News Corporation

Good day and welcome to the News Corp 4Q Fiscal 2021 Conference Call. Today's conference is being recorded. Media will be on a listen-only basis. At this time, I would like to turn the conference over to Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, Valerie. Hello, everyone, and welcome to News Corp's Fiscal Fourth Quarter 2021 Earnings Call. We issued our earnings press release about 30 minutes 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'll open with some prepared remarks, and then 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. Newscorp'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.

Thank you, Mike. The past year has been a severe test for families, for countries, and for companies. The stresses and strains of a pandemic have stretched the social fabric and the commercial canvas. I want, foremostly, to express my gratitude to the employees of News Corporation, who around the world have navigated these testing times with professionalism and with principle. Their efforts, their creativity, and their commitment have built on the company's proud foundations and been a catalyst for these impressive results for News Corp and for our group companies. Overall, revenues in fiscal 21 rose 4% and by 30% in the fourth quarter, that is 30%, indicating that the company is surely gaining in momentum, while profitability improved by 26% for the year. We have continued to focus our investment on growth areas, with the acquisition of Investors Business Daily, Mortgage Choice in Australia, and the Books and Media Division of Horton Mifflin Harcourt. We have also continued to simplify the business, with the rationalisation of REA's Asian property business and the amicable settlement of residual litigation regarding News America marketing, which we successfully sold just ahead of fiscal 21. Our strong cash generation has given us increased optionality, Our cash balance exceeded $2.2 billion at the end of June, and so we were able to take advantage of the required sale of Opus, which we expect to strengthen and ultimately transform the Dow Jones professional information business. And our clearly robust cash position has prompted the company to actively review our capital returns policy with a greater focus on buybacks. A few highlights before delving deeper into the businesses. For fiscal 2021, we had a record number of digital subscriptions at our key milestones. Record traffic at realtor.com, where audience growth, according to Comscore, is significantly outpacing that of its main rivals. and record subscriber growth at Foxtel, where at the end of June, our paid streaming subscribers reached over 2 million, an increase year on year of 155%, a profound escalation that included the successful launch of Binge last year. That success has naturally given us much optionality as we consider Foxtel's rather favorable future. In short, we had the most profitable year since we created the new News Corp. Dow Jones had its most profitable year since it was acquired in 2007. And HarperCollins and MOVE also recorded their most profitable years. And we believe there is clearly more growth ahead. The past year has seen the revaluing of our content through landmark news payment agreements with the major tech platforms. These deals, the financial terms of which are confidential, will add significant revenue annually, clearly into nine figures, and are a profoundly important part of the ongoing transformation of the content landscape. We are also watching the evolution of the digital ad market, which historically has lacked transparency. The active interest of regulators around the world should reduce the opacity and provide higher yields for publishers. At Dow Jones... Subscriber growth continued to pace, leading to a significant increase in segment EBITDA for the fourth quarter and for the year, up 15% and 41% respectively. The full-year segment EBITDA was indeed the most lucrative since the company's acquisition. Digital consumer subscriptions, which were 26% higher in the quarter, contributed to that growth, as did an overall increase in advertising revenues for the year of 4%, as a surge in digital ads more than compensated for a decline in print advertising. At the Wall Street Journal, subscriptions grew 15% year-over-year in the fourth quarter, reaching nearly 3.5 million. and digital-only subs, growing by nearly 100,000 from the third quarter and by 21% year-over-year, now comprise nearly 80% of total subscriptions. Advertising in the fourth quarter rose 45%, and digital advertising was 53% higher. It is worth highlighting the success of our risk and compliance business, particularly as we contemplate the future potential of the just-announced agreement to acquire Opus. Revenues at risk and compliance increased 23% for the fiscal year and burgeoned by 30% in the fourth quarter compared to a year earlier, marking six straight years of over 20% growth. We believe that the professional information business will continue to expand at a strong rate and that Opus will be the cornerstone for a commodities, energy and renewables digital business that will have a long-term positive impact on our earnings. We are excited to be adding a new growth lever to Dow Jones, whose performance has manifestly been exceptional. We firmly believe Opus and Dow Jones will be more than the sum of their parts. Our acquisition of Investors Business Daily was completed in May, and we expect to see the positive impact of this high-margin digital operation in coming quarters. We believe that there are multiple opportunities to cross-sell and up-sell products, as IBD will benefit from Dow Jones' reach and Dow Jones will prosper from IBD's range of high-value specialist investment offerings. We are confident that Elmar Latour and the team at Dow Jones are poised to deliver ongoing excellent results. The Foxtel narrative is particularly positive, as our early emphasis on streaming and on securing long-term valuable sports and entertainment rights has put the company on a decidedly upward trajectory. Our paying subscribers were 40% higher and fiscal year revenue rose 10%, while our EBITDA growth was 11%. There was a noticeable acceleration in revenue growth in the fourth quarter when it surged 33%, driven by our streaming products and thanks in part to positive currency fluctuations. The strong growth in the streaming business, which is taking advantage of and successfully monetizing existing rights, was evident in the fourth quarter, when the number of total paying streaming subscribers was 155% higher than at the same time last year. We are obviously pleased with the exponential evolution of both KO, our sports streaming product... which has rights to Australia's most popular sports, and Binge, our entertainment streaming service, as they combine world-class technology, clever user interfaces and high-quality compelling content. It's worth pausing for a moment to consider how the Foxtel narrative has changed decisively and positively over the past 18 months. Then we were being asked whether we would need to put extra funds into Foxtels. And now we have attractive options for a growing, thoroughly contemporary business that has a tangible