News (NWS) - 2023 Q2 - Quarterly Report

Part I Item 1. Financial Statements The company's financial statements for the period ended December 31, 2022, reflect a significant decline in revenues, net income, and operating cash flow compared to the prior year Consolidated Statements of Operations Total revenues for Q2 FY2023 decreased 7% to $2.52 billion, with net income attributable to stockholders falling 71% to $67 million Consolidated Statements of Operations Highlights (in millions, except per share amounts) | Metric | Q2 FY2023 (3 months ended Dec 31, 2022) | Q2 FY2022 (3 months ended Dec 31, 2021) | YoY Change | H1 FY2023 (6 months ended Dec 31, 2022) | H1 FY2022 (6 months ended Dec 31, 2021) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $2,521 | $2,717 | -7.2% | $4,999 | $5,219 | -4.2% | | Income before income tax | $155 | $361 | -57.1% | $256 | $699 | -63.4% | | Net income | $94 | $262 | -64.1% | $160 | $529 | -69.8% | | Net income attributable to News Corporation stockholders | $67 | $235 | -71.5% | $107 | $431 | -75.2% | | Diluted EPS | $0.12 | $0.40 | -70.0% | $0.18 | $0.72 | -75.0% | Consolidated Statements of Comprehensive Income Comprehensive income attributable to stockholders increased to $277 million in Q2 FY2023, primarily due to positive foreign currency translation adjustments Comprehensive Income (in millions) | Metric | Q2 FY2023 (3 months ended Dec 31, 2022) | Q2 FY2022 (3 months ended Dec 31, 2021) | H1 FY2023 (6 months ended Dec 31, 2022) | H1 FY2022 (6 months ended Dec 31, 2021) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $94 | $262 | $160 | $529 | | Other comprehensive income (loss) | $269 | $(28) | $18 | $(186) | | Comprehensive income attributable to News Corporation stockholders | $277 | $207 | $122 | $283 | Consolidated Balance Sheets As of December 31, 2022, total assets slightly decreased to $16.89 billion, with cash and cash equivalents declining to $1.33 billion Balance Sheet Highlights (in millions) | Metric | Dec 31, 2022 (unaudited) | June 30, 2022 (audited) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,328 | $1,822 | | Total current assets | $3,763 | $4,093 | | Total assets | $16,891 | $17,221 | | Total current liabilities | $2,939 | $3,519 | | Total liabilities | $7,835 | $8,078 | | Total equity | $9,056 | $9,143 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased to $161 million for H1 FY2023, leading to a $488 million net decrease in cash and cash equivalents Cash Flow Summary (in millions) | Metric | H1 FY2023 (6 months ended Dec 31, 2022) | H1 FY2022 (6 months ended Dec 31, 2021) | | :--- | :--- | :--- | | Net cash provided by operating activities | $161 | $430 | | Net cash used in investing activities | $(337) | $(249) | | Net cash used in financing activities | $(312) | $(198) | | Net change in cash and cash equivalents | $(488) | $(17) | Notes to the Unaudited Consolidated Financial Statements The notes provide detailed financial information, including segment revenues, recent acquisitions, restructuring charges, borrowings, equity changes, and legal contingencies Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 7% Q2 revenue decline driven by segment challenges and foreign currency, alongside cost-saving initiatives and strong liquidity - The company expects to implement a 5% headcount reduction (around 1,250 positions) in the current calendar year to address macroeconomic challenges, targeting at least $130 million in annualized cost savings[133] - In January 2023, the company announced it was in discussions with CoStar Group, Inc. regarding a potential sale of its subsidiary, Move, Inc[131] - A proposal from K. Rupert Murdoch and the Murdoch Family Trust to explore a potential combination with FOX Corporation was withdrawn in January 2023, and the special committee formed to evaluate it was dissolved[130] Overview of the Company's Businesses The company operates across six segments, with recent acquisitions strengthening Dow Jones and Digital Real Estate Services, alongside planned headcount reductions - The company's business is structured into six segments: Digital Real Estate Services (REA Group, Move), Subscription