News Corporation Reports Second Quarter Results for Fiscal 2023

FISCAL 2023 SECOND QUARTER KEY FINANCIAL HIGHLIGHTS

• Revenues in the quarter were $2.52 billion, a 7% decrease compared to $2.72 billion in the prior year, reflecting a $171 million, or 6%, negative impact from foreign currency fluctuations. Adjusted Revenues decreased 3%
• Net income in the quarter was $94 million compared to $262 million in the prior year
• Total Segment EBITDA in the quarter was $409 million compared to $586 million in the prior year
• In the quarter, reported EPS were $0.12 compared to $0.40 in the prior year – Adjusted EPS were $0.14 compared to $0.44 in the prior year
• At the Dow Jones segment, revenues from its professional information business grew 45%, benefiting from the acquisitions of OPIS and CMA and the ongoing momentum in its Risk & Compliance products
• At the Subscription Video Services segment, higher streaming revenues from Foxtel's Kayo and BINGE continued to offset broadcast revenue declines
• Revenues at News UK continued to benefit from strong digital advertising revenue growth at The Sun, highlighting the brand's successful expansion into the U.S. and increase in yield
• Engaged in discussions with CoStar Group regarding a potential sale of Move

News Corporation ("News Corp" or the "Company") (NASDAQ:NWS, NWSA, ASX: NWS, NWSLV))) today reported financial results for the three months ended December 31, 2022.

Commenting on the results, Chief Executive Robert Thomson said:

"The second quarter highlighted the progress made in certain of our business segments. Obviously, a surge in interest rates and acute inflation had a tangible impact on all of our businesses. But we believe these challenges are more ephemeral than eternal. Just as our company passed the stress-test of the pandemic with record profits, the initiatives now underway, including an expected 5 percent headcount reduction, or around 1,250 positions this calendar year, will create a robust platform for future growth.

Even in the midst of the obvious global challenges, the professional information business at Dow Jones displayed particular promise, with revenues surging 45 percent year-over-year. That encouraging result highlights the value of our opportunistic acquisitions of OPIS and CMA, and continuing growth at our burgeoning Risk and Compliance business.

In terms of portfolio optimization, as publicly reported, we have been actively engaged in discussions with CoStar Group about a potential sale of Move. Any transaction would be designed to create shareholder value and strengthen Realtor.com^®'s competitive position."

SECOND QUARTER RESULTS

The Company reported fiscal 2023 second quarter total revenues of $2.52 billion, a 7% decrease compared to $2.72 billion in the prior year period. The decline was primarily due to a $171 million, or 6%, negative impact from foreign currency fluctuations, lower revenues at the Book Publishing segment primarily due to lower book sales and lower revenues at the Digital Real Estate Services segment due to challenging housing market conditions in Australia and the U.S. The decline was partially offset by higher Dow Jones segment revenues, which includes the acquisitions of OPIS and Chemical Market Analytics ("CMA"), and higher Subscription Video Services revenues on a constant currency basis. Adjusted Revenues (which excludes the foreign currency impact, acquisitions and divestitures as defined in Note 2) decreased 3%.

Net income for the quarter was $94 million, a 64% decline compared to $262 million in the prior year, primarily due to lower Total Segment EBITDA, as discussed below, and higher losses from equity affiliates due to losses from the Company's investment in a newly launched sports wagering platform in Australia, partially offset by lower tax expense.

The Company reported second quarter Total Segment EBITDA of $409 million, a 30% decline compared to $586 million in the prior year, primarily due to higher costs at the Dow Jones segment, higher operating expenses at the News Media segment, partly due to inflationary pressures, lower revenues, as discussed above, and a $30 million, or 5%, negative impact from foreign currency fluctuations. The results this quarter also include $6 million of one-time costs related to the professional fees incurred by the Special Committee and the Company in connection with evaluating the proposal from the Murdoch Family Trust. Adjusted Total Segment EBITDA (as defined in Note 2) decreased 28%.

Net income per share attributable to News Corporation stockholders was $0.12 as compared to $0.40 in the prior year.

Adjusted EPS (as defined in Note 3) were $0.14 compared to $0.44 in the prior year.

SEGMENT REVIEW

Digital Real Estate Services

Revenues in the quarter decreased $70 million, or 15%, compared to the prior year, reflecting a $26 million, or 5%, negative impact from foreign currency fluctuations. Segment EBITDA in the quarter decreased $50 million, or 28%, compared to the prior year, primarily due to the lower revenues and a $13 million, or 7%, negative impact from foreign currency fluctuations, partially offset by lower broker commissions at REA Group. Adjusted Revenues and Adjusted Segment EBITDA (as defined in Note 2) decreased 10% and 22%, respectively.

