News Corporation

Welcome to News Corp's first quarter fiscal 2023 earnings conference call. Today's conference is being recorded. Media will be allowed 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 first quarter 2023 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. 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 gap-to-non-gap reconciliations of such measures can be found in our earnings release for the applicable periods posted on our website. With that, I will pass it over to Robert Thompson for some opening comments.

Thank you, Mike. While the macro environment is patently more volatile, we believe the resilient foundations of the reincarnated news call give us a platform for sustained growth and increased profitability. That clearly is evident in our revenue performance this quarter. While revenues were down 1% to $2.5 billion, that decline was obviously a consequence of foreign currency fluctuations. On an adjusted basis, our revenues grew a healthy 3%, building on the robust results from last year. Profitability for the quarter was $350 million, down 15%, although that reflects the Forex headwinds and a reset by Amazon of its book inventory levels and warehouse footprint. We view neither factor as reflective of core business conditions or of our long-term potential. Our results follow two successive years of record profits at News Call. It is important to keep that unprecedented success in mind, especially as we encounter what we expect to be ephemeral challenges. Our company has changed the digital terms of trade and we expect the current situation to be transitory. We see positive prospects across all our segments and our mix of revenues and geographies is obviously advantageous in a complicated, perplexing world. Turning first to Dow Jones, Q1 was the best first quarter on record since acquisition for revenue, profitability and margin, affirming the wisdom of our acquisition of Opus and CMA, which have bolstered the Dow Jones professional information business. Revenues grew a resounding 16% and advertising was up 4%, which compares rather favourably to a number of competitors. In particular, digital advertising at Dow Jones rose 11%, a noteworthy achievement in this complex environment. In fact, Q1 represents the ninth consecutive quarter of year-over-year digital ad growth at Dow Jones. In the past year, Dow Jones added 473,000 digital-only subscriptions and, as of the end of Q1, 83% of subscriptions at Dow Jones were digital-only. At the Wall Street Journal, despite the tough market, paid digital subscriptions increased by over 350,000 year over year. During the quarter, Investors Business Daily launched a paid newsletter, Market DM, to attract younger investors and commissioned an options information app that will present new analytics for options trading, a complex but potentially lucrative sector. With its panoply of premium products, Dow Jones has renewed focus on bundling our premium content, including the Wall Street Journal, Market Watch and Barron's. These valuable combinations have already exceeded 200,000 subscriptions and we have begun to roll out a bundle featuring WSJ, Barron's and IBD. Revenues at the professional information business rose 40% year over year. We continue to clearly see the benefit of risk and compliance in an environment of intensifying scrutiny by regulators who are insisting that companies minimise risk and maximise compliance. The integration of Opus and CMA has been proceeding successfully, and they join a burgeoning Dow Jones data and intelligence business, providing an impressive $52 million in combined revenues in Q1 and contributing materially to profitability this quarter. Opus and CMA continue to leverage their proprietary data and analytics with new offerings, including carbon indices, and are assisting companies in making sense of the dynamic market for carbon offsets. Overall, we are delighted with the tangible progress in our professional information business, which is providing an increasing flow of high-yield, low-churn digital clients. At Digital Real Estate Services this quarter, we saw resiliency even though housing market conditions have patently become more volatile, especially in the US. REA Group achieved substantial revenue growth in constant currency on the back of higher pricing, increased penetration of its new Premier Plus enhancement and strong listing volume, while maintaining its more than three-fold lead in traffic over the competition. There was also notable audience and revenue growth at REA India, which further consolidated its position as the number one property portal in that massive and growing market. At Move, operator of realtor.com, revenues were down 6%, reflecting relatively similar trends to the fourth quarter. Realtors' unique users have risen 21% since the first quarter of financial 20, thanks to product enhancements and increased marketing. To position and equip the business to take full advantage of the inevitable upswing in the market, we are expanding our offerings in rentals and in developing sell-side expertise, which we expect will drive profits far into the future. Realtor is also taking decisive steps to streamline and optimise the business while enhancing reinvestment capacity and capitalising on long-term growth opportunities. Our focus on seller leads, which are the source of most revenue in the Australian market, is building on our recently acquired UpNest. The UpNest experience has been integrated into key seller placements across the site, providing sellers the ability to get proposals from multiple agents and offering consumers significantly more choice. Meanwhile, even in a challenging housing environment with higher mortgage rates, tight inventory and inflation, home prices have remained elevated and we note that active listings at Realtor improved