News Corporation (NWSA) Q1 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary shows strong digital growth across segments, increased EBITDA, and profitability improvements, despite some advertising revenue declines. Management's optimism in the Q&A regarding digital subscription growth and HarperCollins' performance further supports a positive outlook. However, lack of clarity on AI revenue and advertising softness slightly temper enthusiasm. Overall, the positive trajectory in digital offerings and operational efficiency suggests a positive stock price movement over the next two weeks.

Key Financial Performance

Revenue $2.58 billion, up 3% year-over-year. The increase is attributed to record first quarter performance and growth in recurring circulation and subscription revenues.

Profitability (EBITDA) $415 million, up 14% year-over-year. This growth is driven by disciplined cost initiatives and a focus on digital-first strategy.

Profit Margin 16.1%, improved from 14.6% year-over-year, reflecting better cost management and revenue growth.

Net Income $144 million, up from $58 million year-over-year, indicating strong operational performance.

Earnings Per Share (EPS) $0.21, compared to $0.05 in the prior year, reflecting improved profitability.

Digital Real Estate Revenue $457 million, up 13% year-over-year, driven by strong performance at REA and increased listings.

Dow Jones Revenue $552 million, up 3% year-over-year, with digital revenue accounting for 82% of total segment revenues.

Book Publishing Revenue $546 million, up 4% year-over-year, supported by strong digital and backlist sales.

Subscription Video Services Revenue $501 million, up 3% year-over-year, with streaming revenues growing more than offsetting declines in linear revenues.

Advertising Revenue (Dow Jones) $85 million, down 7% year-over-year, impacted by softness in technology and finance categories.

Advertising Revenue (News Media) $521 million, down 5% year-over-year, reflecting challenging advertising conditions.

Digital Revenue Growth (HarperCollins) 15% year-over-year, driven by strong audiobook sales.

Digital-Only Subscriptions (Dow Jones) Increased by 15% year-over-year, contributing to overall circulation revenue growth.

Foxtel Advertising Revenue Growth Over 45%, indicating strong performance in streaming services.

Digital Revenue (HarperCollins) $129 million, up 15% year-over-year, driven by audiobook growth.

Total Segment EBITDA $415 million, up 14% year-over-year, reflecting strong operational performance across segments.

Adjusted Earnings Per Share $0.21, compared to $0.16 in the prior year, indicating improved profitability.

Digital Revenue (Realtor.com) Down 1% year-over-year, reflecting broader macro trends.

Circulation Revenue (Dow Jones) Rose 1% year-over-year, with digital-only subscriptions offsetting print volume declines.

Total Revenues $2.6 billion, up 3% year-over-year, driven by strong performance across segments.

Adjusted Total Segment EBITDA Rose 12% year-over-year, indicating strong operational efficiency.

Digital-Only Subscriptions Growth 99,000 sequentially, indicating strong demand for digital offerings.

B2B Products Revenue Growth (Dow Jones) 8% year-over-year, driven by upsells and new customers.

Risk & Compliance Revenue Growth (Dow Jones) 16% year-over-year, reflecting strong demand for new products.

Dow Jones Energy Revenue Growth 11% year-over-year, benefiting from new product launches.

HarperCollins Profitability Growth 25% year-over-year, driven by strong digital and backlist performance.

Foxtel Segment EBITDA $92 million, down just $1 million year-over-year, despite Hubbl costs.

News Media Segment EBITDA Increased 14% year-over-year, driven by cost-saving initiatives.

Adjusted Segment EBITDA (News Media) Increased 7% year-over-year, reflecting improved cost management.

ARPU (Foxtel) Rose 4% year-over-year to AUD89, indicating improved revenue per user.

Broadcast Churn (Foxtel) Fell 70 basis points sequentially, indicating improved customer retention.

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Operating Highlights

New Product Launches: Released several product enhancements this quarter, including a renovation designer tool powered by AI, dynamic mapping across all platforms, and a visual-based keyword search.

Acquisitions: Acquired A2i Systems, a leader in AI-powered fuel pricing solutions.

Market Expansion: REA submitted a bid to acquire the UK market leader, Rightmove.

Digital Real Estate Growth: In Australia, listings nationally rose 7% in the quarter and continued to increase through October.

Subscription Growth: Total Dow Jones digital-only subscriptions grew 15%, including a 10% increase at the journal.

Operational Efficiencies: Cost-saving initiatives led to improved profitability in the News Media segment despite challenging advertising conditions.

Profitability Growth: First quarter profitability surged 14% to $415 million, with a profit margin increase from 14.6% to 16.1%.

Strategic Shifts: Partnership with OpenAI to protect journalism integrity and challenge AI companies misusing their content.

