Good day, and welcome to the News Corp Second Quarter Fiscal 2019 Conference Call. Today’s conference is being recorded. Media will be on a listen-only basis. At this time, I’d like to turn the conference over to Mr. Michael Florin, Senior Vice President and Head of Investor Relations. You may begin, sir.

Thank you very much, Aaron. Hello, everyone, and welcome to News Corp’s fiscal second quarter 2019 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 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 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. News Corp reported increased profitability and revenue growth during the first-half of fiscal 2019, highlighting the power of premium content and authenticated audiences in a fact-challenged world that craves credibility. For the second quarter, the company saw 21% revenue growth and a 13% rise in total segment EBITDA, reflecting the consolidation of Foxtel and a healthy expansion of revenues at HarperCollins, Dow Jones and REA Group. More generally, at News and Information Services, we saw a continuation of positive trends in paid digital subscriptions and digital advertising in Australia and the U.S., where growth mitigated declines in print revenue. Even though, our teams have been diligent in pursuing revenue opportunities, the digital world remains somewhat dysfunctional and subject to intensifying scrutiny. We are in a world of exponential evolution, in which dominant players have the potential to manipulate markets for data, products, advertising, news and ideas. There is no doubt that some of these companies are arbitraging algorithmic ambiguity and hoping that regulators do not fully appreciate or define their dominance in certain sectors. When one company controls much of the U.S. consumer audiobook market and has its own products in that market and can tweak its algorithm at will, the potential for abuse is almost limitless. It is clear that there has been a regulatory awakening and the time has come for a regulatory reckoning. Turning now to our own businesses, which are certainly conscious of their responsibilities as custodians of customer data. It is clear that the ongoing digital transformation of Dow Jones is efficacious. Many traditional media companies are ailing, but that is certainly not the case of The Wall Street Journal, where paid digital subscribers grew 23% to over $1.7 million. Dow Jones overall has approximately 3.2 million total subscribers, 13% higher year-over-year. Elsewhere…

Thank you, Robert. Turning to the financials. Fiscal 2019 second quarter total revenues were over $2.6 billion, up 21% versus the prior year and total segment EBITDA was $370 million, up 13% versus the prior year. Results reflect the impact of the consolidation of Foxtel. On an adjusted basis, which excludes the impact of the Foxtel consolidation, currency fluctuations and the other items disclosed in our release, revenues increased 3% and EBITDA increased 2%. For the quarter, earnings per share were $0.16, as compared to a loss of $0.14 in the prior year, which included a charge related to the U.S. tax reform. Adjusted earnings per share were $0.18 in the quarter versus $0.24 in the prior year. Turning now to the Individual Operating segment. In News and Information Services, revenues for the quarter were $1.3 billion, down 3% versus the prior year. Currency had a $34 million negative impact accounting for more than half the decline. Within the segment, reported revenues at Dow Jones rose to 4%; News UK declined 10%; News Australia declined 5%, although it was relatively stable in local currency; and News America Marketing fell 7%. Approximately 32% of the segment’s revenues were digital, up from 29% in the prior year. Moving on to the segment highlights. Advertising revenues accounted for 50% of segment revenues and were down 5% versus the prior year, with approximately $18 million, or 2% being due to currency fluctuations. Second quarter advertising trends across our new businesses improved modestly from the prior quarter ratio. At Dow Jones, advertising revenues were flat with the prior year. Digital advertising revenues improved significantly, both year-over-year and sequentially, offsetting print declines. The improvement was driven by strong programmatic growth, resulting from audience going to MarketWatch. At News Australia, advertising declined 7%, but down just 1%…

[Operator Instructions] We will take our first question from Alexia Quadrani with JPMorgan. Your line is open.

Hi, this is [indiscernible] for Alexia. Thank you for taking our question. And just New York Times reported another strong quarter of digital subscriber growth yesterday. And from your numbers, The Wall Street Journal is also growing really nicely. Do you believe that longer-term, both The Wall Street Journal and New York Times can grow at this pace? And that – is there room for two meaningful paid digital properties longer-term?

Well, listen, I can’t speak for the New York Times. In fact, I can speak for the prime meaningful newspaper, which is, of course, The Wall Street Journal. At Dow Jones, the subscription business is performing well and obviously, has much potential for growth. And if you look closely, you’ll see the wsj.com, circulation revenues were up 15%. That’s not crosswords or couscous recipes, not – low rent up is we’re seeing elsewhere in the sector. As for professional content in a clustered world, companies want to incorporate Dow Jones content network and that is happening at pace. To be honest, advertising needed work. We have a new ad team at Dow Jones and that team is certainly making a positive difference. Digital ads at Dow Jones were up 15%. And as for risk and compliance, the fastest growing business at Dow Jones, if any of you out there want to minimize risk and maximize compliance, then you simply must have a Dow Jones contract. If not, feel free when the regulator comes out knocking.

Aaron, we’ll…

All right. Thank you very much.

Thanks. Aaron, we’ll take our next question, please.

Certainly. And the next question comes from Entcho Raykovski with Credit Suisse. Your line is open.

Hi, Robert. Hi, Susan. My question is around Subscription Video Services and particularly Kayo Sports given you’ve launched over the quarter, very useful that you provided us some stats around the subscribers. Just interesting whether you expect the sort of right of net adds to continue over the next couple of quarters? And where do you view the addressable market to be suffering, just interestingly high-level thoughts there? And then more broadly, if we’re looking at the churn rate we just stepped up and I pointed to the higher pricing, but do you think there’s a level of cannibalization taking place as well, given you’ve watched Kayo? Thank you.