Video Services (Foxtel Group), Dow Jones, Book Publishing (HarperCollins), News Media (News Corp Australia, News UK, New York Post), and Other (corporate overhead)[123][124][125] - Recent acquisitions include OPIS (energy and renewables data), Base Chemicals (CMA), and UpNest (real estate agent marketplace) to strengthen the Dow Jones and Digital Real Estate Services segments[127][128][129] Results of Operations Consolidated revenues for Q2 FY23 decreased 7% to $2.5 billion, primarily due to segment declines and foreign currency impacts, leading to a 30% drop in Total Segment EBITDA Consolidated Results Summary (Q2 FY2023 vs Q2 FY2022) | Metric | Q2 FY2023 (in millions) | Q2 FY2022 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $2,521 | $2,717 | -7% | | Operating expenses | $(1,294) | $(1,279) | -1% | | Selling, general and administrative | $(818) | $(852) | 4% | | Net income attributable to News Corporation stockholders | $67 | $235 | -71% | - Foreign currency fluctuations had a significant negative impact, reducing revenues by $171 million (6%) for the three months ended December 31, 2022[137] Segment EBITDA (in millions) | Segment | Q2 FY2023 | Q2 FY2022 | % Change | | :--- | :--- | :--- | :--- | | Digital Real Estate Services | $128 | $178 | -28% | | Subscription Video Services | $90 | $86 | 5% | | Dow Jones | $139 | $144 | -3% | | Book Publishing | $51 | $107 | -52% | | News Media | $59 | $111 | -47% | | Total Segment EBITDA | $409 | $586 | -30% | Liquidity and Capital Resources The company maintains solid liquidity with $1.3 billion in cash, despite a significant decrease in operating cash flow and negative free cash flow for H1 FY2023 - As of December 31, 2022, the company held $1.3 billion in cash and cash equivalents[204] - Under its $1 billion stock repurchase program, the company repurchased $174 million of Class A and Class B shares during the six months ended December 31, 2022, with approximately $643 million remaining authorized[207][208] Free Cash Flow Reconciliation (in millions) | Metric | H1 FY2023 | H1 FY2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $161 | $430 | | Less: Capital expenditures | $(217) | $(208) | | Free cash flow | $(56) | $222 | | Free cash flow available to News Corporation | $(102) | $144 | Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no material change in the company's assessment of market risk sensitivity since its prior annual report - There has been no material change in the Company's assessment of its sensitivity to market risk since its presentation in the 2022 Form 10-K[233] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of the end of the period, the company's disclosure controls and procedures were effective[234] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[235] Part II. Other Information Item 1. Legal Proceedings This section refers to Note 10 for details on legal proceedings, including retained liabilities, antitrust complaints, and U.K. Newspaper Matters - For details on legal proceedings, the report refers to Note 10—Commitments and Contingencies in the financial statements[238] Item 1A. Risk Factors There have been no material changes to the risk factors previously described in the company's annual report - There have been no material changes to the risk factors described in the 2022 Form 10-K[239] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details its stock repurchase activity, including the repurchase of 2.9 million shares during Q2 FY2023, with $643 million remaining under the program Share Repurchases (Q2 FY2023) | Period | Class A Shares Purchased (millions) | Class B Shares Purchased (millions) | Total Shares Purchased (millions) | Remaining Authorization (in millions) | | :--- | :--- | :--- | :--- | :--- | | Oct 3 - Oct 30, 2022 | 1.6 | 0.8 | 2.4 | $651 | | Oct 31 - Dec 4, 2022 | 0.3 | 0.2 | 0.5 | $643 | | Dec 5 - Jan 1, 2023 | — | — | — | $643 | | Total | 1.9 | 1.0 | 2.9 | $643 | Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and financial statements in Inline XBRL format - Exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32.1) and financial data in Inline XBRL format (101, 104)[247]