News Corporation

Welcome to News Corp's first quarter fiscal 2026 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 first quarter 2026 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 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 it over to Robert Thompson for some opening comments.

Thank you, Mike. Following a sterling performance in fiscal 2025, one that marked a record year for profitability on a continuing operations basis, Newscore continued to increase both revenue and profitability in the first quarter of fiscal 2026, led by strength at Dow Jones and digital real estate services and bolstered by digital and AI-related revenues. The positive signs came despite an uncharacteristically weak performance in book publishing, which has shown clear signs of improvement in recent weeks. The book publishing results this quarter included a write-off related to the expected closure of a book distributor. But overall, our revenue for the period rose 2% versus the prior year to $2.14 billion, and total segment EBITDA increased by 5% to $340 million. Net income from continuing operations was $150 million, up from $149 million last year, and our adjusted EPS rose from 20 cents to 22 cents in the quarter. Clearly, our current cash position is robust, and we expect to generate strong free cash flow this fiscal year, and have thus materially increased the rate of our share buybacks. We believe our shares are undervalued given the sum of our valuable parts and our profit trajectory. So we will continue to focus on ways and means to maximize shareholder value. One other notable misconception is the value of IP in the age of AI. Information and sophisticated data are the essence of AI. And without these essential ingredients, AI is but empty, vacuous, ignorant infrastructure. Electricity without alacrity. Buildings without billings. Chips without chops. Thankfully we are seeing a positive trend with both enlightened companies and wise courts deciding that creativity and content must not be stolen but purchased. Courtship and courts are both crucial components of our strategy and I must salute Sam Altman and his team at OpenAI for being principled pioneers in understanding the inherent intrinsic value of actual intelligence. As regards other AI players, our wooing and suing continues apace, but thankfully the wooing has gained traction and we expect to announce further partnerships in the near future. We anticipate these deals will have a positive impact on our results. The courts are also increasingly enlightened, and we and our authors certainly expect to benefit from the $1.5 billion award against Anthropic for its use of pirated books. It is fair to say this will not be the last case of its kind, given the proliferation of piracy and increased scrutiny of shameless scraping by these epigonic enterprises. We would obviously prefer to partner and to limit lawyers fees, but let me be absolutely clear to every large language model, however large, however small, if you have received stolen goods, we intend to pursue you relentlessly. You may not have done the actual stealing, but receiving stolen property is an offense in legal jurisdictions around the world. Content crime does not and will not pay. As for our segments during the quarter, Dow Jones EBITDA rose 10% compared to a year earlier, following a solid 6% increase in revenue. Once again, we saw particularly strong revenue growth at risk and compliance, where revenues surged 16%, while Dow Jones energy revenues were 7% higher. We expanded our offerings in the rapidly growing professional information business by acquiring EcoMovement, which provides unique data sets that are sold to map providers and car manufacturers seeking to provide enhanced service for their customers. At the consumer business, total average subscriptions expanded 8% to 6.4 million, including an 11% surge in digital-only subscriptions to the Wall Street Journal. Digital circulation revenues rose from 72% of total circulation revenues last year to 75%. And an increase in digital advertising revenue was offset by a marginal decline in print advertising. In total, digital accounted for 68% of advertising revenues for the quarter, a new record. In digital real estate services, we saw the beginnings of an expected renaissance in the U.S. real estate market as lower interest rates stimulated higher demand for housing. With the Federal Reserve cutting rates and the current 30-year mortgage rate approaching 6%, it is reasonable to conclude that we will be high-fiving when mortgage rates are in the high fives. Even though the market was far from normalised in the first quarter, Realtor.com delivered a 9% revenue boost year on year. That result is a tribute to the concerted work of Damien Eales and his team, who have ensured that we are benefiting from more premium offerings and higher yields. The team has targeted three areas of growth, the sell side, new homes and rentals, which collectively comprise 22% of revenues this quarter, rising three percentage points over the prior year, and we see no reason to suggest the opportunities for growth will abate. We have been working to ensure that realtor.com provides a holistic real estate experience. Our moat is uniqueness and quality. So we have built in recent years the largest publisher of original residential real estate news in the United States, as measured by visits per unique user by Comscore, not by homebrewed metrics. we are providing more reasons for potential buyers and sellers to come to our site, which is why our user metrics are patently superior to those of other sites. In September, we had the largest number of visits per user, clearly outstripping Zillow and other lesser sites. While revenue growth at realtor.com was superior to that at REA this quarter, we have seen increased signs of life in the Australian property market in recent weeks, with auction levels in Melbourne and Sydney on track for the most active October in recent years. For the quarter, revenue at REA Group rose 3% or 5% in constant currency, and yield grew by double digits. Overall, our margin in digital real estate rose from 30.6% a year ago to 33%. We welcomed a new chief executive to the business, Cameron McIntyre, who comes with a distinguished digital background and professional pedigree. There is no doubt that his predecessor, Owen Wilson, performed exceedingly well and that his positive contribution will resonate at the company for many years to come. You will be able to welcome Cam and Lord Owen when REA formally delivers its results later today. Book publishing faced blustery wins in the first quarter, with orders slowing from both readers and retailers, and the write-off of a $13 million receivable due to the expected closure of a book distributor. The numbers last year were elevated by the dramatic resurgence of J.D. Vance's Hillbillyology after he was nominated as the vice-presidential candidate. But it does appear that the sluggish market has turned in recent weeks, as orders have rebounded and our recent releases are thriving, including that of Arif Kuang, whose Katabasis has quickly become a bestseller. We are also seeing strong sales for the latest works by Mitch Albom, Brett Baier, and Reed Drummond. A collection of previously unreleased short stories by Harper Lee, author of To Kill a Mockingbird, has also become an instant hit. We look forward to the release later this month of Wicked for Good, which should bolster book sales through cross promotions and movie magic. In religious books... we saw elevated interest in the Bible following the tragic assassination of Charlie Kirk. September Bible sales revenue rose more than 65% compared to the prior year, with retailers reporting a significant influx of new and younger customers. At news media, revenues rose 1%, while EBITDA grew a resounding 67%. At the New York Post, preparations are underway for the launch of the California Post early in the new year, and the buzz around the project is already audible. We are taking advantage of the Post's reach and influence, which expands with each passing day. One indication of the potency is the advertising revenue at the Post, which leapt 19% year over year, and nearly 90% of that advertising was digital. It is also worth noting that our rugby league team, the Brisbane Broncos, has just won the Australian version of the Super Bowl. That will provide a modest Philip for our business in Australia and an immodest Philip to the mood in Queensland. Rebecca and the team in the UK oversaw continued growth at the Times and Sunday Times, where digital subscribers rose from 600,000 to 640,000, while digital subscriptions at News Corp Australia expanded 3% to 1.162 million. Overall, our margin for the news media business increased from 3.3% a year ago to 5.5%. The first quarter saw a positive start to fiscal 2026, even though there were temporary headwinds that obviously were not auspicious. Thankfully, the wind direction has changed in recent weeks in the book business, and we look forward to building on that momentum through the second quarter and for the rest of the year. We are also confident in the outlook for digital real estate and Dow Jones and expect to continue aggressively pursuing our buyback in coming months. With that, I cede to our insightful Chief Financial Officer, Lavanya Chandrasekhar, for further details.