Leadership Changes: Susan Panuccio is stepping down as CFO, with Lavanya Chandrashekar appointed as her successor.

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Risk or Challenges

Litigation Risks: News Corp is preparing for litigation against AI companies misusing its journalism, indicating a risk of legal battles that could impact resources and focus.

Advertising Market Volatility: The advertising market remains volatile, with digital advertising down 5%, which poses a risk to revenue stability.

Supply Chain Challenges: The company faces challenges in the property market due to high mortgage rates, which could affect sales and lead volume.

Regulatory Issues: Increasing regulatory vigilance globally may impact operations, particularly in the Risk & Compliance sector.

Competitive Pressures: Realtor.com is experiencing competitive pressures with higher marketing spend from competitors, which could affect market share and revenue.

Cost Management: Ongoing AI-related costs, including legal expenses, are expected to increase, which could impact overall profitability.

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Guidance & Outlook

Partnership with OpenAI: News Corp has formed a partnership with OpenAI to protect its journalism from misuse by AI companies.

Litigation against AI companies: News Corp is preparing to take legal action against companies that are using its journalism without permission.

Foxtel's future discussions: Active discussions are ongoing regarding the future of Foxtel to maximize shareholder value.

Acquisitions in book publishing: News Corp has made several acquisitions in book publishing to expand its professional information business at Dow Jones.

Digital-first strategy: The company is focused on executing a digital-first strategy supported by M&A and organic reinvestments.

Cost discipline: News Corp is implementing cost discipline across its operations to sustain and invest in journalism.

Revenue expectations: For Q1 2025, News Corp reported revenue of $2.58 billion, a 3% increase year-over-year.

Profitability expectations: Profitability surged 14% to $415 million, with an improved profit margin of 16.1%.

Circulation revenue growth: Circulation revenue growth is expected to improve in the second half of the year due to digital subscription pricing.

Digital real estate growth: Expectations for continued growth in digital real estate, with Australian residential listings up 14% in October.

Book publishing profit improvements: Further profit improvements in book publishing are anticipated in 2025, albeit at a more modest rate.

Subscription video services strategy: The strategy remains to scale streaming products while retaining high-value broadcast customers.

Cost expectations: Other segment costs are expected to be higher than last year due to ongoing AI-related costs.

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Shareholder Return Plan

Shareholder Return Plan: The company is in active discussions regarding the future of Foxtel and is examining changes to maximize overall value for shareholders. There is a noted discrepancy in the market's assessment of the value of REA in the portfolio, which is perceived to be undervalued compared to its actual worth.

Share Repurchase Program: None

Dividend Program: None

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Key Q&A

Q:Can you give us some sense on how much AI revenue came in during the quarter? How was it split between Dow Jones and the news media segment?

A:We can't be more specific than we already have been about the distribution of AI revenues, particularly from the OpenAI deal, but you will see it having an impact in the news media section.

Q:Can you dig in here a little bit, provide any color around that process? What gives you confidence you can bring those promo subs into higher paying tiers?

A:Overall circulation at Dow Jones rose 11% to 5.9 million subs, while digital-only rose 15% to 5.3 million. The team confidently expects the positive digital trajectory to continue.

Q:Just talk about sort of the sustainability of that? How much of that 250 basis points expansion is the title performance and the back book contribution?

A:HarperCollins is traveling well. Our margin improved to 14.8% from 12% in the same quarter last year. Digital sales rose 15% with audio surging 26%.

Q:Are there any business-specific issues or factors which are causing this underperformance in advertising?

A:We have seen some softness in finance and tech at Dow Jones. But overall, we do bear in mind that news media advertising is itself only 7% of total revenue.

Q:When should investors expect something to materially happen here? Is the delay because of this Murdoch family issue going through the court system?

A:It's been a rather dynamic quarter with the REA team bidding to acquire Rightmove. We are indeed looking to maximize value.

Q:How should we be thinking about the new rate of growth moving forward?

A:Risk & Compliance revenues are still continuing their express growth at around 16% year-on-year. The dispute at Factiva has impacted the numbers by about 6% this quarter.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the specific amount of AI revenue and its distribution between segments, citing confidentiality requirements. Additionally, there was a lack of clarity on the timeline for material changes regarding company optimization and the impact of the Murdoch family issue.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

NWSA Transcript

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The earnings call summary reveals strong financial performance, with revenue and EBITDA growth across key segments, margin expansion, and robust digital sales. The Q&A section highlights positive developments in AI partnerships and potential growth in risk and compliance. Despite some lack of detail, the overall sentiment is positive, driven by strong metrics and optimistic guidance. The absence of negative factors like declining margins or new offerings supports a favorable outlook, indicating a likely stock price increase of 2% to 8%.

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News Corporation (NWSA) Q1 2025 Earnings Call Transcript