Q1 2024 Earnings Summary
- News Corp is consciously and constantly reviewing its structure to maximize shareholder value, acknowledging that the company's valuable assets are not fully represented in the share price. This ongoing review provides potential for future restructuring that could unlock significant value for shareholders.
- Dow Jones' B2B earnings have surpassed B2C earnings and are on track to be larger for the full year, demonstrating higher margins and high retention rates. This shift towards more profitable and stable revenue streams strengthens the company's profitability and growth prospects.
- HarperCollins is showing strong margin improvement and expects continued profit growth, bolstered by a strategic partnership with Spotify in audiobooks. This partnership is anticipated to significantly increase revenue and EBITDA, capitalizing on the fastest-growing sector in publishing.
- Significant decline in real estate revenues at Move (
realtor.com), with revenues down 20% and lead volumes falling 11% year-over-year, reflecting challenges in the U.S. housing market due to high interest rates and low existing home sales. - Potential negative impact from the recent U.S. court ruling around agent commissions, which could affect industry dynamics and create uncertainty for Move's future performance. The company is awaiting the outcome of the appeal.
- Continued investment in
realtor.comdespite declining revenues, including marketing and product development, could impact short-term profitability, especially in a challenging market where it's difficult to increase yields.
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Company Structure Review
Q: Any details on reviewing your structure and potential spinoffs?
A: Management acknowledges the company's transformation over the past decade and agrees that the full value of their assets isn't fully represented in the share price. They are consciously and constantly reviewing their structure and have taken tangible steps to clarify internal corporate structures to ensure maximum flexibility. -
Impact of Real Estate Lawsuit
Q: How does the real estate lawsuit affect realtor.com and Move?
A: They are awaiting the outcome of the appeal in the case. The U.S. property market is evolving, and while it's currently suffering from high mortgage rates, the company focuses on providing the best service and building their sell-side operations. They anticipate stronger activity when mortgage rates moderate, similar to recent surges seen in Australia's listings. -
HarperCollins EBITDA Outlook
Q: Can HarperCollins return to prior EBITDA levels?
A: HarperCollins has emerged from a complex period with margins dramatically improving to 12.4% in Q1. The partnership with Spotify in audiobooks—which now comprise about 45% of digital sales—could generate significantly more revenue and improve EBITDA. They expect continued profit growth, aiming for EBITDA margins in the low double digits for the full year. -
Digital Advertising Trends
Q: Update on digital ad trends and expectations?
A: Advertising trends vary by segment and region. At Dow Jones, advertising was down 3%, a marked improvement from a 14% decline in the prior quarter. In the U.K., there was an 8% decline, mostly in print, while digital advertising was flat year-over-year. The New York Post saw an increase in print-related advertising as it expanded its reach. -
Move's Revenue and Yields
Q: Move's revenue is down; what's affecting yields and outlook?
A: Real estate revenues at Move were down 20% with listings down 11%. It's challenging to push yields up in the current U.S. market, but they continue to balance yield strategies with the macro environment. They plan to maintain costs in line with Q1 and continue investing in product development and marketing to be well-positioned when the market improves.