Good day, and welcome to the News Corp. Third Quarter Fiscal 2021 Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, Todd. Hello, everyone, and welcome to News Corp.'s fiscal third quarter 2021 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'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 identifies 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 will pass it over to Robert Thomson for some opening comments.

Thank you, Mike. While some nations including America are spasmodically emerging from the ravages of the pandemic, other regions continue to suffer profoundly. We certainly hope that the vicissitudes of the virus will abate and trust that all on this call are navigating these perplexing times safely and securely. I must again salute the people of News Corp, as they continue their extraordinary work for the company and for their communities in these demanding circumstances. Their efforts, their expertise and their endurance have yielded strong results for our company and for the millions of people who find comfort and inspiration and illumination from the news, information insight and entertainment our businesses around the world deliver each and every day. It is further testament to the efforts of all in News Corp that fiscal year 2021 has been defined by improving revenue trends and flourishing profitability. In fact in strictly financial terms, this year is on a trajectory to be the most successful since our reincarnation in 2013 in profitability, highlighting how much the character of the company has evolved over that period. Patently, the strategy of simplifying the asset mix, the vigorous pursuit of digitization, the disciplined cost reductions and the investment focus on three growth areas: Digital Real Estate, Dow Jones and Book Publishing have proven to be particularly fruitful. You will have noticed that since our last earnings call in February, we announced three significant acquisitions that we firmly expect will immediately increase revenue and EBITDA upon closing. The first being Investor’s Business Daily to be operated by Dow Jones; the second was Houghton Mifflin Harcourt's Books and Media segment, which will become part of HarperCollins; and the third was Mortgage Choice by REA Group, which will add heft to their Mortgage Broking business. And since our last…

Thank you, Robert. Fiscal 2021 third quarter total revenues were over $2.3 billion, an increase of 3% versus the prior year, while total segment EBITDA was $298 million, up 23% year-over-year, reflecting strong performances across our key segments. Our three core pillars, Dow Jones, Digital Real Estate Services and Book Publishing collectively grew segment EBITDA by 55% versus the prior year. On an adjusted basis, which excludes the impact from acquisitions and divestitures, most notably the sale of News America Marketing in the fourth quarter of fiscal 2020, as well as currency fluctuations and other items disclosed in our release, revenues rose 4%, while total segment EBITDA grew 24%. Net income for the quarter was $96 million compared to a net loss of $1 billion in the prior year, which reflects the absence of a noncash impairment charge related to Foxtel and News America Marketing in the prior period. For the quarter, we reported earnings per share of $0.13 as compared to a net loss per share of $1.24 last year. And our adjusted EPS were $0.09 in the quarter compared to $0.03 in the prior year. Turning now to the operating segments. Digital Real Estate Services segment revenues were $351 million, an increase of 34% compared to the prior year, which was more than double the growth rate we saw in the second quarter. The performance was driven by another record quarterly performance at Move together with improvements at REA as well as the Elara consolidation and positive impact from foreign exchange fluctuations. On an adjusted basis, revenues increased 22%. Segment EBITDA rose 58% to $117 million or 52% on an adjusted basis, the fastest quarterly growth rate in nearly four years. Move's revenues accelerated to $162 million, a 37% increase year-over-year with real estate revenues rising 43%. Move…

Thank you. [Operator Instructions] Also management has asked that you limit yourself to one question. [Operator Instructions] And we'll take our first question from Alan Gould with Loop Capital.

Thanks for taking the question. Robert, these results at REALTOR are quite impressive. Can you just look out three, five years and give us some sense of what the opportunity is for Digital Real Estate in the United States?