In the quarter, revenues at REA Group decreased $47 million, or 16%, to $240 million, driven by a $26 million, or 9%, negative impact from foreign currency fluctuations, lower financial services revenues due to declines in settlement activity and lower Australian residential revenues due to the decline in national listings, most notably in Sydney and Melbourne. The decline was partially offset by price increases and increased depth penetration in the Australian residential and commercial businesses, increased penetration of Premiere Plus and higher revenues from REA India. Australian national residential buy listing volumes in the quarter declined 21% compared to the prior year, with listings in Sydney and Melbourne down 34% and 31%, respectively.

Move's revenues in the quarter decreased $23 million, or 14%, to $146 million, primarily as a result of lower real estate revenues. Real estate revenues, which represented 83% of total Move revenues, decreased $25 million, or 17%, driven by the impact of the macroeconomic environment on the housing market, including higher household interest rates, which has led to lower lead and transaction volumes. Revenues from the referral model, which includes the ReadyConnect Concierge℠ product, and the traditional lead generation product decreased due to these factors. The referral model generated 27% of total Move revenues in the quarter compared to 32% in the prior year. Based on Move's internal data, average monthly unique users of Realtor.com^®'s web and mobile sites for the fiscal second quarter declined 23% year-over-year to 66 million. Lead volume declined 37%.

Subscription Video Services

Revenues of $462 million in the quarter decreased $36 million, or 7%, compared with the prior year, due to a $52 million, or 10%, negative impact from foreign currency fluctuations. Adjusted Revenues of $514 million increased 3% compared to the prior year. Higher revenues from Kayo and BINGE, driven by increases in both volume and pricing, and higher commercial revenues were partially offset by the impact from fewer residential broadcast subscribers and lower advertising revenues. Foxtel Group streaming subscription revenues represented approximately 26% of total circulation and subscription revenues in the quarter, as compared to 19% in the prior year.

As of December 31, 2022, Foxtel's total closing paid subscribers were over 4.3 million, a 10% increase compared to the prior year, primarily due to the growth in BINGE and Kayo subscribers, partially offset by lower residential broadcast subscribers. Broadcast subscriber churn in the quarter improved slightly to 12.9% from 13.0% in the prior year. Broadcast ARPU for the quarter increased 2% year-over-year to A$83 (US$55).

Segment EBITDA in the quarter increased $4 million, or 5%, compared with the prior year, reflecting a $10 million, or 11%, negative impact from foreign currency fluctuations. The growth was partially offset by higher sports programming rights and production costs, driven by contractual increases and enhanced digital rights, as well as higher entertainment rights costs due to an increase in content availability compared to the prior year. Adjusted Segment EBITDA increased 16%.

Dow Jones

Revenues in the quarter increased $55 million, or 11%, compared to the prior year, which includes $36 million and $18 million contributions from the acquisitions of OPIS and CMA, respectively. Adjusted Revenues at the Dow Jones segment increased 1% compared to the prior year, primarily due to the growth in circulation and subscription revenues from continued digital subscription gains and growth in Risk & Compliance products. The growth was partially offset by lower advertising revenues. Digital revenues at Dow Jones in the quarter represented 76% of total revenues compared to 72% in the prior year.

Circulation and subscription revenues increased $61 million, or 17%, which includes the contributions from the acquisitions of OPIS and CMA. Circulation revenue grew 3%, reflecting the continued growth in digital-only subscriptions, primarily at The Wall Street Journal. Professional information business revenues grew 45%, primarily driven by the acquisitions of OPIS and CMA and growth in Risk & Compliance products, partially offset by negative foreign currency fluctuations. Revenues from the Risk & Compliance products grew 13%, which includes a 7% negative impact from foreign currency fluctuations. Digital circulation revenues accounted for 69% of circulation revenues for the quarter, compared to 67% in the prior year.

During the second quarter, total average subscriptions to Dow Jones' consumer products reached over 4.9 million, a 5% increase compared to the prior year. Digital-only subscriptions to Dow Jones' consumer products grew 10%. Total subscriptions to The Wall Street Journal grew 4% compared to the prior year, to nearly 3.8 million average subscriptions in the quarter. Digital-only subscriptions to The Wall Street Journal grew 9% to over 3.1 million average subscriptions in the quarter, and represented 84% of total Wall Street Journal subscriptions.

