Good day, and welcome to the News Corp Third Quarter 2016 Earnings Call. Today’s call is being recorded. Media is allowed to join today’s conference in a listen-only mode. At this time, for opening marks and introductions, I’d like to turn the conference over to Mr. Mike Florin, Head of Investor Relations at News Corp. Please go ahead.

Thank you very much, Tom. Hello, everyone, and welcome to News Corp’s fiscal third quarter 2016 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 Thomson, Chief Executive, and Bedi Singh, Chief Financial Officer. We will open with some prepared remarks, and then we will 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 Corporation’s Form 10-Q for the three months ended March 31, 2016, identifies risks and uncertainties that could cause actual results to differ, and these statements are qualified by the cautionary statements contained in such filings. Additionally this call will include certain non-GAAP financial measurements. The definition of and a reconciliation of such measures can be found in our earnings release and our 10-Q filing. Finally please note that certain financial measures used in this call such a segment EBITDA, adjusted segment EBITDA, and adjusted EPS are expressed on a non-GAAP basis. The GAAP to non-GAAP reconciliation of these non-GAAP measures is included in our earnings release. With that, I will pass it over to Robert Thomson for some opening comments.

Thank you, Mike. In our pursuit of digital and particularly mobile growth, we continue to develop and to diversify the portfolio of our businesses and aggressively control our opening costs to free resources for further innovation and to expand margins across the company. The third quarter results were materially affected by a $280 million pretax charge at News America Marketing to resolve a legacy lawsuit and related claims and continued currency headwinds, which impacted revenues by $72 million and EBITDA by $9 million. Excluding those factors and other special items, our revenues and total segment EBITDA declined 5% and 8%, respectively, which was disappointing. We believe, however, that the company is on track to see improvements in the fourth quarter with the expansion of our digital real estate business, foreign currency comparisons hopefully beginning to ease, and cost saving initiatives that confirm the root. Our pursuit of digital growth continues apace and we enhanced our status as the world’s largest digital property company with REA’s completion of the iProperty acquisition in Southeast Asia, where we are now the most influential player. Meanwhile, traffic and revenue growth remained robust at REA and Realtor.com. We have focused on driving mobile revenue and are pleased with, but are not complacent about, the results at Realtor.com, where their mobile audience grew close to 50% this quarter and now represents 60% of page views and the majority of leads. Despite the difficult conditions for advertising, we saw both Dow Jones and News Corp Australia contributing to segment EBITDA growth thanks to more digital subscriptions, digital advertising growth, and ongoing cost-reduction. While we believe in the strength of our print properties, we are investing energetically in the rapid pursuit of digital which is clearly evident in the transition at Dow Jones. At Dow Jones this quarter,…

Thanks, Robert. We reported FY16 third quarter total revenues of $1.9 billion, down 7% from the prior year period. As Robert noted we were again impacted by currency headwinds, although lessening from the prior quarter, which negatively impacted Q3 total reported revenues by $72 million. Excluding the impact of foreign currency fluctuations and acquisitions, adjusted total revenues declined 5% compared to the prior year. Reported total segment EBITDA loss of $122 million includes a one-time pretax charge of $280 million related to News America Marketing’s settlement of the CPG class-action lawsuit and related claims. Excluding that cost, total segment EBITDA would’ve been a positive $158 million. Currency fluctuations impacted total reported segment EBITDA by $9 million or 5%, and we also incurred transaction costs of $7 million related to REA’s acquisition of iProperty and $3 million in legal costs related to the UK newspaper matters. For the quarter, adjusted EPS from continuing operations was $0.04 versus $0.09 in the prior year. Reported EPS from continuing operations, which includes the News America Marketing settlement charge net of tax, were negative $0.26 compared to $0.08 in the prior year. Turning now to the individual operating segments. In news and information services revenues for the quarter declined $122 million, down 9% versus the prior year period. Adjusted segment revenue declined 6%. Within these segment revenues, advertising declined around 15%, or roughly 11% in local currency due to a weakness at the FSI business in News America Marketing and in print advertising, offset by strong digital ad growth at Dow Jones. Circulation and subscription revenues declined 4%, but were overall flat in local currency. News and information services reported a segment EBITDA loss of $187 million. Excluding the News America Marketing settlement charge, segment EBITDA this quarter would’ve been a positive $93 million, a…

Thank you, sir. [Operator Instructions] We’ll take our first question from Eric Katz with Wells Fargo.

