Welcome to News Corp's Fourth Quarter and Full Year 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 fourth 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 cautious 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 will pass it over to Robert Thomson for some opening comments.

Thank you, Mike. Before we begin the examination of our excellent fourth quarter results, I would like to express our sincere gratitude to all who contributed to the emancipation of Evan Gershkovich. His freedom was made possible by the concerted efforts of concerned, principled people who recognized that his incarceration was unjust and immoral. And so many thanks are due to our leaders at Dow Jones, Emma Tucker and Almar Latour and to all at News Corp who campaigned vigorously for Evan's release. We also acknowledge the sterling work of the U.S. government, which I oversaw the handover and the role of several other enlightened governments whose divine interventions were crucial. As for the fourth quarter, revenues grew 6% from the prior year to almost $2.6 billion, while profitability improved by a healthy 11% to $380 million, a fourth quarter record for News Corp. Reported EPS and net income were also markedly higher. Moreover, despite the negative impact of high interest rates in some of our businesses, fiscal 2024 was the second best year on record with profitability rising 8% to $1.54 billion. Our core pillars of growth book publishing, Digital Real Estate Services and Dow Jones inspired that increasing profitability and revenue growth, and we believe their strength augurs well for fiscal '25. Prior to delving into the details, I would like to highlight several consequential matters for our company. We took a significant step to prepare for an e-book, which we believe will be defined by the confluence of artificial intelligence and emotional intelligence. Our landmark agreement with OpenAI is not only expected to be lucrative but will enable us to work closely with a trusted preeminent partner to fashion a future for professional journalism and for provenance. That partnership is already fructifying. We have also begun to…

Thank you, Robert, and good afternoon to everyone. As Robert highlighted, our transformation of News Corp continues a pace. We have materially grown recurring and digital revenues, added incremental high-margin licensing revenues, and focused our reinvestment plans primarily around the core pillars of Book Publishing, Digital Real Estate Services and Dow Jones, where we expect the highest rate of returns and shareholder value creation. We continue to deliver cost efficiencies to mitigate inflationary pressures, but more importantly, to allow for investment in growth initiatives across our businesses. This disciplined approach has allowed us to deliver our second best year on record and our strongest ever fiscal fourth quarter profitability. For today's discussion, I will focus on the fourth quarter performance. Fourth quarter total revenues were almost $2.6 billion, up 6% year-over-year, and total segment EBITDA was $380 million, up 11% year-over-year. Margins improved by 70 basis points to 14.7% our core pillars accounted for 87% of News Corp's profits and grew at a robust 28%. Fourth quarter adjusted revenues rose 6% compared to the prior year, while adjusted total segment EBITDA rose 13% versus the prior year. For the quarter, we reported earnings per share of $0.09 compared to a $0.01 loss in the prior year. Adjusted earnings per share was $0.17 in the quarter compared to $0.14 in the prior year. Moving on to the results for the individual segments, starting with Digital Real Estate Services. Segment revenues were $448 million, up 21% versus the prior year on both a reported and adjusted basis. Segment EBITDA was $135 million, up 25% as higher profit contribution from the REA Group was partly offset by approximately $11 million of higher costs at Move, a similar increase to the third quarter. Adjusted segment EBITDA grew 28%. REA had another outstanding quarter with…

Thank you. We’ll now start the Q&A session. [Operator Instructions] Our first question comes from David Karnovsky from JPMorgan. Please unmute your line and ask your question.

Hi, thank you. Robert, on the Foxtel third-party interest, can you say anything about the nature of the transaction that's being contemplated? And are you engaged with 1 or multiple parties? It was a little unclear for your remarks. And then how does the potential interest here complicate the thinking or maybe even the time line behind kind of the broader process of the strategic review?

Well, David, you can see from my earlier statement that there are various processes in motion. We have had an overture a significant overdue, which we're naturally assessing -- but let me make absolutely clear that we have full faith in the potential of Foxtel and our talented team at Foxtel who've fashioned a world-class viewing experience and Credit Kayo, which really is the best sports streaming platform globally, hence the interest in emulating its success in the U.S. But on behalf of shareholders, we obviously have to evaluate any interest knowing that we are ourselves further Foxtel fans. I mean the streaming business is surging and broadcast ARPU in the most recent quarter was 6% higher than a year earlier. But secondly, strategically, we have been undertaking a broad review of our portfolio and its potential in the quest to increase shareholder value. Now that review continues a pace. But on that particular matter, you'll have to stay tuned, but not indefinitely, not perpetually not at infinitum.

Thank you, David. Laila, we’ll take our next question, please

Our next question comes from Kane Hannan from Goldman Sachs. Please unmute your line and ask your question.

Yeah, thanks. Just to deal with OpenAI. I mean your patents were talking about U.S. 250 over five years. Is there any more color or things you can talk about around that deal that would help us? I mean particularly, so how much of that value in the deal was around the back catalog, which may not need to be renewed in 5 years' time versus for the ongoing content production? Thank you.

