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Press Release: News Corporation Reports Second -2-

· 02/04/2021 16:40
For the six months ended December 31, ---------------------------------- 2020 2019 ----------------- --------------- (in millions) Net cash provided by operating activities $ 483 $ 192 Less: Capital expenditures (173) (237) ------------- ----------- 310 (45) Less: REA Group free cash flow (65) (86) Plus: Cash dividends received from REA Group 32 35 ------------- ----------- Free cash flow available to News Corporation $ 277 $ (96) === ======== =======-- Closing digital subscribers at News Corp Australia's mastheads as of December 31, 2020 were 738,300, compared to 566,600 in the prior year (Source: Internal data) -- The Times and Sunday Times closing digital subscribers as of December 31, 2020 were 335,000, compared to 320,000 in the prior year (Source: Internal data) -- The Sun's digital offering reached 130 million global monthly unique users in December 2020, compared to 140 million in the prior year (Source: Google Analytics) -- New York Post's digital network reached 141 million unique users in December 2020, compared to 95 million in the prior year (Source: Google Analytics)

As of December 31, 2020, Foxtel's total closing paid subscribers were 3.314 million, a 12% increase compared to the prior year, primarily due to the launch of Binge and the growth in Kayo subscribers, partially offset by lower residential and commercial broadcast subscribers. 2.001 million of the total closing subscribers were residential and commercial broadcast subscribers, and the remaining 1.313 million consisted of Kayo, Binge and Foxtel Now subscribers. As of December 31, 2020, there were 648,000 Kayo subscribers (624,000 paying), compared to 372,000 subscribers (350,000 paying) in the prior year. Binge, which launched in May 2020, had 468,000 subscribers (431,000 paying) as of December 31, 2020. As of December 31, 2020, there were 265,000 Foxtel Now subscribers (258,000 paying), compared to 343,000 subscribers (334,000 paying) in the prior year.

Broadcast subscriber churn in the quarter increased to 17.5% from 16.0% in the prior year, due to fewer promotions and the roll-off of lower value subscribers. Broadcast ARPU for the quarter increased 3% to A$80 (US$58).

Segment EBITDA in the quarter increased $54 million, or 77%, compared with the prior year. The improvement reflects $35 million of lower sports programming rights and production costs, which was primarily driven by the savings from renegotiated sports rights, partially offset by the $20 million negative impact related to the deferral of costs from the fourth quarter of fiscal 2020. The Segment EBITDA improvement was also due to lower entertainment programming costs, lower overhead expenses resulting from cost reduction efforts and an $8 million positive impact from foreign currency fluctuations. Adjusted Segment EBITDA increased 66%.

Dow Jones

Revenues in the quarter increased $16 million, or 4%, compared to the prior year, primarily due to growth in circulation and subscription and digital advertising revenues, partially offset by lower print advertising revenues. Digital revenues at Dow Jones in the quarter represented 70% of total revenues compared to 64% in the prior year.

Circulation and subscription revenues increased $23 million, or 8%, including a $3 million, or 1%, positive impact from foreign currency fluctuations. Circulation revenue grew 8%, reflecting the continued strong growth in digital-only subscriptions, partially offset by lower single-copy and amenity sales related to COVID-19. Professional information business revenues grew 4%, driven by 21% growth in Risk & Compliance products, partially offset by the decline in revenues from other professional information business products. Digital circulation revenues accounted for 63% of circulation revenues for the quarter, compared to 57% in the prior year.

During the second quarter, Dow Jones saw the highest year-over-year growth in total subscriptions and digital-only subscriptions for both The Wall Street Journal and total Dow Jones' consumer products in its history. Total subscriptions to Dow Jones' consumer products reached a record 4.03 million average subscriptions for the quarter, an 18% increase compared to the prior year, of which digital-only subscriptions grew 29%. Total subscriptions to The Wall Street Journal grew 19% compared to the prior year, to a record 3.22 million average subscriptions in the quarter. Digital-only subscriptions to The Wall Street Journal grew 28% to more than 2.46 million average subscriptions in the quarter, and represented 76% of total Wall Street Journal subscriptions.