There’s been quite a bit of news around potential buyout of Telstra’s stake in Foxtel, so I was just wondering if you could touch on some of the key positive and negative aspects you’re mulling over for that potential acquisition? And maybe just your general thoughts in that business over the next few years and how it differs from Telstra, who looks like they want to exit? And I guess on top of that what’s your appetite for leverage to make a deal of this size happen?

Eric, we’re not going to speculate on idle speculation. What we can tell you is that the new team at Foxtel, led by Peter Tonagh, and at our partners in Foxtel Telstra are determined to improve the business. We’re investing in subscriber growth, and you saw today with the announcement of the acquisition of EPL, the premier league rights for the six most important clubs, that day after day, week after week, Peter and team are both improving the product and most crucially improving the projection, because we believe that there’s no doubt that Foxtel has the best suite of programs. There’s no doubt that that portfolio is starting to resonate. It already is resonating with our long-term subscribers. There’s obviously a little bit more churn when you have a lot of offers out there, but long-term we believe that the health of Foxtel is robust and that we have a full faith in the new executive team. And I think the cleverness of the deal that they’ve done on premier league rights tells you that we’re certainly going to look after our fans who like EPL, but we were never going to acquire EPL in a way that would hurt EPS. Now you might want to watch a game in the middle of the night and pay a lot of money to do that. That’s what Australians would call a nocturnal marsupial, but you’re a rather sad and sultry person in the middle the night, or you can watch the game, frankly, with your family at lunchtime and cheer on your favorite players. And one other thing about the particularly interesting offering that Peter and the team have at Foxtel is that you’ll also be able to see all the reserve games, the under 21 games, and so when well-known players like [indiscernible] or Jack Wilshire come back into the intermediate teams ahead of playing in the mountain, you’ll be able to watch those games as well.

Thanks, Eric. Operator, we’ll take our next question, please.

Next question comes from Entcho Raykovski with Deutsche Bank.

Hello, Robert. Hello, Bedi. My question is around digital real estate services and Move specifically. Apologies if I missed this, but are you able to tell us what the EBITDA for Move was over the quarter, and then in light of the continued legal expenses which have been incurred, do you expect Move to be breakeven for the full-year?

So, we don’t actually specific give out Move’s EBITDA, but I can tell you that in Q3 there was positive EBITDA and this was despite the fact that we incurred the higher legal expenses in the Zillow litigation. And we expect, clearly, given the audience growth we see at Move, we expect revenue growth going into Q4, and I would expect barring legal fees, which we don’t know what the quantum of those could be in Q4. Barring legal fees to one side, we would expect to see EBITDA positive and EBITDA growth in the fourth quarter for Move.

Entcho, to supplement what Bedi said, and that includes our stock-based compensation, which some companies in the sector don’t do. As Bedi said, we fully expect core EBITDA growth this quarter, and we fully expect even faster EBITDA growth in succeeding quarters. Were in the middle of what you might call home renovations at Realtor.com. You can see from what you might call a buy-side product, the co-broke where we have 45% revenue growth year on year. That side of the business is doing well, and Ryan O’Hara and the team at Move are now working on improving the sell side products. So that’s one known as Turbo and another known as Showcase, and we expect over coming months and into the next fiscal for those also to have a positive impact.

Thanks, Entcho. Operator, we’ll take our next question, please.

Our next question comes from Alexia Quadrani with JPMorgan.

Hi this is James Kopelman, in for Alexia. A question on the Journal and digital. Digital subs are obviously growing fast and you guys are reaching impressive levels. Can you talk about strategies for further growing digital subs, and maybe provide some color on what you’re looking at, whether it’s with regards to retention, perhaps lowering churn, or in terms of – on the product side, whether it’s adding PDO, expanding into new verticals? You mentioned MarketWatch earlier. I guess, where do you see the opportunities, and how are you exploiting them? And then as a follow-up, one of your publishing peers, I think when they were at a similar level of subs, within about a year they passed 1 million. So I guess any color on – if you could comment on what your own broad timeline is for hitting that key threshold of 1 million digital only subs? Thanks.

