At this time, I would like to turn the conference over to Mike Florin, Senior Vice President and Head of Investor Relations.
We issued our earnings press release about 30 minutes ago, and it’s now posted on our website at newscorp.com.
On the call today are Robert Thomson, Chief Executive; and Susan Panuccio, Chief Financial Officer.
Additionally, this call will include certain non-GAAP financial measurements, such as total segment EBITDA, adjusted segment EBITDA, and adjusted EPS.
For us, the first quarter was the most profitable of its kind since the relaunch of News Corp in 2013, continuing the trends that were evident in the last financial year and building on those rapid rates of growth.
That the company’s purpose has endured and indeed thrived through such challenging times is a tribute to Rupert and Lachlan Murdoch and the culture they created and have curated.
It is worth bearing in mind that this increase follows a 21% increase in profitability in the first quarter last year.
It is a very different buyback to that which was approved in 2013 when we were unsure about share dislocation at the time of the separation from Fox.
We now have confidence in our performance, our resilience, our ability to generate cash for our investors, and our potential.
One noteworthy sign of that optionality is our ability to capitalize on the patent success of the Foxtel streaming strategy, which was highlighted during the Foxtel Strategy Day.
We are pleased with the agreements we have reached and the work that has progressed on revaluing content, but we have always regarded the digital ad market as a separate issue, and the release of an unredacted complaint by the Texas Attorney General last month has highlighted the extent of the problem.
Overall, the Professional Information Business experienced a solid 13% increase in revenues, and that should expand when we complete the acquisition of OPIS, which is expected to close early next calendar year.
The past few weeks have highlighted the importance of intelligence, about energy and carbon markets, and we fully expect to become a world leader in that area.
housing market is sturdy with price rises moderating, more properties coming to the market, and longer listing times, all of which work in our favor.
That said, as an open platform, we do see opportunities to be a marketplace for the industry, including iBuyer, such as Opendoor, providing them with the same kind of dependable and trusted information that agents and consumers alike have valued.
So we believe that positive market conditions will likely continue as the country returns to a semblance of normalcy.
There has been a resurgence of interest in printed books as their tactility and talismanic quality is increasingly important at a time when many people have screen fatigue.
In Subscription Video Services, the first quarter built on the significant progress made in FY ’21 in reshaping the Foxtel Group as a streaming-led business with improved revenues, profitability, and cash generation.
While there will always be a certain seasonality in sports viewing in Australia, Kayo is quickly establishing itself as a year-round provider as it now offers 50 sports in total and is furnishing and engaging off-season programming for the football tragics ahead of the new season early next year.
Foxtel’s appeal was further broadened with the launch of the Flash streaming news service, featuring a nonpareil collection of 20 local and global news sources with content for all political persuasions.
Together, these deals will contribute annual revenues in the nine figures to News Corp, clearly putting our news businesses on a more profitable part.
and will complement talkTV, which is scheduled to launch in the early months of 2022, with Pierce Morgan taking a global role across our broadcast and news properties.
In the U.S., the New York Post, once legendarily loss-making, is now contributing to segment profitability and is an increasingly important voice in the national political debate.
Clearly, there are macroeconomic pressures affecting certain companies, but our increasingly digital orientation has bolstered our ability to weather the pandemic and deal with the economic uncertainty in some of our markets.
Fiscal 2022 first-quarter total revenues were over $2.5 billion, up 18%, marked by higher revenue growth across all our key segments, notably at Digital Real Estate Services.
Total segment EBITDA was $410 million, up 53% versus the prior year, the highest quarterly growth rate since 2017 despite the challenges from the lockdowns in Australia and comparing against 21% total segment EBITDA growth in the prior year.
Segment EBITDA rose 16% to $138 million or 21% on an adjusted basis despite the higher investment spending at Move and REA and tough comparisons against the prior year cost declines implemented to counter the impact of COVID.
With home prices at record highs and supply limited, lead volumes fell approximately 18% compared to over 40% growth last year, albeit with leads still around 15% higher than pre-pandemic levels.
Results benefited from $43 million of contribution from the Mortgage Choice acquisition and $8 million from the consolidation of Elara, which has been rebranded to REA India.
The revenue growth was also driven by an 11% increase in new buy listings despite lockdowns across multiple states, including restrictions on physical inspections in Melbourne.
Revenues for the quarter were $510 million, up 3% versus the prior year, benefiting from higher streaming revenues and a modest benefit from positive currency fluctuations, partially offset by lower broadcast and commercial subscription revenues.
Broadcast ARPU increased 4% from the prior year to AUD82, mitigating subscriber volume declines consistent with Foxtel’s strategy of focusing on higher ARPU subscribers and fewer low-cost offers.
Product innovation continued with the launch of iQ5, an IP-enabled set-top box; the announcement of plans to partner with Comcast and Sky on the launch of Sky Glass and the launch of a third streaming product, Flash, a dedicated live news streaming service, featuring more than 20 local and global live news services.
The improvement was primarily driven by $34 million of lower sports costs benefiting from the $36 million of negative impact seen in the first quarter of fiscal 2021 related to deferred sports cost from the fourth quarter of fiscal 2020.
Circulation and subscription revenues increased 12%, including 13% circulation revenue growth, primarily reflecting the acquisition of IBD and the continued strong volume gains in digital-only subscriptions.
