Good day, and welcome to the News Corp’s 3Q Fiscal 2020 Conference Call. Today’s conference is being recorded. [Operator instructions] At this time, I would like to turn the conference over to Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, Clowey Hello, everyone, and welcome to News Corp’s fiscal third quarter 2020 earnings call. We issued our earnings press release about half 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. We are operating in a different difficult time, so this will be a rather different distant experience. Before the business of the day, I sincerely hope that all on this call, each of our investors, our business partners and their families are safe during this exacting era. Every business and family is facing challenges, and our thoughts, in particular, are for those who are suffering under the curse of COVID-19 and have had to deal with complications from this dreaded disease. For our company, the safety of our employees has obviously been paramount. And many of our journalists have displayed much courage in recent months, including reporting from Wuhan, during the intense first phase of what has become a pandemic. I would also like to honor, Anthony Causi, who passed at a relatively young age, by which time he had already become a legendary sports photographer for the New York Post. As noted in our 8-K filing with the SEC last month, we expected a broad impact on our business from the pandemic’s inevitable economic consequences. We were affected somewhat in Q3, and those effects were likely to be significantly more pronounced in the fourth quarter. As we expect this impact to continue in the near-term, significant cost reductions have been implemented across the company and additional steps will be taken in coming months. These cuts are designed to deal with the short-term exigencies and to reposition the company for long-term growth. There will obviously be an impact on executive compensation. For many senior executives, bonuses are the largest component of their cash compensation, and this will be reduced by at least 20%. The cuts will be led by our Executive Chairman, Rupert Murdoch, who is voluntarily foregoing his entire cash bonus for the current fiscal year. And…

Thank you, Robert. Turning to the financials. Fiscal 2020 third quarter total revenues were approximately $2.3 billion, down 8% versus the prior year and total segment EBITDA was $242 million, down 2% versus the prior year. Currency headwinds negatively impacted revenues and total segment EBITDA by 3% and 6%, respectively. On an adjusted basis, which excludes the impact of acquisitions, divestitures and currency fluctuations and the other items disclosed in our release, revenues fell 4% and total segment EBITDA increased 1%. For the quarter, we reported losses per share of $1.24, as compared to earnings per share of $0.02 in the prior year. The loss includes $1.1 billion of non-cash impairment charges, primarily related to a write-down of goodwill intangible assets of Foxtel and the reclassification of News America Marketing to assets held for sale. Adjusted earnings per share were $0.03 in the quarter compared to $0.04 in the prior year. Before going into the quarterly detail, I will add to Robert’s comments on the COVID-19 pandemic, which is expected to have a significant impact on near-term operating results. Immediate cost actions are under way. Variable costs have obviously been reduced with a heightened focus on the reduction of discretionary spend and non-essential CapEx, together with a thorough review of all headcount requirements. We are accelerating plans to reduce costs across the business in the medium-term, particularly at our News and Information Services segment. These initiatives include, but are not limited to, global shared services to centralize our back-office functions, a thorough review of our property and office footprint and reviewing our printing operations around the globe, whereby we have already announced the printing suspension of 60 community newspapers in Australia. Finally, in relation to companywide liquidity, it is important to note the only debt exposures we have are at…

Thank you. [Operator Instructions] We’ll take our first question from Alexia Quadrani from JP Morgan.

Thank you very much. Can you elaborate on the strength in the digital advertising you highlighted in the quarter at the Wall Street Journal? It sounded like in April, it softened a little bit, but still seems like it’s coming in probably better than what we’re seeing in the industry. I’m wondering if it was specific to certain verticals that continue to be strength in your product mix. And then just a follow-up on the makeup of the strong growth in digital subscribers also at The Journal. Is it international, domestic? Anything different, maybe younger? Or is it pretty much just more of everything that you’ve been seeing for a while?

Well, thanks, Alexia. Look, in terms of the subscribers are, obviously, we have had strong growth in U.S. subscriptions. And I think the thing to remember about Wall Street Journal subscriptions is that, once you have a subscriber, you also have an opportunity to up-sell. And so we’re particularly seeing growth, for example, in subscriptions coming from MarketWatch to The Journal and from MarketWatch to Barron’s and as well as that from The Journal to Barron’s. And then for the more specialist, Wall Street Journal subscribers, there’s an opportunity to sell them – to up-sell them to our premium business products, which obviously have a higher yield. In terms of advertising, clearly, traffic has been particularly strong. There had been, as you may well be aware, some concerns early in the COVID crisis about blocking of ads related to COVID crisis coverage. Gradually, that problem has diminished. And so we are noticing that the amount of advertising we’re getting is matching, not quite, but to some extent, the significant increases in traffic we’ve had across the Wall Street Journal and MarketWatch. We noticed that tech advertising has increased. Custom advertising is also on the rise, and to a certain extent, programmatic. But I think for our business, quite frankly, it’s an extraordinary opportunity, because big clients are coming straight to the Wall Street Journal and to our other publishing houses around the world. And they want to deal directly with us rather than necessarily through an advertising agency. And while this is at the moment, a short-term phenomenon, there are indications that this may very well become a long-term trend.

Look, Alexia, the only other thing that I would add to that is the other pleasing thing that we’ve seen is the average age is broadening out. And so we did have an average age of around 60, and it’s now around 47 as a consequence of those subscribers coming in to that space in 2020.

And if I could further complement Susan by saying that what we’ve noticed, for example, among Wall Street Journal leaders on Apple News+ is that, historically, there’ve been, shall we say, a disproportionate number of men reading the Wall Street Journal, the breakdown is around 75% male, 25% female. Just at this moment, the readership of the Wall Street Journal on the Apple News+ side is majority women, minority men.

