News (NWS) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues increased by 6% to $2.4 billion for the quarter, with total segment EBITDA expanding by 9% to $521 million, despite a one-time inventory-related charge at HarperCollins [4][20] - Net income from continuing operations was $242 million, a 21% decrease from the prior year, primarily due to the absence of a favorable $87 million gain from the sale of PropertyGuru [4][21] - Adjusted EPS for the quarter was $0.40, compared to $0.33 in the prior quarter, with profitability margin rising from 21.4% to 22.1% [4][20] Business Line Data and Key Metrics Changes - Dow Jones: Revenues rose by 8% to $648 million, with digital revenues accounting for 82% of segment revenues. Segment EBITDA grew by 10% to $191 million, achieving a profit margin of 29.5% [21][25] - Digital Real Estate Services: Revenues increased by 8% to $511 million, with segment EBITDA up 11% to $206 million. Realtor.com revenues grew by 10% to $143 million, driven by premium products and improved lead volume [11][26] - Book Publishing: Revenues grew by 6% to $633 million, although segment EBITDA declined by 2% to $99 million due to a one-time write-off related to inventory [29][31] Market Data and Key Metrics Changes - In Australia, REA revenues grew by 7%, benefiting from double-digit yield growth and improved listing volumes in major cities [12][26] - Digital advertising revenue at Dow Jones reached a record $87 million, rising by 12%, particularly supported by demand from the financial services sector [8][25] - The Times and The Sunday Times in the UK saw digital subscribers rise by 7% to 659,000, while News Corp Australia reached nearly 1.2 million total subscribers, surpassing the prior year by 4% [14][15] Company Strategy and Development Direction - The company is focused on transforming into a digital-first entity, increasing recurring revenues, and reducing dependence on advertising [5][19] - There is a strong emphasis on operational efficiency and disciplined investment in core growth pillars: Dow Jones, Digital Real Estate, and Book Publishing, which collectively accounted for 95% of profitability [18][19] - The company is actively pursuing AI partnerships and content licensing opportunities to enhance revenue streams [10][41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the fiscal year, citing strong cash flow and a robust balance sheet [5][16] - The evolving impact of AI on the industry was discussed, with management confident in the value of proprietary content and the company's ability to monetize it [6][36] - The outlook for Dow Jones remains positive, with expectations of continued strong revenue growth in B2B segments [32] Other Important Information - The company repurchased $172 million in shares during the quarter, significantly higher than the previous year, and plans to continue this trend [20][51] - The launch of the California Post was highlighted as a strategic move to enhance the company's media presence [16] Q&A Session Summary Question: Market reaction to AI and its implications for business services - Management clarified that AI's impact is often misunderstood, emphasizing the value of proprietary content and the company's strategy to monetize it through partnerships and legal actions against unauthorized use [35][36] Question: Investment in Dow Jones and CapEx related to AI - Management expressed confidence in the Dow Jones Professional Information business and indicated that CapEx for Dow Jones would be modestly down this year, while overall free cash flow growth is expected to remain strong [40][42] Question: M&A strategy and areas of interest - Management stated that they are continuously looking for sensible investments but will prioritize organic growth and share buybacks at reasonable prices [49][50] Question: Simplifying the company structure and competition from Homes.com - Management noted ongoing evaluations of the company structure to enhance shareholder value and expressed confidence in Realtor.com's growth trajectory despite competition [54][56] Question: Subscription revenue growth and pricing strategy at Dow Jones - Management highlighted successful increases in enterprise customers and the potential for price elasticity, while also noting improvements in ARPU excluding enterprise customers [63][66]