Well, I'm not sure I'm that precedent and I certainly don't pass myself off as a soothsayer. But we are firmly of the view that real estate properties make us the world's leading digital property company. And we also are firmly of the view that we have vast potential for growth, given the markets in which we operate and given our successful acquisition strategy. And equally, we are firmly of the view that the full value of our digital property assets and their potential is not yet entirely recognized in our share price. We now have a global leadership of our real estate assets with Tracey Fellows and her appointment itself was a sign of our intention and our ambition. And she's not just working through ideas for the future. She's driving the business and seeking out new opportunities, such as cities, such as rental and such as other adjacencies that will generate even more momentum.

If I can just…

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

Thank you. We'll take our next question from Kane Hannan with Goldman Sachs.

Good morning, guys. Just in terms of the investment at Move and Dow Jones you've been calling out, should we be expecting investment to step up in the fourth quarter relative to the third quarter? I know you guys, obviously, spoke about this investment in the half year. So just interested how we think about the phasing.

Kane, I'll take that one. So I think, just at REALTOR, if you think about the cost for Q4, we did guide to an additional $40 million of cost in the second half. You probably could assume the bulk of that $40 million that we quoted will hit in Q4. So if you compare that to the Q3 numbers, we also expect those numbers to scale up from a variable cost perspective, given the revenue growth. In relation to Dow Jones, we would expect to see higher costs in Q4, largely as a consequence of compensation and marketing expenditure. But we have been very encouraged by the ongoing cost focus in that business. And as you could see, they had a pretty good cost result for this quarter as well. So probably more investment coming through at REALTOR than what we would expect to see in Dow Jones.

Thank you. Kane -- thank you, Kane. Todd, we’ll take our next question, please.

Thank you. Our next question comes from Alexia Quadrani with JPMorgan.

Thank you. My question's on the Journal, Dow Jones. When you look at the Wall Street Journal digital subscription, do you think that the change in administration here in the U.S. has a positive? Is it a tailwind going forward for future digital subscriptions, or is it a negative, or is it neutral? I'm sure curious to hear how you think the change in the geopolitical environment may or may not influence the digital sub growth there.

Well, the key factor for us is the quality of the Wall Street Journal, the quality of the journalism, the quality of the leadership. We have a great team at Dow Jones with Almar Latour and Josh Stinchcomb, our Chief Revenue Officer, who've done a sterling job collectively in developing our digital expertise. So we don't have to worry about a Trump bump becoming a Trump slump, as you might see in other places. The Wall Street Journal's journalism obviously rises above the -- sort of gormless rhetoric the pants-tearing [ph], the jaundiced journalism that you see in some other places. And so, the Dow Jones results certainly rise above those of the New York Times, both in circulation now in the news segment and in digital advertising, which was almost double that of the New York Times. And so, it is in essence the enduring quality of the Journal that gives us momentum. And those are very positive wins that we're seeing now and are confident that we'll see in the future.

And Alexia, I think, the other thing that is really encouraging for us is, if I look back over the last 10 quarters and the quarter-on-quarter sort of net adds, the net adds that we had this quarter were the second highest that we've had over those 10 periods and so that gives us confidence actually about the ongoing growth potential within Dow Jones.

And to further supplement Susan's wise observation, the acquisition of IBD will give us further opportunity to up-sell to cross-sell across both properties. And that's why we acquired the IBD, which is close to closing. And that's why -- and that investment itself was an indication of our confidence in the sector.

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

Thank you. Our next question comes from Entcho Raykovski with Credit Suisse.

Hi, Robert. Hi, Susan. My question is on the other segments. Costs were up circa $50 million in the quarter year-on-year and you're obviously guiding to a further $20 million increase in Q4. I'm just interested in what's driving the incremental uplift relative to the $50 million number which you gave us back in Feb. I mean, is it the share price performance that's driving bonuses? So any color would be useful. And is there an element of catch-up in those numbers? So if we -- as we look into FY 2022, could we expect a stable cost base in other or could there be a potential for a drop as well? Thank you.