Advertising revenues decreased $10 million, or 7%, primarily due to a 13% decline in print advertising revenues and a 3% decline in digital advertising revenues. Digital advertising accounted for 59% of total advertising revenues in the quarter, compared to 56% in the prior year.

Segment EBITDA for the quarter decreased $5 million, or 3%, which includes an $18 million combined contribution from the acquisitions of OPIS and CMA. The decline was primarily due to higher employee costs and higher marketing costs, partly due to timing. Adjusted Segment EBITDA decreased 16%.

Book Publishing

Revenues in the quarter decreased $86 million, or 14%, compared to the prior year, primarily driven by lower book sales due to slowing consumer demand industry-wide, difficult frontlist comparisons and some logistical constraints at Amazon. The decline also reflects a $22 million, or 4%, negative impact from foreign currency fluctuations. Key titles in the quarter included The Stories We Tell by Joanna Gaines, Demon Copperhead by Barbara Kingsolver and Faith Still Moves Mountains by Harris Faulkner. Adjusted Revenues decreased 11%. Digital sales declined 7% compared to the prior year due to lower e-book sales. Digital sales represented 19% of Consumer revenues for the quarter compared to 17% in the prior year. Backlist sales represented approximately 57% of total revenues in the quarter.

Segment EBITDA for the quarter decreased $56 million, or 52%, compared to the prior year, driven by lower revenues, as discussed above, ongoing supply chain, inventory and inflationary pressures on manufacturing, freight and distribution costs and a $2 million, or 2%, negative impact from foreign currency fluctuations, partially offset by lower costs due to lower sales volume and lower employee costs. These pressures are expected to continue to impact the business in the near term. Adjusted Segment EBITDA decreased 51%.

News Media

Revenues in the quarter decreased $59 million, or 9%, as compared to the prior year, driven by a $65 million, or 10%, negative impact from foreign currency fluctuations and lower advertising revenues in constant currency, partially offset by higher circulation and subscription revenues in constant currency. Within the segment, revenues at News Corp Australia and News UK decreased 13% and 10%, respectively, as both were impacted by negative foreign currency fluctuations. On a constant currency basis, revenues at News Corp Australia and News UK decreased 3% and increased 3%, respectively. Adjusted Revenues for the segment increased 1% compared to the prior year.

Circulation and subscription revenues decreased $20 million, or 7%, compared to the prior year, primarily due to a $31 million, or 11%, negative impact from foreign currency fluctuations and lower print volume. The decline was partially offset by cover price increases and digital subscriber growth.

Advertising revenues decreased $37 million, or 13%, compared to the prior year, primarily due to a $27 million, or 10%, negative impact from foreign currency fluctuations and lower print advertising at News UK and News Corp Australia. The decline was partially offset by growth in digital advertising, primarily at News UK (mainly at The Sun), and higher revenues at Wireless Group, partly due to the FIFA World Cup 2022.

In the quarter, Segment EBITDA decreased $52 million, or 47%, compared to the prior year, driven by lower revenues, as discussed above, and reflects a $5 million, or 5%, negative impact from foreign currency fluctuations. The decline was also due to approximately $22 million of higher costs related to TalkTV and other digital investments, primarily at News Corp Australia, the $21 million negative impact from higher newsprint prices, higher employee costs and higher marketing expenses, partially due to the increased spend in relation to the World Cup at News UK. The Segment EBITDA decline was partially offset by cost saving initiatives. Newsprint, production and distribution costs are expected to be higher in fiscal 2023 than the prior year due to supply chain and inflationary pressures, partially offset by the Company's continued transition to digital products. Adjusted Segment EBITDA decreased 43%.

Digital revenues represented 37% of News Media segment revenues in the quarter, compared to 34% in the prior year, and represented 35% of the combined revenues of the newspaper mastheads. Digital subscribers and users across key properties within the News Media segment are summarized below:

• Closing digital subscribers at News Corp Australia as of December 31, 2022 were 1,011,000 (924,000 for news mastheads), compared to 909,000 (861,000 for news mastheads) in the prior year (Source: Internal data)
• The Times and Sunday Times closing digital subscribers, including the Times Literary Supplement, as of December 31, 2022 were 489,000, compared to 399,000 in the prior year (Source: Internal data)
• The Sun's digital offering reached 194 million global monthly unique users in December 2022, compared to 163 million in the prior year (Source: Google Analytics)
• New York Post's digital network reached 141 million unique users in December 2022, compared to 160 million in the prior year (Source: Google Analytics)

CASH FLOW

The following table presents a reconciliation of net cash provided by operating activities to free cash flow and free cash flow available to News Corporation:

Net cash provided by operating activities of $161 million for the six months ended December 31, 2022 was $269 million lower than $430 million in the prior year, primarily due to lower Total Segment EBITDA, as noted above, and higher working capital, partially offset by lower restructuring and tax payments.

