Q3 2024 Earnings Summary
- News Corp is advancing its transformation and simplification efforts to unlock shareholder value, recognizing that despite a 46% share price increase over the past year, there remains a significant sum of the parts discount.
- The company is implementing cost-saving initiatives across businesses, including a pivot to streaming in the UK and joint printing ventures, leading to margin expansion and offsetting revenue shortfalls.
- Strategic investments in realtor.com, including a partnership with Zillow on rentals, position News Corp to capitalize on the evolving U.S. real estate market, leveraging their experience and media assets to make the most of opportunities in the world's largest property market.
- Uncertainty and lack of transparency regarding the company's restructuring plans, which may affect investor confidence. Management provided vague timelines and limited details when asked about progress, stating they have "maximum flexibility, genuine optionality" but offered no specifics ,.
- Overreliance on cost-cutting measures to maintain profitability, which may not be sustainable long-term. The company implemented a 5% headcount reduction resulting in $160 million in cost savings , but continues to focus on efficiencies to offset revenue shortfalls, indicating potential challenges in revenue growth.
- Challenges in key business segments, including:
-
Company Transformation Timeline
Q: When will the company transformation be completed?
A: Robert Thomson indicated that they are well advanced in their planning, which has involved necessary regulatory steps. They aim to create maximum value for shareholders, recognizing a significant sum-of-the-parts discount, and advised to "stay tuned and not indefinitely." -
Cost Reductions and Margin Expansion
Q: Can you achieve further cost reductions next year?
A: Susan Panuccio stated they have hit and exceeded their prior cost-out target of $160 million from a 5% headcount reduction announced a year ago. The businesses are constantly focused on cost efficiencies, with ongoing transformation initiatives expected to unlock further savings, contributing to the strong margin expansion seen this year. -
Move Investment and Realtor.com Spending
Q: How is investment in Move being allocated?
A: Spending is roughly evenly split between marketing and product development. They are focused on solidifying the backend, improving the user interface, and ensuring customers get value for money. The partnership with Zillow on rentals will be beneficial to both companies as they focus on the world's largest property market. -
Google Deal Renewal and AI Content Usage
Q: Does the Google renewal include generative AI content?
A: Robert Thomson confirmed that the renewal is of the existing deal and does not include payments for generative AI use of their content. Any negotiations for AI-related content use will come later. Financial terms are broadly consistent with the previous deal. -
Book Publishing Trends and Spotify Partnership
Q: What are current demand trends in Book Publishing?
A: Early last quarter, sales were strong but then saw a slight pause. They've seen a return to strong year-on-year performance in April and have a compelling roster of new releases. Margins improved from 11.8% last year to 12.3% this year. Audiobook streaming revenue rose 14% in the third quarter, benefiting from international expansion and efforts by Spotify, transforming the audiobook market. -
BINGE Subscriber Decline at Foxtel
Q: What caused the decline in BINGE subscribers?
A: The writers' strike towards the end of last year impacted content flow, which affected subscriber numbers, and they are seeing a carry-forward of that impact on BINGE subscribers. -
Company Structure Changes
Q: What are the recent company structure changes?
A: Robert Thomson explained that the changes were regulatory adjustments related to the original composition of the company in Australia and is not at liberty to provide more details at this moment.