Welcome to News Corp's Third Quarter Fiscal 2023 Earnings Conference Call. Today's conference is being recorded. Media will be allowed on a listen-only basis. At this time, I would like to turn the conference over to Michael Florin, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, operator. Hello, everyone, and welcome to News Corp's fiscal third quarter 2023 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 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 the earnings release for the applicable periods posted on our website. With that, I'll pass it over to Robert Thomson for some opening comments.

Thank you, Mike. Before discussing our results for the third quarter of fiscal year 2023 it is particularly important to begin by noting that today marks the 44th day in captivity for Wall Street Journal reporter Evan Gershkovich who was wrongfully willfully detained in Russia. I would like to express our thanks and that of Mr. Latour, Emma Tucker, and all the Dow Jones for the unstinting support shown for Evan and his family by the U.S. and many other governments, media companies, journalism organizations and concerned principled people around the world. We trust that justice and common sense will prevail and that Evan will soon be released. Turning now to the third quarter results. We began to see meaningful improvements compared to the prior quarter with certain macro and sect oral trends more positive, and our cost cutting program beginning to gain traction. For context, these earnings follow record revenues and profitability in fiscal 2022. And we've been confronting the challenges of foreign exchange volatility, a surge in interest rates, persistent inflation, and ongoing supply chain disruptions. Our results demonstrate the fundamental differences in the character of News Corp, compared with other media companies. In a period in which advertising activity was clearly insipid in certain parts of the world our core non advertising revenue was particularly robust, highlighted by a 38% increase in revenues at the Dow Jones professional information business. For the quarter, total revenues were over $2.4 billion down only 2% year-over-year as compared to the 7% decline in Q2. Adjusted revenues excluding our acquisitions and distinctly unfavorable Forex movements equal those of last year. Meanwhile, profitability was $320 million down 11% despite a tough prior year comparison, and the just articulated external pressures. As for the company wide cost reduction drive, we are well advanced…

Thank you, Robert. Our financial results this quarter demonstrated tangible improvements from the first half, which combined with the implementation of our aggressive cost actions should position News Corp well, for fiscal 2024. Third quarter total revenues were over $2.4 billion down just 2% year-over-year which was a significant improvement from the second quarter rate and included a $98 million or 4% negative impact from foreign currency headwinds. Excluding the impact of foreign currency fluctuations, acquisitions and divestitures third quarter adjusted revenues were flat compared to the prior year with improving trends at the news media Subscription Video Services and publishing segments offset by the decline at digital real estate services segment. Advertising trends were mixed across our geographies. Total segment EBITDA was $320 million 11% lower compared to the prior year's record Q3 profits. Results included $7 million of professional fees related to the proposed merger with Fox and the potential sale of Move. Adjusted total segment EBITDA declined 15% versus the prior year. For the quarter, we reported earnings per share of $0.09 compared to $0.14 in the prior year. Adjusted earnings per share were also $0.09 in the quarter compared to $ 0.16 in the prior year. Before I discuss the quarter, I wanted to provide an update on our headcount reduction program. Reductions across the business units will vary given the differing nature of our businesses and costs work done to date. We currently expect the annualized gross cost savings to exceed $160 million, up from our initial estimate of at least $130 million, with the majority of the savings to be reflected in fiscal 2024. We also expect to incur approximately $90 million to $100 million of cash restructuring charges related to the headcount reductions in the second half of fiscal '23. Moving on to…

Thank you. We will now start the Q&A session. [Operator Instructions] Our first question comes from David Karnovsky from JPMorgan.

Hi. Thank you, Robert, following up on your comments about generative AI, I'd be interested to get kind of your expanded view on how you think this tech is going to impact how consumers receive their news and information and what opportunities or risks that opens up for you in terms of your relationship with readers. And then maybe as a follow on what use cases do you see for the technology and the generation or repackaging of some of the news content you produce? Thank you.

David, a very thoughtful question. We're obviously at an early stage of the evolution of generative AI. It will have a profound impact. And I was recently in Tokyo seeing our teams. And in recent months HarperCollins, Japan has been using sophisticated programs to create images for manga stories by transforming a sketch or a photo or just inputting words three separate generative AI programs. You use an image from our library to create complete manga sets, obviously saving a lot of time, and transforming potentially the character of that business. But it's not only going to have an impact on content. It will clearly have a profound impact on the management of the business, whether customer service or billing or whatever. I mean one contradiction of any businesses that the more you customize the harder and more expensive it is to scale. And that contradiction can be overcome with AI. I think as the well known management consultant Socrates observed, the secret of change is to focus all of your energy not on fighting the old but building the new.

Thanks, David. Leila we'll take our next question please.

Our next question comes from Kane Hannan from Goldman Sachs.