Digital advertising trends remained robust, up 38% on top of 14% growth in the first quarter of the prior year, and accounted for 61% of total advertising revenues.
Dow Jones segment EBITDA for the quarter rose 32% to $95 million, with EBITDA margins improving by almost three percentage points to 21% despite an 11% increase in total cost, which included IBD and higher employee costs.
This quarter benefited from a rebound in Christian Publishing, which was more exposed to the closure of retail stores in the prior year and higher sales in the U.K.
The backlist represented 62% of revenues, up two percentage points from last year, underscoring the importance of this steady, high-margin revenue stream and a key factor behind the acquisition of HMH.
Revenues for the quarter were $576 million, up 18% versus the prior year, benefiting from the continued recovery in the advertising market, strong growth in circulation and subscription revenues, and a $25 million or 5% positive impact from foreign currency fluctuations.
Circulation and subscription revenues rose 16%, which included a $13 million or 5% benefit from currency fluctuations, strong digital subscriber growth, incremental revenues from our platform agreements, and cover price increases.
Segment EBITDA of $34 million increased $56 million compared to the prior year, reflecting higher revenues, cost savings at News UK and News Corp Australia, and a modest positive contribution from the New York Post.
Like many companies, we are closely monitoring supply chain issues, particularly in book publishing and our mastheads, as well as the impact of wage inflation on talent and retention.
At Digital Real Estate Services, Australian residential listings for October rose 16%, and we are encouraged that restrictions on physical inspections, notably in Melbourne, have eased.
The rate of cost increase year-on-year in the first quarter was exacerbated by the COVID-19 savings initiatives in the prior year across headcount and marketing.
We do expect seasonality in Kayo given the end of key winter codes but look forward to our summer schedule with The Ashes and the Cricket World Cup in the second quarter.
Overall, we continue to expect costs for the full year to be relatively stable in local currency.
capex was modestly higher in the first quarter, and we continue to expect full-year capex to be up $100 million versus the prior year.
So I’ve got one question and one just very quick follow-up.
And then secondly, just I know, Robert, you mentioned Zillow winding down the iBuyer model.
But clearly, we and our partners at Telstra recognize that the prospects of Foxtel have changed fundamentally and that we have a streaming success story.
As you’ll recall, we had been asked by the skeptics whether we would need to put more money into the company.
And as for Zillow, obviously, we had discussed ourselves getting into bricks and mortar, but we had a very clear sense of the digital priorities.
As for Zillow, look, the idea that it was simple to find a great plumber, plus a plant or a planter; the idea that prices were not variable, subject to vicissitudes; the idea that holding inventory was not itself costly, to me, those were rather strange ideas.
If prices are too high, two things will happen: buyers will start hesitating, more sellers will appear on the market.
There was a myth that millennials would not want to own their own home, that there would be a WeWork version of home, WeHome; or that car-sharing meant that we wouldn’t mind sharing bathrooms and lounges.
In the U.S., the eviction moratorium is mostly over, time and the market gradually increasing, our massive increases in audience traffic, 30% to 40% more than pre-COVID and leads 15% to 20% above pre-pandemic levels all tell us that there is deep demand and ensure we’re rather excited about REALTOR’s prospects now and far into the future.
In the News Media business, I was wondering if you could sort of pontificate or give us an idea of what you think the overall opportunity is, even longer-term, from licensing fees from tech platforms sort of over time.
Well, first of all, on News Media, what you’re seeing is really a transformation led by our teams. As Susan mentioned, whether it be ad revenue, which, in the U.K., was up 36%; Australia, 5%; the New York Post, 32%.
And frankly, all we can say, given the constraints of confidentiality, is that the deals mean that comfortably over nine figures are flowing into the news companies in return for the highest-quality news services in three separate continents.
We have always kept the ad tech issue to one side, as I strongly believe that there were two components in need of resolution: the value of content and digital ad dysfunction.
And I think the Foxtel team did a great job of talking about this at the Strategy Day around the great content they have within sports, particularly the AFL, the NRL, and the cricket contracts that they have.
My first question, you’ve talked about, in relation to a question from one of the other guys on the phone, that you’re — an ongoing review of Foxtel from a strategic standpoint.
The local newspaper business at Dow Jones, which we presumed would struggle, didn’t turn out to be the case; Amplify, which found a bit of home; News America Marketing, which was less meaningful to us as print sales declined somewhat; Unruly, which has found a welcome home elsewhere and with whom we still have a relationship.
So we will constantly be institutionally introspective, reviewing our structure, whether Foxtel or Digital Real Estate or as we’ve done to designate Dow Jones as a separate segment so that you can see, not only the potential there but also to be clear about the very positive progress that the team is making in News Media.
As you know, we don’t give the EBITDA number, but the year-on-year difference was a $6 million negative in relation to realtor.
Look, clearly, we’re focused on the buyback, and we’re now in a position to begin the buyback as we’ve had to wait until the earnings announcement given the regulatory restrictions of the quiet period.
The pacing depends on being rational about the trends in the market, but this is a very different buyback to that initiated at the time of the split.
So as I mentioned, now that the quiet period is almost over, you will soon hear the sound of buyback.
And Brian, just in relation to your question on the content licensing, we haven’t given out that number, apart from saying it was going to be in the nine figures.