performance, News UK improved but News Corp Australia faced challenges.
• Strategic Initiatives: Partnership with OpenAI, legal actions against Gen AI aggregators and advertising industry bias, Foxtel's strategic review with third-party interest.

Segment Performance

• Digital Real Estate Services: Segment revenues were $448 million, up 21% year-over-year on both reported and adjusted basis. Segment EBITDA was $135 million, up 25%. REA had strong growth with revenues rising 37% y-o-y, while Move's revenues were $143 million, down 2% y-o-y but showing signs of recovery in sell-side offerings, rentals, and new homes.
• Subscription Video Services: Revenues for the quarter were $506 million, up 1% y-o-y. Adjusted revenues rose 2% y-o-y. Streaming revenues accounted for 32% of circulation and subscription revenues. Total closing paid subscribers across Foxtel Group were nearly 4.7 million, with total paid streaming subscribers reaching a record 3.2 million, up 5% y-o-y.
• Dow Jones: Fourth quarter revenues were $566 million, up 4% y-o-y. Digital revenue accounted for 81% of total revenues. B2B growth was strong with PIB revenues rising 8%, including 12% growth at Risk & Compliance and 14% at Dow Jones Energy. Segment EBITDA grew 3% to $137 million.
• Book Publishing: Fourth quarter revenues were $512 million, up 15%. Segment EBITDA improved over 250% to $57 million. HarperCollins benefited from strong top-line growth, digital sales up 12%, and audiobooks exceeding e-books for the first time.
• News Media: Revenues for the quarter were $545 million, down 5% y-o-y. Segment EBITDA of $28 million declined 38% due to challenges at News Corp Australia, while News UK posted an improved performance.

Guidance

• Digital Real Estate: Anticipates real estate market recovery, focuses on modernizing technology, investing in content, and leveraging News Corp's network.
• Dow Jones: Expects continued B2B growth, improved circulation revenue through digital subscription step-up pricing, and focuses on cost efficiencies despite moderate expense increase.
• Book Publishing: Hopes for further profit improvements in 2025, building on backlist momentum and successful partnerships.
• News Media: Aims to enhance first-party data offerings, benefit from lower talkTV costs and operational efficiencies, and expects new revenue from OpenAI partnerships in 2025.

Risks

• Market and Competitive Risks: High interest rates impacting some businesses, competition from Gen AI aggregators and advertising industry bias posing legal and operational challenges.
• Strategic Review Uncertainty: Uncertainty around Foxtel's strategic review process and potential impact on the company's portfolio and shareholder value.

Question and Answer

• Q: David Karnovsky from JPMorgan on Foxtel third-party interest: A: Robert Thomson stated there are various processes in motion, with full faith in Foxtel's potential, and the company is evaluating the overture while continuing to assess the portfolio for shareholder value maximization.
• Q: Kane Hannan from Goldman Sachs on OpenAI deal: A: Robert Thomson mentioned the OpenAI agreement is meaningful, with guaranteed amount and joint product creation, but precise details couldn't be disclosed.
• Q: Entcho Raykovski from Evans & Partners on Foxtel transaction: A: Robert Thomson noted the process is full and fair, and Susan Panuccio mentioned shareholder loans are just shy of $600 million outstanding, with any transaction contemplating their treatment.
• Q: Brian Han from Morningstar on Move's traffic: A: Robert Thomson highlighted Move's sequential unique user growth and focus on tech improvement, with Susan Panuccio stating continued investment in the business expected.
• Q: Darren Leung from Macquarie on Foxtel targets: A: Robert Thomson emphasized undaunted ambitions for Foxtel, with Susan Panuccio noting changed landscape since 2021 Investor Day and streaming subscribers at all-time high.
• Q: Lucy Huang from UBS on cost momentum in FY '25: A: Susan Panuccio discussed cost cadence varying by segment, with REALTOR expecting reinvestment, News Media benefiting from cost savings, Dow Jones expecting mid-single digit cost increase, and HarperCollins costs stabilizing.
• Q: Alan Gould from Loop Capital on OpenAI negotiations and company structure: A: Robert Thomson stated preference for negotiation over litigation with Gen AI companies and emphasized the value of all divisions together, with Susan Panuccio highlighting News Media's role in providing audience and content complementarity across the portfolio.
• Q: Craig Huber from Huber Research on company simplification process: A: Robert Thomson stated the process is ongoing, with significant regulatory work completed, but no specific date could be given, and it's coinciding with Foxtel's strategic review.