Good day, ladies and gentlemen and welcome to the News Corp’s Second Quarter Fiscal 2017 Earnings Conference Call. Today’s call is being recorded. Media is allowed to join today's conference in a listen-only basis. At this time, for opening remarks and introductions, 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, Catherine. Hello everyone and welcome to News Corp’s fiscal second quarter 2017 earnings call. We issued our earnings press release about 45 minutes ago and it’s now posted on our website at newscorp.com. On the call today, 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-K and 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 reconciliation of such measures can be found in our earnings release. With that, I'll pass over to Robert Thomson for some opening comments.

Thank you, Mike. In the second quarter, we saw the efficacy of our strategic reinvestment and digital diversification; both were evident in our increased operating profitability in the quarter, when the challenges in the advertising marketplace, which is in the midst of transition, were patent. We achieved 16% EBITDA growth year-over-year driven by strong performance at our Digital Real Estate Services segment and robust revenues at HarperCollins, along with appropriate and ongoing management of the cost base at our new mastheads. As noted in the press release, reported earnings were significantly impacted by non-cash reduction in the carrying value of Foxtel and a non-cash impairment charge related to our print properties in Australia, while they also benefited from a one-time gain as a result of the cash proceeds from the sale of REA European business. Revenues overall were relatively stable, adjusting for foreign currency fluctuations. And that came despite the obvious blustery headwinds in print advertising. As I mentioned, our results this quarter demonstrate the profound importance of becoming more diverse, more digital and more global. Our core platform has been bolstered by a determined expansion in Digital Real Estate, which is well on the way to becoming the largest contributor to our profitability. This segment posted another strong quarter with a 16% year-over-year revenue increase, improved EBITDA margins and sizable audience gains. We are now the largest digital property business in the world with a strong and growing presence in the U.S., Australia, India and East Asia. We are more global, as evidenced by the extension of our publishing footprint with the developments of the international platform we acquired with Harlequin which has given us greater access to authors and readers in a broader number of languages and regions. The last month, we announced that we were achieving full…

Thanks, Robert. We reported fiscal 2017 second quarter total revenue of $2.1 billion, down around 2% compared to the prior year. Currency had a $53 million unfavorable impact to revenues with modest year-over-year improvement in the Australian dollar more than offset by continued weakness in the pound sterling. Reported total segment EBITDA was $325 million, compared to $280 million up 16% versus the prior year. For the quarter EPS from continuing operation were negative $0.50 compared to $0.15 in the prior year. Significant non-recurring items impacting EPS in the current quarter include a pretax non-cash impairment charge of $310 million principally related to fixed assets of the Australian Publishing business. In addition, equity earnings of affiliates include a pretax write-down of $227 million to reduce our carrying value of Foxtel. These were offset in part by a pretax gain of $120 million at REA from the sale of the European businesses and a significant improvement in our operating results. Adjusted EPS from continuing operations were $0.19 versus $0.20 in the prior year, and adjusted EPS excludes the items I just mentioned and the other items shown in the press release reconciliation table. Turning to the Individual Operating segments. At News and Information Services revenues for the quarter decreased 7% from the prior year to approximately $1.3 billion and within segment revenues advertising which accounted for 53% of revenue this quarter decreased around 9% or down 8% of local currency driven by weaker global print ad trends. Circulation and subscription revenues decreased 5%, but rose 1% in local currency driven by price increases and higher paid digital volume offset by lower print volume. News and Information Services segment EBITDA this quarter was $142 million down from $158 million in the prior period or approximately 10% down driven principally by lower print…

Thank you. [Operator Instructions] We'll go first to John Janedis with Jefferies.

Hi. Thank you. On Dow Jones, with the revenue there more than 50% digital, how quickly are the digital circulation and advertising buckets growing? Is the Journal primarily competing with Facebook and Google or traditional publishers for ad budgets? And what is the time line of the $100 million in cost savings?

John, Robert here. I think the journal itself has quite distinctive audience as you can imagine both by virtue of income and demography generally. And it's difficult to imagine Facebook, Snapchat or anyone else replicating what is a unique audience. And I think that's what the team at Dow Jones are emphasizing. A unique audience is growing because of its unique quality content and the push for WSJ2020 is not only to improve the flow of news, but to make much more efficient, the actual delivery of the content in ways that suit the contemporary user. Generally speaking at Dow Jones, as you said, digital revenues are growing both in terms of advertising, circulation revenues up around 6%. And in terms of print this quarter, as I mentioned earlier, it's hard to give you a definite outlook for this quarter, but certainly thus far the decline is moderating.

