Welcome to News Corp's Fourth Quarter and Full Year Fiscal 2023 Earnings Conference Call. Today's conference is being recorded. Media will be allowed on a listen-only basis. At this time, I would 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 fourth quarter 2023 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 Susan Panuccio, Chief Financial Officer. We will 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 the earnings release for the applicable periods posted on our website. With that, I'll pass it over to Robert Thomson for some opening comments.

Thank you, Mike. Before we discuss results for the fourth quarter and full year of fiscal 2023, I would like to acknowledge that we’ve now completed a decade of the News Corp's existence. So this is surely an appropriate moment to reflect on our profound transformation, a transformation faithful to the company's founding principles. Consider then and the now, our revenue basis changed fundamentally and expanded dramatically. News and information services accounted for 72% of total revenues in fiscal 2014, which included News America Marketing and Dow Jones. By fiscal 2023, News Media was 23% and revitalized Dow Jones segment was 22%. Digital real estate comprised 5% of total revenues 10 years ago, and that has tripled to over 15% this past year, which includes the acquisition of Move, were revenues have more than doubled. Subscription video services revenues increased from 6% of News Corp's total to 20%, bolstered by the consolidation and control of Foxtel, a business renewed, and Foxtel's imminent completion of a refinancing is expected to facilitate repayments of our outstanding shareholder loans beginning this fiscal year. Candidly, since our reincarnation, we have increasingly digital recurring revenues, higher margins, significantly more free cash flow, robust finances, and bright prospects for long-term growth and value creation for all our shareholders. A few facts to demonstrate our digital scale today. Based on our June metrics, we had 79 million unique visitors at Dow Jones, 159 million at the Sun, 74 million at Realtor.com, 21 million at Housing.com in India, and 145 million at the increasingly influential New York Post. And that digital momentum is surely gathering pace in the age of Generative AI. Along with this relentless focus on digitization, we have been intent on simplifying the company and heightening our cost consciousness. That cost discipline was clearly evident…

Thank you, Robert. Our second half results show marked improvement from the first half of the year with fourth quarter profitability up year-over-year, highlighting the diversity and durability of our revenue streams, and our ongoing cost efficiencies as we navigated the ever changing macro conditions, supply chain pressures and currency headwinds. As the company continues to transition to digital, digital revenues now comprise over half of the company's fiscal 2023 revenues. We have also transformed the revenue base away from cyclical advertising revenues to one that is much more recurring and subscription base with strong growth prospects. We have made strategic acquisitions that we believe have fundamentally strengthened the company. The acquisitions of OPIS, CMA, HMH, Mortgage Choice, and IBD during fiscal 2021 and 2022, have essentially replaced the revenues from News America Marketing, providing a much stronger base for long-term growth. The company has changed and evolved since 2013, and is well-positioned for future success. We have maintained a very healthy balance sheet, while we strengthen the asset base, transformed digitally, generating healthy free cash flow and continue to improve our operating efficiencies. Turning to our financials, I'll focus on the fourth quarter performance. Fourth quarter total revenues were over $2.4 billion, down 9% year-over-year, which was heavily impacted by the $110 million or 4% negative impact related to the extra week last year, and the $72 million or 3% impact from foreign currency fluctuations. Impressively, total segment EBITDA was $341 million, up 8% year-over-year despite very difficult year-over-year comparisons and weak trading conditions at HarperCollins. Margins improved by over 2 percentage points to 14%. Fourth quarter adjusted revenues declined 7% compared to the prior year, while adjusted total segment EBITDA rose 2% versus the prior year. Both revenues and total segment EBITDA were also negatively impacted by the…

[Operator Instructions] Our first question comes from David Karnovsky from JPMorgan. Please unmute yourself to ask question.

Thank you. Maybe, Susan, just on the cost initiatives. I don't know if there's a way you could frame how much that was contributor in the quarter. And then I think last earnings, you'd stated, you thought the majority of the benefit would come through in the fiscal first quarter. Is that still the case? And then just on the other segment EBITDA that was better sequentially. Is that from the cost savings? And should we think about that line is sustainable?

