News Corporation

Good day, and welcome to the News Corp Second Quarter Fiscal 2019 Conference Call. Today's conference is being recorded. Media will be on a listen-only basis. At this time, I'd like to turn the conference over to Mr. Michael Florin, Senior Vice President and Head of Investor Relations. You may begin, sir.

Thank you very much, Aaron. Hello, everyone, and welcome to News Corp's Fiscal Second Quarter 2019 Earnings Call. We issued our earnings press release about an hour ago, and it's now posted on our website at newscorp.com. On the call today are Robert Thompson, Chief Executive, and Susan Panuccio, Chief Financial Officer. We've all been with some prepared remarks, and we'll be happy to take questions from the investment community. This call may include certain forward-looking information with respect to News Corp's business and strategy. Actual results could differ materially from what is said. News Corp's Form 10-K and Form 10-Q filings identify risks and uncertainties that could cause actual results to differ. and contain cautionary statements regarding forward-looking information. Additionally, this call will include certain non-GAAP financial measurements, such as total segment EBITDA, adjusted segment EBITDA, and adjusted EPS. The definitions and GAAP to non-GAAP reconciliations of such measures can be found in our earnings release. With that, I'll pass it over to Robert Thompson for some opening comments. Thanks, Mike.

News Corp reported increased profitability and revenue growth during the first half of fiscal 2019, highlighting the power of premium content and authenticated audiences in a fact-challenged world that craves credibility. For the second quarter, the company saw 21% revenue growth and a 13% rise in total segment EBITDA. reflecting the consolidation of Foxtel and a healthy expansion of revenues at HarperCollins, Dow Jones and REA Group. More generally, at News and Information Services, we saw a continuation of positive trends in paid digital subscriptions and digital advertising in Australia and the US, where growth mitigated declines in print revenue. Even though our teams have been diligent in pursuing revenue opportunities, the digital world remains somewhat dysfunctional, and subject to intensifying scrutiny. We are in a world of exponential e-evolution in which dominant players have the potential to manipulate markets for data, products, advertising, news and ideas. There is no doubt that some of these companies are arbitraging algorithmic ambiguity and hoping that regulators do not fully appreciate or define their dominance in certain sectors. When one company controls much of the US consumer audio book market and has its own products in that market and can tweak its algorithm at will, the potential for abuse is almost limitless. It is clear that there has been a regulatory awakening and the time has come for a regulatory reckoning. Turning now to our own businesses, which are certainly conscious of their responsibilities as custodians of customer data. it is clear that the ongoing digital transformation of Dow Jones is efficacious. Many traditional media companies are ailing, but that is certainly not the case at the Wall Street Journal, where paid digital subscribers grew 23% to over 1.7 million. Dow Jones overall has approximately 3.2 million total subscribers, 13% higher year over year. Elsewhere in the Dow Jones family, MarketWatch saw strong gains this quarter, with visits up 45% year-over-year, according to Adobe Analytics, while Barron's grew its total subscribers 27% year-over-year. The professional information business at Dow Jones also continues to show progress, with risk and compliance reporting a 26% increase in revenues. there has now been in excess of 25% year-over-year revenue growth for seven consecutive quarters. At The Times in the UK, print advertising revenues rose for the fifth consecutive quarter. The Times and Sunday Times saw solid growth in digital subscribers, while The Sun continues as the UK's number one news brand across print and digital combined, according to the latest PAMCO survey. Last month... we made an application to the UK government to allow sensible sharing of resources and cost reduction across the Times and the Sunday Times. The editorial independence and uniqueness of these peerless publications will be protected. But there are clearly areas of cost duplication, and we want to ensure the very best use of our financial and of our journalistic resources. Chris Evans, the gifted legendary radio broadcaster, joined Wireless Group's Virgin Radio last month, and the audience growth has been remarkable. To put the impact and the potential in perspective, during the first day of Chris's show, Virgin Radio saw more app downloads for digital listening than in all of 2018. The breakfast program also deployed a unique sponsorship partnership with Sky. so that the flow was not disrupted by conventional ad breaks. That model has already proven its worth and is likely to be replicated elsewhere on the radio roster. At News Australia, profitability improved thanks to continued digital advertising growth and cost efficiencies. News.com.au was again the number one news website, significantly ahead of its competitors, reaching almost 10 million unique users in the month of December, according to Nielsen. Meanwhile, the Australian, where digital page subscriptions account for more than half of the total subscriber base, we saw strong digital subscription growth this quarter, up 23% year over year. Since we brought together Foxtel and Fox Sports Australia, we have made extensive changes in management, enhanced the sports and entertainment portfolio, and upgraded the technology. Average audiences across Fox Sports Australia channels are up over 70% year over year. with the addition of live cricket boosting viewership during the summer, traditionally a relatively quiet period for customer acquisition. Our new sports streaming product, Kayo, has certainly changed the traditional trend. As of February 5th, Kayo had attracted over 115,000 users of which approximately 100,000 were paid, and we expect that number to increase markedly as we head into the peak selling season for the more popular winter sports, Australian football and rugby league. It is clear in a competitive world of content that the passion for sport drives subscription growth, and Foxtel has by far the best collection of that cherished content. In our digital real estate services segment, REA Group in Australia continues to outperform the competition, posting robust results despite a challenging listings environment, driven by strong residential growth and the inclusion of the data services business, which was not in the prior comparative period. The continued success of REA would not have been possible without the leadership of Tracey Fellows. She will be driving global expansion and seeking new opportunities for our fastest revenue growing segment in her new role as President of Global Digital Real Estate at Newscore. Since the creation of the new Newscore in 2013, Digital Real Estate Service revenues have more than tripled and segment EBITDA has more than doubled. The appointment of Tracey underscores our increasing commitment to the sector. We are particularly pleased that Owen Wilson has become the new Chief Executive of REA, where he has overseen strategy, M&A and operations, all of which have thrived. Turning to US real estate, our long-term optimism is undiminished, even as shorter-term trading in the property market has been somewhat sluggish. As evidence of the enduring strength of our business, real estate revenues at the operator of realtor.com, Move Inc, were up 23% this quarter, with total revenues up 11%. This includes Op City, the acquisition of which we successfully closed in October. Its strategic importance is evident in the higher quality value-added leads it provides for brokers about potential clients. Unlike a certain other company in the sector, We are not in the business of flagrantly flipping houses or covertly competing with our clients. Our aim is to provide the best possible service to buyers, sellers and realtors. In book publishing, HarperCollins delivered another outstanding performance this quarter, bolstered by best-selling titles such as Homebody by Joanna Gaines and Girl, Wash Your Face by Rachel Hollis, both of whom are set to publish new titles in the current quarter. And in the UK, also very successful, was the Ice Monster by the irrepressible David Walliams. Digital sales also grew 12% in the prior year, driven by a 58% increase in the sales of audiobooks. Our results this quarter and for the first half of the fiscal year demonstrate the power of our premium products and reflect our ongoing digital transformation, which is building a muscular platform for the future and for our investors. Now Susan will provide incisive insight into the finer details of our accounts.