Good morning guys. Thanks for the question. Maybe just the cost out which interested, I suppose some of the commentary there particularly Dow Jones and books was pretty positive on the top line outlook and how things have been improving. There's interested why the cost targets been upgraded with that backdrop. And I suppose as a follow on to that, just what the net benefit of the [indiscernible] program was in the first quarter, if we think about all in with the restructuring charges potentially coming through? Just --

Kane look, obviously, the headcount reduction is about calibration or celebration, but it's fair to say that the savings will exceed the significantly the 136 million that we identified in the last earnings call and will now surpass 160 million that's attributed to the diligence of our teams undertaking difficult work. And I do emphasize that's just one element of the cost cutting that's underway at the company we've severely scrutinize everything from tech spend and travel expenses. So the total savings number next year will obviously exceed that total.

And Kane Just to add our business units, they're quite experienced to identifying areas for improvement, and we can leverage those across the group as we looked for cost savings, which is one of the reasons we've been able to drive additional cost savings. We're not going to get into the details without sort of the net off of the cost savings but we can expect that as we head into fiscal [2024] from Q1 we really would expect to see the majority of both cost savings on with P&L.

Thanks Kane. Leyla, we'll take our next question, please.

Next question comes from Craig Huber from Huber Research. [Operator Instructions].

Yes. Hi, Craig Huber. Thank you. Had a similar question on the costs. Obviously, you announced five headcount reduction three months ago, roughly about 2% of total costs. Can you quantify all what the other cost savings you're talking about is I mean, few companies just reduce headcount don't touch other stuff. And you guys are taking calls out elsewhere ? Can you quantify that for us? Is that possible?

We haven't quantified it, Craig. But what I can say is it cuts across lots of different areas. We're looking at discretionary spend, as you'd expect office expenses, T&E we have a look across our print sites, and we're constantly looking for opportunities around our manufacturing plants and what we can do there. We look at our casual cost base with the variable costs. We have a look at marketing costs as well. So it's really a variety of costs that we continue to focus on. And as I said that the businesses are pretty good at actually having a look at this now.

Thanks Craig. Leyla we'll take our next question, please.

Next question will come from Darren Lung from Macquarie.

Hello, guys, thanks for the opportunity. I just want to ask around the higher printing costs and supply chain issues in books, please. So I think we're talking about it being a headwind in prior periods and looking at it looks like it's flat versus the prior year. Can you just give us a view as to what we've achieved or what's changed in the business to sort of maintain that please?

Actually, I think the comps are up year-on-year because we are still experiencing some of the supply chain pressures. I mean, what I would say is freight costs, we're seeing a moderating of that as we're seeing an easing of some of the supply chain pressures on shipping costs. But we are seeing enhanced paper costs still coming through and we're seeing some additional fuel costs are coming in because of the inflationary pressures. So it was a little bit mixed. We are seeing the moderation but they have been up.

And Darren just to supplement Susan. Of course, what has been particularly prevalent over the past year is the change in purchasing rhythm, [indiscernible] Amazon and now that the reset has been reset, we have more confidence in the profitability of HarperCollins. And no doubt that the current crop of best sellers will make a positive difference in coming quarters.

Thank you, Darren, Leyla we will take our next question, please.

Our next question comes from Alan Gould from Loop Capital.

Thanks for taking the question. Robert, Susan I'm always shocked how well the news media business continues to hold up. Two things on there. Can you give us a little more detail of what's happening with Talk TV and the plans to turn that profitably? And secondly, just shocked to see print advertising actually doing better than digital advertising this quarter? What is happening there?

Well, on the Talk TV we've always said it will be a low cost high quality project. And it will constantly review progress and technological developments that give us flexibility in delivery and reduce expenses. In the coming months, you should see that incremental costs are falling with a naturally positive impact on our earnings. And I have to say the venture certainly enabled us to promote products across a plethora of our platforms and enhanced video capability globally, given that we're able to slice and dice programs in different formats for different time zones. And as you can imagine, increasing our video expertise generally is a core priority for all our businesses.

I mean Alan just on the print side, I mean look at it has been a pleasant surprise. And we've seen this over the last couple of years as it relates to print advertising. It really just depends on categories. Down in Australia, they've seen a pickup in travel advertising, which has really helped down there as the market has started to open up. They do get some good tailwind through retail, in different quarters as well. So it really is variable each quarter, but it's down to the different categories.

Thanks, Alan. Leyla, we'll take our next question, please.

We'll take a follow up from Craig Huber from Huber Research. Go ahead Craig your line is open.

Your book revenues held up much better than we thought in the quarter. I mean, given the issues you guys were called out in the past about Amazon warehouses issues with them and stuff. You just talk through that or you think that's all behind you now?

Craig, as I mentioned earlier, there clearly has been an adjustment at Amazon. That adjustment as we understand is complete. And so those awkward moments are past. And now really it's down to the quality of the front list and expanding impact about backlist. For example, in the most recent quarter a backlist was 60% of sales. As you know, backlist generally is more profitable for us. And so now we have an opportunity to make the most of our excellent authors and our marketing potential.

And Craig also I mean for April, we've just had the results come in. And there has been a little bit of softness just in consumption. So we're still waiting to see where consumption settles down in the post COVID world. But pleasingly, the results for Q3 were much better than the first half.

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

At this time, we have no further questions. So I'll hand back to Michael Florin for closing remarks.

Great. Well, thank you, Leila. And thank you all for participating. Have a great day. And we'll talk to you soon. Take care.