Entcho, Kayo was in the early innings. In cricket, I would say, it was in the first of four innings or in baseball the second of nine innings. One can definitively say is that, we have 115,000 customers, around 100,000 paying and that number has indeed been rising week after week in two months since we launched. And indeed, we are on the cusp of the peak sports selling season, which is Aussie Rules and Rugby League, as you know. It is beyond clear that sports events are crucially important in an age of confected, concocted content. And we have the events that matter in Australia for the next four or so years. That’s an incontrovertible fact and an extraordinary asset. So you can be in platform agnostic, but you can’t be content ideastick [ph]. Of course, there is more churn when you increase prices, as we did late last year. But what we’re absolutely not seeing is massive spin down to Kayo from premium subscribers. The fact is that the earlier versions of the IQ Box were inadequate, and the current version is much more sophisticated and satisfying. The iQ4 really does go to show that the higher the iQ, the better.

I think, Entcho, I’d also add. Just in relation to your question on the addressable market, obviously, our penetration has been sort of sub-30% for some years and there’s old past audience out there within Australia, the other 70% that we haven’t managed to reach that our research has been very clear are open to paying for proposition if it’s at the right price point. So that would be the addressable market that we’re having a look at. And just in relation to churn, I did mention it in the release. But the team in Australia are very focused on churn management and they are – and we are investing a lot of money in data capabilities in order to effectively manage that churn going forward. And as Robert said, we really have seen very little spin down as a consequence of Kayo, but it is early days and we will continue to focus on that metric as we move forward.

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

Certainly. Our next question comes from Kane Hannan with Goldman Sachs. Your line is now open.

Good morning, Robert and Susan. Just be [indiscernible] that comment made around Tracey and taking new opportunities following that appointment. Could you just elaborate on what you meant by that comment? And then just a couple of brief comments around the only traction of the opportunity model and what you’re seeing on the ground following that completion?

Well, Tracey has just settled into the job and it’s a task obviously to increase the corporation among our various properties around the world, and that will be the first priority. Beyond that one, of course, can’t speculate. It’s interesting, the U.S. real estate market is a tad sluggish. And obviously, listings are down in Australia and yet digital property revenue growth remains real. You could indeed say that these are testing times and model and investment is definitely passing that test. And it shows the value of the Opcity purchase, because we’re providing a higher level of market intelligence and analysis and value-added services, in the case of Opcity. And that is appreciated by our clients who know that there are both quantity leads and quality leads and quality leads mean revenue for our customers.

And I think, Kane, just to add on the Opcity, sort of the way that we look at this is the conversion of the leads into revenue will continually evolve as we move forward and we reported best-in-class [indiscernible] company, which will enable realtor to better monetize their leads by offering higher quality leads that will enable a better closed rate for the agents, which will provide higher revenue. It also gives us access to high-quality data as a consequence of bedding the leads, which we can use to branch out into other adjacencies be it mortgage type of insurance, moving, et cetera, which is what we’re currently looking at building out now. So I think the combination of those comments is what we think will drive the results with the Opcity and realtor.

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

Certainly. Our next question comes from Craig Huber with Huber Research. Your line is now open.

Great. Thank you. I have some quick housekeeping questions. What should we expect for CapEx for Foxtel for the full fiscal year and also for the entire company? And also curious if you could just tell us how the circulation of revenues did with or without currency in the UK and Australia in the quarter? And my last one, if I could, give a comment on how you think the Australian economy is doing, given all your media assets down there? Do you think it’s about stable, or you think it’s getting worse, [indiscernible] I’m asking? Thank you.

So just in relation to your first question on CapEx, I think, we’ve given guidance on this before. So $285 million was the number for last year, U.S. dollars that we quoted for Foxtel and we’re expecting it to be $15 million higher. We haven’t changed our expectations in relation to that, but obviously we continue to monitor that CapEx as we progress through the year. I think, your next question was in relation to circulation in local currency. So I think, from a Dow Jones perspective, circulation revenues were up 7%; from News UK, circulation revenues were down 1%; and News Australia, circulation revenues were up 3%. [What was the third part in your question?] [ph]

Yes, CapEx for the whole company, please, and also Australian economy comment?

We haven’t given that out before, Craig. But what I can say is, we’re broadly expecting it, excluding Subscription Video Services to be roughly in line with last year.

Craig, for the macro economics, it’s obviously a little difficult to tell, there are two events upcoming as state election in New South Wales and federal election locked [ph] to be held in May in Australia. Both of those events could have some impact on business activity. But the underlying macro trends in Australia are positive. There has been something of the decline in the housing market. But that – in some respects, welcome, because it means that the rapid increases in property prices, which many analysts were unsustainable have indeed come to an end. And as in many countries, ensuring that there is enough excessively priced property is not just an economic issue, but a political issue, and one which is generating a lot of debate. So that trend of itself is efficacious. And News Australia and the team, led by Mike Miller, is performing very well. EBITDA is growing, the digital transformation of the company is continuing at pace and we’re particularly optimistic about the potential for the business.

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

Certainly. And our next question comes from Brian Han with Morningstar. Your line is open.

Hypothetically, if you had strong buyer interest for Wall Street Journal, is that a master that you and the Board would consider selling or is the journal an absolutely integral part of your digitization strategy across the Board?

Hypothetically, you shouldn’t answer hypothetical questions. But The Wall Street Journal not only is a powerful platform for us. That the network effect that you have, for example, and the relationship between realtor and The Wall Street Journal, the ability to cross promote for us increasingly to get sophisticated permission data on those platforms and right around to HarperCollins and the New York Post Digital Network. It is truly more than some of the pause at the very center, but is The Wall Street Journal.

Okay.

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

At this time, there are no additional questions. I’d like to turn the program back over to the presenters for any additional comments.

Great. Aaron, thank you very much. Thank you all for participating. And have a great day, and we’ll talk to you soon. Take care.

Thank you for your participation. This does conclude today’s program. You may disconnect at any time.