Good day, and welcome to the Welcome to News Corp First Quarter Fiscal 2017 Earnings Call. Today's call is being recorded. [Operator Instructions] At this time for opening remarks and introductions, I would like to turn the call over to Mr. Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead, sir.

Thank you very much, Matt. Hello, everyone, and Welcome to News Corp's Fiscal First Quarter 2017 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 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 Corporation'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.

Thank you, Mike. The most recent quarter has highlighted the continuing digital development at News Corp at a time of great transition for media companies, many of which are struggling to cope with e-evolution. Our growing portfolio of Digital Products and our global character have enabled us, not only to weather those profound changes, but to build a firm foundation for profitable future. There is no doubt that 2 of our core markets, the U.S. and U.K., have been characterized by a certain amount of uncertainty in the economic and political environment, but we have remained focused on developing long term and robust sources of revenue while curtailing costs without undermining the quality of our uniquely valuable content. Collaboration among our businesses has increased, with the sharing of lessons, software and data to provide more valuable insights for our clients, readers and advertisers. During the first quarter of financial year 2017, despite a distinctly soft print advertising market and patent weakness in the British pound, our revenues were down only slightly. It is thus clear that our emphasis on digital real estate has given the company more resilience in even difficult trading periods. We are still at the early stages of that real estate development, particularly in the U.S., where we are renovating realtor.com while still living in the house. We expect the rates of growth at realtor.com will increase later in the year as new products and pricing take hold in a U.S. property market that is itself still recovering from the extreme dislocation of the financial crisis. In the most recent quarter, total segment EBITDA declined 21% versus the prior year, but half of that decrease was due to planned investments and onetime transaction costs, and we do not expect the quarterly performance to be reflective of the…

Thanks, Robert. We reported fiscal 2017 first quarter total revenues of $1.97 billion, down 2% compared to the prior year. Currency had a $36 million unfavorable impact to revenues, with modest year-over-year improvement in the Australian dollar more than offset by continued weakness in the British pound. Total segment EBITDA was 130 million, including $5 million in transaction-related costs for the Wireless Group acquisition compared to $165 million in the prior year. For the quarter, EPS from continuing operations were negative $0.03 compared to positive $0.22 in the prior year. Adjusted EPS from continuing operations were negative $0.01 versus positive $0.05 in the prior year. Before discussing segment performance, as Robert noted, listing-based revenues from our digital real estate businesses are now captured in a new real estate line on our income statement to better highlight that growth. Prior to this change, those revenues were reflected within advertising revenues. We have also adjusted prior year comparatives for this. This real estate revenue line represented 9% of total revenues this quarter and grew 19% compared to the prior year. Turning to the individual operating segments. In News and Information Services, revenues for the quarter decreased 5% from the prior year to approximately $1.2 billion. And within segment revenues, advertising, which accounted for just under 50% of revenues, decreased around 11% or down 10% in local currencies, driven by weaker global print ad trends. Circulation and subscription revenues decreased 4%, but were up 1% in local currency, which is relatively stable with last quarter and the prior year, driven by higher paid digital volume and price increases. News and Information Services segment EBITDA this quarter was $46 million, down from $83 million in the prior period. This decrease was driven by lower print advertising revenues combined with $12 million in additional investment…

[Operator Instructions] At this time, we will take our first question. This will be from Entcho Raykovski with Deutsche Bank.

My question's around News and Information Services, and you've obviously spoken about digital advertising revenues offsetting some of the print declines. Can you give us an idea of some of the quantum of growth within digital ad revenues? And also, any breakdown you could give us by jurisdiction as well -- what sort of trends you've seen within digital ad revenue growth would be appreciated.

Entcho, thanks very much for the question. As for the future itself, unfortunately, I don't have sibylline powers so it's difficult to divine. At Dow Jones, we are seeing some improvement in October, but beyond that, I don't have the confidence to give you a forecast. Just more broadly, before we get into the granular details, what we are seeing at the moment is some mayhem in the ad market. Advertisers are having ads placed on sites that seem almost to have contempt for, for profit companies. Or they have their products bobbing around in bilge water. And that ad apostasy simply can't continue ad infinitum. So at heart, we're very confident about our quality content, our quality audiences and the quality canvass we have for advertisers. At News Australia, we saw advertising down about 11%, excluding FX in the quarter. News UK, advertising, in total was down mid-teens. Print was down high teens; digital, up low teens. And at Dow Jones, advertising was down 21%. But we have experienced double-digit growth for digital at News UK and Australia. We're emphasizing the quality of our data -- and the quality of permission data, that is, and our audiences. And we're building out more segmented products for advertisers so that we will be able to target those quality audiences in a meaningful way. And I think what we're talking about is a longer-term strategy, but one that should have results in the short term.

We'll move along to Craig Huber with Huber Research Partners.

A question on the Wall Street Journal. Just what are your thoughts on why the declines have accelerated negative 21% at the print Wall Street Journal this last quarter? And what's your outlook there for the upcoming quarter?

I think there is a broader issue about advertising, generally. There is definitely mayhem in the market. I mean, some advertising is driven more by trend than by substance. And when you have that amount of volatility in the broader market, you are going to have, for certain mastheads in certain quarters, a fair amount the volatility. And that was certainly the case at the Journal. Tech advertising was down to a certain degree; finance also. On the other hand in -- for the WSJ magazine, we had a record issue in September. So it's not as though advertisers have abandoned print as a sector, and print is a very powerful platform, it is that there is a lot of content out there. Frankly, a significant amount of that content is less meritorious and more meretricious.

