Welcome to News Corp's Third 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 third 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 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. News Corp has again made substantial progress on our strategic imperative to transform the company and increase value for all shareholders. Our profitability rose slightly in the third quarter, as compared to the prior year, continuing our growth this fiscal year, and that increase follows the three most profitable years since the company was reincarnated in 2013. That improvement, which gathered pace in April came despite certain macroeconomic circumstances that were far from auspicious whether a strong dollar that devalued our revenues outside the U.S. particularly in Australia or the punitively high mortgage rates that obviously undermined activity in the U.S. housing market. The U.S. housing market contrasts starkly with that of Australia, where strong performance underpinned robust revenue growth at Digital Real Estate Services. While at Dow Jones, the professional information business continued to prosper and the segment's profit margin expanded from 20.6% to 21.7%. We remain well on track for the full year of strong results at News Corp. It is by the way worth highlighting that our free cash flow in the first three quarters was $491 million, a 53% increase on the $320 million for the same period last year. It is also worth noting that for more than a year, digital revenue has accounted for over half of our total revenues and we believe that trend is destined to continue. We are in the midst of an exponential digital revolution and our own company has continued to change significantly and profitably. Importantly, we are working to promote our quality journalism in the age of generative AI and are gratified that the most enlightened leaders in the industry appreciate the commercial and social value of that content. Separately to that end, we have this week extended our existing partnership with Google. As mentioned…

Thank you, Robert, and good afternoon to everyone. As Robert highlighted, we remain focused on the execution of our strategy to transform News Corp with an increased mix of recurring and digital revenues as we continue to expand our information services businesses. This has been balanced with reinvestment in key growth initiatives and cost efficiencies as we navigate ongoing inflationary pressures in our markets. Our third quarter total revenues were over $2.4 billion, down 1% compared to the prior year, while adjusted revenues were flat compared to the prior year. Total segment EBITDA was $322 million for the quarter, up 1% compared to the prior year on a reported and adjusted basis and ranked as the second most profitable Q3 since the company's separation in 2013. For the quarter, we reported earnings per share of $0.05 compared to $0.09 in the prior year. Adjusted earnings per share were $0.11 in the quarter compared to $0.09 in the prior year. Moving on to the results of the individual segments, starting with Digital Real Estate Services. Segment revenues were $388 million, up 7% versus the prior year and up 9% on an adjusted basis. Segment EBITDA was $104 million, up 2% as higher profit contribution from the REA Group was partly offset by lower revenues and approximately $11 million of higher costs at Move. Adjusted segment EBITDA grew 7%. REA had another very strong quarter with revenues rising 15% year-on-year on a reported basis to $256 million and up 20% in constant currency. Growth was again driven by a combination of residential yield increases and improved growth in national listings, favorable geographic mix and customer contract upgrades. New buyer listings rose approximately 6% with Sydney up 20% and Melbourne up 18% despite an early Easter which negatively impacted March volumes. Please refer…

Thank you. We will now start the question-and-answer session. [Operator Instructions] Our first question comes from Entcho Raykovski from Evans & Partners. Please un-mute yourself to ask the question.

Hi, Robert. Hi, Susan. So my question is around the Move investment, which you've made during the quarter and you flagged is ongoing. It sounds like it's both marketing and product development. Are you able to confirm that? And how much is going into marketing? How much is going to product development? And on the product development side, are you specifically targeting the sell-side agents with that spend given the NIR settlements? If you can provide some more detail around the sort of products you're investing in? And just more broadly, how do you think that settlement is going to impact the business model going forward? Thank you.

Entcho, look, obviously, I don't intend to comment on specific legal cases. And the US real estate industry is clearly in transition. But there's no doubt that realtors have a crucial role in the purchasing process, and we are proud to serve them. As for realtor.com, our experience in Australia and our complementary media platforms and US position us perfectly to take advantage of that tradition, where transition. We are very focused in the interim of on making sure that the back end is solid, that the user interface is great and that our customers get value for money. We are very focused on buy-sell, hence our partnership deal with Zillow on rentals, which will be beneficial to both companies. And the imperative, really, is to focus on the world's largest property market, which is still relatively early in its digital evolution. And we have the media assets and now, from our global experience, to make the most of that moment.

And Entcho, maybe just to add on that, too, I mean the spend itself is probably broadly focused roughly evenly across both categories. But I think the thing to remember is in relation to the back half of last year, we pulled back significantly on the marketing spend, particularly in Q3 and a little bit in Q4. So the prior year compares will look more challenging in relation to marketing spend. But to think about it more broadly, it's focused on both areas, product and marketing.

Thank you, Entcho. We will take our next question.

Our next question comes from David Karnovsky from JPMorgan. Please unmute yourself to ask your question.

Thank you. Maybe on Book Publishing. I wanted to see if you could speak a little more broadly to what you're seeing in terms of demand trends right now. You mentioned some softness at big box retailers. And then with Spotify, what potential tailwind do you see for streaming and widening kind of the overall market for audio books? And can you say if you've seen any incremental interest from other DSPs to carry HarperCollins content?

Well, as for HarperCollins, we are all bookish to a certain degree and purchases ebb and flow like the pilot books on the bedside table. Early last quarter, sales were strong, and then there was clearly a slight pause in purchasing. But what I can say is that we have seen a return to strong year-on-year performance in April and have a compelling roster of new releases. And even in Q3, we saw an improvement in margin from 11.8% last year to 12.3% this year. We're certainly benefiting from the international expansion of audio books as you mentioned and the efforts of Spotify who have transformed audio book streaming revenue, which rose 14% in the third quarter. So, we're proud to partner with Daniel Ek and his talented team as they roll out streaming globally.

