News (US:NWSA)2021-05-06 16:00Part I - Financial Information Financial Statements News Corporation reported Q3 FY21 revenue growth and a shift to net income, with improved nine-month net income, increased assets, and doubled operating cash flow Consolidated Statements of Operations Consolidated Statements of Operations (Unaudited, in millions) | Financial Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $2,335 | $2,266 | $6,866 | $7,085 | | Operating Expenses | $(1,186) | $(1,283) | $(3,548) | $(3,972) | | Impairment & Restructuring | $(30) | $(1,125) | $(93) | $(1,451) | | Income (Loss) before Tax | $139 | $(1,046) | $557 | $(1,123) | | Net Income (Loss) | $96 | $(1,036) | $404 | $(1,144) | | Net Income (Loss) Attributable to Stockholders | $79 | $(730) | $344 | $(872) | Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Comprehensive Income (Loss) (Unaudited, in millions) | Financial Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $96 | $(1,036) | $404 | $(1,144) | | Other Comprehensive Income (Loss) | $29 | $(460) | $450 | $(462) | | Comprehensive Income (Loss) | $125 | $(1,496) | $854 | $(1,606) | | Comprehensive Income (Loss) Attributable to Stockholders | $104 | $(1,081) | $710 | $(1,216) | Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in millions) | Account | As of March 31, 2021 (Unaudited) | As of June 30, 2020 (Audited) | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $1,974 | $1,517 | | Total current assets | $3,943 | $3,461 | | Non-Current Assets | | | | Goodwill | $4,304 | $3,951 | | Total Assets | $15,397 | $14,261 | | Liabilities & Equity | | | | Total current liabilities | $3,169 | $2,682 | | Borrowings (Non-current) | $1,000 | $1,183 | | Total Equity | $9,129 | $8,389 | | Total Liabilities and Equity | $15,397 | $14,261 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Unaudited, in millions) | Cash Flow Activity | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,060 | $462 | | Net cash used in investing activities | $(346) | $(327) | | Net cash used in financing activities | $(329) | $(341) | | Net change in cash and cash equivalents | $385 | $(206) | | Cash and cash equivalents, end of period | $1,974 | $1,388 | Notes to the Unaudited Consolidated Financial Statements The notes provide detailed explanations of accounting policies, segment reporting changes, recent acquisitions, restructuring charges, and significant subsequent events - The company disaggregated its Dow Jones operating segment into a separate reportable segment, revising historical disclosures accordingly18276 - In December 2020, the company acquired Avail for approximately $36 million and a controlling interest in Elara Technologies for $138 million4243300 - For fiscal 2021, the company recorded $93 million in restructuring charges for the nine months ended March 31, primarily for employee termination benefits and plant closure costs4445302 - The company is involved in several legal proceedings, including antitrust claims related to News America Marketing and HarperCollins, and U.K. Newspaper Matters civil claims indemnified by FOX98103104 - Subsequent to quarter end, the company acquired Investor's Business Daily for $275 million, issued $1 billion in senior notes, and agreed to acquire HMH Books & Media for $349 million and Mortgage Choice for approximately A$244 million140141142 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q3 FY21 revenue growth to key segments, offsetting News Media declines, with significant EBITDA growth, strong liquidity, and increased free cash flow Overview of the Company's Businesses - The company operates across six segments: Digital Real Estate Services, Subscription Video Services, Dow Jones, Book Publishing, News Media, and Other152153410 - Recent strategic developments include the acquisition of Investor's Business Daily for $275 million, a $1 billion senior notes offering, and agreements to acquire HMH Books & Media and Mortgage Choice155156157 - In February 2021, the company entered a multi-year partnership with Google for content provision, subscription platform development, and ad revenue sharing160418 Results of Operations Consolidated Revenue and Expense Changes (Q3 FY21 vs Q3 FY20, in millions) | Item | Q3 FY21 | Q3 FY20 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $2,335 | $2,266 | $69 | 3% | | Operating expenses | $(1,186) | $(1,283) | $97 | 8% | | SG&A | $(851) | $(741) | $(110) | (15)% | | Impairment & restructuring | $(30) | $(1,125) | $1,095 | 97% | | Net Income (Loss) to Stockholders | $79 | $(730) | $809 | N/M | - The Q3 revenue increase was driven by growth in Digital Real Estate, Book Publishing, Subscription Video, and Dow Jones segments, partially offset by a $199 million negative impact from the sale of News America Marketing166 - The significant improvement in Net Income was primarily due to the absence of a $1.1 billion non-cash impairment charge recognized in the prior-year quarter174182 Segment Analysis Segment EBITDA (in millions) | Segment | Q3 FY21 | Q3 FY20 | % Change | 9 Months FY21 | 9 Months FY20 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Digital Real Estate Services | $117 | $74 | 58% | $378 | $274 | 38% | | Subscription Video Services | $91 | $68 | 34% | $293 | $219 | 34% | | Dow Jones | $82 | $51 | 61% | $263 | $176 | 49% | | Book Publishing | $80 | $55 | 45% | $255 | $167 | 53% | | News Media | $8 | $24 | (67)% | $52 | $97 | (46)% | | Total Segment EBITDA | $298 | $242 | 23% | $1,063 | $818 | 30% | - Digital Real Estate Services revenue grew 34% in Q3, driven by strong performance at Move (realtor.com) and REA Group191 - Subscription Video Services (Foxtel) saw total paid subscribers grow to 3.54 million from 2.93 million year-over-year, driven by growth in Kayo and Binge OTT services199200 - Dow Jones' Segment EBITDA increased 61% in Q3, benefiting from strong growth in digital-only subscriptions at The Wall Street Journal, which reached 2.6 million (up 29% YoY)203205 - Book Publishing revenue increased 19% in Q3, boosted by strong sales of the Bridgerton series and other backlist titles, with digital sales growing 38%213 - News Media revenues declined 25% in Q3, primarily due to the sale of News America Marketing, with Segment EBITDA falling 67% to $8 million218 Liquidity and Capital Resources - The company's principal source of liquidity is internally generated funds and cash on hand, which stood at $2.0 billion as of March 31, 2021225483 Free Cash Flow Available to News Corporation (in millions) | Metric | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,060 | $462 | | Less: Capital expenditures | $(253) | $(335) | | Free cash flow available to News Corporation | $762 | $63 | - As of March 31, 2021, total borrowings were $1.2 billion, primarily non-recourse debt at the Foxtel and REA Group subsidiaries239497 - In April 2021, the company issued $1 billion of 3.875% senior notes due 2029 for general corporate purposes, including potential acquisitions241499 Quantitative and Qualitative Disclosures About Market Risk The company reports no material change in its assessment of market risk sensitivity since its 2020 Form 10-K disclosure - There has been no material change in the Company's assessment of its sensitivity to market risk since its 2020 Form 10-K presentation247505 Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls during Q3 FY21 - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of period end248506 - No material changes occurred in internal control over financial reporting during Q3 FY21249507 Part II - Other Information Legal Proceedings This section refers to Note 10 of the Consolidated Financial Statements for details on legal proceedings - For details on legal proceedings, the report refers to Note 10—Commitments and Contingencies in the Consolidated Financial Statements251509 Risk Factors The company reports no material changes to the risk factors previously described in its 2020 Form 10-K and Q1 FY21 Form 10-Q - There have been no material changes to the risk factors described in the Company's 2020 Form 10-K252510 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported252510 Exhibits This section lists the exhibits filed with the Form 10-Q, including debt agreements, incentive plan forms, and required CEO/CFO certifications - Exhibits filed include the Indenture for the April 2021 Senior Notes, amendments to Foxtel facility agreements, and CEO/CFO certifications255513