News Corporation

Welcome to the News Corp's second quarter fiscal 2025 earnings conference call. Today's conference is being recorded. Media will be allowed on a listen-only basis. At this time, I'd 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 2025 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 Lavanya Chandrasekhar, Chief Financial Officer. We'll open some prepared remarks. They'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 releases 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. News Corp had yet another fruitful quarter, qualitatively and quantitatively. Revenues on a continuing operations basis, which excludes Foxtel, grew 5% to $2.24 billion, while profitability rose 20% to $478 million, as we made significant progress in our digital development. A few more metrics to highlight our performance. Net income from continuing operations surged to $306 million, a 58% increase compared to the same quarter in the previous year. That is correct, 58%. While our EPS from continuing operations was $0.40 compared to $0.28 in the prior quarter. And our overall margin rose from 18.7% to 21.4%. Our three pillars of growth, digital real estate, Dow Jones and book publishing, continued to expand their segment EBITDA robustly, while we saw the positive impact of rigorous cost discipline and digital development in our news media segment. With a keen eye on our innate strengths, we took a significant step towards simplification with the agreement to sell Foxtel to DAZN, a premier global sports streaming provider, for a total enterprise value of Australian $3.4 billion, or approximately seven times Foxtel's fiscal 2024 EBITDA. The agreement is a tangible recognition of Foxtel's successful digital transformation and should surely benefit our shareholders, our partners at DAZN and all Australian sports fans. We expect the transaction to close in the second half of the current fiscal year, subject to regulatory approvals and other customary closing conditions. Hence, Foxtel Financials are now reported as discontinued operations. The sale of Foxtel should have a meaningful impact on our balance sheet. Upon closing, Foxtel's outstanding shareholder loans will be repaid in full, including A$574 million to News Corp, while its third-party debt will be transferred with the business. News Corp will also hold an approximate 6% stake in the fast-growing DAZN. We are proud to be long-term partners with the DAZN team and see material value upside potential in the growth of a company that is at the cutting edge of international sports development. I encourage all to download their app and delve into a vast range of sports. In the wake of this important deal, we were delighted that both S&P Global and Moody's upgraded our credit rating to investment grade, reflecting the impact of our long-term strategy of focused investment and an emphasis on the return of invested capital. We certainly lead the way in providing priceless content for generative AI and remain vigilant in our pursuit of degenerative AI and abuses of our intellectual property. We are pleased with our partnership with OpenAI and hope that other companies in the segment take a similarly enlightened approach. Our legal action against the perplexing perplexity is underway, and we look forward with relish to document discovery. We firmly believe that this discovery process will be an important phase, not just for us, but for all who cherish the sanctity of IP. The sudden rise of DeepSeek is itself a salutary lesson for all AI players. If they are unable to host fresh, trusted news, their version of AI will lack immediacy and relevance. Data centers and energy sources and newfangled chips may well be essential AI infrastructure, but ultimately, we believe content will be king in the world of AI. One rather general generic post-election observation. We are seeing a tangible increase in business confidence here in the US since the election, the temporary turmoil of transactional tariffs aside. There is the confluence of economic optimism and a cultural awakening with the yoke of woke having been lifted. We believe these trends should lead to less superfluous gratuitous regulation, greater capital formation, increased opportunities for all Americans, and more candid, creative, compelling conversations. Hopefully, an era of censorship and self-censorship is receding into the distance. As for specific segments, digital real estate revenue increased 13% to $473 million and segment EBITDA burgeoned 26% to $185 million. That strength came despite significant growth in the prior year quarter at REA and reflected renewed revenue growth at Realtor.com, despite the still hostile housing market conditions in the US, with the 30-year mortgage rates above 7% in recent weeks. Clearly, Realtor.com's efforts to strengthen adjacent revenue streams are paying off, with accelerated growth in rental, seller and new homes revenues. Realtor continues to make significant progress in engagement, as evidenced by the highest repeat visitation and most number of views per visit in the industry in December, as per CommScore. At REA, the success story continues, as the company achieved a quarterly record in revenue, while extending its audience leadership and reinforcing its position as Australia's pre-eminent property site. REA achieved 129 million average monthly visits during the quarter, nearly four times more than the nearest competitor on average. Listing volumes rose 4%, with yield growth at 14%, while our India division continued to post healthy revenue growth. At Dow Jones, revenue grew 3% to $600 million. Segment EBITDA expanded 7% to $174 million and margins rose an impressive 110 basis points. While overall performance in the first half of the fiscal year has been strong, we expect year-over-year growth to increase in the second half of the year. In Q2, digital circulation revenue grew year over year at its fastest pace in two years, as digital ARPU improved sequentially, and the conversion from introductory promotions and digital bundle offers ran ahead of expectations. Readers derive significant value from our prestige portfolio of The Wall Street Journal, Barron's, IBD, and MarketWatch. And we believe there is potential for revenue improvement as we emphasize the strength and the distinctiveness of individual titles. Risk and Compliance and Dow Jones Energy reported revenue growth of 11% and 10% respectively, and the teams continue to benefit from new products such as Advanced Screening and Monitoring and Analytics Pro that add meaningful value for our compliance-focused risk-averse clients. New initiatives contributed about one third of B2B revenue growth this quarter. Now more than ever, Dow Jones risk and compliance clients are navigating rapidly changing regulations and sanctions. This complex environment in the US and globally boosts demand for risk and compliance products as organisations rely on our expert insights and comprehensive data to make informed decisions and to stay compliant. The uncertainty regarding the transactional tariffs is driving demand for Dow Jones Energy's insights and forecasting services as clients seek to understand the potential impact on global energy markets and investment opportunities. Book publishing reported yet another exceptional quarter, with revenue expanding 8% to $595 million and segment EBITDA surging 19% to $101 million. Growth in the quarter was powered by strong Bible sales, a sterling performance at Harbour College UK, and a healthy mix of titles. Margins improved thanks to buoyant sales of backlist books and a particularly noteworthy 13% increase in audio revenue. Among the bestsellers, the Pumpkin Spice Cafe and the first volume of Cher's memoirs were standouts. The successful cinematic release of Wicked led to strong sales of Gregory Maguire's four-book series, and we anticipate a further boost from the next instalment in that series. The positive cycle should continue with the release of the hit film sequel later this calendar year. At news media, revenue fell a modest 2% to $570 million, but segment EBITDA grew an impressive 30% to $74 million. Success in the quarter was driven by the transition of talk in the UK to streaming and our commercial printing partnership with DMG, as well as reduced costs at News Australia. Overall ad trends moderated, while the Times posted its largest quarterly net additions of paid digital subscriptions in two years. Digital advertising grew by 13% at the New York Post, where profitability was also assisted by our OpenAI deal. News media generally has clearly benefited from those open AI revenues and we are pleased with the progress in our partnership with Sam Altman and his exceptional colleagues. Content is but one part of a broad deal and, for example, our legal and government affairs teams are swapping ideas and experiences as we negotiate the nuances of AI. As part of our partnership, News Corp content will be featured in OpenAI's new Operator product, ensuring prominence for our journalism in the burgeoning world of agentic AI. Both companies are striving to ensure that the A in AI does not stand for anarchy, unalphabetic or absurdity. In a world in which so many media companies and mastheads are in terminal decline, our business is thriving, thanks certainly to the diligent and creative work of our talented teams and the savvy strategic guidance of Lachlan and Rupert Murdoch and our astute board of directors. Speaking of talent, I am honoured to introduce our new Chief Financial Officer, Lavanya Chandrasekhar, who will eloquently expand on the exegesis.