Advertising revenues decreased $5 million, or 4%, primarily due to a 29% decline in print advertising revenues, driven by general market weakness and lower print volume across The Wall Street Journal and Barron's due to COVID-19. The decline was partially offset by record quarterly digital advertising revenues, driven by custom revenue and a rebound in direct display sales. Digital advertising revenues grew 29% compared to the prior year, which was the highest growth rate in 10 years. Digital advertising accounted for 58% of total advertising revenues in the quarter, compared to 43% in the prior year.

Segment EBITDA for the quarter increased $33 million, or 43%, primarily due to higher revenues, as discussed above, and lower costs related to lower print volume and other discretionary cost savings, partially offset by higher compensation costs.

Book Publishing

Revenues in the quarter increased $102 million, or 23%, compared to the prior year, including a $5 million, or 1%, positive impact from foreign currency fluctuations. The revenue growth was primarily due to higher sales in every category with the success of titles such as Didn't See That Coming by Rachel Hollis, The Happy in a Hurry Cookbook by Steve Doocy, The Greatest Secret by Rhonda Byrne and Code Name Bananas by David Walliams. Adjusted Revenues increased 19%. Digital sales increased 15% compared to the prior year, driven by growth in both e-book and downloadable audiobook sales. Digital sales represented 18% of Consumer revenues for the quarter. Segment EBITDA for the quarter increased $41 million, or 65%, compared to the prior year, primarily due to the higher revenues discussed above and the mix of titles. Adjusted Segment EBITDA increased 60%.

News Media

Revenues in the quarter decreased $238 million, or 29%, as compared to the prior year, including a $22 million, or 3%, positive impact from foreign currency fluctuations. The decline was primarily driven by a $191 million, or 24%, impact from the divestiture of News America Marketing in May 2020. The decline also reflects weakness in the print advertising market and the $34 million, or 4%, impact from the closure or transition to digital of certain regional and community newspapers in Australia. Within the segment, revenues at News Corp Australia and News UK declined 11% and 5%, respectively. Adjusted Revenues for the segment decreased 9% compared to the prior year.

Circulation and subscription revenues increased $12 million, or 5%, compared to the prior year, primarily due to digital subscriber growth, a $9 million, or 4%, positive impact from foreign currency fluctuations and price increases, partially offset by lower single-copy sales revenue, primarily at News UK and the New York Post.

Advertising revenues decreased $231 million, or 48%, compared to the prior year, reflecting a $191 million, or 40%, negative impact from the divestiture of News America Marketing. The remainder of the decline was driven by continued weakness in the print advertising market, exacerbated by COVID-19, and a $28 million, or 6%, negative impact related to the closure or transition to digital of certain regional and community newspapers in Australia, partially offset by a $10 million, or 2%, positive impact from foreign currency fluctuations and growth in digital advertising at the New York Post and News UK.

In the quarter, Segment EBITDA was flat compared to the prior year, as higher cost savings at News UK and News Corp Australia, as well as a positive contribution from the New York Post, were offset by lower revenues, as discussed above, and the absence of a $22 million one-time benefit in the prior year from the settlement of certain warranty related claims in the U.K. Adjusted Segment EBITDA increased 5%.

Digital revenues represented 31% of News Media segment revenues in the quarter, compared to 22% in the prior year, and represented 29% of the combined revenues of the newspaper mastheads. Digital subscribers and users across key properties within the News Media segment are summarized below:

CASH FLOW

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

Net cash provided by operating activities of $483 million for the six months ended December 31, 2020 was $291 million higher than $192 million in the prior year, primarily due to higher Total Segment EBITDA as noted above and lower working capital.

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February 04, 2021 16:40 ET (21:40 GMT)