News Corporation Q2 FY2025 earnings call

Management Statement and Operational Highlights

• News Corp had continuing operations revenue of $2.24 billion (+5%) and profitability of $478 million (+20). Net income from continuing operations surged 58% to $306 million. EPS from continuing operations was $0.40.
• Sold Foxtel to DAZN for AUD 3.4 billion, with News Corp holding ~6% stake in DAZN. Foxtel financials now reported as discontinued operations.
• S&P Global and Moody's upgraded credit rating to investment grade. Strong partnership with OpenAI, legal action against Perplexity underway.
• Digital Real Estate: REA Group had record quarterly revenue, Realtor.com saw adjacency revenue growth. Dow Jones: Digital circulation revenue growth, Risk and Compliance and Energy segments grew. Book Publishing: Strong Bible and HarperCollins U.K. sales, audio revenue up. News Media: Cost savings and streaming transition benefits.

Segment Performance

• Digital Real Estate: Revenue increased 13% to $473 million, with segment EBITDA burgeoning 26% to $185 million. REA Group had outstanding revenue growth, and Realtor.com saw improved adjacency revenues.
• Dow Jones: Revenue grew 3% to $600 million, segment EBITDA expanded 7% to $174 million. Digital revenue accounted for 81% of total segment revenue. Risk and Compliance and Dow Jones Energy showed strong growth.
• Book Publishing: Revenue expanded 8% to $595 million, segment EBITDA surged 19% to $101 million. Driven by strong Bible sales, HarperCollins U.K. performance, and audio revenue growth.
• News Media: Revenue fell 2% to $570 million, but segment EBITDA grew 30% to $74 million. Benefited from streaming transition and cost savings.

Guidance

• Market trends mixed geographically; currency translation expected to be a headwind in second half.
• Dow Jones expects growth improvement in second half, with focus on B2B growth. Digital Real Estate expects modestly higher reinvestment in second half. Book Publishing expects more modest profit improvement. News Media anticipates challenging second half with higher costs.
• Dow Jones digital circulation revenues expected to be stronger in third quarter.

Risks

• Foxtel deal subject to regulatory approvals. Currency translation headwinds in second half. Transactional tariffs impacting demand for Dow Jones Energy's services. AI-related legal costs and IP concerns.

Question and Answer

Q: Discuss the structure of the Foxtel deal and News Corp's view on the DAZN equity. Also, update on strategic review.

A: The deal is subject to regulatory approvals. News Corp will be close partners with DAZN. The Foxtel deal reinforces the company's portfolio review and decision-making.

Q: Dow Jones earnings growth accelerating in second half. What's driving it?

A: Combination of Dow Jones circulation trends (digital circ revenues up 8%, total subs up 9%) and strong performance in Risk and Compliance and Energy segments.

Q: Thoughts on the Spotify deal after a year?

A: Proud of partnership with Spotify, audience expansion in audio books, and change in consumer behavior benefiting the company.

Q: Use of proceeds from Foxtel sale?

A: Focused on maximizing shareholder value, with $1 billion buyback provision in place and dividends being paid.

Q: Timing of lapping price increases and new products at REA and Book Publishing outlook?

A: Dow Jones pricing trends expected to continue, REA's new products and Book Publishing's backlist strength contribute to growth.

Q: More optimization of company structure?

A: Constantly reviewing structure, Foxtel deal is evidence of that, and Realtor.com's strong audience metrics show valuable assets.

Q: Dow Jones growth acceleration: revenue or earnings? Investment plans?

A: Expecting growth acceleration in both revenue and earnings, with ongoing investment in Dow Jones as opportunities arise.

Q: Dow Jones margin expansion and Factiva impact?

A: Factiva had over 300 basis point revenue impact. Second half focus on cost discipline and margin improvement.