Welcome to News Corp’s First Quarter 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 Mike 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 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'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 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. While the macro environment is potently more volatile, we believe the resilient foundations of the reincarnated News Corp. give us a platform for sustained growth and increased profitability. That clearly is evident in our revenue performance this quarter. While revenues were down 1% to $2.5 billion, that decline was obviously a consequence of foreign currency fluctuations. On an adjusted basis, our revenues grew a healthy 3%, building on the robust results from last year. Profitability for the quarter was $350 million down 15%. Although that reflects the Forex headwinds and a reset by Amazon of its book inventory levels and warehouse footprint. We view neither factors reflective of core business conditions or of our long term potential. Our results follow two successive years of record profits at News Corp. It is important to keep that unprecedented success in mind, especially as we encounter what we expect to be ephemeral challenges. Our company has changed the digital terms of trade and we expect the current situation to be transitory. We see positive prospects across all our segments and our mix of revenues and geographies is obviously advantageous in a complicated, perplexing world. Turning first to Dow Jones. Q1 was the best first quarter on record since acquisition for revenue, profitably and margin, affirming the wisdom of our acquisition of OPIS and CMA, which have bolstered the Dow Jones Professional Information business. Revenues grew a resounding 16% and advertising was up 4%, which compares rather favorably to a number of competitors. In particular, digital advertising at Dow Jones rose 11%, a noteworthy achievement in this complex environment. In fact, Q1 represents the ninth consecutive quarter of year-over-year digital ad growth at Dow Jones. In the past year, Dow Jones added 473,000 digital-only subscriptions, and as of the end of…

Thank you, Robert. We have entered fiscal 2023 with a different macro environment, including volatility in foreign currency impacting our headline results from our Australian and UK businesses. Throughout fiscal 2022, we successfully navigated the company to be in a position of strength, guided by our ongoing cost transformation work, which we have balanced with investment and innovation to drive digital expansion. The first quarter of fiscal 2023 presented some challenges, particularly at HarperCollins, but most of the businesses performed well in constant currency and suffice to say that News Corp remains well positioned given the strength of our asset mix, healthy balance sheet, and the continued diversification of our revenue base. First quarter total revenues were approximately $2.5 billion down 1%, which included a $153 million or 6% negative impact from foreign currency headwinds. Excluding the impact of foreign currency fluctuations, acquisitions and divestitures, first quarter adjusted revenues grew 3% compared to the prior year. Total segment EBITDA was $350 million down 15% compared to the prior year, which saw a record profit with 53% growth. That being said, total segment EBITDA this quarter was still up 31% over fiscal 2021, underscoring the material changes in recent years. Also noteworthy is that the majority of the profit decline this quarter was driven by lower sales from Amazon due to the reset of its inventory levels and the right sizing of its warehouse footprint, as well as foreign currency fluctuations, neither of which we believe are reflective of underlying performance. Adjusted EBITDA declined 13% versus the prior year period. For the quarter, we reported earnings per share of $0.07 compared to $0.33 in the prior year. Adjusted earnings per share were $0.12 in the quarter compared to $0.23 in the prior year. Moving on to the results for the individual…

[Operator Instructions] The first question comes from Kane Hannan from Goldman Sachs.

Maybe just on the book publishing side of things. Helpful comments there at the end around Amazon and the broader inflationary pressures. Just give us a sense of, I suppose, the margin decline in the first quarter, some 50 basis points and what you'd attribute to Amazon's impact and what you'd attribute to, I suppose, the inflationary side of things that is probably going to continue for the rest of the year? And then just as a second sort of quick follow-on. Just talk about how you're thinking about M&A in the book publishing space and whether you think Harper would have any of the regulatory pushback that Penguin Random House had with their proposed acquisition?

Ken, look, clearly, the supply chain is a factor. But as for Amazon, it's fair to say, it's ephemeral, not eternal, but meaningful in the first quarter. The combination of both inventory adjustment and warehouse closures clearly created logistic issues, which we trust Amazon will resolve relatively soon. But the demand for books is undiminished, and we certainly have some alluring titles looming including Joanna Gaines and Colleen Hoover. So -- and in the meantime, Brian Murray and his team are resolutely focused on cost control and necessarily improving margins. As for Simon & Schuster, look, clearly, there is much more work ahead for the lawyers at both companies. The legal documents must already run to many volumes themselves. But it is appropriate that the judge rule that the proposed merger would create a book behemoth, literally a leviathan, a titan of terms that would wield disproportionate weight in the industry. For ourselves, we're absolutely resolutely focused on building the HarperCollins business and continuing the integration of Houghton Mifflin Harcourt.