And just with regard to the cost savings that we mentioned on the WSJ2020, we expecting to take out $100 million on an annualized basis by the end of fiscal 2018.

Thanks, John. Catherine, we will take our next question please.

Thank you. We'll go to Entcho Raykovski with Deutsche Bank.

Hi, Robert. Hi, Bedi. My question is around Foxtel, firstly around the churn rise, which has remained around that 15%, 16% marks. Do you expect that to decrease in coming quarters as perhaps you get into more favorable comps? And just on Foxtel as well, you've obviously detail the expected shutdown costs around Presto, will there be any output deals, which will remain on force that will also need to be renegotiated that my stay would be with the Foxtel platform and we continue to incur costs?

Entcho, I'll handle the first part of that question. As you say Q2 churn is around 15.6% compared to 10.3% in the prior year during Q2, but clearly there a lot of offers that in the market. No contract sales offices, which aren't necessarily more fluid. Also last year at this time, we had the Rugby World Cup, whereas as you know Australia performed unexpectedly well, which was obviously auspicious façade. There is no Rugby World Cup, this year, but we are entering a crucial sales period for the key core winter sports Rugby League in Aussie rules. And so over the next two quarters, we obviously expect to see stronger results, but look there are office out there with the phasing out of Presto and the focusing on Foxtel play and it’s certainly up to our team in Australia to prove to customers what we all know to be in fact that the offering in sports and other programming by Foxtel is far superior to that of the competition.

I think in terms of the question you had on the Presto shutdown, look we expect, as I said for additional costs in the coming quarter. I mean, we don't comment on specific output deals, but we have recently linear HBO. I think that was announced and the team there is keeping a very close eye on the costs.

Thank you, Entcho. Catharine, we will take our next question please.

We’ll go to Craig Huber with Huber Research.

Yes, thank you. Just want say right upfront just forgive the tone of this question, I mean no disrespect here, but just bear with me a second. Your stock is down as you know, about 20% from mid 2013 when you are separate out from your parent company. The S&P 500 however is up 45% since then and any industry that own your stock for a significant period of time. It's pretty frustrated here to imagine. I'm just wondering if you and your Board, the Murdoch family was seriously considered doing some different as you think out over the next 12 to 18 months and what the current game plan has been here over the last three and a half years, I mean potentially sell underperforming assets, spin-offs and assets potentially step up the share buyback significantly with the $1 billion plus on the balance sheet of cash, raise the dividend significantly, clearly investors don’t buy into the current game plan. I’m just wondering if there is any appetite at your level, the Board’s level, the Murdoch family level potentially different here in the next 12 to 18 months. Thank you.

Craig, Robert here. This has been taken, as you know that - as we made clear to investors, we are in the midst of transition. You can see what's happening to the used type of business that's no secret to anyone and to the someone as observing as you that's certainly no secret at all. As you also realize, we've made a series of investments and divestments including Amplify. So it is a company in transition. We are seeing that [Craig] you asked about change, the character of the company itself is changed based on the traditional principles that were fuel to success for the old News Corp for many decades. But it's also a company which is using that expertise for example in news and judgment analysis to enhance its profile in digital real estate, which is now the fastest growing sector of the company itself. And as you can tell from both our numbers in our voices, we're optimistic about the expeditious evolution of that particular sector. At heart, as we are, as we have always been focused on the long-term value per share and we're quite confident that over a period that will become evident to all.

Thank you, Craig. Catharine, we will take our next question.

Our next question comes from Brian Han with Morningstar.

Good afternoon, gentlemen. In the News and Information Services division, can you please give us a rough idea as to the percentage of its revenue from North America marketing? And also, in the impairment for Foxtel, what penetration rate are you assuming now for the long-term?

