News Corporation

Welcome to News Corp's fourth quarter and full year fiscal 2024 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 fourth quarter 2024 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 I will be happy to take questions from the investment community. This column 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 it over to Robert Thompson for some opening comments.

Thank you, Mike. Before we begin the examination of our excellent fourth quarter results, I would like to express our sincere gratitude to all who contributed to the emancipation of Evan Gershkovich. His freedom was made possible by the concerted efforts of concerned, principled people. who recognised that his incarceration was unjust and immoral. And so many thanks are due to our leaders at Dow Jones, Emma Tucker and Omar Latour, and to all at News Corp who campaigned vigorously for Evans' release. We also acknowledge the sterling work of the US government, which oversaw the handover, and the role of several other enlightened governments whose divine interventions were crucial. As for the fourth quarter, revenues grew 6% from the prior year to almost $2.6 billion, while profitability improved by a healthy 11% to $380 million, a fourth quarter record for News Call. Reported EPS and net income were also markedly higher. Moreover, despite the negative impact of high interest rates in some of our businesses, fiscal 2024 was the second best year on record, with profitability rising 8% to $1.54 billion. Our core pillars of growth, book publishing, digital real estate services, and Dow Jones, inspired that increasing profitability and revenue growth, and we believe their strength augurs well for fiscal 2025. Prior to delving into the details, I would like to highlight several consequential matters for our company. We took a significant step to prepare for an epoch which we believe will be defined by the confluence of artificial intelligence and emotional intelligence. Our landmark agreement with OpenAI is not only expected to be lucrative, but will enable us to work closely with a trusted, preeminent partner to fashion a future for professional journalism and for provenance. That partnership is already fructifying. We have also begun to take legal steps against the Gen AI aggressors, the egregious aggregators, who are less principled and more predatory in their confiscation of our content. So-called open source can never be a justification for open slather. We are also considering our legal options in confronting the blatant political bias of advertising industry bodies who have done serious damage and denied many advertisers access to a significant audience. We applaud the work of the U.S. House Judiciary Committee in pursuing the misnomer that is the Global Alliance for Responsible Media, or GARM, and its coordinated boycott of media platforms perceived to be unfashionable by illiberal liberals. GARM harm has been real, and there need to be commercial consequences. We believe the company's prospects are patently propitious, and we are also continuing to review our portfolio with a view to maximizing returns for shareholders. That review has coincided recently with third-party interest in a potential transaction involving the Foxtel Group, which has been positively transformed in recent years with record numbers of streaming subscribers, low broadcast churn, and rising broadcast and streaming APU. We had no imminent intent to sell Foxtel, but are reviewing potential strategic and financial options for the business with our advisers and engaging with third parties in light of that external interest. That process should not be interpreted as a sign that we are not reviewing the status of other segments. As I mentioned, we were not actively looking for purchasers and we believe strongly in the potential of Foxtel given its world-class technology and unique aggregation of sports and entertainment content. With that context, let us analyse the laudable performance in the fourth quarter. Digital real estate had a particularly strong quarter as revenues rose 21% and segment EBITDA surged 25%. That resounding performance was mainly driven by REA, where listings flourished and financial services returned to growth, while revenues expanded substantially at REA India. Listings growth continued into July as REA broadened its suite of successful premium products to improve results for clients and lift yields. In the United States, we enhanced both the technology and the offerings to sell and buy side agents at realtor.com as we prepare for an upturn in a property market that has been pummeled by high mortgage rates, limited inventory, lofty prices, and historically low home sales. While prognostication is not our profession, we are hopeful that interest rate cuts by the Federal Reserve are imminent and will have a positive impact on affordability and liquidity in this stagnant market. Certainly, the lesson of the Australian market is that when suppressed demand is emancipated, activity in the housing sector accelerates rapidly and listings prosper. We have already seen sequential improvement in revenue at realtor.com as the company has taken astute advantage of the complementarity of our media platforms to drive traffic and improve the content experience. There was particular improvement on the sell side, which has become a priority for realtor.com and which is the core source of revenue for our thriving Australian business. The progress at Dow Jones continues apace, with revenue growth in the quarter of 4%, despite a mixed advertising market. At the heart of that growth is the continued strength of B2B, where revenues climbed 14% at Dow Jones Energy and 12% at Risk and Compliance. In fact, fiscal 24 was a pivotal moment in the history of the company, as it was the first year in which more than 50% of Dow Jones profitability was driven by the surging B2B segment. Indeed, it is difficult to overstate the impact of B2B