Good day, and welcome to the News Corp Fourth Quarter and Full Fiscal Year 2019 Conference Call. Today's conference is being recorded. Media is invited on a listen-only basis. At this time, I would like to turn the conference over to Mike Florin. Please go ahead sir.

Thank you very much, Karina. Hello, everyone, and welcome to News Corp's fiscal fourth quarter 2019 earnings call. We issued our earnings press release about an hour ago, and it's now posted on our website at newscorp.com. On the call today are Robert Thomson, Chief Executive; and Susan Panuccio, Chief Financial Officer. We'll open with 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 our earnings release. With that, I'll pass it over to Robert Thomson for some opening comments.

Thanks, Mike. News Corp completed fiscal year 2019 in a strong position with revenues increasing 12% and profitability rising 16% against the prior year, reflecting not only the consolidation of Foxtel, but also the continued strength and development of core segments of the company, including Book Publishing and Digital Real Estate Services, and substantial progress in the digital transformation of our News and Information Services businesses. The concerted focus on our primary revenue drivers, including the creation and distribution of premium content, was reflected in audience growth across News Corp's milestones and digital properties. We are also acutely focused on simplifying the structure of the company and making clear the full value of the sum of our parts. To that end, we recently announced a strategic review of News America Marketing, including a potential sale of the business. We have received material interest and the process is progressing rather well. There is clearly a fundamental shift under way in the content landscape. And one consequence, other than intensifying regulatory scrutiny of big digital, is a gradual transference of value to content creators, who over the past decade have lost influence in revenue to their digital distributors with Rupert and Lachlan Murdoch’s encouragement. News Corp has been advocating vigorously on behalf of journalists, journalism and the protection of intellectual property and that intense, sometimes solidarities advocacy, has begun to pay dividends for journalism and importantly for our shareholders. We are still at a relatively early stage of this tectonic transformation, but there will surely be an ongoing transfer of value to creators in coming years, which should be a great benefit to News Corp and its investors. We have begun partnering with companies such as Apple and Twitter, which recognize the value of our content. And discussions are under way with…

Thank you, Robert. Before I review this year’s end quarter financial results, I wanted to highlight five themes from this past fiscal year where we’ve made significant progress. Firstly, we’re making notable progress in stabilizing the News and Information Services segment and entered our fiscal year on a positive note. Our digital paid subscriber base continues to grow while we continue to focus on streamlining our critical space and investing in new revenue streams. Importantly, the segment posted a higher profitability this year with improvement across our key news publishing business units. The first time we’ve seen this improvement since the Company’s separated. We will remain focused on these areas in the coming year, and we are optimistic we can build on the current use of this. Secondly, the team at Foxtel have made steady progress on its over-the-top offering, including a successful launch of Kayo in November and further improvement to its premium broadcast product. Foxtel returned to volume growth, ending the year at the highest closing paid subscriber base since separation. And now with the core platforms in hub, they are focused on improving a path to revenue and profit growth. The performance in our Book Publishing segment this year underscores the value of premium content and the advantage of a global distribution network, posting record profitability even when facing a very challenging prior year comparable. Given the rapid rise of downloadable audiobooks and the explosion in demand for premium content globally, we continue to explore ways that HarperCollins can see the leverage its highly valued content into other media. As Robert mentioned, recent examples of these efforts are our announced partnership with Sony Pictures Entertainment and also with media in Canada our Harlequin division. These are deals with minimum capital outlay which have the potential to monetize…

Thank you very much. [Operator instructions] And we'll take our first question from Entcho Raykovski with Credit Suisse. Please go ahead.

Hi, Robert. Hi, Susan. A couple of brief questions for me. First one is around costs within news and insight services. So in the quarter, you had the same market, pretty good cost performance given that the EBITDA grow on revenues. Can you talk to the extent to which that was cost reductions within News America Marketing as opposed to the other segment within news and insight services? I'm just interested particularly in extent to which of those cost reductions can continue into FY 2020. And then on News America Marketing, you've given us a brief update on the sale process. Can you give us an indication of likely timing that you're looking at? And are you looking at mainly tied to financial bias?

Hi, Entcho, it’s Susan here. Maybe I'll take the first question and hand over to Robert for the second question. Just in relation to the cost, they declined 7%, but down 4% on an adjusted basis. So cost distribution, Dow Jones cost are up but we would expect that to be up given the subscriber growth and the investments that we have in the PIB business in Risk and Compliance. Across the other businesses in the UK and Australia posted decline, and within them clearly cost declined by around 12% year-on-year. We are expecting to see cost continue to increase across the UK and Australia. We have been quite vocal about that over the past couple of years. The teams across the UK and Australia are very focused on cost reduction and continue to look at ways that they can innovate and drive costs, particularly out of the back office and some of the distribution chain. And we would also expect to see Dow Jones investing in that business going forward. But I would say that overall, we do balance the cost reductions with investment even within the UK and Australia because it's important that we can support that digital growth coming through in the businesses.

