News Corp earnings hit by weak advertising revenues from print and News America Marketing
Book publishing division, though, reports 14 percent increase in revenue, while net income for the company is still positive for the year
The recently spun off publishing arm of News Corp today reported mixed earnings for the company’s third quarter of fiscal 2015. News and Information Services, which includes newspapers and News America Marketing, reported a sharp decline in revenue, while book publishing grew revenue by 14 percent.
Net income for the quarter came in at $23 million versus $48 million in the same quarter of 2014. But for the first nine months of fiscal 2015, News Corp reported net income of 230 million versus $225 million for the prior year.
The book publishing division was strongly aided by the acquisition of Harlequin, as well as strong backlist sales due to American Sniper.
Here is News Corp’s earnings announcement:
NEW YORK, NY – May 5, 2014 — News Corporation today reported financial results for the three months ended March 31, 2015.
Commenting on the results, Chief Executive Robert Thomson said:
“The new News Corp continues to build a firm foundation for digital growth. We see that most clearly in the successful integration of realtor.com®, which grew audience and revenue at record levels in the third quarter. News Corp is now a global leader in digital real estate, which we believe will underpin long-term expansion and complement our expertise in news and financial analysis, both of which have been important ingredients in realtor.com®’s accelerated growth. While the quarter faced some revenue challenges, particularly at News and Information Services, including currency headwinds, our adjusted EBITDA was relatively stable, underscoring the strength of our assets and the diversification of our revenue base. We believe the company is firmly on track and the signs are positive for year-over-year EBITDA growth in the fourth quarter.”
THIRD QUARTER RESULTS
The Company reported fiscal 2015 third quarter total revenues of $2.06 billion, a 1% decline as compared to prior year third quarter revenues of $2.08 billion. The majority of the revenue decline reflects negative foreign currency fluctuations and lower advertising revenues at the News and Information Services segment, offset in large part by growth in the Book Publishing and Digital Real Estate Services segments as a result of the acquisition of Harlequin Enterprises Limited (“Harlequin”) and Move, Inc. (“Move”), respectively. Adjusted revenues (as defined in Note 1) declined 2% compared to the prior year.
The Company reported third quarter Total Segment EBITDA of $163 million, a 7% decline as compared to $175 million in the prior year. These results include $15 million and $20 million in fees and costs – net of indemnification – related to the U.K. Newspaper Matters (as defined below) in the three months ended March 31, 2015 and 2014, respectively. Declines at the News and Information Services segment, including higher legal costs at News America Marketing, negative foreign currency fluctuations and increased stock-based compensation expense resulting from the acquisition of Move were partially offset by lower expenses at Amplify and increased revenues in the Book Publishing segment due to the inclusion of Harlequin results. Adjusted Total Segment EBITDA (as defined in Note 1) declined 1% compared to the prior year.
Net income available to News Corporation stockholders was $23 million as compared to $48 million in the prior year, due to lower Total Segment EBITDA as well as a higher effective tax rate, lower equity earnings of affiliates, and lower interest income. Adjusted net income available to News Corporation stockholders (as defined in Note 3) was $28 million compared to $66 million in the prior year. Impairment and restructuring charges were $10 million in both the three months ended March 31, 2015 and 2014.
Net income available to News Corporation stockholders per share was $0.04 as compared to $0.08 in the prior year. Adjusted EPS (as defined in Note 3) were $0.05 compared to $0.11 in the prior year.
Free cash flow available to News Corporation decreased by $105 million in the nine months ended March 31, 2015 to $391 million, primarily as a result of certain one-time items.
Revenues for the third quarter of fiscal 2015 decreased $135 million, or 9%, compared to the prior year. Total segment advertising revenues declined 12%, driven primarily by negative foreign currency fluctuations, weakness in the print advertising market and lower revenues at News America Marketing. Circulation and subscription revenues declined 6%, due to negative foreign currency fluctuations, a decline in professional information business revenues at Dow Jones and lower print circulation volume, partially offset by higher subscription pricing, cover price increases and higher digital subscription volume. Adjusted revenues declined 3% compared to the prior year.
Segment EBITDA decreased $33 million in the quarter, or 23%, as compared to the prior year. Results were impacted by lower advertising revenues, negative foreign currency fluctuations and $8 million of higher legal expenses at News America Marketing, partially offset by lower expenses at News Corp Australia. Adjusted Segment EBITDA decreased 21% compared to the prior year.
Revenues in the quarter increased $48 million, or 14%, compared to the prior year driven by the inclusion of the results of Harlequin and strong backlist sales in General Books resulting from the continued popularity of American Sniper by Chris Kyle, partially offset by lower revenues from the Divergent series. E-book revenues declined 3% versus the prior year period, driven by lower contribution from the Divergent series as well as a shift towards the non-fiction genre, which has lower e-book conversion, partially offset by the inclusion of Harlequin results. E-book revenues represented 22% of consumer revenues for the quarter. Segment EBITDA for the quarter increased $3 million, or 6%, from the prior year, primarily due to the inclusion of the results of Harlequin and lower expenses, partially offset by lower contribution from the Divergent series. Adjusted revenues decreased 5% and Adjusted Segment EBITDA decreased 8% compared to the prior year.
Cable Network Programming
In the third quarter of fiscal 2015, revenues increased $3 million, or 3%, compared to the prior year primarily due to higher affiliate and advertising revenues, partially offset by negative foreign currency fluctuations. Segment EBITDA in the quarter was flat compared with the prior year, as the higher revenues were offset by negative foreign currency fluctuations and higher programming rights costs. Both Adjusted revenues and Adjusted Segment EBITDA increased 15% compared to the prior year.
Digital Real Estate Services
Revenues in the quarter increased $68 million, or 67%, compared to the prior year, primarily driven by the inclusion of the results of Move, coupled with higher residential listing depth product penetration and higher pricing at REA Group Limited (“REA Group”), partially offset by negative foreign currency fluctuations and a decline in Australian listing volumes across the market which are down against the prior comparative period. Segment EBITDA in the quarter decreased $11 million, or 21%, compared to the prior year primarily due to negative foreign currency fluctuations, partially offset by increased revenues. Segment EBITDA also includes $11 million of stock-based compensation expense related to awards assumed in the acquisition of Move, of which $5 million is related to the acceleration of stock-based compensation resulting from the departures of senior executives. Excluding the impact of Move, divestitures and foreign currency fluctuations, Adjusted revenues and Adjusted Segment EBITDA increased 9% and 7%, respectively, compared to the prior year. In the third quarter, Move saw strength in its Connection for Co-Brokerage product and Media revenues. Based on Move’s internal data, average monthly unique users of realtor.com®’s web and mobile sites for the quarter grew 34% year-over-year to approximately 39 million, which was driven by more than 70% growth in mobile users; traffic accelerated in April to 44 million monthly unique users, or 38% growth year-over-year.
Revenues in the quarter were $21 million, which was flat compared with the prior year. Segment EBITDA in the quarter improved $24 million, or 53%, from the prior year, primarily due to the impact of the capitalization of Amplify Learning’s software development costs of $12 million and lower operating expenses.