And David maybe just to complement that a little bit. It's not like a perfect comparison. The Book Scan data when we have a look at it for Q3 showed consumption down 3%. So, that gives you an indication that the market was a little bit softer for Q3. But going into Q4 we did have a particularly weak Q4 last year so we would expect to see pretty strong compares as we finish out the year.

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

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

Thanks for taking the question. Hello Robert, hello Susan. Question on the Google transaction. Can you flesh -- or this renewal can you flesh this out a little bit? And remember at one point last year you talked about a nine-figure deal with the digital companies, I don't recall if that was just Google or others. And does this include generative AI in addition to using your using your journalism for other sources?

Look I can't comment on the financial details of the deal other than to say that this is a renewal of the existing deal. It has nothing to do with a payment for AI, Gen AI use of our content, servicing of that content, training of that content, or grounding of the content. So, any negotiations for that particular use of our content will come later.

And Alan just from a financial perspective well we've never given a doubt specifically you can assume that it's broadly consistent with the financials of the previous deal.

Okay. Thank you.

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

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

Our next question comes from Craig Huber from Huber Research.

Yes, hi. Can you hear me okay?

Yes Craig.

Yes hi. Just I think everybody is really curious just about the progress that you're trying to make here to transform the company to simplify the company and stuff. And obviously we talked about this three months ago and six months when you talked about it privately -- I mean publicly I should say. And obviously you've done a lot of work on this before you made the announcement six months ago. I'm just kind of curious can you give investors at all any sort of timeline when you guys might wrap this up and stuff? I mean obviously things are pretty quiet out there for most of the investment banks and the legal folks after that work on this sort of stuff. So, I know it's very complicated what you guys are doing here, but what -- how much longer do you think we should have to wait with the next quarter or so? Or do you really have no idea?

Craig I'm sure that you and all on the call are sage enough to pass the phrases used in my earlier explanation and define the potential meaning. You can see that we're well advanced now thinking and planning and that planning has involved necessary regulatory steps and those were not simple steps to ensure that we have maximum flexibility genuine optionality. We want to continue to generate momentum and create maximum value for our shareholders. And we're certainly not complacent. Even though the share price has risen as of yesterday just over 46% in the past year we do recognize that there is a significant sum of the parts discount so stay tuned and not indefinitely.

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

Our next question comes from Darren Leung from Macquarie. Please unmute your line.

Hi guys. Thanks for the opportunity. Just a quick one for me. Looking at the BINGE subscribers in Foxtel, they're down sequentially quarter-on-quarter. So, the second time it has happened. But I'm just keen to understand a little bit about the drivers here and your response and thought process here please? Thank you.

Darren I think when we think about it from the last quarter I think we talked about this there was the writers' strike towards the back end of last year and that obviously had an impact on the content that was flowing through there. So, that did have an impact on the subscribers and we're seeing a carry forward of that. I mean that's really what the impact is.

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

Our next question comes from Lucy Huang from UBS.

Thanks, Rob and Susan. My question is in relation to cost out. I guess right now the macro outlook still seems relatively uncertain particularly for advertising and similar way with like the US housing market. So just wondering if there's any script for some further cost reductions through the course of the next year if these conditions start to improve?

I think Lucy you might remember we did --we sort of announced I think probably a year ago the 5% head count reduction. And I think we quoted a number of 160 million for the cost out. I mean it's great that we're actually -- we hit those numbers and exceeded those numbers actually. But the really good thing is that the businesses are actually always focused on costs. So whilst that was a particular exercise that we did across the whole group. Across all our businesses there are different transformation initiatives that they continue to work on as they look for efficiencies. So we feel pretty confident that we've got a good cadence in relation to that that can help offset any shortfalls in revenue. And that's why you've seen such good margin expansion in the year.

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

Our next question comes from Brian Han from Morningstar. Please unmute your line to ask your question.

Susan just on that cost out question. So it looks like some sort of cost reduction initiatives will be ongoing in the current fourth quarter. But how much of that do you think will be reinvested in realtor.com?

We sort of we're trying to keep the balanced reinvestment within REALTOR itself. So I think I said in my prepared remarks we've got some benefit from the upside in the new rental agreements that we've done with Zillow and we've got some other cost savings that we're doing with realtor. So whilst there is an increase in cost we are trying to manage it there. I think when we sort of think more broadly about costs across the business and sort of to the earlier point that we talked to with Lucy -- we just constantly focus on looking for efficiency. So the UK, we've announced a pivot in the TalkTV strategy to streaming and that should unlock some savings which we'll really see come through in fiscal 2025. The UK team have also announced a joint venture with the Daily Mail Group in relation to joint printing that should unlock further savings. We know our Australian team are constantly iterating when it comes to savings. So we sort of we try and have to think about it broadly across the whole company but specifically in the divisions that we look for those cost savings.

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Our next question comes from Jamie Laskovski from Goldman Sachs.

Hi, guys. Thanks for the question. I was just wondering if you could elaborate on the underlying company structure changes that have happened so far that were called out and what we should expect over the medium-term growth? Thank you.

Jamie they were regulatory changes related to the original composition of the company in Australia. And really other than what I said earlier I'm not at the liberty to say -- say anything more at this moment.

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

At this time we have no further questions. I'll now hand back to you for closing remarks.

Thank you, Laila. Thank you all for participating. Have a wonderful day and we will talk to you soon. Take care.