by 29% in the quarter compared to the prior year period. Realtor remains focused on the long-term opportunities in what is an estimated $200 billion addressable market. As mentioned earlier, the Amazon reset affected many publishers in Q1, including HarperCollins. This reset relates to Amazon's decision to reduce inventory levels and shutter warehouses and accounted for almost the entirety of HarperCollins' revenue contraction and the vast majority of its profit decline this quarter. Notably, consumer appetite, which expanded during the pandemic, continued to be robust and provides us with increasing confidence going forward. And we are absolutely focused on cost control at Harbour Collins and the imperative to improve margins in these challenging conditions. Key front list titles in the quarter included Portrait of an Unknown Woman by Daniel Silva, Livewire by Kelly Ripper, and Breaking History by Jared Kushner. We are prospering from our global ownership rights to the Lord of the Rings trilogy, given the popularity of the Amazon series, and we are looking forward to the release of the stories we tell by Joanna Gaines and Colin Hoover's next work. Finally, we note that HarperCollins Focus last month acquired Cider Mill Press Book Publishers, an independent publisher of quality gift books. Cider Mill specialise in cooking, wine and spirits and humour books and includes Applesauce Press, a children's brand. Its deep backlist should provide an ongoing source of incremental revenues. At subscription video services, Foxtel had another strong quarter. Streaming subscriber penetration continues to expand and costs have been thoughtfully controlled. Foxtel has recently renewed or signed valuable long-term sports rights and content agreements, including the AFL, WWE and NBCUniversal. We have obvious optionality at Foxtel, where the conversation is no longer about how much capital we plan to invest, but the potential for capital return. Foxtel streaming services attained 2.8 million paying subscribers as of the end of September, surging 34% versus the prior year, and accounting for 63% of the total paying subscriber base. KO and Binge added nearly three quarters of a million paying subscribers in the past year alone, underscoring the potential of Foxtel in a still expanding Australian market. Foxtel Group delivered record audiences for the recent AFL and NRL finals. Meanwhile, motorsport, the Rugby League World Cup and T20 World Cup cricket are bolstering subscriber loyalty as we near the spring selling season. The news media segment experienced a revenue decline of 4%, though it rose a healthy 6% on an adjusted basis when taking into account forex fluctuations and other items. In constant currency, we saw healthy growth in advertising, circulation, and subscription revenues. At Newscore Australia, circulation revenues improved in constant currency and digital subscriptions exceeded the 1 million mark for the first time, up 13% year over year. News.com.au asserted its leadership in the free media environment with an audience of 13 million in the month of September. Meanwhile, the New York Post continued to improve profitability, thanks in part to a strong increase in digital advertising revenues. The Post digital network also flexed its muscles with a 24% increase in page views, reaching an average of 129 million per week in Q1 and 151 million average monthly uniques in September. At News UK, the Sun's digital advertising exceeded print for the fourth consecutive quarter and accelerated its growth. And we're delighted by the success of the Sun.com, which continued to increase its already sizable audience, particularly in the United States. And the Times, Sunday Times, also saw a 23% increase in digital paid subscriptions, reaching 468,000, marking its second best ever quarter of digital growth. News Broadcasting, the new name for the radio and television brands of News UK, reported an increase in both reach and listening hours, according to the latest Rajar's report. Talk Sport reached 2.9 million listeners, who tuned in for more than 18 million hours, up 10% quarter on quarter, and we expect the imminent World Cup to be a source of audiences and of advertising. Newscore is building on a base that has grown stronger, more global and more digital in recent years. We have seen record profitability in each of the last two fiscal years. By many key measures, our resounding progress has continued. Digital advertising on the rise, streaming surging and subscriptions soaring. Despite the macroeconomic uncertainty, having streamlined and digitised our businesses and reached substantial agreements with the big tech platforms to compensate us for our premium journalism, we are better equipped to generate increasing value to our investors. And our strong cash position means that we have been able to return capital to shareholders and invest thoughtfully in future growth while honouring our proud provenance. One last point. As announced last month, following the receipt of letters from Rupert Murdoch and the Murdoch Family Trust, the Newscore Board of Directors has formed a special committee of independent board members to begin exploring a potential combination with Fox Corporation. There can be no certainty that the company will engage in such a transaction. We do not intend to comment further at this time and for that reason we will not be taking questions on this topic today. We are, of course, happy to answer your questions about the performance of and prospects for our business, particularly as it relates to the first quarter of this fiscal year. As always, we thank our investors for their faith and confidence in us and all our employees, advertisers, readers and audiences for their valuable contributions and enduring support. Now I turn to Susan to expound and expand on these results.