Just on News America marketing, Brian, all I can tell you is that we’re very pleased with the performance with the in-store sales. As we've indicated, the freestanding inserts, which are themselves probably dependent on the newspaper business nationally, haven't been performing as well, but the particularly strong position in installed does indeed prove the privacy of point of purchase and we're working with our partners in that area to further develop our expertise and dovetailing that expertise with the data and intelligence that we are harvesting from Checkout 51. So overall for that segment, we are quite confident about performance and potential.

And just with respect to Foxtel obviously, we don't comment on the specific assumptions that we use, but we do expect Foxtel to improve as a business. The management team there is working hard. They have a target to improve subscribers into their future. Clearly, they've got some cost challenges and we have the meeting those head on, but I would say we're optimistic about Foxtel’s future.

Thank you.

Catherine, we’ll take our next question please.

Thank you. We’ll go to Raymond Tong with Evans and Partners. Mr. Tong, your line is open. Please check your mute button.

Hello.

Hey Raymond.

Good morning, Robert. Good morning, Bedi. Just a question on the books division, clearly the growth is improving, then you still talked about how and you've got some good lineup books coming. How do you think, we should be thinking of that margin for the next couple quarters in the medium-term?

Well, the books business is difficult to forecast to long-term, but what we're very confident about is the broader strategy to Brian Marion and the team have developed for internationalization of HarperCollins through the purchase of Harlequin. The ability that gives us not only to take advantage of the front and but also backwards books. And secondly that as Bedi has outlined, the current roster of books, which is performing particularly well and during we sell. Interestingly, we are seeing an uptick in digital sales and fascinatingly part of that is due to the popularity of digital audio. But as I mentioned earlier on, we are particularly heartened by the Nashville based HarperCollins Christian business, which is generating a lot of titles, which unmatched by other publishers given orientation and generating a lot of revenue

Thanks, Raymond. Catherine, we'll take our next question, please.

[Operator Instructions] And we'll go to Tim Nollen with Macquarie.

Thanks. I thought I had tapped in star-one, but I guess I didn't. So thanks for taking this. Robert, I'm intrigued by your comments on fake news and also your complaint about how automated ad exchanges are benefiting the fake new sites, as well as the ad agencies. And you mentioned, I believe, starting up a digital ad network. Now I thought you already were quite active in programmatic buying or selling of your inventory. So I'm wondering if you could speak a bit more about what you're up to, what you will be doing that's new and different versus what you've been doing to date, and how you may be able to channel ad dollars to your site, your journalistic sites, as opposed to, say, a fake news site that I might start up one day, or anybody else. So I'm just curious, how do you think you can use this to monetize your business better?

Well, Tim, what I can talk about is the broad principle, which is harnessing the audience that we have from a different mastheads and related real estate sites around the world where you and verified environment where the advertising can be authenticated, where advertisers are not embarrassed by the guilt by association that's clearly evident in the Times of London report today. I think many of our executives have been talking about the lack of veracity in digital metrics. They are mad metrics. And I think we are reaching a point where this awakening by advertising becoming a reckoning which makes a verified environment of quality content with a quality demographic much more desirable. And I'm fairly certain that advertisers will start to be more digitally discerning. And while not going into too much detail about what our plans are at this stage, we're not quite ready to do that, but our plan is fairly well advanced. We do believe that we will be the beneficiaries of that reckoning.

Thank you, Tim. And Catherine we will take our next question please.

We’ll go to Eric Katz with Wells Fargo.

Thank you. You guys have been very transparent about the cost savings initiatives throughout your News and Info Services business, but can you give us an idea about much capital you've brought back into the business to bolster the digital side, and maybe how much has been in the last year? Just trying to understand how to quantify the investments versus the cost savings. Thank you.

We haven't given that sort of a specific number, but I think we have said in the past that when you look at our capital expenditures, a significant part of the CapEx is IT related and within that IT related bucket quite a lot of it goes into - investing into digital products. So even though CapEx is down, year-over-year the percent there that remains focused on digital is about the same. So that’s one why of probably thinking about the kind of investment we are making. Obviously, there is OpEx costs in addition to CapEx. And we don't generally break those out, but most of our OpEx investments are being focused more and more towards digital.

Great. Thank you.

Thanks, Eric. Catherine we'll take our next question.

And with no additional questions, Mr. Florin, I’d like to turn the floor back over to you.

Great. Thank you, Catherine. Thank you all for participating. We'll talk to you soon. Have a good night.