Entcho, obviously at this moment it is a little difficult to be absently specific about the identity of the bidders other than to say there's quite a few. But more broadly, we understand when it comes to the new score, that this is complex, it's not properly valued. And so we have begun a process of simplification that will be ongoing. The first, most tangible sign of that is the sale process at NAM. That company itself would change characters over the past few years and become more value because there was in-store and digital growth and a little less relevant into News Corp's core business. So it made sense to do that strategic review and that is materially interesting becoming.

Thank you. And so Karina will take our next question please.

Thank you. We'll next hear from Kane Hannan with global – I'm sorry, Goldman Sachs. Please go ahead.

Good morning, guys. Just on the Foxtel OTT strategy, I think in the past, you've said you would only launch an entertainment SVOD if you're happy with Kayo's performance. But first, just given that growth you reported in the quarter, can you give us a bit of an update on around your plans if they exist for an entertainment SVOD? And just on the NAM business, can you give us a sense of both the EBITDA and margin that business makes? Or how you're thinking about any potential for that transaction?

Kane, again a little difficult to be specific, but the fundamental principle applies that if we thought Kayo was successful, then we would proceed with the new products. What we are seeing is Kayo is success, and fundamentally what we're seeing is a real growth in a number of Australians prepared to pay for premium programming. And there is little more premium than exclusive sports runs. So the old story about Foxtel was it had maxed out on subscribers that they were strictly limited number of Australians prepared to pay for content, and we heard that limit. Frankly, that's clearly not the case, and the doubling of Kayo subscribers has actually been accompanied by a fall during the same period by the rate of churn among sports users, subscribers on broadcast. That is a significant trend and an indication of the success of Kayo.

And Kane, just in relation to News America Marketing, we don't disclose the margins in relation to that business. What I can say is we do disclose the revenues and that is obviously in the release. At this stage, we are obviously exploring the options as Robert said, in relation to the strategic review, and that will including exploring the sale. But we're not going to comment further biggest that process is being concluded that's what we may do with the cash proceeds.

Thank you, Kane. Karine, we’ll take our next question, please.

Thank you. We'll hear next from Craig Huber with Huber Research Partners. Please go ahead.

Yes. Hi. Thank you. I guess two quick questions. Robert, Susan, what's changing your mind and your Board's mind to actually potentially put News America Marketing for sale now? I mean why now for that? And also, Susan, can you give us more clarity about how we should think about the cost for Foxtel for fiscal 2020 above and beyond what you've already said? Thank you.

Craig, as I said a little earlier, we understand that the company is complex and that the valuation that we get, really a remarkable collection of asset is not fully realized in the share price. And so we have begun this process of simplification and that the most obvious outcome at this stage of that is the decision to conduct the strategic review of NAM, and that is well under way.

I think Craig, I'll just also add to that, that one of the things that we've been thinking about is how to allow greater focus on News Corp's primary pillars including the creation and distribution of premium content in the digital segment. So just in addition to the comments that Robert said. Just in relation to your second question, in relation to Foxtel cost base, in relation to next year, clearly the current year, fiscal 2019 is the investment year for Foxtel. We are very clear about that and transparent particularly in relation to the Cricket rights. If we cast our lines forward to the next financial year, we would expect to have a one additional quarter of Cricket right so that. US$20 million, we will, no doubt, have some continued investment in OTT as we scale this product and depending on the marketing activities around that. But more importantly as I mentioned in my comment, we'll have this non-cash impact related to the programming amortization change, which is about $30 million to $35 million. So that will impact on the result. Outside of that, we expect that cost base will be relatively notwithstanding the variable nature of it due to subscribers.

Thank you, Craig. Karine, we’ll take our next question, please.

Thank you. We'll next hear from Brian Han with Morningstar. Please go ahead.

Hi, Robert, I have one question for you. I noticed that Fox recently invested in an online lending company called Credible, I think. And it looks like something that perhaps News Corp could also have been interested in as part of your digital – digitalization strategy. So my question is has there been situations where News Corp and Fox compete for an acquisition? And if so, how do you guys decide who's going to take the first dibs and who is going to back off?

Brian, we look after News Corp. [indiscernible] saying about that Fox acquisition is that clearly, the Fox news and Fox Business news, great plasticizers of products. And that particular company has a very broad range of financial products aimed at consumers. So I wouldn't be surprised at all that it was a Fox acquisition. But we are separate companies and we ourselves are always reviewing our portfolio. Operator, we’ll – any more questions, Karina.

[Operator instructions] And it appears we have no further questions at this time. I'd like to turn the call back over to Mr. Florin for any additional or closing remarks.

Great. Thank you, Karina, and thank you for all participating. We look forward talking to you soon. Have a great rest of the day. Take care.

Once again, that does conclude today’s conference. Thank you for your participation, you may now disconnect your phone line.