Good day and welcome to the News Corp 2Q FY 2016 Earnings Conference Call. Today’s conference is being recorded. The media is invited to today’s call on a listen-only basis. At this time I would like to turn the conference over to Mr. Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead, sir.

Thank you very much, Noel. Hello everyone, and welcome to News Corp’s Fiscal Second Quarter 2016 Earnings Call. We issued our earnings press release about 30 minutes ago. 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’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-Q for the three months ended December 31, 2015 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 as 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. News Corp is evolving rapidly into a more digital and increasingly global company with a diverse revenue mix that we resolutely believe will drive long-term growth in revenue, profits and shareholder returns. The quarter presented challenges with a still uncertain macroeconomic environment and foreign exchange volatility, but we believe in the enduring value of our prestigious brands and the sound logic of our digital strategy. Revenues fell 4% to $2.2 billion and reported total segment EBITDA declined 20% to $280 million. EBITDA for the quarter includes legal and transaction costs which Bedi will momentarily explain in detail. However, excluding the effects of forex fluctuations, revenues would actually have grown 2% versus the prior year as the successful integration of realtor.com and growth of REA contributed materially to our performance. It is thus appropriate in examining the individual segments that we begin with Digital Real Estate Services in which, by most measures, we have become the world’s largest player over the past 12 months. The position will be further enhanced by the imminent closing of REA’s acquisition of iProperty, the preeminent digital property company in Southeast Asia. We are particularly pleased by the early returns of Move, which we acquired just over a year ago and whose realtor.com network has become the fastest-growing player in the still emerging U.S. digital real estate market. For the quarter average monthly unique users increased by 37% year-over-year driven by a 57% surge in mobile users. For the month of January we recorded 50 million monthly uniques compared to 30 million in the month before we acquired realtor in late 2014. We are significantly ahead of schedule in revenue growth and in the trajectory of EBITDA for Move. Even with the investment required to enhance the site, we firmly expect positive EBITDA…

Thanks, Robert. First I’d like to share some high level financial highlights for the second quarter, and then we’ll go into each segment in further detail. We reported fiscal 2016 second quarter total revenues of $2.2 billion, down 4% from the prior-year period. As Robert noted, we were again impacted by currency headwinds, primarily the weaker Australian dollar, which negatively impacted Q2 total revenue by $141 million or 6%. Excluding the impact of foreign currency, acquisition and divestitures adjusted revenue declined only 1% compared to the prior year. We reported total segment EBITDA of $280 million compared to the prior-year period of $352 million, excluding the impact of Digital Education segment in both periods. Currency fluctuations impacted total reported segment EBITDA by $25 million or 7%. Reported segment EBITDA this quarter includes $7 million of legal costs related to the U.K. newspaper matters net of indemnification as well as $5 million of one-time transaction costs related to the Unruly acquisition which closed on September 30, and is reflected in the News and Information Services segment. For the quarter adjusted EPS from continuing operations were $0.20 versus $0.30 in the prior year. Reported EPS from continuing operations were $0.15 compared to $0.27 in the prior year. Now let’s turn to the individual operating segments. In News and Information Services, revenues for the quarter declined $123 million, down 8% versus the prior-year period. More than 70% of that declines was related to the impact of foreign currency. Adjusted segment revenues declined 4%. Within segment revenues, advertising declined around 12% or about 6% in local currency due to weakness in print, partially offset by strong digital ad growth across each business unit. Circulation and Subscription revenues declined 5%, but was actually up 1% in local currency due to higher consumer circulation revenues in…

Thank you. [Operator Instructions] And we’ll take our first question from John Janedis with Jeffries.

Thank you. You talked about the macro headwinds and you’ve also been focused on acquisitions over the past couple of years, and so with the mixed picture do you think this creates more opportunities to buy assets? And in the past you talked about a consistent return to capital program. Is this an opportunity to be more aggressive on the buyback front? Thank you.

Well, John, I understand that you wouldn’t expect me to reveal any details about any particular acquisitions we may or may not have in mind. You have your own prescience on that. The truth is that we’re very happy with the mix of the portfolio that we have now. You can see how complimentary the assets are that we’ve acquired. These haven’t been random investments by any means and so any investment we would ever contemplate has to fit that picture where we genuinely believe it becomes more than the sum of the parts. And the way that we’ve been able to use Realtor for example to increase the usage and the downloading of the at the Checkout 51, the way we’ve been able to use MarketWatch to boost traffic to Realtor, and vice versa, has been an important part of the strategy. So that strategic imperative which we articulated at the time of the spend remains constant at the moment. As for the use of capital, we want to be consistent in our messaging and consistent in our returns of capital. We have, as you know, instituted a semi-annual dividend and we want to be consistent about that, and we’ve had a lot of buyback program. We want to be consistent about that as well. And so the principle of a certain amount of return is one that we’ve established, and we will abide by that principle. But on the other day, should there be a strategic opportunity for investment, we remain attuned to that possibility.

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

We’ll take our next question from Entcho Raykovski with Deutsche Bank.

