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News Corp Q3 revenue falls marginally to $2.06 billion

MUMBAI: Publishing company News Corp has reported fiscal 2015 third quarter total revenues of $2.06 billion, a fall of one per cent compared to prior year third quarter revenues of $2.08 billion.

The majority of the revenue decline reflects negative foreign currency fluctuations and lower ad revenues at the News and Information Services segment, offset in large part by growth in the Book Publishing and Digital Real Estate Services segments as a result of the acquisition of Harlequin Enterprises and Move respectively.  Adjusted revenues declined by two per cent  compared to the prior year.

The company reported third quarter total segment EBITDA of $163 million, a seven per cent  decline as compared to $175 million in the prior year.  These results include $15 million and $20 million in fees and costs – net of indemnification – related to the UK Newspaper Matters (as defined below) in the three months ended March 31 2015 and 2014 respectively.  Declines at the News and Information Services segment, including higher legal costs at News America Marketing, negative foreign currency fluctuations and increased stock-based compensation expense resulting from the acquisition of Move were partially offset by lower expenses at Amplify and increased revenues in the Book Publishing segment due to the inclusion of Harlequin results.  Adjusted Total Segment EBITDA declined by one per cent  compared to the prior year.

Net income available to News Corp stockholders was $23 million as compared to $48 million in the prior year, due to lower Total Segment EBITDA as well as a higher effective tax rate, lower equity earnings of affiliates, and lower interest income.  Adjusted net income available to News Corp stockholders was $28 million compared to $66 million in the prior year.  Impairment and restructuring charges were $10 million in both the three months ended March 31, 2015 and 2014.

Net income available to News Corp stockholders per share was $0.04 as compared to $0.08 in the prior year.  Adjusted EPS were $0.05 compared to $0.11 in the prior year.

Free cash flow available to News Corp decreased by $105 million in the nine months ended March 31, 2015 to $391 million, primarily as a result of certain one-time items.

CEO Robert Thomson said, “The new News Corp continues to build a firm foundation for digital growth.  We see that most clearly in the successful integration of realtor.com, which grew audience and revenue at record levels in the third quarter. News Corp is now a global leader in digital real estate, which we believe will underpin long-term expansion and complement our expertise in news and financial analysis, both of which have been important ingredients in realtor.com’s accelerated growth.

“While the quarter faced some revenue challenges, particularly at News and Information Services, including currency headwinds, our adjusted EBITDA was relatively stable, underscoring the strength of our assets and the diversification of our revenue base.  We believe the company is firmly on track and the signs are positive for year-over-year EBITDA growth in the fourth quarter.”

News and Information Services: Revenues for the third quarter of fiscal 2015 decreased $135 million, or nine per cent, compared to the prior year.  Total segment advertising revenues declined by 12 per cent, driven primarily by negative foreign currency fluctuations, weakness in the print ad market and lower revenues at News America Marketing.  Circulation and subscription revenues declined by six per cent due to negative foreign currency fluctuations, a decline in professional information business revenues at Dow Jones and lower print circulation volume, partially offset by higher subscription pricing, cover price increases and higher digital subscription volume.  Adjusted revenues declined by three per cent compared to the prior year.

Segment EBITDA decreased $33 million in the quarter, or 23 per cent, as compared to the prior year.  Results were impacted by lower advertising revenues, negative foreign currency fluctuations and $8 million of higher legal expenses at News America Marketing, partially offset by lower expenses at News Corp Australia.  Adjusted segment EBITDA decreased 21 per cent compared to the prior year.

Book Publishing: Revenues in the quarter increased $48 million, or 14 per cent, compared to the prior year driven by the inclusion of the results of Harlequin and strong backlist sales in General Books resulting from the continued popularity of American Sniper by Chris Kyle, partially offset by lower revenues from the Divergent series.  E-book revenues declined 3 per cent versus the prior year period, driven by lower contribution from the Divergent series as well as a shift towards the non-fiction genre, which has lower e-book conversion, partially offset by the inclusion of Harlequin results.  E-book revenues represented 22 per cent of consumer revenues for the quarter.

Segment EBITDA for the quarter increased $3 million, or six per cent, from the prior year, primarily due to the inclusion of the results of Harlequin and lower expenses, partially offset by lower contribution from the Divergent series.  Adjusted revenues decreased five per cent and Adjusted Segment EBITDA decreased by eight per cent compared to the prior year.

Cable Network Programming: In the third quarter of fiscal 2015, revenues increased $3 million, or three per cent compared to the prior year primarily due to higher affiliate and advertising revenues, partially offset by negative foreign currency fluctuations.  Segment EBITDA in the quarter was flat compared with the prior year, as the higher revenues were offset by negative foreign currency fluctuations and higher programming rights costs.  Both Adjusted revenues and Adjusted Segment EBITDA increased by 15 per cent compared to the prior year.

Free cash flow available to News Corp in the nine months ended March 31, 2015 declined $105 million to $391 million from $496 million in the prior year.  The decrease was primarily due to the absence of the net receipts related to a foreign tax refund of $73 million and lease incentives of $35 million received during the nine months ended March 31, 2014, as well as higher net tax payments of $53 million and approximately $45 million of higher deferred compensation payments related to the acquisition of Wireless Generation incurred in the current year period.  The decrease was partially offset by lower restructuring payments of $62 million, lower payments for fees and costs related to the U.K. Newspaper Matters of $46 million and higher dividends received from REA Group.