Okay. And we really can't go into the precise details, but you will be able to see the impact in our news businesses. It's tangible, it's meaningful. The way to regard the OpenAI agreement is that there will be a guaranteed amount and the two companies will be working to create products that generate even more value for both companies. The OpenAI team under Sam Altman has a sophisticated sense of how to productize profitably and with principal. And neither of those qualities are given with all Gen AI players, some of whom are merely content carpet baggers.

Thank you, Kane. Laila, we’ll take our next question please.

Our next question comes from Entcho Raykovski from Evans & Partners. Please go ahead.

Hi, I've got a Foxtel transaction question as well. I mean assuming some sort of Foxtel transaction goes ahead, do you still expect to be able to recoup all of the Foxtel shareholder loans? And if you can remind us how much is still outstanding. I think that would be quite helpful in relation to those loans. And I mean, I appreciate there's only so much you can say, but is that a trade or financial buyer that's most interested? What do you -- I mean, what do you think is the most likely identity of the buyer that ends up coming through?

Well, look, no, as for Foxtel, we just want to be sure that the process is full and fair and to reassure our cherished colleagues that the external interest should be seen as a clear vote of confidence in what they have achieved and how they have positively transformed the company. I mean you recall the skepticism about Foxtel's fate five or four years ago. That skepticism has become optimism and the company's performance has obviously caught the eye at the discerning IRSA of others, who not only see a great company, but in these turbulent troubled times, an expanding market like Australia, which offers regulatory certainty and ongoing economic opportunity.

And Entcho, just in relation to the shareholder loans, they're just shy of $600 million outstanding at the moment. And clearly, any transaction would contemplate what we do with those loans.

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

Our next question comes from Brian Han from Morningstar.

Good morning. You guys have been investing in Move for some time now, yet the traffic numbers for realtor.com continued to be pretty stagnant. So will there be any changes in the kind of investments you'll be making in Move?

Brian, our unique users in Q4 were 3% higher sequentially at $74 million, even though the market itself is sluggish and the competition is more intense. But the most important thing to bear in mind with realtors that Damian and the team have been doing a vast amount of work in improving the tech, the experience. And so they're poised with poised, I say, given that the market does seem on the cusp of a revival. And as mentioned earlier, we've seen from our Australian experience that an extended period of suppressed demand can lead to almost an explosion in activity as families can finally afford to make the moves that they've been delaying. And once those movements start, there will be more liquidity, which of itself stimulates further demand. Have to say that Damian has done an excellent job in taking full advantage of our media platforms to raise the profile of REALTOR and drive traffic. And there's much anticipation, excitement at REALTOR. And in particular, because the revenue of the newer product lines, seller, for example, is markedly higher than a year ago. The U.S. has traditionally been a bio-led market, but the Australian market where we've had stunning success with REA is a seller market. So we're pleased to see that growth trend here. And we're also pleased to see today that 30-year mortgage rates dropped to a 15-month low to 6.47%. Now it's fair to presume that rate will continue to fall over time. And historically, there's been a corresponding increase in housing activity.

And Brian, to that end, and to what Robert was saying, we will keep investing in the business because we believe in the business. We expect the cost increases to be modest for the full year, with the increases more weighted to the second half. But you can expect that the dollar value of those increments are going to be less than the dollar value of the increments that you saw in Q3 and Q4 of this year.

Thank you, Brian. Laila, we’ll take our next question please.

Our next question comes from Darren Leung from Macquarie. Please go ahead.

Good morning, guys. Congrats on the good results. My question was just in relation to Foxtel maybe just on the operational side. Robert, you made some comments about the improvement in Foxtel thus far. I guess when I think about the Investor Day in 2021, there were sort of three major aspirational targets, subscribers, revenue, sort of CapEx targets, things like -- sort of hit 2024, and we're just a little bit short of those targets. I guess I'm clear to hear if there's any update in terms of how you're thinking about those new targets either from a commentative perspective or from a timeline perspective, particularly in light of the strategic review? Thanks.

Darren, we can't really revealing more figures than we already have today. But our ambitions for Foxtel are undaunted. And I think what is particularly striking is that you're seeing growth in the streaming business. While combined with about 6% increase in ARPU in the Broadcast segment. So you're not seeing the fundamentally fatal contradictions that you are at some broadcasting companies in other parts of the world, which is why no doubt, the success of Kayo, the success of BINGE, the emerging success of Hubbl have attracted a certain amount of attention.

And Darren, since we had that Investor Day, I mean, it's fair to say that the landscape has changed materially over the last couple of years. But we're really proud of the fact that the streaming subscribers are an all-time high. We have been taking price across our broadcast and our streaming products in order to focus on that revenue growth. And our CapEx, notwithstanding the investment in Hubbl in the current year, it has been coming down. So I think we feel pretty good about those targets that we put out there.

