News Corporation

Welcome to the News Corp's third 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 third 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, 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 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 sustained strength of News Corp's third quarter results reflects the company's strategic transformation. We have pursued digital growth, realigned our assets, focused relentlessly on cost discipline and asserted the essential value of our intellectual property in a changing, challenging content world. These potent results come despite political turbulence that has clearly affected some of our business partners and undermined their ability to plan coherently. We firmly believe that this disruption is ephemeral and that the U.S. has the potential for robust growth when the heavens return to equilibrium. The administration's pursuit of sensible deregulation and a sound energy policy, combined with America's economic prowess and innate creativity, should surely produce favorable results. When Adam Smith spoke sagely of the power of the invisible hand, he did not envisage an economic slap in the face from the unruly introduction of exorbitant tariffs. America's animal spirits do need emancipation from the cage of uncertainty. As for our company, net income from continuing operations rose 67% to $107 million in the third quarter compared to the prior year, while revenues were $2 billion ahead of the prior period by 1% despite blustery currency headwinds. Total segment EBITDA increased 12%, with the overall margin expanding from 13% to 14.4%. Third quarter adjusted revenues were actually ahead by 2%, while adjusted total segment EBITDA expanded 15%. Our reported EPS from continuing operations doubled to 14 cents, while our adjusted EPS was 17 cents compared to 13 cents a year ago. Following the close of the quarter, we concluded the sale of Foxdale to DAZN, highlighting our intention to concentrate investment on three core pillars of growth – Dow Jones, digital real estate and book publishing. The transaction saw the transfer of US$724 million of Foxdale debt off our balance sheet and the direct repayment of Australian$592 million in shareholder loans to News Corp. We also received an equity interest of approximately 6% in the fast-growing DAZN, which is a world leader in sports streaming. While music has Spotify, DAZN could well become Sportify. We are immensely proud of the Foxtel team and their transformation of the company in recent years, and are also proud to be a global partner of DAZN, which has much technological expertise and global reach. The transaction is expected to be earnings accretive and improve our return on invested capital. As we noted last quarter, Moody's and S&P have both upgraded the company to investment grade. And there is no doubt that the return of significant cash from the deal, combined with the strength of our free cash flow and expected lower capital intensity, has increased our optionality. As demonstrated with the sale of Foxtel, we are continuously exploring structural options to maximise returns for our shareholders. The sempiternal importance of quality journalism cannot be underestimated in the midst of the current political maelstrom. It is imperative that journalists focus on facts, a task complicated by faux fact-checking at a time when even science, from climate to medicine, has become politicised and polarising, undermining the long-term credibility of once-trusted experts and institutions. The currency of credibility will become even more crucial as AI continues its exponential growth and inevitably blurs the lines between the actual and the anthropomorphic. We are pleased with our principal partnership with OpenAI and trust that other AI operators, strip-mining our intellectual property, fully appreciate their responsibilities to our company, to creativity, and to the community. Having recently visited China, it is obvious that America's comparative advantage is not in chips or compute power or data storage, but in creativity, in lateral thinking. And it would be shameful if big digital players undermined that source of strength by eviscerating IP rights. Patently, blatantly, we believe some AI companies are stealing content, so much so that they have no doubt ripped off even the President of the United States, Donald Trump, by ingesting books, including The Art of the Deal, and repurposing them for profit without his permission. And we expect the AI anarchists will surely have done the same with Truth Social, purloining content and data to fuel their economic engines. Returning to our results, Dow Jones was a highlight. We foresaw an improvement in the quarter and that expectation was definitely realised. Dow Jones posted a healthy 6% revenue growth while profitability surged 12% and the margin rose from 21.7% to 23%. There is still much toil ahead, as Elmar and the trustee team realise, but we saw digital circulation revenue expand 14%, the fastest growth rate in almost three years, and recorded improvement in digital ARPU year over year and quarter over quarter, while total consumer subscriptions surpassed the six million milestone. Since our resegmentation in 2020, not only has Dow Jones profitability more than doubled, but total subscriptions have risen over 60%, with more than 90% now fully digital. The rather active news cycle has unsurprisingly contributed to further increases in audience traffic and subscriptions in recent days. The professional information business at Dow Jones continued to thrive, posting an improved 6% revenue growth, driven by double digit expansion at both risk and compliance and Dow Jones Energy. Risk and compliance posted 11% revenue growth despite unfavourable currency volatility as risks rose in the global economy and the need for compliance remained