News Corporation

Dan, welcome to the News Corp's fiscal 2022 fourth quarter and full year earnings conference call. Today's conference is being recorded. Media will be on a listen-only basis. At this time, I would now like to turn the conference over to Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, Sarah. Hello, everyone, and welcome to News Corp's fiscal fourth quarter 2002 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'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 for the applicable periods posted on our website. With that, I'll pass over to Robert Thompson for some opening comments.

Thank you, Mike. The overuse of superlatives really is unbecoming. but the past quarter and the full year have created so many unprecedented records that reflect well on all at News Corp, and we believe have created a platform for future performance and enduring returns for our investors. These accomplishments, which necessarily demand the use of superlatives, follow intense digital transformation by the businesses and focused acquisitions that we expect will provide increased revenue and healthy profits far into the future. Profitability for the full year rose 31% to a record $1.67 billion, and that followed a 26% surge in the previous year, which itself was a record. Revenues rose a robust 11% despite incipient economic uncertainty and unfavorable forex fluctuations that outweighed the benefit of an extra week. In total, the favourable results were reflected in our reported EPS of $1.05 compared to $0.56 in the prior year. It is worth noting that we saw enhanced success in each and every business segment last year, and we are confident of our prospects in fiscal 2023. Our core pillars, Dow Jones, digital real estate services, and book publishing, all notched record results that exceeded the sterling performance of the previous fiscal year, when new benchmarks were set across most of the company. And it's worth noting that our net cash from operating activities was a record $1.35 billion, topping the previous year's record of $1.24 billion. That extra cash has enabled us to return capital to shareholders and to be poignantly poised for opportunistic investments of the kind that have already transformed the Dow Jones business, making it more digital, more premium and more profitable. The successful journey of our media properties is unlike any in the world, as has been the principal pursuit of change terms of trade with the big digital players. We believe the profoundly positive commercial and social impact of those changes will be felt for many years to come. None of that would have been possible without a strong corporate culture created by and curated by Rupert and Lachlan Murdoch. The support of an engaged, enlightened board and passionate, committed and creative employees around the world. So we have a sturdy balance sheet, potent cash generations, profitable and growing businesses, and the resources to take advantage of emerging opportunities. That muscularity was also reflected in the past year by the termination of our shareholder rights plan, or as it is referred to colloquially, the poison pill. Over the past eight years, our reported revenue has grown by $1.8 billion. even though our advertising revenue, print newspaper dependent as it was, declined by $2.2 billion. That is a $4 billion swing. Over the same period, our total segment EBITDA has more than doubled, and our free cash flow available has increased by over 80%. Dow Jones has prospered, more than doubling its segment EBITDA to $433 million in just the past three years. Our faith in its prospects has been shown by the acquisitions of Investors Business Daily, Opus and Base Chemicals, all of which we expect will contribute to revenue and profitability in the years ahead. Meanwhile, digital real estate services has expanded rapidly, from 5% of our revenues in 2014 to 17% in fiscal 22. To be precise, we have seen growth in every quarter of this past year, despite the recent increases in interest rates and the home supply challenges. We are confident the digital runway for real estate is long and lucrative. It is certainly worth recognising that News Corp's profits have expanded prodigiously compared to eight years ago, rising from a reported $770 million in total segment EBITDA to nearly $1.7 billion this year. Our teams have made this successful journey despite the upheaval in the advertising market, despite the significant challenges to print media, and despite a pandemic. We are more digital, more mobile, more global, acutely cost-conscious, and astutely tracking trends in the quest for more revenues, increased profitability, and enhanced returns for our investors. To be specific about the segment, Dow Jones is already seeing the tangible benefits of opus and base chemicals, which we have rebranded Chemical Market Analytics, or CMA to the cognoscente. These two businesses complement each other, and they certainly complement Dow Jones. We were fortunate to acquire them at a favourable price, as their sale was required by regulators for approval of the S&P Global IHS market merger. We thank those companies and the regulators for the opportunity bequeathed to us. Not only are OPUS and CMA starting to benefit us financially, but they have contributed to the depth and breadth of Dow Jones' overall expertise in commodities, in traditional fuel sources, in essential chemical products, and in renewables and more. The analysis and analytics fit perfectly into our professional information business, where we have seen sustained growth, particularly from risk and compliance. which reported an 18% surge in full-year annual revenues, with the fourth quarter seeing another double-digit increase. That means we have reported 28, that is correct, 28 successive quarters of double-digit growth. Advertising at Dow Jones remained strong in the fourth quarter and was a significant contributor to the segment throughout the year. Total advertising at Dow Jones achieved year-over-year growth of 20% for the full year, the highest on record. Dow Jones also made progress in expanding its high-yielding subscriber base, which rose 9% to almost 4.9 million, including over 4 million digital-only subscribers. As a point of comparison, digital advertising at Dow Jones rose 16% in the most recent quarter, while it shrank, it contracted, it diminished at the New York Times. In what was a resounding performance for News Corp, Dow Jones really is worthy of note. Dow Jones profitability soared 54% in the quarter to $106 million. And as noted earlier, for the year, segment EBITDA was $433 million, up 30%, while revenues