Thank you, Darren. Laila, we’ll take our next question please.

Our next question comes from Lucy Huang from UBS. Please go ahead.

Hi, Robert and hi, Susan. So my question is on cost as well coming into FY '25. I mean I think this year, we've seen pretty strong cost control across the business. Just wondering how we should be thinking about the cost momentum into '25? I note that recently, you made some changes in the Australian business as well to take some cost out. So just wondering if we can go through some puts and takes. Thanks.

Look, we talk about this each quarter. I think we feel pretty good about our cost cadence. Clearly, it's going to be different depending on the segments that we operate in. We're just talking about REALTOR expecting that whilst they will still focus on cost efficiencies there's likely to be reinvestment in that segment. Within News Media, we have sort of got a little bit ahead of the game in that the UK has done their transition from linear of talkTV and the commercial joint venture printing venture that we've mentioned. So that will give them some good cost savings coming into '25. And as you mentioned, News Corp Australia has restructured down there. So that will also give some added momentum going into the new year. We expect across Dow Jones that costs would increase probably mid-single digits. That's pretty consistent with what we saw this year, and that supports the fact that, that business is growing, particularly on the B2B side of the business. And HarperCollins really their costs have started to stabilize off the back of a pretty choppy couple of years. And so we expect that the margins of that business will be broadly consistent as we go into 2025.

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

Our next question comes from Alan Gould from Loop Capital. Please go ahead.

Thank you. I've got two questions, please. First, Robert, how is signing the OpenAI deal impact your negotiations with other Gen AI companies? And my second question is, both you and Susan in the press release discussed the divisions -- the three divisions that are the pillars of growth, it makes one thing when we have the other two divisions. Now Foxtel may take care of itself. And I don't know if Rupert and Lachlan are on the call, but I know that News Media is sort of the genesis of the company. But you see the -- it'd be simpler and the company will be growing quicker without those two divisions? So just your thoughts on those two questions. Thank you.

Well, I'll take the second question first. We're constantly reviewing our structure. We're very proud of all the divisions and the growth that we're seeing across the majority of them over the past quarter and the past year, you can see from yourself from new accounts. As for OpenAI, we have made clear in the past that we would prefer to woo rather than to sue to negotiate rather than to litigate. But for some, the process of suing has started. Now sometimes the threat of suing can be a precursor to wooing, but we will surely see the upcoming coming months.

And Alan, just to add just on News Media, we have been really focusing on that segment in order to keep that segment stable and transition to digital. They've faced enormous headwinds since we separated. And the businesses have actually done an enormous job in light of the huge print declines that we've seen across those businesses. And those businesses also provide a valuable audience that we use across the rest of the portfolio. They've really helped REA with advertising from a marketing perspective, they help audience growth across move. They've helped support Foxtel with some of the marketing efforts down in Australia. And so -- we do utilize those segments in a broader way across the portfolio.

And just to reinforce that point, for example, at the New York Post, we have 117 million monthly uniques. There's content complementarity with REALTOR. That's true for many of our media properties around the world, the combination between our News Media properties in Australia and REA and Foxtel. So these companies together far more than the sum of the parts.

And the content is hugely valuable when we think about these content deals that we're doing across the business. They have valuable archives that go back hundreds of years that are hugely important to us.

Thank you, Alan. Laila, we’ll take our next question please.

Our next question comes from Craig Huber from Huber Research. Please go ahead.

Yes, hi. Thank you. Robert, I just wanted to ask you if I asking you in prior calls about the simplifying the company, obviously, almost nine months to the day, you made the formal public announcement of looking at the process of simplifying the company we're here nine months later. When I asked you three months ago, you sort of hinted that part of the holdup here with on the regulatory side of things and stuff. I guess my question, honestly, is why was that not anticipated? And also, why would -- did you guys go public with your thoughts that you want to simplify the company nine months? I suppose to just wait longer here and do more homework in the background. Because you talked about before, you have -- you did a lot of work on this before you made the public announcement, and we're still sitting on nine months later. I know a lot of investors are quite eager to see a simplification of the company here, and so we're sitting here nine months into it. It doesn't sound like it's around the quarter. I don't know that for sure, but I guess my question is how much longer is this going to -- the process is going to take? I know it's a complicated company , but is it just simple just the regulatory side of things is what slowing this whole thing down? Thank you.

Greg, we're constantly institutionally in perspective, we've obviously been engaged in the process. And as I indicated earlier, that process will not continue indefinitely nor perpetually. But we have actually already completed a significant amount of regulatory work to make possible that kind of introspection. But we can't give you a specific date. We can assure you that there's much effort going on. And obviously, that effort now coincides with interest in Foxtel that process has to play out in a full and fair manner for all concerned. But clearly, there will be a certain amount of tension on that in coming weeks and coming days.

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

At this time, we have no further questions. I'll now hand over to Michael Florin for closing remarks.

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