Welcome to News Corp’s First Quarter Fiscal 2024 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 first quarter 2024 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 I 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 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 the 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 will pass it over to Robert Thomson for some opening comments.

Thank you, Mike. In a world replete with uncertainty, News Corp is proud to report rising revenues and increased profitability in the first quarter of fiscal 2024. These distinctly positive results come despite specious macroeconomic conditions including steep interest rates and unfavorable foreign exchange fluctuations. The potential for even greater profitability should be even more pronounced when we return to economic equilibrium. These results follow the three most profitable years since the creation of the new News Corp and our digital transformation has continued at pace. And in our view, these results certainly highlight the disparity between the value of our company and our share price, which we believe does not reflect our present profitability yet alone the potential of our incomparable growing businesses. We are acutely focused on enhancing long-term value for all of our investors, and in that quest, have the patent advantage of prized assets, whose value we believe is increasing. We are also assiduously reviewing our structure in the quest to optimize that value. Our first quarter revenues rose modestly to $2.5 billion, while profitability rose 4%, marking the second consecutive quarter of profit growth in these challenging conditions. We believe these positive results are a harbinger of our potential in the medium- and long-term. We expect to continue to drive our digital growth, the scale of which has been transformative over the past decade. It is worth noting a couple of metrics for context and to highlight the intrinsic value of our company. In 2014, print related advertising accounted for 39% of our revenue and now it is trying to get less than 5%, while digital revenues exceeded 50% of revenues last year, up almost 300%. Our loyal investors understand the inherent value of our assets and the scale of our dramatic transition. But we…

Thank you, Robert, and good afternoon, everyone. As Robert mentioned, we are pleased with the positive start to the new fiscal year, returning to revenue growth and posting the second consecutive quarter of profit growth despite the macroeconomic conditions. We have been diligently executing on our long-term plan to drive greater value for our shareholders and believe this is yet to be reflected in our current market value. Our first quarter total revenues were $2.5 billion, up 1% compared to the prior year, marking the first year-over-year revenue growth since the fourth quarter of fiscal 2022. Adjusted revenues also grew 1% compared to the prior year. Total segment EBITDA was $364 million, up 4% compared to the prior year. HarperCollins was the largest contributor to the profit improvement, which is encouraging on the back of last year’s challenging results. Adjusted total segment EBITDA grew 5% versus the prior year. For the quarter, we reported earnings per share of $0.05, compared to $0.07 in the prior year. Adjusted earnings per share was $0.16 in the quarter, compared to $0.12 in the prior year. Moving on to the results for the individual reporting segments, starting with Digital Real Estate Services. Segment revenues were $403 million, down 4% compared to the prior year, a notable improvement from the fourth quarter rate. On an adjusted basis, segment revenues declined just 2%. Despite the revenue decline, segment EBITDA rose 3% to $122 million due to higher contribution from the REA Group and cost saving initiatives that move that were partially offset by revenue headwinds. Adjusted segment EBITDA rose a healthy 8%. REA had a very strong quarter with revenues rising 4% year-on-year on a reported basis to $261 million, which included an $11 million or 4% negative impact from foreign exchange. Growth was driven by…

Thank you. [Operator Instructions] Our first question comes from Lucy Huang from UBS.

Hi. Good morning and thanks for taking questions. My one question is in relation to Move. So I just wonder if you can give us an update into the competitive landscape in the U.S. And just any early thoughts on the recent U.S. court ruling around agent commissions, like do you think this could have an impact on industry dynamics more broadly, and I guess, for the Move business longer term? Thanks.

Yes, Lucy. Well, first of all, we will have to see what transpires on appeal in that particular case. But it’s clear that the U.S. property market has already been evolving if rather incrementally. I mean our focus is solely on providing the best possible service for vendors, for purchases and for Real Estate professionals, and we will continue to build audience through the use of our rather large media platforms. We have been taking advantage of the present downturn in the market to build out our sell-side operations and there is definitely a downturn in existing home sales when you have an annual rate of $3.9 million, which is well below the normal average of $5.5 million. We certainly foresee stronger activity longer term on the sell-side, a bit like the Australian market and we have acquired a company UpNest, which is particularly strong in that area. And there are interesting lessons for the U.S. market generally from Australia about what happens when the market turns. There’s patently much suppressed demand here at the moment. In Australia, we saw listings in Melbourne and Sydney surged 14% and 16% in the last quarter, and those numbers were even higher in October, Melbourne listings surged 32% and Sydney saw 33%. So we look forward to similar surging and soaring in the U.S. market when mortgage rates moderate.

