News Corporation (NWSA Quick Quote – ) reported strong second quarter fiscal 2022 results, with both the top and bottom lines improving year-over-year and beating the Zacks Consensus Estimate. The company primarily witnessed strength in its Digital Real Estate Services, Dow Jones and Book Publishing divisions. Profitability in the News Media segment rose sharply due to the recovery in the advertising market. At the same time, Foxtel's total number of streaming subscribers grew significantly.

Management remains optimistic about its acquisitions of oil price information services and basic chemicals businesses that may enhance Dow Jones' information services business. News Corp. expanded its multi-year global agreement with Apple Inc. The deal will help generate subscription and advertising revenue for the global news site.

Shares of this Zacks Rank #3 (Hold) company have risen 5.8% over the past year, while declining 26%.

Quarterly Details

News Corp. reported adjusted quarterly earnings per share of 44 cents. The total figure beat the Zacks Consensus Estimate of 16 cents and was a significant improvement over the 34 cents of adjusted earnings reported in the same quarter last year.

Total revenue of $2,717 million exceeded the Zacks Consensus Estimate of $2,584 million. Revenues increased 13 percent from year-ago levels, primarily reflecting growth in real estate and advertising and recent acquisitions. Adjusted revenue increased 8 percent.

Total segment EBITDA increased 18% year-over-year to $586 million due to higher revenues. This was partially offset by higher costs in all operating segments, including the impact of recent acquisitions. Adjusted total segment EBITDA increased 16%.

Segmentation details

Digital Real Estate Services revenue increased 35% year-over-year to $456 million, driven by strong performance from Move and REA Group, as well as the acquisitions of Mortgage Choice and REA India (renamed from Elara). Adjusted segment revenue grew 22%, while adjusted EBITDA grew 29%.

Move's revenue grew 9% to $169 million due to increased real estate revenue. Real estate revenue accounted for 86 percent of Move's total revenue and increased strength in the referral model and traditional lead generation products by 13 percent. The referral model generated nearly 32% of Move's total revenue. Move's internal data shows that the monthly average unique users on the realtor.com website and mobile site grew 6% year-over-year to 85 million.

REA Group's revenue increased 56% to $287 million, driven by increased financial services and higher residential revenue in Australia. This metric was gained from the acquisition of REA India, which contributed $10 million.

Subscription video services segment revenue was $498 million, down 3 percent year-over-year. Revenue growth from Kayo and BIGE was offset by a decline in residential broadcast subscribers and a decline in commercial subscription revenue, primarily due to the ongoing pandemic. Adjusted segment revenue declined 3 percent, while adjusted EBITDA declined 31 percent.

Foxtel Group's streaming subscription revenue represents approximately 19% of total circulation and subscription revenue. As of December 31, 2021, Foxtel's total paid subscribers exceeded 3.9 million, an increase of 19% year-over-year. The upside can be attributed to an increase in BIGE and Kayo subscribers, partially offset by a decrease in residential radio subscribers. Broadcast subscriber churn increased to 13% from 17.5% last year. Broadcast ARPU increased 3% year-over-year to A$82 (US$60).

Revenues in the Dow Jones segment increased 14 percent year-over-year to $508 million, driven by increased advertising revenue, growth in circulation and subscription revenue, and an $18 million contribution from the acquisition of Investor's Business Daily (IBD). The division's digital revenues accounted for 72 percent of total revenues. Adjusted segment revenue increased 10%, while adjusted EBITDA increased 29%.

Distribution and subscription revenues grew 12% in the quarter under discussion. Circulation revenue grew 13 percent, driven by continued growth in digital-only subscriptions and the acquisition of IBD. Professional Information revenue grew 9% due to an increase in Risk & Compliance products and modest growth in Newswire. Digital distribution revenue accounted for 67 percent of distribution revenue.

Advertising revenue increased 23 percent, driven by an 18 percent increase in digital advertising revenue and a 29 percent increase in print advertising revenue. Digital advertising accounted for nearly 56% of total advertising revenue in the reported quarter.

During the quarter, Dow Jones Consumer Products averaged more than 4.7 million subscriptions overall, up 17 percent from the prior year quarter. This includes 126,000 IBD subscriptions. Pure digital subscriptions grew 23 percent. Subscriptions to The Wall Street Journal grew 12 percent to an average of more than 3.6 million. Digital-only subscriptions to The Wall Street Journal increased 19 percent to an average of more than 2.9 million subscriptions, representing 81 percent of The Wall Street Journal's total subscriptions.

The Book Publishing segment reported revenues of $617 million, up 13% year-over-year. Revenue growth was driven by strong consumer trends due to higher forefront sales of general titles and a $50 million contribution from the acquisition of Houghton Mifflin Harcourt's Books and Media division ("HMH"). This growth was also driven by the U.K. segment and the Christian books category, partially offset by a decline in children's book sales. Digital sales increased 8 percent year-over-year, benefiting from growth in downloadable audiobooks, which accounted for 17 percent of consumer revenue. Adjusted segment revenue increased 4 percent, while adjusted EBITDA declined 7 percent.

News Media segment revenue increased 11 percent year-over-year to $638 million in the quarter under review. This included a 1 percent favorable impact from foreign exchange fluctuations. Revenue in this segment was driven by the continued recovery of the advertising market from the previous year's pandemic-induced weakness and increased circulation and subscription revenue. In this segment, News Corp. in Australia and News Corp. in the U.K. grew revenues by 14 percent and 7 percent, respectively. The division's adjusted revenue grew 10%, while adjusted EBITDA soared 65%.

Circulation and subscription revenue increased 9%, driven by digital subscriber growth, higher cover prices, increased content licensing revenue and the positive impact of foreign exchange fluctuations. This was partially offset by a decline in print volumes.

Advertising revenue increased 17 percent due to improvements in enterprise digital advertising, a recovery in News UK print advertising and gains from currency fluctuations.

Digital revenue contributed 34 percent to news media segment revenue, compared to 31 percent a year ago. The same accounted for 32% of total newspaper masthead revenue. Closed digital subscribers to The Times and The Sunday Times were 399,000 as of December 31, 2021. News Corp Australia's metric was 909,000. The Sun's digital product reached nearly 163 million monthly unique subscribers worldwide in December 2021, while the New York Post's digital network reached approximately 160 million monthly unique subscribers in the same month .

Other financial aspects

News Corporation ended the quarter with cash and cash equivalents of $2,184 million, borrowings of $1,968 million and shareholders' equity of $8,383 million, excluding a non-controlling interest of $964 million.

Net cash provided by operating activities was $430 million for the six months ended December 31, 2021. The Company incurred $208 million in capital expenditures during the period. For the six-month period, News Corporation had available free cash flow of $144 million.

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