Thanks, David. Look, I think we did have a really good quarter in Q4 in relation to the cost savings, and that certainly helped some of the segments, particularly News Media, you can see that coming through in the results. And yes, I did say last quarter that we would expect to see the full benefit coming through into fiscal 2024. I think that still is the case, as we sit here today. We do expect to exceed that $160 million of gross cost savings from the 5% headcount reduction. But I would note as we go into 2024, we will have some inflationary pressures related to wages, newsprint prices, and manufacturing costs. And we will continue with our digital reinvestment initiatives across the various businesses. So that number quoted was gross cost savings, and that will help offset those increases in investments. Just in relation to the other segment, there are a couple of things going on. We had the NAM settlement, the legal fees in the quarter last year. So we got the benefit of that in this quarter. We also had lower bonus accruals coming through in this year than what we did relative to the prior year. I think if you want to think about the next year, I probably have a look at the Q3 rate as sort of an indicative performance for going forward.

Thank you.

Thank you. Leila, we'll take our next question, please.

Our next question comes from Alan Gould from Loop Capital. Please unmute yourself to ask your question.

Hi. Yes, thanks for taking the question. Robert, I've got two actually. On the Generative AI, can you give us an indication of this consortium? Are you in a consortium? What the process is? Is there any legislative movement? And secondly, can you give some discussion on Simon & Schuster? I realized that they had one author that speak very talkative, but it seemed like the multiple was expensive.

Yes. Alan, look, first of all, on AI you're right by instinct that this is an important moment in the history of news and knowledge, with commercial and social implications and profound impact on creativity and integrity. If fake news and deep fakes are a concern, the potential for sophisticated forgeries for counterfeit content is almost endless. And separately, Generative AI has the potential to recycle itself in what you might call endless, perfidious permutations, and that's why the provenance of the archival base is so crucial and why refreshing daily weekly with incremental improvements is imperative. But -- so the potential is enormous, but garbage in garbage out, garbage all about. We've invested billions of dollars in knowledge creation, actually tens of billions of dollars, and that content certainly has a value in this editorial epoch. And for almost two decades, we've genuinely led the digital debate about provenance, which is echoed in Washington and London, Brussels and Canberra and Tokyo and Rome. For us, what gives me confidence for our company and our community is that the leaders of the largest digital companies are clearly sincerely focused on the issue. They understand our collective responsibility, and we are actively individually engaged in fruitful discussions. So I can't be more specific at this moment. But we see a positive financial result through consensual negotiation, not through litigation. We would like to reward journalists, not lawyers. As for Simon & Schuster, normally we don't speculate on speculation about M&A. But candidly, as you intimated, we wouldn't be prepared to go that high given that in our case, you could reasonably expect 18 months of scrupulous scrutiny by the antitrust authorities, with all related legal costs and the financial opportunity cost. We obviously have great respect for the company and its authors. But given the regulatory risk, we were quietly hoping that, frankly, Simon & Schuster would be reminded, and that we would get the company for a bargain, but it obviously didn't end up in the Barnes & Noble bargain bin.

Thanks, Alan.

Thank you.

Thanks, Alan. Leila, we'll take our next question, please.

Our next question comes from Kane Hannan from Goldman Sachs. Please unmute yourself to ask your question.

Good morning, guys. Just on Foxtel, should we still think about the 5 million subs, $3 billion revenue target you guys set out for next year back at the Investor Day? And just given those CapEx comments, does that -- I mean, do we still think it will eventually come down to that [indiscernible] target or something changed there?

Okay. We're certainly aiming high when it comes to Foxtel. And you can see from the success that we've had in streaming, total streaming subs rose 14% to 3.1 million, and our streaming revenues rose 26%, so that's also healthy growth ARPU. At the same time, broadcast churn fell sharply and was 11.1% in the quarter compared to 13.8% in the prior year, while broadcast ARPU rose 2%. So where else in the world are you actually witnessing a decline in the broadcast churn rate while experiencing a continuing surge in streaming, that really is the Foxtel success story.

And Kane, just in relation to the CapEx, yes, we still think that's a relevant target over time. As I've mentioned in my comments, we expect CapEx to be relatively stable in the coming year because we've got the reinvestment in relation to the aggregation service that we're about to launch.