And Ken, maybe just to frame the Amazon impact. The majority of the EBITDA decrease was due to Amazon. We had hopes that it will be limited to Q1, but we are expecting to see some impacts coming into the second quarter. But all things being while we expect the second half to pick back up. And the inflationary impacts have been coming down actually. We are seeing it slightly offset by volume, but we can hopefully again, expect to see those subside a little bit in the second half.

Next question comes from David Karnovsky from JPMorgan.

Robert, on Wall Street Journal digital subscribers. Can you talk to the trends there for the prior 2 quarters? I think you mentioned a tough market. I wanted to see how you view factors like new cycle or economy? And then Dow Jones digital ads grew strongly in the quarter. Is that sort of disassociated to the macro or would you expect some impact to the demand eventually?

Second part of the question was a little unclear but on digital subs, they were up 13% for both Dow Jones and the Wall Street Journal. Our total subs were up 8% at Dow Jones, 4.9 million and the WSJ, that's 3.8 million. What we're seeing with Dow Jones generally is that we're able to take advantage of a massive audience, which is 116 million monthly uniques and then gradually push people up for the hierarchy of premium products at a premium price. And clearly, as we've taken on more professional information content, the ability to take advantage of that opportunity is realized. And secondly, we believe in vertical bundling. So for example, MarketWatch and WSJ, WSJ and IBD, IBD and Barron's not what you might call horizontal bundling which other companies in indulge in. And there's no doubt that you'll see, over the next 6 months, the virtue of those bundles that Dow Jones has just begun marketing. So we'll be able to update you in succeeding quarters, but we have no doubt that the strategy is a wise one.

And David, look, I think on the advertising. We didn't quite catch what the question was, but we actually been really pleased with the performance of advertising in Dow Jones, they have been growing advertising quarter-on-quarter for quite a few quarters now, which has been really pleasing and actually have surpassed our expectations as to how well they've been doing. I did say in my comments that we were expecting it to be a little bit more challenged come Q2. Q2 is one of the biggest advertising quarters across our markets, but it's still pretty early days, and we'll see how that pans out. So we do expect it to be a little bit more challenged in the second quarter against tougher comps.

Next question is from Darren Leung from Macquarie.

Just a quick one about the BINGE subscriber growth. So it's up quarter-on-quarter. Any feel for how much was driven by House of the Dragon versus potential [Indiscernible] from cost conscious consumers, and maybe another way to frame that is did the trend pace increase?

We are very pleased with the subscription performance at BINGE. And frankly, at Kayo both have around 1.3 million subscribers now. And what we're seeing is very uplifting in the sense that even though the streaming subscription has increased notably, in fact, up 35%. while broadcast ARPU is actually higher. So we're not seeing the feared cannibalization. And what it has done with Foxtel, it's given us optionality, which is a tribute to the toil of Patrick, [Siobhan] (ph) and the team in Australia, we've secured long-term rights, the most watched sports and entertainment in Australia, and they have been working relentlessly to improve the customer experience. And the focus not only on what the customer watches, but how they watch and that's why the churn performance has been so good.

And next question is from Brian Han from Morningstar.

Just a quick one. In digital real estate, can you please confirm that News Corp is still investing in those adjacencies and seller lead businesses in the U.S. Or is cost cutting the main thing now for the division?

Brian, very much so because we see a bright long-term future for Realtor. And that's why we are indeed investing. We're rightly cost-conscious. But whether it's rentals, whether it's the sell side as well as the buyer side, we're continuing to invest in products because there is absolutely no doubt about the long-term opportunity that digital real estate presents in the United States.

And Brian, just to add to that, our actual core operating expenses at Realtor are flat in the core business year-on-year and actually the increase that we've seen in costs year-on-year are due to those 3 adjacencies in the investment [Indiscernible].

Next question is from [Jonny Hein from Emerson Partners] (ph).

I just wanted to ask about BINGE again and then specifically on the ad [Indiscernible]. Can you talk about expectations on ARPU and then also the demand from advertisers as well?

Well, generally, we're very pleased with the BINGE performance. Bringing in advertising gives us another layer of revenue potential and I have no doubt that as the team does its modeling of that potential that we'll be able to update you in coming quarters as it's unfurled to the market.

And Johnny, just to add to that. So I think there's been a couple of questions just in relation to the pricing. We've been really pleased actually with how customers have been retained for BINGE and the price-rise that's been put through. So we've been very, very pleased with that. And as Robert said, we're expecting strong performance across BINGE with the content that we've got and the work that, that business has been doing down there.

There are no further questions from the line.

Great. Well, thank you, Tatiana. Thank you all for participating. Have a great day, and we will talk to you soon. Take care.