Well, we certainly are optimistic for the digital potential at Dow Jones and the Journal in particular. What we’re doing obviously is emphasizing, as one must in the contemporary age of content, video, increasingly interactive engagement with this premium audience. But also developing new verticals. Virtuous verticals that give us more elasticity because they touch professionals in a way that, on a need to know basis, these are knowing audiences, but frankly they’re also paying audiences. I think you need to see the Dow Jones offering as essentially having three segments. The B2C and the B2B, both of which are well known, Factiva and newswires, venture capital related verticals are at the B2B side, but there’s also a very strong B2P play between the consumer and the business. That’s the business to professional, and we see that the team there, Will Lewis and the editorial team are constantly fashioning new products for the fast-growing B2P segment, which is obviously a more sophisticated product, frankly, at a more sophisticated price.

Operator, we’ll take our next question, please.

Next question comes from John Janedis with Jefferies.

Thank you. Robert, you talked about mastheads and audiences being undervalued by agencies, and I think you’d say you have the scale and you felt that way for awhile. So how do you change that narrative and/or inertia to realistically gain share of budget?

So that’s a really good question. One way you change the narrative is to start talking about it, as we are. Secondly, we have to do a better job of selling the power of the platforms and the reach of the audiences. You look at our US digital platforms, and that’s Realtor, the Post, Wall Street Journal, Marketwatch, that’s around 160 million monthly uniques. And I’ll tell you one story, which we use our own platforms to create new products and generate new audiences. You may have noticed just over two weeks ago, we traded a packaged libertarian site called HeatStreet. HeatStreet has picked up 1 million uniques in just over two weeks. External marketing spend on Heat Street, $10,000. That is proof of the power of our platforms relative to external platforms. We have to do a better job of explaining it, but quite frankly, I think advertisers need to challenge agencies. Because at times, the interest in the agency and the interest of the advertiser or not in alignment.

Thanks, John. Operator, we’ll take our next question, please.

And our next question comes from Doug Arthur with Huber Research.

Bedi, on book publishing, HarperCollins, just to be clear, are you expecting topline growth in the fourth quarter, or just improvement? Thanks.

Look, clearly it also depends on what the mix of books is, but at this stage when we look at where the last month and where we were entering this month, I would expect both topline growth and I would expect improvement at the bottom line.

Great. Thank you.

Thanks, Doug. Operator, we’ll take our next question, please.

Next question comes from Craig Huber with Huber research.

You guys threw out a lot of numbers on the new super ad revenues. I don’t think I heard the UK ad revenue percent change in the core year over year without currency. And also, can you remind us, the Zillow lawsuit you talked about, what dollar amount are you guys going after there please?

On the UK, what I said was that ad revenues in the UK declined 21%, but in local currency they were down mid teens. And on the legal segment, I’m not sure we are going to be saying a lot other than the fact that there is a trial date that’s been set in early June and we are preparing to go to trial.

Thanks, Craig. Operator, we will take our next question please.

Next question comes from Michael Kass with BlueMountain Capital.

Just a follow-up on one earlier question on Move. [indiscernible]. Did you disclose the revenue in the quarter for Move, you have generally done that?

Mike, can you repeat the question, we just had trouble hearing you.

I was wondering what the absolute revenue at Move in the quarter was?

We actually don’t give out a separate number for actual revenue, we give out percentage increase.

It was up 20%, quarter on quarter. The unique users up 30% for the quarter itself, in April up 25%.

Thanks, Mike. Operator, we’ll take our next question, please.

Next question comes from Brian Han with Morningstar.

Thanks very much. Are you still incurring any cash flow losses on Amplify, even though you sold it? And also as a general question, what percentage of your newspaper cost space relates to newsprint now?

With respect to Amplify, we’ve pretty much cleaned up most of the bits that were left over. In the quarter, there was a very immaterial loss, looking at the Q4. We have a very immaterial amount of cash flow to go, and we expect to be completely sheet cleaned up as of 30 of June.

And as for newsprint, newsprint is probably less than 10% of total cost for a masthead these days. What we have been able to do across our mastheads were the extra focus of the new news is whether it be software, the publishing systems, newsprint contracts, generally we are engaging a lot more collective cooperative bargaining of the company. We are able to get costs down. Share experiences. Share expertise. De-dupe expenditure in a way that is having a tangible positive impact on all the cost bases.