Hi, Robert. Hi, Bedi. My question is around the Australian Publishing operations and obviously we’ve seen pretty severe declines in the market overall. How are you thinking about those operations going forward? Are they contingent on consolidation taking place? And I guess as part of that question, would any consolidation in the market, in your view, be contingent on media reform which has been speculated? Thank you.

Entcho, there has been speculation about media reform. I’m not going to speculate about the possible outcome other than to say that one, it should be holistic; and two, that it should reflect the reality of the contemporary digital age. For Australian mastheads clearly, as both Bedi and I have articulated, it was a difficult quarter in advertising, and to that extent we’ve clearly embarked on a cost cutting program at the mastheads. Now of course, a consequence is that cost cutting has a cost, a short term cost and a long term benefit, but we are not being defeatist about the power of those platforms. They are very powerful platforms. And so we will continue to invest in the digital development, and we continue to believe that our print has a future as a powerful platform. For example, you look at all the angst over add blockers. You know what, add blockers don’t work on newspapers, and you have 100% viewability. So the reality of power of print as a platform, as part of our portfolio, remains constant. And I think we are in a period of advertising experimentation, and some advertisers would be, I think, slightly surprised to find the sites that they find themselves associated with. They are not premium sites; they range from the ordinary to the tawdry. Our sights are premium sights, and that value is an enduring value.

Thanks, Entcho. Noel, we’ll take our next question.

We’ll take our next question from Alexia Quadrani with JPMorgan.

Thank you. My one question is sort of related to the first one, which is on cash reallocation. I guess with the heavy cash balance, would it be fair to assume that when assets headwinds subside or the business gets a bit more stable that the Board may be likely to revisit being more aggressive on either the size of the dividend or the pace of the buyback? Or is it more likely that you’ll keep a lot of dry powder because acquisitions will always remain a higher priority?

Alexia, I think Robert summarized very eloquently the answer to that question. I think we said in the past that when you look at cap returns you have to think of those in the context of our operating cash flows and the cash flows available to shareholders. And pretty much the balance of cash that we have is there to help us with investments, both internal and external. So I think we remain consistent with what we’ve said before.

And I dare say when opportunities arise or are appropriate, we will be opportunistic.

Thank you.

Thanks, Alexia. Noel, we’ll take our next question.

Our next question comes from Eric Katz with Wells Fargo.

Thank you. We saw the New York Times report a strong pickup in digital subs today. And you mentioned some positive stats earlier for certain newspapers. Can you highlight in some more detail the gains you’re making at some of your key newspapers? What’s working and what you learned from the Sun?

Well certainly, it varies by geography and demography. But at the Wall Street Journal, we’re seeing strong growth digitally. Not alone in numbers but also in circulation revenues. So the ARPU is strong. At the Sun, as both Bedi and I explained, we will be relaunching the site in March. And that, combined with the fact that it’s obviously a changing of that model, we’re confident in the power of that platform. Not only in the service it can provide for readers but also in the functionality for advertisers. The Times of London is doing extremely well, behind a strict paywall. It is, I think by most measures, the most successful newspaper in the UK at the moment. It’s gaining in market share, it’s gaining in revenue. We have explained in the past that it has reached profitability, which is fair to say wasn’t the case when I was the editor a few years ago.

Thank you.

Noel, we’ll take our next question.

Our next question comes from Michael Morris with Guggenheim.

Thanks, guys. Good afternoon. My question’s really around the technology investment and something of a transformation I think you guys are making toward the more digital future you’ve referenced. It seems like you’ve invested in interesting technologies that have been complementary. But my question is are you getting to a point where you have a critical mass of technology expertise where you can really start identifying and developing your own solutions and maybe even selling those outside the company and what does it take to get there? Is it hiring more within the structures that you’ve built or do you think you have to acquire more technological expertise going forward?

I think we have, it’s fair to say a brilliant tech team. We’re very happy with the pace of development internally. We’re not arrogant about that, because it’s a challenging environment and this is a tech team that’s up for the challenge. In part, you have to ensure that when you acquire a wonderfully creative company like Storyful or Unruly that you’re able to integrate them in a meaningful way. They can’t become orphans. So that’s as much a cultural challenge as a technological challenge. So we’ve been very careful to introduce the leaders of those companies and tech engineers of those companies right across the News Corp network, and because you want them to be beacons of creativity and ingenuity institutionally, So they’re performing that role that’s difficult to define in a pure metric sense but is absolutely material to the future of the company.

Thanks Mike. Noel, we’ll take our next question.

We’ll take our next question from Craig Huber with Huber Research Partners.

Yes. Hi. Just wanted to further understand the cost savings plan going forward please in book publishing but also the newspaper area, it looked like in the last quarter if you adjust for currency or news and information cost were flat or maybe lightly down. Just talk a little bit further about your game plan to take out more cost there please. Thank you.

