Q2 2024 Earnings Summary
- News Corp is exceeding its cost savings targets, achieving over $160 million in reductions and continuing to find efficiencies, including leveraging AI to reduce expenses.
- The Book Publishing segment continues to outperform expectations, with strong EBITDA growth due to revenue stability post-COVID, cost control, and effective pricing strategies, leading to improved margins over the prior year.
- The Dow Jones segment is showing strong performance, with margins increasing from 24.7% to 27.9%, driven by the high-growth Professional Information Business, which has high-margin, recurring revenues with renewal rates well north of 90%, indicating robust future prospects.
- The $160 million cost-out program's net benefit to profitability may be limited due to reinvestments across the portfolio and ongoing expenses, which could hinder margin improvement.
- Management's evasive responses about the timing and specifics of the portfolio review and potential restructuring suggest uncertainty and possible delays in unlocking shareholder value.
- The strong performance in the Book Publishing segment may not be sustained, as margins are expected to decline from the high levels in the first half to low double digits for the full year.
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AI Content Negotiations
Q: Update on AI negotiations and potential payments?
A: Robert Thomson emphasized that News Corp is leading in AI discussions and that negotiations are at an advanced stage with willing partners. While specifics are confidential, he noted the company's expectation to be a core content provider for generative AI companies. He highlighted the thoughtful approach of partners like Sam Altman and expressed optimism about positive engagements. -
Portfolio Simplification Timing
Q: When will we hear about portfolio simplification?
A: Robert Thomson acknowledged significant introspection about the company's structure, emphasizing that it is functional, not emotional. He stated that they have created options for shareholders and are seriously considering how to fully monetize their valuable portfolio. Discussions are purposeful and ongoing, hinting at potential future announcements. -
Dow Jones Costs and PIB Margins
Q: Can we extrapolate Dow Jones cost performance and margins?
A: Susan Panuccio reported strong cost performance at Dow Jones due to transformation initiatives and a 5% headcount reduction. While pleased with the cost savings, she noted that expenses may rise in the second half due to increased marketing spend. The Professional Information Business (PIB) saw margin improvements, with revenues expanding by 15% in Dow Jones Energy and 16% in Risk & Compliance. -
PIB Growth Strategy
Q: Plans for PIB growth and acquisitions?
A: Robert Thomson stated that PIB is core to Dow Jones and News Corp, expressing satisfaction with progress post-integration of Opus and CMA. While he couldn't share specific plans, he indicated a focus on leveraging existing data sets and exploring exciting opportunities in areas like renewables. Susan Panuccio added that new products can draw off core data, enhancing growth prospects. -
Cost-Out Program Savings
Q: Update on cost-out program progress?
A: Susan Panuccio announced they have exceeded the initial $160 million cost-out target, achieving the run rate already. Savings resulted from headcount reductions, and the company continues to seek efficiencies to reinvest in the businesses. Robert Thomson added that they remain cost-conscious and are exploring AI advancements to further reduce costs. -
Books EBITDA Growth
Q: Is Books EBITDA growth a trend or coincidence?
A: Susan Panuccio attributed the strong EBITDA growth in Book Publishing to stability in revenue post-COVID, effective cost management, and price increases on books. While pleased with first-half results, she expects full-year margins to be in the low double digits, suggesting growth may not continue at the same elevated rate.
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