News Corporation

Welcome to News Corp's second 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 Michael 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 second 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 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 the 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 second quarter produced challenges for some of our businesses and highlighted the progress made in other segments that had been challenged. Obviously, a surge in interest rates and persistent inflation had an impact on all of our businesses, but in particular digital real estate and book publishing, which remains a majority physical business and continues to be subject to logistical exigencies. But we believe these challenges are more ephemeral than eternal, and just as our company passed the stress test of the pandemic with record profits, the reforms now underway at our businesses should create a solid platform for future profitability. Crucially, we will be reducing headcount across the company by 5%. That is a necessary response given these macro conditions. There are other broader trends that will inevitably be auspicious, such as our evolving partnerships with major tech platforms and the incipient changes to the digital advertising market, which should enable us to improve yields for our valuable inventory and have more oversight of permissioned data. At the same time, we are absolutely focused on reducing costs across our businesses and making price adjustments where prudent. And we are continuing to work on the integration of our recent acquisitions, Opus and CMA, which are already enhancing revenue and profits at Dow Jones. As for our discussions over the potential sale of Move, we will provide an update at the appropriate moment. Obviously, any potential deal would be designed to maximise value for our shareholders in the short and long term. Looking now at the second quarter of fiscal year 2023, we generated over 2.5 billion in revenues, representing a decline of 7% year over year, though most of that was due to foreign currency. Adjusted revenues were down only 3%. Profitability was $409 million compared to $586 million in the prior year, reflecting the challenges of interest rates and inflation noted earlier, and the impact of fickle forex movements, which have shown signs of abating in recent weeks. Even in the midst of the obvious global challenges I've described, Dow Jones had a solid quarter, and the professional information business displayed particular promise, with revenues surging 45% year over year. The result highlights the value of our opportunistic acquisition of Opus and CMA, where we have recently launched products, including carbon credit indices, and are working on more sophisticated analytics for our growing customer base. Risk and compliance again reported strong revenue growth, increasing 13% despite capricious currency trends, with the demand for know-your-customer tools expanding as governments globally continue to tighten regulations and wield sanctions. The imperative for an authoritative audit trail has expanded far beyond financial institutions and the credibility that Dow Jones brings is in itself an important factor for many companies. Is there anyone on this call who does not want to minimise risk and maximise compliance? Dow Jones has begun to roll out a new user interface for the Aladdin's cave of content that is Factiva, which is an essential tool for serious businesses. The truth is that the interface was in need of simplifying, and the Dow Jones team have addressed that issue. The easier Factiva is to use, the more it will be used. Overall at Dow Jones, digital revenues now comprise 76% of total revenues, a 4 percentage point rise over the past year. Some of that expansion is due to continuing strength in digital subscriptions. Digital-only subscriptions increased 10%, while total Dow Jones consumer subscriptions rose 5%. In fact, just in recent weeks, total Dow Jones subscriptions sold past the 5 million mark for the first time. El Malatour and the team are increasing the emphasis on upselling subscriptions with the bundling of MarketWatch, the WSJ, IBD and Barron's. The basic strategy is to provide an ever more premium service for our readers as we leverage valuable audiences across platforms. I am particularly proud to highlight the continuing revival of Foxtel's fortunes under the sage leadership of Patrick and Siobhan and the team, who have increased profitability and thus optionality. Reported segment revenues were down 7%, while segment EBITDA rose a healthy 5%. Even more impressively, adjusted revenues, which excludes the impact of Forex volatility, rose 3%, while adjusted segment EBITDA rose a handsome 16%. Streaming continues to be a core strength of Foxtel as we have added well over half a million paying OTT subscribers in the past year. Binge reached nearly 1.4 million paying subscribers in the quarter and will be launching an advertising tier later this fiscal year as we seek to maximise Foxtel's revenue potential. Total paying subscriptions at Foxtel were up 10% year over year and we also saw the benefits of modest price increases at Kayo and Binge. Our sports programming portfolio has been enhanced with renewal of Australian cricket rights to 2031. We are now on the cusp of the peak selling season for KO as the Australian football and rugby league seasons will start imminently. And we solidified our entertainment offerings with an expanded multi-year content deal with NBCU. Overall, Foxtel's continuing success and positive trajectory have certainly increased our optionality for that business. HarperCollins experienced another difficult quarter, reflecting sluggish spending on books after the pandemic-inspired surge, difficult front-list comparisons, as well as the continuing impact of Amazon's logistics issues. Under the prevailing circumstance, it is absolutely necessary to confront the cost base as we seek to bolster long-term profitability in the post-pandemic marketplace. Some of our key titles this quarter include Fox News host Harris Faulkner's Faith Still Moved Mountains and Joanna Gaines' The Stories We Tell, while best-selling authors Colleen Hoover and Taryn Fisher's work Never Never will be released later this month. The news media segment showed signs of real resilience in the midst of a volatile advertising market and Forex headwinds. The standout masthead was the Sun.com in the US, which reported a 127% year-over-year increase in quarterly page views. Meanwhile, the Times and Sunday Times reached nearly 490,000 digital subscriptions in the quarter. And at News Corp Australia, total digital subs exceeded 1 million, representing an 11% rise year-over-year. Wireless had a solid quarter in connected listening, which was assisted by interest in the World Cup on Talk Sport, while Talk TV revitalised its line-up. And the New York Post remains on target for another profitable year, despite the ad mark. As for digital real estate services, the patent complexities of the current housing market in both the US and Australia are well known and have had an effect on REA and MOVE. The property market inevitably has interest rate-related cycles, but with rates nearing a peak in both the US and Australia, we believe the next phase of the cycle is not far away. We have this week launched a new campaign to use our media inventory to drive traffic at realtor.com and the positive effects should be seen in coming months. REA continued to maintain its number one market share in Australia this quarter, with over 3.3 times the audience of its nearest competitor. And our business in India, now the market leader in audience, is showing much potential. While leads were down at Realtor.com in the quarter, the business saw year-over-year improvement in revenue per lead as the team is focused on pricing, sell-through and close rights. We now are increasing our emphasis on the monetisation of sell-side listings, as inventory time on market has increased significantly in recent months, and we will be able to provide realtors and vendors with improved service. In closing, while we expect the macro trends to have a continuing effect on our businesses and are committed to a 5% reduction in our workforce, we are confident that the combination of prudent cost management, sound capital stewardship, commitment to digital expansion, and simplification should provide a firm foundation for future growth. And we will remain acutely focused on the creation of value for our shareholders, as the possible sale of Move eloquently testifies. We also remain firmly committed to our billion-dollar share buyback and dividend program. And now, for a more granular account of our second quarter, I give you over to Susan Panuccio.