an imperative for thoughtful companies in a fast-changing regulatory environment. Significantly, we completed the acquisition of Oxford Analytica and Dragonfly Intelligence in the fourth quarter, which should enhance our ability to provide insight and intel to companies across the globe. Meanwhile, Dow Jones Energy posted 10% revenue growth as we invested in product offerings and built on unique pricing products and real-time analysis. One example was carbon and clean fuels analytics, which helps businesses, investors and traders capitalise on opportunities from energy transition at a time of pronounced regulatory upheaval. The Dow Jones team expects that Factiva, which has been in an unfortunate drag on professional information revenues, should improve in coming quarters as we cycle past the unfavourable impact of a contentious client dispute. At Digital Real Estate Services, profitability surged 19% on a 5% increase in revenues and, notably, margin improved from 26.8% to 30.5%. REA posted 6% revenue growth, or 11% on a constant currency basis, thanks to a 15% increase in yield compared to the same period last year. REA maintained a rather healthy audience lead, with nearly four times as many average monthly visits as domain and nearly five times the user engagement, as measured by independent metrics. At realtor.com, revenues rose 2% as growth initiatives across rental, seller and new homes flourished, accounting for 22% of total revenue, even though overall market conditions remain difficult because of elevated mortgage rates and economic instability. Damien Eales and the Realtor team thrive on competition and are gaining audience and user loyalty, pulling further ahead of Redfin and Homes.com thanks to the network effect created by our media platforms. We believe that network advantage will become more pronounced as the character of search continues to change profoundly in coming years. Based on third-party verified source Comscore, total visits to the site reached 239 million in March, representing 29% of market share among the top real estate portals and a 3.7 times traffic advantage over homes.com and 2.7 times greater than Redfin. while our 4.5 visits per visitor is the category leader and a compelling sign of engagement and loyalty. And let's be very clear, these are not home-brewed metrics. In book publishing, in a relatively slow season, with Brian Murray's guidance, revenue expanded by 2% to $514 million and EBITDA rose 3% to $64 million, thanks in large part to the recent acquisition of German book publisher Graefer & Unser. Additionally, digital revenues grew 3% as audiobooks continued to prosper, including contributions from our key partnership with Spotify. We saw strength from Gregory Maguire's latest addition to the Wicked universe, Elfie, along with other standouts such as Tessa Bailey's Dream Girl drama and Alex Astor's Summer in the City. Our Christian divisions showed sustained strength, particularly in Bible sales, and Bible Gateway, which we are developing as both a portal and a community, had 87 million uniques during the quarter. We expect that burgeoning site will add to our network effect as a funnel for Realtor.com and our media sites, which in turn will drive traffic to Bible Gateway. In the coming quarter, we are excited by the release of the paperback of Shelby Van Pelt's bestseller, Remarkably Bright Creatures, along with On Democracies and Death Cults by Douglas Murray, I Wish Someone Had Told Me by Dana Perino, and Uptown Girl by Christy Brinkley. HarperCollins has acquired the North American rights to The Land of Sweet Forever, Stories and Essays by Harper Lee. The collection, set to publish in the first half of fiscal year 2026, will include several unseen short stories from the legendary author of To Kill a Mockingbird. The news media segment posted healthy EBITDA growth of 22%, building on the 30% year-on-year growth reported last quarter as our partnerships with OpenAI and other principal digital platforms continue to benefit our mastheads, while the teams were diligent in their cost disciplines. At News UK, under Rebecca Brooks' leadership, digital subscriptions to The Times and Sunday Times reached 629,000, rising 8% compared to prior year, and digital advertising revenue at The Times continued to expand. Meanwhile, we launched The Sun Club in February, which provides premium journalism and exclusive offers to members. At the New York Post, our reach was as influential as its vast audience, finishing with 85 million uniques for the month of March. It is a rare publication indeed that can boast such a broad and deep readership, from the Corner Office to the Ogle Office. News Corp Australia's mastheads provide an important platform for informed reporting and debate during the recent election campaign. And we also saw continued growth in digital subscriptions, reaching 1.1 million. Meanwhile, News.com.au was the number one digital news brand in page views, achieving 292 million per month in March, according to Ipsos. And Sky News Australia was the country's number one YouTube news channel with 5.5 million subscriptions, reflecting its local and global reach. The strength of our results through the first three quarters of the current rather colourful fiscal year speaks to the meaningful metamorphosis that began a decade ago. That transformation simply would not have been possible without the leadership of our Chair, Lachlan Murdoch, and Chairman Emeritus, Rupert Murdoch, and a thoughtful and thoroughly engaged board. Our success is also a tribute to our employees around the world, and the collective achievement is a sturdy platform on which to build even greater returns for shareholders in the years to come. And now, I turn to our esteemed Erudite Chief Financial Officer, Lavanya Chandrasekhar, to provide further insight into our third quarter results.