NWS has again published good results in Q3, with an acceleration...

NWS has again published good results in Q3, with an acceleration for adjusted revenues (+ 4 % yoy vs + 2 % in Q2) and still a good growth for adjusted EBITDA (+ 24 % adjusted vs + 39 % in Q2).
EPS and revenues has beaten consensus according to Seeking Alpha (revenues were 6 % ahead of consensus).

Once again, these results were reached despite weak advertising revenues (- 35 % yoy, with some disposal impact) and before the impact of the recent agreement with Google and FB.
They continue to benefit from the strategic decision to focus on subscription and digital business (digital advertising and digital sales for the publishing business).

Revenues trends
- Adjusted revenues accelerated for digital real estate (growth doubled at + 22 %) and Dow Jones (+ 5 % vs + 3 %), while they remained high for the publishing business (+ 15 % vs + 19 % in Q2).
- Adjusted revenues continue to struggle in the other 2 divisions : - 4 % for subscription video (incl Foxtel) and - 7 % for News Media.

EBITDA trends
- increase for the 5 divisions for adjusted EBITDA with strong increase for their 3 main divisions : + 58 % for digital real estate, + 61 % for Dow Jones and + 45 % for Book Publishing,
- the only negative was a large increase of costs for the "other" division" where the EBITDA loss was 80 m (vs 30 m 1 year before) due to higher employee costs (higher equity compensation) and investment spending. This increase looks like a one off as the company expects an increase of just 20 m yoy for the other segment in Q4.

The company highlighted in particular the performance of their US real estate business (realtor.com) which accelerated its revenue growth in Q3 with a revenue growth of 37 % (vs 28 % in Q2). Even if they still do not disclose the margin of their US business, they disclosed that Move explains 84 % of the EBITDA increase for the digital real estate division.
The revenue increase of Move was supported both by the traditional lead generation product, as well as the referral model.

These good EBITDA results led to a large improvement for the cash flow and the free cash flow (decrease of Capex due to Foxtel).
After 9 months, the free cash flow available to News (which corrects from REA minority interests) was 762 m for 9 months (vs 63 m 1 year before).
If we annualize these figures, News Corp has a free cash flow yield of more than 7 %.