Good day, and welcome to the News Corp Q1 Fiscal 2020 Conference Call. Today's conference is being recorded. [Operator Instructions]. And at this time, I would like to turn the conference over to Michael Florin. Please go ahead.

Thank you very much, Eduardo. Hello, everyone, and welcome to News Corp's Fiscal First Quarter 2020 Earnings Call. We issued our earnings press release about 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. In the first quarter of fiscal 2020, News Corp showed strong growth at Dow Jones and higher revenues at Move, operator of realtor.com. So the company also faced challenges from pronounced currency headwinds, a sluggish Australian economy, in particular, a struggling Australian property market, as well as difficult comparisons with the prior year onetime revenue item, a noncash impairment charge in this quarter. For the quarter, the company reported total revenues of $2.34 billion with total segment EBITDA of $221 million. This represents a decline of 7% in revenues and 38% in profitability versus the prior year. Of the revenue decline, 3% was directly attributable to currency and 2% to our onetime cash payment last year by Tabcorp in the U.K. Before getting into the final details of the quarter by segment, I want to address a significant development that bodes well for our future prospects. There has been a fundamental change in the content landscape. For over a decade, News Corp has led the international debate in seeking fair returns for our high-quality content from the digital platforms. Clearly, the dominant digital platforms are under intense and continuing regulatory scrutiny on issues such as privacy and an opaque advertising market. There has, however, been a substantial development with Facebook's decision to pay a significant premium for our premium journalism at the WSJ and beyond. This decision begins to change the content equation, and we expect a positive impact on financials at our News and Information Services segment over the long term, beginning this fiscal year. The Facebook deal complements the agreement we reached with Apple in March when The Wall Street Journal became a launch partner for Apple News+, which expanded the reach of The Journal and its journalism to new audiences. Our brands and our content…

Thank you, Robert. Turning to the financials. Fiscal 2020 first quarter total revenues were approximately $2.3 billion, down 7% versus the prior year, and total segment EBITDA was $221 million, down 38% versus the prior year. The results were impacted by last year's onetime benefit related to the exit of the partnership for Sun Bets in the U.K., coupled with continued currency headwinds and challenging prior year comparisons at HarperCollins. On an adjusted basis, which excludes the impact of acquisitions and divestitures, currency fluctuations and the other items disclosed in our release, revenues fell 4%, and total segment EBITDA decreased 30%. Net loss for the quarter was $211 million compared to net income of $128 million in the prior year, reflecting a $273 million of noncash impairment charges, primarily at News America Marketing. For the quarter, we reported a loss per share of $0.39 as compared to earnings per share of $0.17 in the prior year. Adjusted earnings per share were $0.04 in the quarter versus $0.17 in the prior year. Turning now to the individual operating segments. In News and Information Services, revenues for the quarter were over $1.1 billion, down approximately 8% versus the prior year. Currency had a $35 million or 3% negative impact. Digital revenues for Dow Jones and the newspaper mastheads represented 38% of the combined revenues. Approximately 34% of the segment's revenues were digital, up from 33% in the prior year, which included the onetime Tabcorp payment. Advertising revenues for the segment were down 8% in the quarter versus the prior year, with approximately $15 million or 3% due to negative currency fluctuations. Performance was stable versus the prior quarter rate. Improvements at Dow Jones and News U.K., absent currency impacts, were offset by declines at News America Marketing and News Australia. Circulation and…

[Operator Instructions]. I'll take our first question from Kane Hannan at Goldman Sachs.

Just at Dow Jones revenue growth of 6%., can you give a bit more color around the level of cost growth during the quarter to drive that growth? And then I suppose, some comments around the revenue quantum we should be expecting from those digital partnerships this year, sort of next year? I -- should we expect them to be material?

Well, look, I'll take the second part of the question first, Kane. The Facebook deal is a big deal. It establishes a clear precedent of paying a premium for premium journalism. And there are a couple of other initiatives that are notable. When you click on a headline in the Facebook News tab, you'll be taken to our site. So the story is not hosted by Facebook. And that means that we're able to sell advertising directly, and we'll have a more lucrative flow of permission data. And these were all essential preconditions for our ascent and our agreement, and will have a long-term benefit on our accounts. The fact is that there'll be less providence if there's not a premium for Providence. And it's frankly clear that the revenue show flow had shifted dramatically from the creators to the distributors. So for us, there are -- commercially, there are 2 things that are meaningful and absolutely essential. Firstly, development of a subscription sensibility. There has to be more of a propensity to pay. Thankfully, Facebook understood that priority. Secondly, the digital advertising market is dysfunctional. The so-called open market is a virtual monopoly. We've been very public about our concerns on that segment, which is in dire need of reform, and is thankfully now under close scrutiny by 50 U.S. attorneys general.

And Kane, just in relation to the costs, we saw about a 4% increase in cost for the quarter for Dow Jones. So you should use that number as your proxy.

Eduardo, we'll take our next question please.

[Operator Instructions]. We'll now take the next question from Eric Pan at JPMorgan.

You mentioned in your comments, you're bringing extra focus on your key assets. And given the proposed sale of NAM, how should we think about the company's overall strategy going forward? Are you looking to unlock the value of the assets via monetization? Or could you be looking to beef up your existing businesses with acquisitions?

Eric, simplification is indeed an ongoing process, and it doesn't stop at News America Marketing and Unruly. But we're very cognizant that the company trades at a discounted to some of the parts. We're seeking to rectify that situation and maximize value for all our shareholders. So it's fair to say that the institutional introspection will continue apace.

Eduardo, we'll take our next question please.

Our next question comes from Entcho Raykovski at Crédit Suisse.

