News Corporation

Good day, ladies and gentlemen. Welcome to the News Corp 3Q Fiscal 2022 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, Operator. Hello, everyone, and welcome to News Corp's Fiscal Third Quarter 2022 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 will 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. 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.

Thank you, Mike. I'm delighted to report that revenues and profitability were at a new record for the third quarter since the company's rebirth in 2013, building comprehensively on the momentum of our record performance in preceding quarters. News Corp delivered $2.5 billion of revenues, up 7% despite the vicissitudes of currency volatility, while profitability improved by 20%, and that was despite the one-time transaction costs for our Opus acquisition. the tangible benefits to revenue and profitability of that transaction should be obvious in coming quarters. To put the results in a broader context, we attained more in profitability at over $1.3 billion through the first three quarters of fiscal 22 than we did in any entire fiscal year since our rebirth in 2013. And there is certainly more to come in the fourth quarter. Given the impact of the pandemic, and not so transitional inflation, both exogenous in the extreme, these sterling results are testament to the strength of the company's culture, created and curated by Rupert and Lachlan Murdoch, and the commitment, creativity and passion of all our employees. We are investing, as well as returning capital to shareholders, and have focused that investment on bolstering our growth pillars. The results of that productive investment should be felt for years to come, Our core product suite has expanded, as has our reach, and we expect that auspicious combination will continue our long-term growth. Following a strong fiscal 21 and first half of fiscal 22, Dow Jones continued to power ahead, with revenues and segment EBITDA both sharply rising, though the latter was impacted by the one-time costs related to the Opus transaction. Segment EBITDA was up 7%, even including the Opus costs, Adjusted segment EBITDA actually rose 16%. Opus, along with base chemicals, which we expect will close by the end of next month, represents an exciting opportunity for Dow Jones, extending the depth and reach of our news and information capabilities in the commodities sector. The appetite for data, analysis and insight in the energy, renewables, chemicals and related fields is strong and growing, and we believe Dow Jones is ideally positioned to to capitalize for many years to come. Not only did we acquire Opus at a rather favorable price, but the recent surge in global commodity prices highlights the profound importance of this sector for Dow Jones. The need for trusted and accurate information has never been more imperative, and we expect to capitalize on that opportunity. Opus has healthy subscriber growth with robust margins and extremely high retention rates. Given the lack of overlap between the customer bases of Dow Jones and Opus, we see very strong cross-sell and up-sell potential, using the vast WSJ, IBD and MarketWatch audiences as a premium pool for customer leads. Subscriber growth at Dow Jones remained robust, with WSJ digital-only subscribers crossing 3 million this quarter, expanding at a robust 16% rate. Digital-only subscriptions across all Dow Jones consumer sites increased by 19%, which also reflects the consolidation of IBD and early success in new bundled offerings. Digital advertising burgeoned 21%, marking the seventh consecutive quarter of double-digit percent growth. Notably, print advertising has actually expanded for four consecutive quarters in double digits. While the conflict in Ukraine had a short-term impact on advertising, given that certain advertisers did not want juxtaposition with war coverage, overall trends remained favourable. The imposition of sanctions and expansion of watch lists underscore the value of the Dow Jones risk and compliance business, which continued its unbroken streak of rapid growth in Q3 when it recorded the 27th straight quarter of double-digit increases. And on Ukraine... We are deeply appreciative of the professionalism of our journalists and their support teams in covering the tragic conflict and bringing understanding to readers around the world. At Digital Real Estate Services, both revenues and segment EBITDA continued to expand at a healthy rate. Revenues at REA grew a robust 30% following a surge in listing value and also benefited from the integration of mortgage choice. which obviously provides another means of monetising our valuable leads. In the US, the real estate market is in the midst of flux, with historically low inventories and rising interest rates. Home prices generally have continued to rise, there is much variation depending on the location, while rents are increasing at a double-digit rate. Affordability and supply, which are obviously related, remain issues for first-time buyers. who also face an escalation in mortgage rates, though, by historical standards, rates remain relatively low. The ebb and flow of market forces is not unusual, and we believe the opportunity for Realtor.com and Newscore has never been greater, as the digitisation of the property market continues apace, and current trends are likely to expedite that evolution. Our product innovation has accelerated. Our scale has increased and we are in the early