Thank you, Alexia. Clowey, we’ll take our next question, please.

Absolutely. The next question comes from Entcho Raykovski from Credit Suisse. Please go ahead.

Hi, Robert. Hi, Susan. A couple for me. Just the first one, you’ve obviously mentioned the sports rights deals and you’ve given us a good framework on what happens on a quarterly basis. But just interested whether you see this is an opportunity to renegotiate some of those sports rights deals longer-term? Do you think they can genuinely be any longer-term savings? And yes, I mean, do you think that’s warranted, given some of the fairly high costs? So interested giving your thoughts on that issue? And secondly, are you able to quantify the potential impact of the relief measures that move in Q4? And do you expect that, that’ll continue to remain in place beyond that? Thank you.

Entcho, first of all, on sports rights, obviously, it’s inappropriate to go into detail at this stage. But there obviously needs to be a fundamental reset. The idea that things will suddenly turn to normal as season is absurd. It’s not just the quantity of games, it’s the quality of the experience, and that has obviously been diminished. And that reset has to apply longer-term to rights in Australia. In essence, there is a new reset reality.

And Entcho, just in relation to your question on Move, we haven’t given that for Q4. But what I can say is, we implemented the measures on the 19th of March in relation to Move and the impact of that in Q3 was $6 million. So you can use that as a proxy for your run rate, and we haven’t made any announcement as to any further extension in Malaysia.

Thank you, Entcho. Clowey, we’ll take our next question, please.

Absolutely. The next question comes from Craig Huber from Huber Research Partners.

Thank you. Hi. On the newspaper side in Australia, on the cost-cutting side, there’s a lot – decent that’s been written out there about your newspapers, some of them down there, that you are shutting down the hard copy version and going digital-only and stuff. Can you just talk a little bit further about that? And just like I’m curious like what percentage of your print subs down there, would you have shutdown that are moved to online-only as the business model, for example, in that market? So I mean, just like only 10%, 15%, 20% of the subs down there. I mean, how significant is it? That’s my first question. And then my second question is, I guess, on newspaper side as well, just generally, do you think you have a lot more cost you can take out of the U.S. for Wall Street Journal, Dow Jones, U.K., Australia, I think, you have a lot more cost you can take out in reaction to this virus situation? Thank you.

Well, I’ll take the second question first, Craig. Clearly, we’re constantly reviewing costs. And that is cost in headquarters where there have been significant reductions in recent days. And right through where we’re looking for efficiencies in tax spend. We’re looking for the efficiencies that come from the closer coordination that really has been under way in recent years, it’s not a new phenomenon. But it gives us an opportunity to look across businesses very, very closely, measured at different cost levels and respond appropriately. What we’re not going to do is cut cost in a way that undermines the editorial integrity of the leading news organization in the world.

And Craig, just in relation to the masthead start in Australia. So the masthead that we’ve seized printing at the moment were community masthead, which are not subscription-related to their advertising-related products. And as Robert mentioned, we are undertaking a detailed strategic view of the entire regional and community portfolio down in Australia. So the regional mastheads, we’ll have subs attached to them, but not the communities. And then just to supplement on the cost side. I mean, I agree and echo with Robert’s point. But we do believe that across all our businesses on a global scale, particularly when we think about our back-office functions, that we do have some significant opportunities that we can unlock. We have been actively working on those measures over the course of the last 12 months, particularly looking at PEC. But we do believe that there’s a lot more opportunities we can do as we broaden the scope of that as we move forward.

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

Absolutely. [Operator Instructions] Our next question comes from Brian Han from Morningstar.

Hi, Robert. Does the current environment help the simplification program that you have going for News Corp? And – or does it make it actually more complicated, especially for asset sales? And also, Susan, the impairment charge taken at Foxtel, was that more driven by changes in assumptions related to the traditional Foxtel business, or have your views for Kayo and Foxtel now also changed?

Brian, clearly, the simplification was a preexisting program. But to a certain extent, you may well be correct in that various things have been expedited during this period of crisis. What I would like to say specifically around simplification is that, clearly, we’re pleased that the NAM transaction has progressed. Actually, we had full fit the Charlesbank who have preexisting specialist expertise in that area, we’ll be able to make a significant success of the business. And you can tell from the tenor of our content comments about Australia that there is obviously a strategic review of our print holdings well under way. So our simplification process is far from finished. And part of that is that we’re very keen to highlight the value inherent in, for example, Dow Jones, which we reported vastly superior numbers to those of the New York Times, but whose figures are not fully obvious in the current News and Information Services segment. Now if you think of the journey in recent years, the sale of Amplify, the early sale of the local media group at Dow Jones, the NAM sale. And on the other side of the ledger, the acquisition of Realtor, the purchase of Harlequin, we are a rather different, more specialized company than we were a few years ago.

And then Brian, just in relation to your question on Foxtel and the impairment. We do look at this from a DCF perspective and also from a market multiple perspective. And clearly, there has been an impact that’s adversely affected our trends resulting in lower expected forecast subscribers. And the impact of COVID-19 is expected to have clearly an adverse impact on advertising OTT to customers and commercial subscription revenues in the near-term. So when we combine all those, we thought it was appropriate to take an impairment on Foxtel.

Okay. Clowey, are there anymore questions?

There are no further questions at this time. And I’d like to turn the conference back over to you. Thank you.

Great. Well, thank you, Clowey, and thank you for all participating. Have a great day, and most importantly, stay safe. We’ll talk to you soon.

This concludes today’s call. Thank you for your participation. You may now disconnect.