Free cash flow in the six months ended December 31, 2022 was $(56) million compared to $222 million in the prior year. Free cash flow available to News Corporation in the six months ended December 31, 2022 was $(102) million compared to $144 million in the prior year period. The decrease in both free cash flow and free cash flow available to News Corporation was primarily due to lower cash provided by operating activities, as mentioned above. Foxtel's capital expenditures for the six months ended December 31, 2022 were $84 million compared to $89 million in the prior year.

Free cash flow and free cash flow available to News Corporation are non-GAAP financial measures. Free cash flow is defined as net cash provided by operating activities, less capital expenditures, and free cash flow available to News Corporation is defined as free cash flow, less REA Group free cash flow, plus cash dividends received from REA Group.

The Company believes free cash flow provides useful information to management and investors about the Company's liquidity and cash flow trends. The Company believes free cash flow available to News Corporation, which adjusts free cash flow to exclude REA Group's free cash flow and include dividends received from REA Group, provides management and investors with a measure of the amount of cash flow that is readily available to the Company, as REA Group is a separately listed public company in Australia and must declare a dividend in order for the Company to have access to its share of REA Group's cash balance. The Company believes free cash flow available to News Corporation provides a more conservative view of the Company's free cash flow because this presentation includes only that amount of cash the Company actually receives from REA Group, which has generally been lower than the Company's unadjusted free cash flow. A limitation of both free cash flow and free cash flow available to News Corporation is that they do not represent the total increase or decrease in the cash balance for the period. Management compensates for the limitation of free cash flow and free cash flow available to News Corporation by also relying on the net change in cash and cash equivalents as presented in the Company's consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

SUBSEQUENT EVENTS

Potential Disposition of Move

In January 2023, the Company announced that it was engaged in discussions with CoStar Group, Inc. regarding a potential sale of its subsidiary, Move, Inc. However, there is no assurance regarding the timing or completion of any transaction.

OTHER ITEMS

Dividends

The Company today declared a semi-annual cash dividend of $0.10 per share for Class A Common Stock and Class B Common Stock. The dividend is payable on April 12, 2023 to stockholders of record as of March 15, 2023.

Withdrawal of Proposal to Explore Potential Combination with Fox Corporation ("Fox")

In October 2022, the Company announced that its Board of Directors (the "Board"), following the receipt of letters from K. Rupert Murdoch and the Murdoch Family Trust, had formed a special committee of independent and disinterested members of the Board (the "Special Committee") to begin exploring a potential combination with Fox (the "Potential Transaction"). In January 2023, the Board of Directors received a letter from Mr. Murdoch withdrawing the proposal to explore the Potential Transaction. As a result of the letter, the Special Committee has been dissolved.

COMPARISON OF NON-GAAP TO U.S. GAAP INFORMATION

Adjusted Revenues, Total Segment EBITDA, Adjusted Total Segment EBITDA, Adjusted Segment EBITDA, adjusted net income attributable to News Corporation stockholders, Adjusted EPS, constant currency revenues, free cash flow and free cash flow available to News Corporation are non-GAAP financial measures contained in this earnings release. The Company believes these measures are important tools for investors and analysts to use in assessing the Company's underlying business performance and to provide for more meaningful comparisons of the Company's operating performance between periods. These measures also allow investors and analysts to view the Company's business from the same perspective as Company management. These non-GAAP measures may be different than similar measures used by other companies and should be considered in addition to, not as a substitute for, measures of financial performance calculated in accordance with GAAP. Reconciliations for the differences between non-GAAP measures used in this earnings release and comparable financial measures calculated in accordance with U.S. GAAP are included in Notes 1, 2, 3 and 4 and the reconciliation of net cash provided by operating activities to free cash flow and free cash flow available to News Corporation is included above.

Conference call

News Corporation's earnings conference call can be heard live at 5:00 p.m. EST on February 9, 2023. To listen to the call, please visit http://investors.newscorp.com.