Thank you, Lucy. Laila…

Thank you.

… we will take our next question, please.

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

Thank you. Robert, I was wondering if you can get into a little bit more detail about this residulously reviewing our structure? And secondly, if you could comment on how the recent Real Estate lawsuit might affect the realtor and Move? Thank you.

I think, Alan, I answered the second question just now. So we will have to wait for the appeal there. The market itself is still obviously suffering from the heavy burden of mortgage rates here in the U.S. As for structure, look, we agree with the general thesis that the company has been transformed over the past decade and the full value of our incomparable assets is not fully represented in the share price. And that’s a tribute to the leaders of all our business from Rebecca in London to Patrick at Foxtel and to all our teams who have navigated through fundamental changes in each of their sectors and through the pandemic and the subsequent surge in interest rates. And as you can divine from today’s numbers, we are in a truly different position to most media companies with a robust balance sheet and are poised for even greater growth and profitability in the coming years when the economic heavens return to equilibrium. But at the same time, we are consciously and constantly reviewing our structure and have already taken tangible steps to clarify internal corporate structures to ensure that we have maximum flexibility in that overall structural consideration.

Thanks, Alan. Laila, we will take our next question, please.

Our next question comes from David Karnovsky from JPMorgan. Your line is open.

Yes. Hi. Thank you. This is Ted on for David. I wanted to ask if you could give us an update on digital ad trends. Any color you can share on the quarter and expectations moving forward would be appreciated? Thank you.

Sure. Obviously, the trends across the mass heads vary by segment and region and algorithm changes can have a short-term impact. Though we do have a strong relationship with both Google and Facebook, and they tend to respond thoughtfully to any infulicities that we identify and I’d particularly like to call out Sundar Pichai and his trustee team, who are conscious of the importance of journalists and journalism. Specifically, at Dow Jones, advertising was down 3%, which was a marked improvement after a 14% decline in the prior quarter, both digital and print reported improvement in trend lines. And there was a more modest decline of 8% in the U.K. But most of that was actually in print as digital advertising was flat compared to the same quarter last year. And the New York Post, while flat overall, actually saw an increase in print related advertising as the paper continued to expand its social, political and commercial reach.

Thank you, Ted. Laila, we will take our next question, please.

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

Hi, Robert. Hi, Susan. So, firstly, I just wanted to ask, given that there have been some public comments from a shareholder over the past month about a proposal to spin out REA, interested in your comment as to whether you see merit in that proposal and is that something you are willing to explore or are you looking at other ways, as you have spoken about of closing the valuation gap? And if I can quickly throw a second one in there as well, hopefully, a straightforward one. Given that Foxtel refinanced over the quarter, when do you think the shareholder lines will be repaid? Are there any other impediments or hurdles to that repayment taking place now? Thank you.

Entcho, it would obviously be inappropriate to comment on any shareholder in particular and actually inappropriate to comment on any shareholder comment. But as I have made clear, we are conscientiously reviewing our structure and have taken steps corporately to ensure that we have maximum flexibility that of itself reflects the constant institutional introspection that characterizes the way we oversee these very valuable assets.

And Entcho, just in relation to your question on Foxtel, we expect a modest return this year and anticipate the bulk of the repayments to come over the next few years. That’s obviously dependent on the current plans and cash flow position.

Thanks, Entcho. Laila, we will take our next question, please.

Our next question comes from Craig Huber from Huber Research. Craig, your dial star six on your keypad to unmute.

Great. Thank you. Robert, it’s nice to hear that you guys are reviewing your structure. I have long talked about for the last 10 years or so. I mean, the company is very complicated for an investor -- an outside investor standpoint. So I am glad to hear you guys are looking at that seriously. I mean, when I look at the stock, I mean, I looked at 35% to 40% conglomerate discount that’s embedded in your stock in order to justify the stock in the low 20%s here and stuff. So I guess we will see what happens. I hope some significant happens on that front. If I could ask a question about books, I mean it’s nice to see the recovery from a year ago. Are you guys seeing anything in the book area, whether it be on the cost side or on the revenue side that would stop you from getting back to your EBITDA level that you are at in the low 300s back in fiscal 2021 and 2022? Thank you.

Craig, look, obviously, HarperCollins’ journey through a rather unique period of unusual circumstances. The pandemic, logistical issues at Amazon, cost pressures and it has emerged from that confluence -- complexity with a strong front, backlist and margins actually dramatically improvement -- improving from the 4% in the final quarter of last fiscal to 12.4%. So we are seeing that margin improvement already. And there’s also no doubt that there’s reason for excitement about the entry of Spotify into audio books. Over the past few years, audio books have been by far the fastest-growing sector. And Spotify itself has really transformed both the concept and the experience of streaming. And so Daniel Ek and I have been discussing audio books for a few years, and we have reached an agreement on a model that is great for orders, for book lovers, for Spotify, and for us. The early signs from the U.K. and Australian markets are certainly positive. And if those trends hold, audio, which now comprise about 45% of digital sales will reach a far higher threshold level, we will be generating significantly more revenue, and as you asked, be improving our EBITDA.

And Craig, maybe just to add, we do expect continued profit growth in the balance of the year given certainly the prior year compares subject, of course, to that consumer demand that Robert talked about, but we expect it to be at a more modest rate than Q1. And we are hopeful that the EBITDA margin can remain positive to last year and in the low double digits for the full year having delivered the 12.3% in Q1. So I expect that margin rate will be more over the medium-term when we look to lift it.

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

Our next question comes from Brian Han from Morningstar. Please unmute yourself to ask a question.

Robert or Susan, can you please clarify, did you guys say in Dow Jones B2B earnings are larger than B2C earnings or did you mean its contribution to growth is now larger than B2C?

They are larger and on track to be larger for the full year. So, yes, we did say that.

On track to be larger?

And they were for the quarter.

And for the quarter and they are obviously a higher margin digital high retention rates.

Thank you.

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

Our next question comes from Darren Leung from Macquarie.

Hi, guys. Thanks for the opportunity. I just have one on Move please and the Real Estate revenues were obviously down 20% and you called out listings down 11%, pretty crude, but it sort of implies that yield -- average yield was down about 9%. Can you talk a little bit about the drivers on this front please and how we should be thinking about the yield driver in the remainder of the year? Thanks.

Darren, we don’t, as you know, give out specific yields. You may recollect that actually over the course of probably the last 18 months, we have been seeing increases in yields that have helped us offset some of those declines. You could imagine in the current market it’s obviously challenging to be pushing yields up in the U.S. So look, I think what we would say is that we just continue to balance where we think we can push yields in certain markets with the current macro environment. That’s probably all we can say on that.

Thank you, Darren. Laila, we will take the next…

Thanks. Thanks.

Thanks, Darren. Thank you, Darren.

One moment…

Sorry, Laila, we will take our next question, please.

We can go to Craig Huber with a follow-up.

Yeah. I have a follow-up question on realtor.com please. Can you maybe just comment a little further on what you are planning to do on the cost side of the business for the rest of the fiscal year here? I understand obviously the pressure on the topline. But I mean, where do you guys think profits in realtor.com are going to go the -- issue on the topline from a macro standpoint, but you want to invest more it sounds like on the R&D side and in marketing? Thank you.

Craig. Look, if you think about the next quarter, you could probably expect costs to be relatively in line with what we have seen in Q1. As we mentioned, we do want to continue to invest in that business. We see a huge opportunity in that business when the market picks up. We want to make sure that we are in the best position to take advantage of that. Some of the investment areas that we are looking at are building our product investment having a look at marketing, obviously, just given the competitive position there. It’s really important that we do that. So we will probably back in some of those cost investments depending on how revenue trends.

Thank you. Thank you, Craig. Laila, any other questions?

There are no further questions on the line at this time.

All right. Well, thank you all for participating. Have a wonderful day and we will talk to you soon. Take care.