Thank you, Kane. Leila, we'll take our next question, please.

Our next question comes from Entcho Raykovski from Evans & Partners.

Hi, Robert. Hi, Susan. My question is around the Foxtel shareholder loan. Obviously, you flagged the intention for it to be repaid. Just interested in once that's repaid, do you expect any recourse to News Corp from lenders? In other words, will you have to guarantee any of the Foxtel refi? And I guess as part of answering that question, is there anything in particular which has driven the ability of Foxtel to refinance, particularly if you're not guaranteeing the loan. And sorry, I will just extend it a little bit further. Should we read this into a preparation for a potential spin out of Foxtel down the track? Obviously, that's been speculated for a little while. Thank you.

Entcho, maybe I'll take the first couple. So no, we don't have a guarantee on there. And no, we don't expect that there will be anything to do with the guarantee going forward in relation to the refi. Actually, the reason that we could refi it so successfully is really because of the underlying business performance of Foxtel. They've had a great couple of years and really reinvented themselves. And it's a real credit to the team down there that they've got themselves into this position. So that's really what's driving the strong refi outcome. And maybe I'll hand over to Robert to comment on the IPO.

Yes. Entcho, obviously, we can't comment specifically about an IPO. But what I can say with absolute certainty is that the success we've had with Foxtel has given us absolutely the option of optionality.

Okay. Thank you.

Thank you, Entcho. Thanks, Entcho. Leila, we will take our next question, please.

Our next question comes from Craig Huber from Huber Research. Please unmute yourself to ask your question.

Great. Thank you. Book publishing, obviously, the margins and the profit dollars there were much lower than I think most people expect it certainly me, but also they are much lower than what the pre-COVID stuff. Is there any reason to think this environment that the revenue performance and the margins won't continue for at least a few more quarters? This is my question.

Craig, look, obviously, the 53rd week comparison exaggerates the decline, but the inflationary pressures are beginning to abate and some of the costs around royalty write-offs were relatively unique. So the team has Collins have obviously been taking a remedial action to improve our fortunes for this fiscal. We've implemented a price rise across various categories. And actually, the team is particularly confident about the impact of our current releases. And it's safe to say that our expectation, our firm expectation is that there will be significant margin improvement this year. This very week we have 3 of the top 10 fiction bestsellers in the U.S. with the #1 seller, Ann Patchett's Tom Lake, which has already sold more than 100,000 copies across print and digital in the first week on sale. As well in that top 10, we have Demon Copperhead from Barbara Kingsolver, and The Collector by Daniel Silva. Now that success in the top 10 will be reflected in the bottom line.

Thank you, Craig. Leila we will take our next question.

Our next question comes from Lucy Huang from UBS. Please unmute yourself to ask your question.

Thanks, Robert, and thanks, Susan. I just had one question on Professional Information Services. Are you able to talk through kind of what drove the growth over the fourth quarter. Is it -- or what's the contribution from subscriber growth versus price growth in that business? And I guess maybe if you can talk through some of your margin expectations coming into the fourth quarter. Is there expected to be more incremental investment in this space? Or could we see margins continue to expand into next year? Thanks.

Well, Lucy, safe to say we're delighted with the progress in the Dow Jones B2B business. You can see the impact on our margin more broadly at Dow Jones and longer term, you'll see it at News Corporation. In the fourth quarter of 2022, the EBITDA margin at Dow Jones was 13.8% [ph]. In the last quarter, it was 24.4%, and the overall margin at News Corp rose from 11.8% to 14% in a year where we were presented with real macro challenges. Net margin increase is, of course, a measure of growing profitability, but it's also a measure of our robustness. So quarter-after-quarter, year-after-year, we've seen double-digit growth increases at Risk & Compliance. We now expect the same for OPIS and CMA and we are frankly, delighted with the speed of integration of both OPIS and CMA and ensuing quarters, you will see the benefits of that.

Thank you, Lucy. Leila, we will take our next question, please.

Our next question comes from Brian Han from Morningstar.

Hi. On the Wall Street Journal, can you please provide some color on digital subscription pricing in terms of how much it rose in the June quarter and what the outlook may be for '24?