I think I referenced the cost savings that we have more on the newspaper side. I think on the book publishing side they are obviously taking costs out after the Harlequin acquisition; and I think for Harlequin we had said that there would be around $20 million of synergy savings. I think we are pretty much on track to get the majority of those in this fiscal year and obviously software flowed into the first half. With respect to the newspaper, in Australia we’ve indicated that we’re looking at like a 5% run rate sort of cost savings into the future. In terms of dollars that’s around, in the first half it was around $40 million to $50 million, I think on an annualized basis we expect it to be in the $60 million to $70 million range of savings. News U.K. is aggressively looking at its cost structure. We haven’t given specific numbers out on that. But again, as I said in Q2, while reported sort of costs are down 5%, the head count – it’s mainly through head count and most of that through Australia. We’ve also renegotiated newsprint and ink deals. That’s had a sort of significant impact. We’ve closed printing facilities. We’ve got rid of some of our loss-making activities. So I think generally all of those things are continuing and we’d expect to see the benefits flowing through into the future.

Thanks, Craig. Noel, we’ll take our next question.

We’ll take our next question from Doug Arthur with Huber Research.

Yeah, just a point of clarification on your targets that move on the bottom line. The positive EBITDA by year-end, is that with or without stock comp?

Sorry, with or without?

Yeah, I mean in other words will you be...

Oh, stock comp. Yeah, we will be EBITDA-positive on both, with and without stock comp.

Okay. Thanks.

But clearly without stock comp the EBITDA numbers are a lot bigger. And of course just to sort of remember our competitors when they report, they report all their numbers before stock compensation expense whereas News Corp has traditionally included stock compensation expense in the numbers we report. So that’s why I try and give both of those metrics. So you have a helpful comparison. So…

Thanks, Doug. Noel, we’ll take our next question.

We’ll take our next question from Tim Nollen with Macquarie.

Hi, thanks. My question is on e-books. I don’t know if I’ve ever heard a publisher before say that their print business was up and their digital was down. I appreciate that there were some comp issues in the quarter that affected the digital sales. But I just wonder if you could explain a little bit more what’s happening with E-books in general? It seems like a few years ago we would’ve thought it would’ve been a larger percentage of total book sales, now 16% as a percentage of total sales seems a bit small to me. I know there’s some differences between fiction versus nonfiction titles and print versus e-book, but anything you can say on pricing between the two, profitability between the two? And if you might even have to dial back some of these efforts in digital and go back to print? I know that sounds perhaps extreme but anything you could say on that, please?

Look it’s a fascinating question and clearly what it shows is that purchasers make a discerning decision based on price. They are valuing a print book versus an e-book. And so you’re quite right, it’s not just the mix. Although clearly a – for example, a teen fiction book is heavily digital and a coffee table book is a coffee table book. But the longer term I think it’s fair to presume that the digital ratio will increase and exactly what that ratio will be is a matter for the soothsayers. But you can see that as people are getting devices they aren’t necessarily downloading as many digital books as they did previously. There is more competition on devices for the digital experience. But our very, very astute team at HarperCollins is learning these lessons as we go. They are intelligent, they are creative, they understand also how people read digitally a little differently to say two years ago when early adopters had one pattern, and mature adopters had another. So we certainly see book publishing as an area of opportunity, both in print and in digital.

Thanks, Tim. Noel, we will take our next question.

[Operator Instructions] And we’ll take our next question from Sacha Krien with CLSA.

Hi, Robert. Hi, Bedi. I’ve just got a question in relation to Foxtel and Fox Sports because I think you had previously guided toward EBITDA growth for the full year for Foxtel. Are we still on track for that outcome? And what’s the assumptions that depend on in terms of subs growth? And then in relation to Fox Sports, Bedi, you mentioned the incremental costs renewal in the second half of 2016. To what extent can we see that being offset in FY 2017? You mentioned offsets in second half 2016. Are they any in FY 2017? Thanks.

So I think with respect to Foxtel you know we expect strong growth in Q3 and Q4. And I think we believe that we are in line for EBITDA growth as we said before for the full year. EBITDA improvement fuels the cyber revenue as I said going up, as well as there will be some additional cost savings in a business wide in programming, sales and marketing as it becomes ease with what the level of costs were in Q2. So I think we are on track with Foxtel.

There is a lot of competition in the market at the moment when you look at for example, Netflix and others. But what I think you need to understand is that Netflix in the U.S. is very different to Netflix in Australia. The Australian operation has quantitatively and qualitatively a far lesser offering, and you might puckishly call it not Netflix, but Notflix. And we believe that as people look closely at the offerings that the value that Foxtel can bring will become increasingly apparent.

Okay. And there’s a question on Fox Sports. Sasha, did you have a question on Fox Sports?

Yes. I was just wondering, Bedi, you mentioned that you would be able to offset the incremental costs in the NRL in the second half of 2016 given the cycle in the World Cup costs and also Soccer costs. Just wondering is there any offset in FY 2017 either at the cost line or via subscription cost increases.

I think clearly expect EPL will be affected. We will see continued revenue growth from subscriber build into fiscal 2017.

Thanks, Sacha. Noel, we’ll take our next question.

And we have no further questions in the queue. I’ll actually turn it back to Mike Florin for any additional or closing remarks.

Great. Well, thank you, Noel. Thank you all for participating and have a great rest of the day.