growth on Dow Jones and News Corp over the past four years, as B2B revenue has expanded at a compound annual rate of 17%, and the margin at Dow Jones has broadened from 15% to 24%, while segment EBITDA has more than doubled. Crucially, digital accounted for 80% of fiscal 2024 segment revenue, up from 67% in 2020, and the core B2B products have renewal rates north of 90%. In that same four-year span, total subscriptions in the consumer business have burgeoned nearly 55%, with digital subs almost doubling. For the fourth quarter, Dow Jones gained 158,000 digital subscribers sequentially, and digital advertising expanded 14% year-over-year, more than offsetting the expected declines in print advertising. The quality of Wall Street Journal content continues to be a differentiator as our company signed a valuable multi-year content licensing agreement with the London Stock Exchange Group to provide WSJ news and analysis to its corporate clients, thus building our brand in the European marketplace. Upper Collins reported a notably strong quarter, with a more than 250% increase in segment EBITDA to $57 million, as revenue rose 15% to $512 million, reflecting strength in Bible sales, in Amazon demand, and in audiobooks, thanks in part to our successful partnership with Spotify. The HarperCollins back catalogue continued to perform vibrantly, with the Bridgerton Collection benefiting from the latest streaming series, while new works like Lucy Foley's The Midnight Feast and Sarah A. Parker's When the Moon Hatched reached fresh audiences. Overall, digital sales grew 12%, and for the first time, audiobooks were a larger share of that segment than e-books, soaring by 28% in the quarter. That's right, 28%. There is much to cherish this quarter, including the latest works from best-selling authors Daniel Silva, Tessa Bailey, Lisa Turkhurst, and Geoffrey Archer, among others. One interesting sales phenomenon is the resurgence of interest in J.D. Vance's Hillbilly Elegy, which sold 150,000 copies in various formats within 24 hours after his selection as Donald Trump's running mate was announced. In July alone, Hillbilly Elegy sold 877,000 units, which will have a positive impact on our Q1 results for fiscal 2025. At subscription video services, revenue in the quarter grew on both a reported and constant currency basis, as streaming strength more than offset broadcast declines. Audiences are continuing to transition from traditional broadcast to over-the-top consumption. We believe Foxtel is particularly well positioned for both subscriber and advertising growth, as KO and Binge have gained traction given their unique strengths in sports and entertainment programming. Those two services added almost 200,000 paying subscribers in the quarter, and digital advertising now represents more than 40% of Foxtel's total advertising, with KO growing 42% compared to the prior year, and the recently rolled out ad offering at Binge growing fourfold. We will keep you updated on the advertising renaissance as the quarters unfold. Our launch of the Hubble service is still in its early days, but, encouragingly, more than 30% of Hubble customers are new to Foxtel, which is significant given our existing presence and profile in the Australian marketplace. About 75% of customers of the Hubble aggregation service purchase an additional Foxtel product, along with their device and subscription. On the broadcast side, ARPU grew 6% and churn was a pleasingly low 11.7% for the quarter. Foxtel continued to generate strong cash flow as we were able to monetise our long-term sports rights across multiple platforms. In news media, our profile and impact have only grown over the past year when many news organisations lost the plot, editorially and commercially. The collapse of old and new media titles is in stark contrast to our mastheads and our journalists. The quality of our journalism was a prime motivator for Sam Altman and his talented team at OpenAI, with whom we are genuinely proud to partner. Leaders from both companies have already begun working together to improve the flow of trustworthy information and develop contemporary distribution channels. Those learnings will be deployed in newsrooms around the world to strengthen our journalists' understanding of how the digital reading experience is evolving and how we need to adapt to that changed content consciousness. Meanwhile, we are far from complacent and continue to develop and reform our news media operations. We are in the midst of a restructuring in Australia designed to enhance our digital prowess, while the New York Post was once again profitable this year after decades of chronic losses. and we will look to expand its audience and influence and profitability in the coming year. It is worth highlighting that the Post reached a monthly digital audience of 117 million unique visitors in June, and that News Corp owns two of the top three best-selling print masters in the U.S. with The Wall Street Journal and The New York Post. NewsUK, under Rebecca Brooke's leadership, saw an improved profit contribution for the quarter and the full year, as we benefited from lower newsprint costs, increased digital subscriptions, cover price rises and lower television expenses. Our strong results for the year and record returns for the quarter would not have been possible without the leadership of Lachlan and Rupert Murdoch, the support of our board and the admirable efforts of our employees around the world. The company's enduring success is built on an honourable tradition of creativity and curiosity and integrity. Our success would also be impossible without the support of our shareholders, and we are acutely conscious of our responsibility to generate value and provide robust returns to those who have invested both money and faith in News Corporation. And we are certainly not beholden to past structures as we confront the future. I now hand you to our CFO, the sage, Susan Panuccio.