Brian, difficult to be too specific. What you're seeing in the circulation patterns at Dow Jones is partly a matter of phasing and a modest decline in print subscriptions. The emphasis is on the digital bundle with the combination of Mark Wash Barns and the Wall Street Journal. And sometimes in the shorter term, that means the average price of age is a little lower, but we are building loyalty and reducing churn in each of the products and in the long-term, increasing the price elasticity. I mean, the biggest problem for any [indiscernible] business, apart from acquisition itself is churn.

Thank you, Brian. Leila, we will take our next question, please.

Our next question comes from Darren Leung from Macquarie. Your line is open. Feel free to unmute.

Hi, guys. Thanks for the [indiscernible]. Just a quick one on Move, please. It looks like the revenues declined 24%, but listing is obviously only down 20%. So I just wanted a bit of clarity in terms of essentially the first period where we've actually seen revenue growth decline more than volume growth. So I just wanted a clarity as to what's happening to the yield and other products space, that's usually been a bit of an offset for the business, please?

Obviously, the housing market slowdown in the U.S. is having a profound impact on all digital property companies. And that is being reflected to a certain extent at Realtor. But I have to say the company is core to News Corporation, it's complementary to other assets. And you're going to see that irrefutable fact in coming months with the impact of Damian Eales, who knows company intimately. And what you will see with a lot of digital property companies is the cost of marketing. And we're remaking our marketing and have strong plans for leveraging our platforms. And look, we're talking about enormously influential digital platforms. It helps the Wall Street Journal, by the way, to have exposure in Florida via Realtor. And it helps Realtor to have the Florida audience in the New York Post, which is in the many, many millions. As I mentioned, the post has about 145 million monthly uniques. We have about 80 million at Dow Jones. And in the U.S. alone, about $110 million at the Sun depending on the month. And so in building both listings and yield, we're going to be obsessively focused on leveraging that comparative advantage.

And Darren, there's a little bit of noise in the numbers because of week 53. If you exclude the week 53 impact, it was actually down 17%, which was consistent with what it was down last quarter.

And I would just make one further observation about the Australian property market, as Susan alluded to earlier. I would say that we are seeing some particularly positive signs in the Australian housing market, which will surely benefit REA and us. There's no doubt that activity has already picked up this quarter, and that should be reflected in our results. It's a very transparent market. Anyone can track listings and the auction completion rate. So I would encourage investors to do the math in coming weeks. Sometimes we've gotten that, thanks to Lachlan Murdoch. REA is an integral part of News Corporation, and it has a market cap today of around A$21 billion.

Thank you, Darren.

Thanks, guys.

Thanks, Darren. Leila, we will take our next question.

The Next question will be a follow-up from Craig Huber from Huber Research.

Great. Thank you. I appreciate the much better results in this quarter and you guys have had some really good results you ever since COVID happened, in particular. But it comes up all the time with investors, why is this company News Corp so complicated. And is there any potential movement here to simplify the company going forward? I just -- I guess, I'd love to have updated thoughts on that with what you can tell us. Thank you.

Look, we are constantly reviewing our structure to ensure the optimal use of resources and the best outcomes for investors. That's why we were prepared to contemplate the sale of Realtor for rather generous price. And why we've done much underlying structural and regulatory work that gives us more flexibility in our collective decision making. So we are conscious -- acutely conscious of our responsibilities to investors, but also acutely aware of the value of our assets. And we've been building a portfolio for a reason. You can see -- since our split, annual print-related revenues have decreased almost $3.2 billion. That is correct, $3.2 billion. And we've more than replace that number with digital growth and made the company far more profitable with far greater free cash flow. So we know that we do need to provide more transparency so that the value and the potential of our assets are better understood as you make clear. That's why we break out Dow Jones. And you can see the rapidly increasing revenues, particularly in the professional information business, which was the largest contributor to profitability this year. And that has already been noticed by investors.

Thank you, Craig. Leila, we will take our next question.

At this time, we have no further questions. So I'll hand over to Michael Florin for closing remarks.

Great. Well, thank you, Leila, and thank you all very much for participating. Have a wonderful day, and we will talk to you soon. Take care.