Operator, we’ll take our next question please.

We go next to Sacha Krien with CLSA.

Thanks, guys. In relation to News America Marketing legal costs, can you give us idea of the quantum of fees you’ve incurred over the past quarter and perhaps over the past 12 months? And just to confirm that there aren’t any legal fees rolled up in that charge? And then just a quick second question in relation to Foxtel. Is it churn that’s the primary reason behind not hitting the previous guidance?

With respect to legal fees for NAM, we incurred $10 million roughly in the quarter, and the settlement that was for $280 million does not include these $10 million of legal fees, which went through separately.

As for Foxtel, as you know, we’re in the midst of an intensive marketing drive. The churn will have an impact on revenues partly because, as Bedi mentioned, they are no contract offers. But you’re still looking at ARPU in the high $80’s which is significant. And you’re looking at a low rate of churn for long-term customers. And you should note that Foxtel implemented a $1 price increase for the entertainment tier, which will have a benefit in the next quarter.

Thanks. Operator, we’ll take our next question, please?

Next question comes from Tim Nollen with Macquarie.

Hi thanks. I’m interested in the Sun, with you removing the paywall, and if I remember correctly, when you set up the paywall for the Times several years ago in the UK, your viewership dropped by a big number, 90% or something like that, which is understandable because you are getting people to pay. So I just wonder if the Sun went through something similar, and now I think you said the unique’s have – I think you said have doubled. I recognize it’s relatively early, but it seems like there might be a lot more ground to recover, and I just wonder what might be different now versus the last time The Sun was basically free to all viewers. Thanks.

I think we have a lot of faith in the quality of content of the Sun. There’s no doubt that the audience already has increased. We are relaunching the website itself in coming weeks, which we presume both obviously on desktop and crucially on mobile will have a profound impact. The ad sales teams are gearing up for that opportunity and it’s definitely an opportunity. The Sun will be a brand that resonates obviously particularly in the UK, but it’s also a brand with a global halo. And so we see real potential there over coming quarters.

Thanks Tim. Operator, we’ll take our next question, please?

We’ll take a question from Michael Kass with BlueMountain Capital.

Thanks for taking another question. I was just wondering, now that you’ve settled at least on the CPG side, the NAM suit, I was wondering if you could talk a little bit more about how you see the value of that business quantitatively versus the pretty considerable settlement? I guess from a market perspective, it’s not clear that you’re getting that much value from the ownership of NAM, and you don’t disclose metrics, so why was it worth spending $300 million to settle this lawsuit?

As you can see, Marty and the team at NAM are investing significantly in the digital character of the company, because NAM has unique relationships with CPGs. It has unique relationships with retail. And what we’re seeing with NAM coming closer to other parts of the organization, is those are complementary skills which are helping introduce, for example, Realtor and our other properties to advertisers who in the past may not have had a particularly close client relationship with us. So the key thing over the next 12 months will be the development of digital. You always have to remember that NAM has significant free cash flow. That the in store business has been a growing strongly, even as the FSI business has been under pressure. And in a very short period, Checkout 51 – and would advise you to check out Checkout 51, has become one of the top 10 shopping apps. And that means in terms of reach on the Apple App Store, it has more prominence that Walmart and Walgreens.

Thanks, Mike. Operator, we’ll take our next question, please?

We’ll take a question from Peter Stamoulis with Evans and Partners.

I was hoping you could provide a little visibility into programming costs back across Fox Sports Australia and Foxtel going forward of the next 12 months? Thanks.

In terms of Fox Sports, as you know, the simulcast of the NRL will be starting in the fourth-quarter. So we expect to incur some additional costs there. We will also have some additional costs related to a few more matches of Wimbledon and then the new Rugby Union contract also kicks in. So we’ll see an increase in sports costs there. But as you know, at Fox Sports costs tend to be lumpy, and so EBITDA tends to be a little lumpy. But overall we expect that in the fourth quarter, EBITDA should be improving slightly compared to the prior year.

Thanks, Peter. Operator, we’ll take our next question, please?

[Operator Instructions] Mr. Florin, there are no further questions at this time. I’d like to turn the call back over to you for any closing remarks.

Well, great. Thanks Tom, and thank you all for participating. Have a great rest of the day. We’ll talk to you soon.