rose to over $2 billion, an 18% increase. The imperative at Dow Jones is to provide a premium service and premium value to a premium audience. and is remembering that this is a premium audience at scale, with more than 100 million visitors each month to Dow Jones sites and thousands of the world's largest companies as enterprise clients. Our task, our opportunity, is to offer more of the information, the intelligence demanded by discerning professionals. These are fertile fields for the future. At Digital Real Estate Services, revenues for the full year surged 25% to more than $1.7 billion, while segment EBITDA grew 12% to $574 million, as we continue to build brands and products for future success. In Australia, REA continued its expansion into intelligent adjacencies, most notably with the mortgage choice acquisition and residential listing volume improved by 11% in fiscal 22 to the highest level since 2016. We also now have the number one digital property company in India in terms of audience share, with Housing.com expanding its lead in an expanding market. Monthly visitors rose in June by 52% to 15.7 million. In the US, move operator of realtor.com reported revenue growth for the year of 11% while we invested in expanding our expertise in rentals and acquired Upnest, an agent marketplace that focuses on monetizing seller leads. The broader theme is that we see a confluence of trends in the US and Australian marketplaces. The US market has traditionally derived revenue from buyer leads. but the future will bring opportunity to harvest seller revenue, which is the basis for REA's emphatic success in Australia. As for the US housing market, obviously the hiking of interest rates has influenced market trends. For example, mortgage refinancing has imploded, which plays to our strength as a source of mortgage origination leads, which mortgage companies were ignoring somewhat because it was easier to refinance an existing, a known customer. The rate of price increases that put homes out of reach is generally expected to continue to decline, and inventories have at last started to improve, with active inventory in June up 19% year over year, according to Realtor.com. News media, which in recent years has faced severe challenges, did particularly well, both in Q4 and throughout the fiscal year. To be precise, news media was the single largest contributor to profit improvement across the company this fiscal year. Let's be candid. This spectacular result came as many other newspaper companies around the world struggled and is a true tribute to the efforts of our executives and teams in Australia, the UK and the US. In fiscal 2022, revenues were up 10% and the segment delivered $217 million of segment EBITDA. Expanding 317% year over year. I should repeat that stunning number for clarity. 317%. At News UK, the Sun reported an historic shift, with digital advertising outpacing print in fiscal 22, as its online audience surged 33% in Q4 to 165 million monthly average uniques globally, including 173% growth for the Sun.com, driven by the successful launch of the Sun US. Overall, News UK, thanks to Rebecca Brooks and her team, increased its profit contribution by 54 million dollars Newscore Australia, under Michael Miller and his team, increased its profit contribution by $109 million, its highest since separation. As digital subscribers to Newscore Australia, properties rose by 12% to $964,000, and advertising revenues remained robust. The New York Post posted an historic result. It formally reported a profit, possibly the first since Alexander Hamilton founded the paper, and we are now on a pathway to increasing profit contributions. The Post has distinguished itself with brave journalism that has seen its soar far above the media mediocrity. That is a tribute to the intrepid editor Keith Poole, his journalist, and to Sean Giancola, the chief executive, and all on the team. We also transitioned from the Bronx printing site and are working towards completion of that facility's sale. At subscription video services, the Foxtel Group's renaissance continued, with adjusted revenues, which excludes currency impact, rising 4% in the fourth quarter, while adjusted segment EBITDA rose 32% in the fourth quarter. And importantly, excluding currency, full-year revenues for the segment rose for the first time in five years. Again, the Foxtel Group is a company transformed, and one generating record metrics. Total streaming subscribers at the end of the fiscal year soared 31% from a year ago to 2.8 million, while broadcast churn fell to 13.8% in the fourth quarter, sharply lower than the prior year. Our sports streaming service, KO, is particularly successful, with APU rising, partially attributable to the recent price increase, and given the quality of our teams, productions, and the quantity of quality sports. HarperCollins grew full-year revenue and segment EBITDA despite higher freight and manufacturing costs and a challenging prior year comparison, given that the pandemic created a captive audience and record revenues in many countries. We can clearly see the virtue of acquiring Horton, Mifflin, Harcourt books and media as the value of that priceless backlist is being realised. That efficacy should be obvious in coming months as HMH includes the US rights to the Lord of the Rings collections, and we have seen increased orders ahead of the Rings of Power series on Amazon Prime, scheduled to be launched next month. Speaking of superlatives, we have the best-selling book in the US with the new Daniel Silver novel, Portrait of an Unknown Woman, and we are pleased by the lingering melody of Where the Crawdads Sing, the first movie that was just released in partnership with our friends at Sony Pictures. The news corporation of nine years ago is not the news corporation of now. The provenance and the principle endure, but the business is fundamentally transformed. It is vastly more profitable and with the potential for even greater growth. Our teams are rightly proud of the way they have influenced the digital landscape, changing the terms of trade for media businesses, bringing clarity to an opaque advertising market and increasing transparency to hitherto uncountable algorithms. The commercial changes are integral to our ongoing success, but the social consequences are also profound and enduring. Almost a decade after our reincarnation, thanks to the efforts of our employees and the faith of our investors, News Corp is set fair for the future. Our CFO, Susan Panuccio, will now provide a concise account of what has transpired and a glimpse of the shining light that is the future.