upside. Our immediate task and that of our team, led admirably by Siobhan McKenna and Patrick Delaney, is to keep driving the business, to keep striving, because those options will certainly be enhanced by continued success. Digital real estate is another fast-growing sector for the company, and we are proud of the performance of both REA and Realtor. Many of you will recall there was a certain skepticism when we acquired Move, the realtor.com parent, a certain doubt about our ability to turn around the company's then flagging fortunes. Well, there's no overstatement to say there has been a realtor renaissance, with fiscal 2021 profit contribution from Move increasing by $100 million as its revenue scaled. For the year, revenue grew by 36% and the rate accelerated to 68% in the fourth quarter. Audience numbers hit record highs during the quarter. As measured by the independent Comscore, audience growth has exceeded that of Zillow and Trulia for 17 successive months. and averaged more than 20 percentage points faster in the last eight months. That is a telling testament to the great work by Tracy Fellows, David Doctorow, and to all at Realtor. The two core pillars of the Realtor business, the premium referral model and lead generation, have both reported superlative growth. and those who watch the industry closely will have noted that a key indicator, the number of houses listed for sale, has increased in the past two months. The more inventory on the market, the more opportunities for the realtor team to deliver their best-in-class services to buyers, sellers, and agents. REA had a supernal year, with revenue growth of 27%, benefiting from currency, and a robust housing recovery in Australia. Revenue growth actually accelerated in the fourth quarter compared to the third quarter. Again, listings were a key driver of that success, with full-year listings 15% higher, while those in the fourth quarter surged 54%. One of the absolute lessons of the pandemic is that families and investors have focused on property as both a source of returns but also of enduring security. The allure of real estate is real and the profits are palpable. Meanwhile, we are expanding into sensible adjacencies, in particular mortgages, which will also benefit from the renewed flow of listings. Smartline is already thriving and Owen Wilson and the team are confident that Mortgage Choice will benefit from that increased activity by offering borrowers the best possible range of loans. We look forward to updating you in coming quarters with the progress at both Mortgage Choice and Smartline. HarperCollins is another resilient source of revenue growth, profits, and cash generation for the company. Revenue for the full year rose 19%, while segment EBITDA was 42% higher, as the company benefited from digital sales, the rediscovery of books as a medium, and an extensive lucrative backlist. For example, the company certainly profited from the immense popularity of Bridgerton, the eponymous Netflix series, which has been extended into a second season to the benefit of Julia Quinn's novels and HarperCollins. The company's prospects and its backlist have been bolstered by the addition of the Horton Mifflin Harcourt books and media segment, which has a living library of 7,000 titles, including the perennially popular George Orwell and Curious George. We also acquired the US rights to J.R.R. Tolkien's works, including The Hobbit and The Lord of the Rings trilogy, and now have global English language rights, which will surely benefit from the upcoming blockbuster Amazon series based on those classic, perdurable books. Brian Murray and the HarperCollins team have focused on driving digital and direct-to-consumer offerings. and it is worth noting that e-book sales rose 14% during the year, while audio books expanded a healthy 22%. Clearly, there is much interest by various podcast-related companies in our unique audio book offerings, and we stand to gain from the proliferation of streaming audio. For those of you who have perused our numbers, it is clear that there has been a strong improvement in the profitability of the news media businesses, with News UK, News Corp Australia and the New York Post all performing admirably and contributing to News Corp's overall enhanced profitability. There was disciplined cost control and sage leadership throughout those businesses and a strong recovery in advertising during the fourth quarter. In the UK, our businesses delivered a significant profit contribution for the year, with digital subscriptions increasing markedly and listening at wireless rising sharply during the European Football Championships, with advertising benefiting accordingly. And we look forward with alacrity to the launch of the Premier League season next week. The Sun remained the country's largest digital news brand and advertising revenue across the properties in the UK rebounded in the fourth quarter compared to a year earlier. That rebound is a sign that reach, engagement, and provenance are important to advertisers, and that our UK media companies, under Rebecca Brooks' leadership, provide a uniquely effective forum. At Newscore Australia, where Michael Miller and the team took the bold and necessary decision to convert most of our regional and community papers to digital-only platforms, we saw a 25% increase in digital subscribers at the mastheads in the fourth quarter, while there was a healthy recovery in advertising. Clearly, businesses are subject to the vagaries of the virus in Australia, but the robust recovery in recent months is a hopeful harbinger. The New York Post was on the very cusp of making an annual profit for the first time in many decades, perhaps for the first time since the age of Alexander Hamilton, which is testament to the epochal work of Sean Giancola, Keith Poole, and all at the Post. The Post was a digital success in fiscal 21, generating 45% digital ad growth, including an acceleration in the fourth quarter with 65% growth. That is 65% growth. And we should harvest further savings from the exiting of our Bronx printing plant, which is attracting much demand from companies seeking this prime site. I would like to thank all who have printed and distributed the Post and Dow Jones publications through the decades. They provided a great service to the company and to society by delivering news and insight every morning around the greater New York region. All of our employees deserve gratitude for their sterling contributions, both for the company and their communities over the past complicated, sometimes stressful year. Their efforts have been a crucial part of our unprecedented success and provided a firm foundation for ongoing revenue growth and increasing profitability. As I mentioned earlier, we are generating record profits in cash, and that has given us the ability to make opportunistic acquisitions to bolster the company and generate even more momentum. We will certainly be thoughtful and strategic in deploying our assets and will, as always, be cognizant of our responsibility to and the interests of all of our shareholders. And now I hand you over to Susan Panuccio, who will provide more salient details about an extraordinary year.