Robert. Just a couple from me related to SVs. And just firstly, Susan, wanted to clarify your comments around the next quarter. You said you've lapped the increase seen in domestic cricket rights, so should we expect any increase in the cost of the cricket heading into Q2? And then just secondly, your commentary around the launch of an entertainment-only offering in SVOD. Do you expect any additional costs associated with that offering? Or do you think that you can pretty effectively utilize your existing rights and offer streaming products? And then just related to that, sorry, to kind of carry on with this. But just your rationale for it given that it feels like it is a pretty crowded space in streaming services in Australia?

I'll take maybe the first two, and Robert can take the last one Entcho, if that's okay. So just in relation to cricket, we would expect to see very, very modest increases over the course of the year. So the bulk of those costs have come through in Q1. But I think it's important to note when we think about the cost base, the largest increase that's come through is because of the noncash amortization in relation to those entertainment expenses. So over the full year, absent those costs, we would expect the whole cost base to be relatively stable. But it is important to note that the team down in Australia are continuing to focus on rightsizing their cost base and are continuing to look for opportunities as they move forward. In relation to Aeries [ph], we are looking to launch that towards the back half of this particular fiscal year. We're not expecting to see significant incremental costs to your point. We do have a lot of the content covered within existing deals. We will, of course, have marketing costs as we scale up that product, but the actual incremental cost that we'd expect to see within the year is going to be minimal.

And if I could just supplement Susan's comments. And it will obviously be based on the Kayo distribution platform. So much of the engineering there has already been done. And I think when you speak of streaming, this salient point to note about Foxtel is the rapid growth of Kayo from nothing a year ago to 402,000 paying customers now and another 443,000 in total. And this is not a service that cost $6.99 a month. It's $25 a month. And given the view of feedback and satisfaction, there's obviously some longer-term elasticity in that price. And when you see the sluggishness in the Australian economy in advertising and real estate, which has obviously had an impact on our earnings, the results are even more impressive.

Thank you, Entcho. Eduardo, we'll take our next question, please.

We'll now take our next question from Craig Huber at Huber Research Partners. All right. We'll now take our last question from Fraser Mcleish at MSC [ph].

Robert, I'm just interested in your comments upfront that you were talking about giving us a clear view of the assets and the value, you're willing to just give us a little bit more insight to what you mean there. I assume you're talking about The Wall Street Journal and timing of that. I mean do we now have to wait until the next financial year for that? And that's my first question. And then just secondly, just on Move, which the margins -- you've got to do a little bit of work obviously to back them out because you don't report them, but look later around about that sort of 10% level and have sort of been stubbornly at that level for a little while. Is it structurally just a low-margin industry in the U.S. because they're obviously very low margins relative to similar businesses around the world? Or do you think you can really see some margin improvement there over the next few years?

On your first question, we really can't go into detail about what simplification means in the longer term. What it does mean at the moment is News America Marketing and Unruly, which are under strategic review. But as I said, that strategic review does not stop with those 2 properties, and we are very conscious of the need to highlight the value of the company and provide more transparency for investors. As for Move, both short, medium and long term, we believe that realtor.com is a tremendous property. You could see that the growth in audience is far superior to that at Zillow at the moment. If you take the independent comScore figures from September, the unique users at realtor.com were up 17%, while Zillow grew at only 2%. And Trulia actually shrank by 2%. And the divergence was even more marked on desktop with 10% of growth at realtor and Zillow, down by 12% year-on-year. We're at a very early stage of the evolution of the digital real estate market in the United States. And we think as it evolves, those margins will surely increase.

And Fraser, I think I'll just add to that, that part of the reason and the rationale for acquiring Opcity was to accelerate that revenue growth going forward and provide an opportunity for margin expansion via ancillary revenues and different services. And so we would expect to see for the balance of this year and over the full year that revenue and EBITDA will continue to grow within that business.

Thanks, Fraser. Eduardo, we'll take our next question.

All right, we'll now take the next question from Craig Huber at Huber Research Partners once again.

Yes. Can you hear me this time?

We can hear you.

Yes, we can hear you. Loud and clear, Craig.

I have no idea what happened there. Look, I have two questions. Housekeeping question, circulation revenue across Dow Jones, Australia and the U.K. with and without currency. Did you give that? Maybe I missed it, but that's my first question. And my second question, Robert, you mentioned, I think a lot of people agree with you on this, that there's two large monopolies out there on the digital advertising front. I'd like to hear from you if you could just expand upon this, what do you think the solution is on that front?

Craig, just in relation to your housekeeping question. So circulation at Dow Jones was up 6%. In the U.K., it was flat. But in reported numbers, down 5%. And in Australia, it was down 2% in local currency; reported, down 8%.

Craig, obviously, the tech topography is evolving very quickly. If you think back even 12 months ago, the prospects of Facebook paying for content, a carriage fee, as we called it, in fact, Rupert was the first to cite that as a need, the prospects seem remote. It's now real. And what we're finding generally in our discussion with the digital platforms is that, that they have indeed adopted a new approach. They realize that for various reasons that their past policies were unsustainable. But as I made clear to you, it's not just about paying a premium for premium journalism. It is also about sorting out what is an opaque advertising market, and there's no doubt that the regulatory pressure in that area is only going to increase. And a consequence of that, well, I suspect, be that as we're already seeing, more advertisers understand how dysfunctional that market is and seek association with high-quality content, and we will undoubtedly be a beneficiary of that given the excellent journalism that we have, not only in this country, but around the world.

Thank you, Craig. Eduardo, we'll take our next question.

[Operator Instructions]. It appears there are no further questions at this time. I'd like to turn the conference back to Michael Florin for any additional closing remarks.

Great. Thank you, Eduardo, and thank you for all participating. We look forward to talking to you soon. Have a great day.

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