days of venturing into relevant adjacencies with large addressable markets. Despite the shifting market conditions, Move posted revenue growth in the third quarter and our aim to be the digital marketplace for consumers and the industry is clearly paying dividends, as our average monthly unique users exceeded 100 million in March. Over the past two years, third quarter revenues at the digital real estate services segment have increased by 59%, which gives a measure of both the growth and the opportunity. The past two years have been remarkable for book publishing, with third quarter revenues rising 5% this year, which means that there has been a 25% increase since the third quarter of fiscal 2020. And this in an industry that some observers had presumed to be matured. we expect sales to continue at significantly higher levels than before the pandemic. Unsurprisingly, EBITDA for the segment was challenged, including by supply chain cost increases for paper, printing and distribution. We expect these near-term disruptions to abate over time. We also expect continuing success from both new releases and our bolstered backlist, which was enhanced by the acquisition of the Horton, Mifflin, Harcourt Books and Media divisions. Successful releases included the best-selling memoir by former Attorney General Bill Barr, One Damn Thing After Another, Red-Handed by Peter Schweitzer, and The Paris Apartment by Lucy Foley. Given the public's abiding appetite for reading, HarperCollins is certainly well positioned for future success. We're excited about Finding Me, the new book by Viola Davis, released late last month. and we anticipate a surge in interest in the Lord of the Rings franchise, for which we now have global English language rights, given the launch of Amazon's landmark series later this calendar year. It is worth noting that, according to Amazon, the teaser trailer for that series broke a global record for the most-watched entertainment trailer to debut during a Super Bowl. Within 24 hours of the trailer's release, it had 257 million views. News media was the biggest contributor to Newscore's growth in profitability in Q3, with segment EBITDA approximately 388% higher in the quarter. We saw continued strong performance in digital advertising across the segment, alongside a notable rebound in print advertising at NewsUK. News Australia had a strong quarter, with substantial improvement in profit contribution, thanks in part to our deals with the tech platforms, our continuing cost discipline and the development of our digital platforms. The New York Post renaissance continues with its massive audience, strong advertising growth and improved profit contributions. The New York Post Digital Network now ranks among the top news sites in the US and has grown nearly eightfold since fiscal 14 to over 172 million average monthly unique users in the third quarter. News UK also had a healthy profit contribution with significant revenue improvement of The Sun where digital advertising outpaced print. It is also notable that TheSun.com, the brand extension of The Sun in the US market, increased page views in Q3 by over 260% year-over-year to 500 million, with yields significantly improving. Piers Morgan's much-anticipated program launched on April 25th, and it more than exceeded expectations in reach across the UK, the US and Australia, thanks to the power of our platforms, the pivotal partnership with Fox News and the quality of the programming. Not only does TalkTV plan to be a broad church of diverse views and lively discussion, it offers a new opportunity to leverage our strong brands, talented people and premium video content in the UK and around the world. In subscription video services, the Third Quarter saw continued progress in reshaping the Foxtel Group as a growth-oriented subscription business, with continued success in streaming, stable revenues and solid cash generation. Notably, Kayo and Binge both surged in the quarter and are now reaching record numbers of subscribers. Kayo plans to implement a price increase as it benefits from its scaled platform and high-quality production, which is driving record ratings at the start of the season for both the NRL and the AFL. Overall, total paying streaming subs reached nearly 2.6 million, up 62%. We remain pleased with Foxtel's turnaround and have a great optimism about its near and long-term future. We are continuing to explore all options for Foxtel to maximise its value, while watching closely all relevant developments in the financial markets. Through the first three quarters of fiscal year 2022, Newscore is well on track for its most profitable year since separation, clearly besting last year's record results. Success is building on success. We will relentlessly continue to drive our performance in the quest for enhanced returns for our investors. Complacency, smugness and hubris are not words in our vocabulary. Newscore is a company transformed, more intensely digital, more intelligently global, with strong growth in our core markets and much unrealised potential. Macroeconomic challenges affect all businesses, whether that be the supply chain, corrosive inflation or febrile currency markets. But our resilience, adaptability and ingenuity were stress tested by the pandemic and led to record revenues and profits. We, understandably, are optimistic about the years ahead. For more granularity about our quarterly performance, I now hand you over to the adroit Susan Panuccio.