Yeah. Look in Q4, we obviously had the absence of some bonuses in Q4 of last year and so we obviously wouldn't expect to see that this year. So we've got that movement that's happening. We also had some of the COVID impacts coming through in Q4. So we did have a couple of one-off cost savings that hit in Q4 of last year which we didn't see repeated -- expected to repeat in Q4 of this year. And we also have the scale after some of the news next step transformation project costs that are going to hit in Q4. So I think when we look sort of going forward, we wouldn't expect to see the large movement that we've been seeing in equity comp. I mean, obviously if the share price continues to go up we'll have that natural fluctuation. So we did have a very depressed share price as a consequence of COVID back in Q4 and so we've been seeing those movements come through this year.

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

Thank you. Our next question comes from Craig Huber with Huber Research Partners.

Thank you. I want to focus if I could on your IBD acquisition in the book segment. You guys are buying from Houghton Mifflin Harcourt. Obviously, you're spending a little bit over $600 million for the two. I wanted to hear if you agree with this. I mean my take on this, in this environment for you guys to spend over $600 million, which is unlike you. You don't do it too often. And I think you run your balance sheet pretty conservative, you run your company pretty conservative over the years. But for you to do this right now, do you agree with my thought that you must be feeling pretty good, pretty optimistic on the direction of the virus, the direction of the global economies and more importantly direction of your revenues and your great cost containment. When you put it all together that gave you the confidence out there to spend $600 million plus?

Craig, look I think that's a fair assessment. We certainly have confidence in our teams and their ability to integrate those acquisitions. We certainly have a fundamental faith in the sectors themselves. And you will see that the financial impact of the acquisitions will be almost immediately positive for both revenue and EBITDA. At both Investor’s Business Daily and Houghton Mifflin Harcourt General Book division are highly profitable. And in Australia Mortgage Choice will surely complement the existing mortgage broking business at REA. And as I mentioned earlier with IBD being 90% digital now, it's extremely contemporary. We will be able to cross-sell and upsell and make the most of our existing content. And there's -- at HarperCollins Brian Murray and the team there's no doubt we have a history of successfully integrating businesses. And so we fully expect profits to increase at both HMH and thus at HarperCollins and thus at News Corp.

Thank you, Craig. Todd, we will take our next question please.

Thank you. Our next question comes from Darren Leung with Macquarie.

Good morning. Thank you for the update. I just wanted to ask a question around Dow Jones. You obviously talked about the sort of growth trajectory in the Risk & Compliance business. Can you please give us a feel for what the margins look like, not necessarily in FY 2021, but perhaps into the medium term, once you're done investing for The Wall Street Journal versus the Risk & Compliance business please?

We don't give out the margins actually for Risk & compliance. But what we would say is though that they are high margin and they've been scaled. So we are seeing good growth within that particular segment.

And as we indicated earlier, the climate for Risk & Compliance is certainly conducive to growth given the advent of US administration that is obviously intent upon increasing regulation and the need for compliance.

Thanks you, Darren. Todd, we will take our next question.

[Operator Instructions] Our next question comes from Brian Han with Morningstar.

Hi. For Foxtel in Australia, you are still investing in marketing and retention of Foxtel broadcast subscribers, or is most of the marketing efforts directly towards Kayo and Binge?

Well we're certainly focused on all segments at Foxtel and we're genuinely delighted by the progress where we have EBITDA up 34%. And the revenue trends are obviously improving. We haven't seen the spindown from broadcasting that some feared. And Kayo is as we mentioned on the cusp of one million paying subscribers with a user base already larger than that and Binge growing week after week after week. And frankly, all underpinned by world-class cutting-edge technology that provides a great user experience. And its financial position overall is much more robust and Patrick Siobhan and the team deserve much credit for the markedly improved performance. That means, we frankly have options real options.

Thank you, Brian. Todd, we will take our next question please.

Sir, at this time, we have no questions. I'll turn it back to you for closing remarks.

Great. Well thank you Todd. Thank you for all for participating. Have a great day. And as always, we look forward to speaking with you all in the very near future. Have a great day.

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