News Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• News Corp's third quarter results reflect strategic transformation, with net income from continuing operations rising 67% to $107 million, revenues up 1% to $2 billion despite currency headwinds. Total segment EBITDA increased 12% with margin expanding to 14.4%. Adjusted revenues were up 2% and adjusted total segment EBITDA expanded 15%.
• Divested Foxtel to DAZN, transferring $724 million of Foxtel debt off the balance sheet and repaying shareholder loans. Received an equity interest in DAZN. Focus on three core pillars: Dow Jones, Digital Real Estate, and Book Publishing.
• Dow Jones had 6% revenue growth, margin rose to 23%, with digital circulation revenue up 14%. Acquired Oxford Analytica and DragonFly Intelligence. Professional info biz up 6%, Risk & Compliance up 11%, Dow Jones Energy up 10%.
• Digital Real Estate had profitability surge, REA revenues up 6% (11% constant currency), Realtor.com revenues up 2% with strong user engagement.
• Book Publishing saw revenue up 2%, EBITDA up 3%, with digital revenues up 3% and strength from Christian division and acquisitions.

Segment Performance

• Dow Jones: Reported revenues of $575 million, up 6% year-over-year. Segment EBITDA was $132 million, up 12% year-over-year with a margin of 23%. Digital revenue accounted for 82% of total Dow Jones segment revenues. Professional information business revenues rose 6%, with Risk & Compliance up 11% and Dow Jones Energy up 10%. Circulation revenues rose 7%, with digital circulation revenue up 14%.
• Digital Real Estate: Revenues were $406 million, up 5% year-over-year. Segment EBITDA was $124 million, up 19% year-over-year. REA revenues rose 6% (11% on a constant currency basis). Realtor.com revenues rose 2%.
• Book Publishing: Revenues were $514 million, up 2% year-over-year. EBITDA was $64 million, up 3% year-over-year. Digital revenues grew 3%, with backlist contributing 65% of consumer revenues.
• News Media: Revenue was $514 million, down 8% year-over-year. Segment EBITDA was up 22% year-over-year driven by cost savings initiatives.

Guidance

• Dow Jones: Focus on B2B growth, circulation revenue growth expected similar to Q2.
• Digital Real Estate: Australian residential listings for April down 11% due to holiday timing. Realtor.com to focus on technology improvements.
• Book Publishing: Facing difficult Q4 comparisons.
• News Media: Expected to benefit from cost initiatives, but advertising likely volatile due to macro uncertainty.

Risks

• Economic and geopolitical uncertainties.
• Tariff impacts, though direct impact on News Corp is expected to be immaterial currently.
• Factiva dispute had a 200 basis point impact on professional info revenues, though beginning to resolve.
• Volatility in advertising conditions.

Q: On the Dow Jones business, any color on Q4 investment and how Dow Jones margins can get to higher levels?

A: No particular startling increase in investment. Confident in continuing growth of revenue and profits at professional info biz. Margins expected to expand with growth of professional info service business and operating leverage from consumer business growth.

Q: On the 200 basis point impact from Factiva dispute, expect similar impact in Q4? Longer-term margins target?

A: Impact will start to reduce in Q4. Margins expected to expand due to growth of professional info service business, operating leverage from consumer business, and cost discipline.

Q: How prioritizing capital allocation across internal investments, external investments, capital returns? Any M&A opportunities?

A: Focus on 3 core pillars. Will look for opportunities in those areas without overpaying. Returned 70% of available free cash flow to investors last fiscal. Recently upgraded to investment grade, increasing optionality.

Q: Expect rationalization/simplification of company further? Thoughts on real estate and Factiva?

A: Foxtel deal is example of simplifying focus. Focused on realizing maximum value for shareholders. Factiva issue beginning to resolve, and real estate underappreciated in current market.

Q: On Dow Jones consumer subs converting to higher-priced plans, churn impact and elasticity?

A: Learning about price elasticity with dynamic pricing. Aim to reduce churn and maximize revenue with expertise and tools available.

Q: Churn impact from customers moving to non-promotion plans and elasticity of consumer subs?

A: Learning about price elasticity. Advanced AI helps in identifying cohorts, aiming to reduce churn and maximize revenue.