The only thing I would add, Craig, is that -- advertising pretty much week-by-week. And what we are seeing, though, is that when we look at October, there is some tempering of this rate of decline that we saw in the first quarter. And whether that continues for the rest of the quarter, it's difficult to say. But certainly, in The Wall Street Journal and at News Australia and at News UK, we're seeing some tempering of the declines. So I think visibility is limited, but at least we're seeing things improve a little bit.

We'll now move to Brian Han with Morningstar.

I really had just one question. You've had a $500 million buyback program in place for a while now, and yet, you've only bought back a fraction of that to-date. Just wondering how the board thinks about all this, especially during times when your stock price is depressed.

Well, we do have a $500 million provision. We have bought back a modest amount of stock. But clearly, when we think in terms of capital allocation, it's a broad-based strategy, which includes internal investment and it certainly includes returns to investors. And we have also a modest dividend in place. And -- but it has to be based on an understanding of the long-term value of the company, and that is what guides all of our decisions and the board's decisions about the buying back of stock. Thus far, we've bought back $71 million, and -- but will be -- any further moves will be in that context of that broader strategy.

[Operator Instructions] We'll move to Peter Stamoulis with Evans & Partners.

I was hoping you could provide some color around free cash flow operations for the business. Obviously, down $300 million for the quarter, and what the expectations are going forward. And I suppose, can we track EBITDA? And what can we expect around conversion of free cash flow?

So free cash flow was -- obviously, we reported negative for this quarter. As I mentioned, it's mainly driven by the fact that we had a payment to make for settling the News America Marketing litigation, which was $250 million. We'd accrued for that last year, and now, we paid it out this quarter. We also had slightly higher working capital this quarter. Some of it was due to the acquisitions around iProperty. And obviously, we had lower EBITDA. So all of those factors contributed to that. You shouldn't take the first quarter as being indicative for the rest of the year. We're very focused on generating healthy positive free cash flow, and I would say, mainly, it's all timing things this quarter. So without giving a specific number, though, I think we are striving to make sure that we are very healthy for the remainder of the year.

[Operator Instructions] We'll take a follow-up question from Craig Huber with Huber Research Partners.

I'd be curious to hear what the margins were like at move.com versus a year ago, the profits there.

So we don't give out specific margin information, as you know, Craig. We had started giving out, obviously, revenue information based on your last request. I would say that margins are growing. And if you exclude stock-based compensation, EBITDA was higher than we've had before, and it's on its ramping -- it's ramping up, is what I would say. And so we're not giving the specific number, but we're on track to be very meaningfully profitable for next quarter onwards.

We have a follow-up question from Brian Han with Morningstar.

Just one more. In your other division, I appreciate, Robert, that you want to continue to canvas new businesses to invest in, but the $180 million of costs in the other divisions still seems quite substantial. Do you think there's any room to reduce that cost base?

We're continually striving to reduce the -- as you call the other, which is principally sort of corporate and overhead costs, and it's come down a lot since we started showing our results 2, 3 years ago. So we've been constantly bringing that down, and I think you'll expect to see some improvement on that as we go forward. And UK newspaper matters, which are included in that, are obviously coming down as we've reported.

We'll take a follow-up from Entcho Raykovski of Deutsche Bank.

Just a follow-up for me around the new agreement with HBO, which you mentioned that Foxtel has entered into. Could you give us any more indication of the terms of that agreement and the sort of uplift in costs, which it resulted in, and -- I mean, if it was significant. I appreciate you might not give us the exact numbers, but how significant that uplift may have been.

Entcho, your instinct is correct that we're not going to give you the exact numbers. But look, I think the keyword at Foxtel is focus. The rights, you're talking about, are exclusive to subscription TV. As you know, we have taken the decision to close down Presto. Frankly, we saw that was a distraction from the core brand and core proposition, which has, by far, the best suite of programs in Australia as I'm sure you well know from your personal experience.

We have one more question in the queue. This will be from Eric Katz with Wells Fargo.

So you mentioned, looking through the balance of the year, several segments talking about improvements, particularly in EBITDA. I was wondering if you can give a little bit more color on that because it sounds, overall, that you expect improvements, but I don't know if that means for instance, in news, EBITDA would be higher or growth rates would be better. Any particular quarter in the back half of the year that you point out in any particular segment?

Certainly. Look, I'll start, and then Bedi, will no doubt complement my comments. But in digital real estate, as Bedi has indicated, we expect momentum as the year unfolds, with new products and new pricing. And it will be strongly EBITDA positive. That is certainly a growing business. At HarperCollins, you need only to look at the best seller list at the moment to get a sense of the impact of our titles. And we are very pleased with the focus on books that -- like the Magnolia Story, like Sully, and no doubt, like Megyn Kelly's Settle For More. They will have broad impact in society and a positive impact on our accounts. And we think FOXNews, as we get into the spring selling season in Australia for sports, given the record audiences of last year and the buzz around both Rugby League in Aussie Rules next year that, that will be efficacious also.

Well, thank you all for participating. Have a great day, and we'll talk to you soon.

Once again, this does conclude today's conference call. Thank you all for your participation.