Earnings: Dow Jones Posts Lower Q2 Profits; Revenue Up 16.2 Percent; Director Resigns
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In what could be its last earnings report before it becomes part of News Corp., Dow Jones (NYSE: DJ) said its profits fell 26.5 percent, posting earnings of $21 million, or 25 cents per diluted share, for Q2, versus $28.8 million, or 34 cents a share, one year ago. Excluding special items, the company earned 45 cents per diluted share for the quarter, up 15.4 percent from the 39 cents per diluted share earned in Q206.
On the revenue side, Dow Jones was up $529.7 million, a gain of 16.2 percent year-over-year. The company pointed to a number of factors pushing revenues up: the acquisition of Factiva, plus growth at Dow Jones Indexes, international media (including the acquisition of eFinancialNews) and The Wall Street Journal Digital Network (previously Dow Jones Online). The revenue success of those areas were able to offset a decline in print ad sales at WSJ in the U.S. and newspapers in its Local Media segment. Other highlights from the release:
—Dow Jones recorded special items that reduced earnings per share by 20 cents. Included in those special items is a charge of 13 cents for incremental stock-based compensation expenses as a result of an increase in Dow Jones’ stock price after the announcement of News Corp.’s acquisition bid the Company at $60 per share ($5 billion in total). The company also recorded a 7 cent restructuring charge related towith restructuring of the Consumer Media segment. Incidentally, Consumer Media revenue in Q2 came in at $290.8 million, a slight drop from a year ago as ad revenue fell 1.6 percent.
—Local Media revenue declined 6.2 percent to $62.5 million, due to softness in classified, non-daily, retail, national and preprint advertising revenue. More to come. Earnings release | Webcast (10:00 a.m. EST)
Update: During the conference call with investors and analysts, Dow Jones executives highlighted the intermingling of print and online as a centerpiece of the company’s revenue drivers. Furthermore, while some ad categories saw spending retreat both in print and online, most notably in the technology category, executives said they already saw that category beginning to recover for Q3. More after the jump…
—Time Of Transformation: Rich Zannino, CEO and director, briefly recapped the board’s acceptance of News Corp.‘s $5 billion offer to buy the company. He noted that New Corp. was attracted to Dow Jones for its strong brand and content, while adding that the company has not been distracted by the negotiations in terms of building a stronger connection between its print and digital units. “The second quarter was a time of transformation. During Q2, we continued to upgrade our online operations, by launching a new home page for WSJ.com, a new digital site and new auto site. Video usage is growing rapidly, with 1.9 million videos viewed in May.”
—Print/Online Bundling: Total revenue at the WSJ Digital Network grew 5 percent, primarily due to a 13 percent increase in online circulation revenue, said Bill Plummer, Dow Jones’ CFO. Paid subs to the Online Journal were up 24 percent to 983,000, driven in part by the $99 print/online subscription bundle. Last quarter, we changed our methodology for counting online paid subscribers to the Online Journal. We now include online-only subscribers and print subscribers who have paid and registered at the Online Journal. During the Q&A portion of the call, Zannino added: “The plan going forward is, upon renewal, to step these subscribers up to paying more than $99 a year and have them continue to access both the print and online versions equally.”
—Tech Ad Spend To Recover In Q3: Online ad revenue at the WSJ Digital Network increased 3 percent, a slowdown from the double-digit growth levels Dow Jones has experienced in the past, Plummer added. “This was almost exclusively attributed to significant declines in technology advertising, which represents 22 percent of our online advertising base. We believe this is more an anomaly than a trend. We already see examples of accounts that were part of the decline in Q2 having scheduled ads for Q3. And while not all have yet rescheduled their advertising, we’ve seen enough to continue to expect that our online tech advertising will be recovered in the third and fourth quarters.” Offsetting the tech losses were the double-digit gains in financial, business services, consumer, retail and travel categories. For the first half of the year, online advertising revenue was up 15 percent. The company expects double-digit ad growth for the remainder of the year.
Updated: Dow Jones director Dieter von Holtzbrinck has resigned in protest over the board’s decision to recommend New Corp.‘s $5
billion takeover offer. In a letter to the board filed with the SEC, von Holtzbrinck said “although I’m convinced that News Corp. offer is very generous in financial terms, I’m very worried that Dow Jones unique journalistic values will long-term strongly suffer after the proposed sale.”
Posted In: Advertising, Media & Publishing, Newspapers, Money, Earnings, Companies, News Corp., Dow Jones, Wall Street Journal
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