Cautionary Statement Concerning Forward-Looking Statements

This document contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding trends and uncertainties affecting the Company's business, results of operations and financial condition, the Company's strategy and strategic initiatives, including potential acquisitions, investments and dispositions, and the outcome of contingencies such as litigation and investigations. These statements are based on management's views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from these expectations due to the risks, uncertainties and other factors described in the Company's filings with the Securities and Exchange Commission. More detailed information about factors that could affect future results is contained in our filings with the Securities and Exchange Commission. The "forward-looking statements" included in this document are made only as of the date of this document and we do not have and do not undertake any obligation to publicly update any "forward-looking statements" to reflect subsequent events or circumstances, and we expressly disclaim any such obligation, except as required by law or regulation.

About News Corporation

News Corp (NASDAQ:NWS, NWSA, ASX: NWS, NWSLV))) is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. The company comprises businesses across a range of media, including: digital real estate services, subscription video services in Australia, news and information services and book publishing. Headquartered in New York, News Corp operates primarily in the United States, Australia, and the United Kingdom, and its content and other products and services are distributed and consumed worldwide. More information is available at: www.newscorp.com.

NOTE 1 – TOTAL SEGMENT EBITDA

Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses. Segment EBITDA does not include: depreciation and amortization, impairment and restructuring charges, equity losses of affiliates, interest (expense) income, net, other, net and income tax (expense) benefit. Management believes that Segment EBITDA is an appropriate measure for evaluating the operating performance of the Company's business segments because it is the primary measure used by the Company's chief operating decision maker to evaluate the performance of and allocate resources within the Company's businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company's business segments and its enterprise value against historical data and competitors' data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).

Total Segment EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net income (loss), cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements and excludes items, such as depreciation and amortization and impairment and restructuring charges, which are significant components in assessing the Company's financial performance. The Company believes that the presentation of Total Segment EBITDA provides useful information regarding the Company's operations and other factors that affect the Company's reported results. Specifically, the Company believes that by excluding certain one-time or non-cash items such as impairment and restructuring charges and depreciation and amortization, as well as potential distortions between periods caused by factors such as financing and capital structures and changes in tax positions or regimes, the Company provides users of its consolidated financial statements with insight into both its core operations as well as the factors that affect reported results between periods but which the Company believes are not representative of its core business. As a result, users of the Company's consolidated financial statements are better able to evaluate changes in the core operating results of the Company across different periods. The following tables reconcile net income to Total Segment EBITDA for the three and six months ended December 31, 2022 and 2021:

NOTE 2 – ADJUSTED REVENUES, ADJUSTED TOTAL SEGMENT EBITDA AND ADJUSTED SEGMENT EBITDA

The Company uses revenues, Total Segment EBITDA and Segment EBITDA excluding the impact of acquisitions, divestitures, fees and costs, net of indemnification, related to the claims and investigations arising out of certain conduct at The News of the World (the "U.K. Newspaper Matters"), charges for other significant, non-ordinary course legal or regulatory matters ("litigation charges") and foreign currency fluctuations ("Adjusted Revenues," "Adjusted Total Segment EBITDA" and "Adjusted Segment EBITDA," respectively) to evaluate the performance of the Company's core business operations exclusive of certain items that impact the comparability of results from period to period such as the unpredictability and volatility of currency fluctuations. The Company calculates the impact of foreign currency fluctuations for businesses reporting in currencies other than the U.S. dollar by multiplying the results for each quarter in the current period by the difference between the average exchange rate for that quarter and the average exchange rate in effect during the corresponding quarter of the prior year and totaling the impact for all quarters in the current period.

The calculation of Adjusted Revenues, Adjusted Total Segment EBITDA and Adjusted Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment. Adjusted Revenues, Adjusted Total Segment EBITDA and Adjusted Segment EBITDA are not measures of performance under generally accepted accounting principles and should not be construed as substitutes for amounts determined under GAAP as measures of performance. However, management uses these measures in comparing the Company's historical performance and believes that they provide meaningful and comparable information to investors to assist in their analysis of our performance relative to prior periods and our competitors.

The following tables reconcile reported revenues and reported Total Segment EBITDA to Adjusted Revenues and Adjusted Total Segment EBITDA for the three and six months ended December 31, 2022 and 2021:

Foreign Exchange Rates

Average foreign exchange rates used in the calculation of the impact of foreign currency fluctuations for the three and six months ended December 31, 2022 and 2021 are as follows:

Adjusted Revenues and Adjusted Segment EBITDA by segment for the three and six months ended December 31, 2022 and 2021 are as follows:

The following tables reconcile reported revenues and Segment EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA by segment for the three and six months ended December 31, 2022 and 2021: