Good day, and welcome to the News Corp 2Q FY 2018 Earnings Conference Call. Today's call is being recorded. Media is invited on a listen only basis. At this time, I'd like to turn the conference over to Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead, sir.
Thank you very much, Justin. Hello, everyone, and welcome to News Corp's fiscal Q2 2018 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 Thompson, Chief Executive and Susan Panuccio, Chief Financial Officer. We will open with some prepared remarks and then we will 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 ks 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 will pass it over to Robert Thompson for some opening comments.
Thank you, Mike. The robust results for the first half of this fiscal year highlight the virtue of our strategy to become increasingly digital and global, the discipline of our financial management and our commitment to premium content and to high quality, high integrity news. 2nd quarter revenues grew 3 percent to $2,200,000,000 and reported total segment EBITDA was up 1% to $329,000,000 First half revenues were up 4% and reported segment EBITDA rose 27%. Clearly, there are profound changes taking place in the creation and the distribution of digital content. The big tech disruptors are in the midst of a particularly disruptive period, commercially, socially, and politically.
We appreciate that Google has ended the prejudicial first click free and that Facebook is prioritizing provenance, but these are modest steps towards changing a digital environment that is dysfunctional and sometimes dystopian. With the support of Rupert and Lachlan Murdoch and the clear backing of the NuScore Board, our company has long been the strongest international advocate of necessary changes to this mephitic landscape. It is certainly in the interest of our shareholders that there be a digital reorientation towards quality and integrity and that more people are encouraged to pay for professional journalism. There is a social and commercial value to journalism, but that value needs to be valued by the digital publishing platforms. The bot infested badlands are hardly a safe space for advertisers, whose brands are being tarnished by association with the extreme, the violent, and the repulsive.
Now, let's get into the details of this quarter's results. I'll start with Digital Real Estate Services, which once again reported a strong quarter with 21% revenue growth and 25% EBITDA growth, solidifying its role as a significant engine of expansion at News Corp. At Move, home of realtor.com, revenues rose by 18% and core real estate revenues expanded by a healthy 22%. Realtors connections for buyers product continues to thrive with accelerated traffic growth as well as a continued boost in customer and lead volume in the Q2. There is an ongoing drive to increase the profile of realtordot com as we have the highest consumer engagement and highest ROI for agents and brokers based on our latest metrics.
We're also making concerted push in the New York market with an emphasis on having the most extensive listings and always enlightening editorial. The realtor.com roadmap includes enhancements to our software and services products, which we believe provide best in class leads for brokers and the most comprehensive suite of essential tools. Realtor.com will also continue to focus on driving engagement with My Home, which extends usage beyond search and discovery and allows owners to claim their home online and provides data that will be the basis of added value adjacencies. REA maintains a healthy lead over its stumbling competitor in Australia's digital real estate market, with 24% revenue growth year over year. Since the launch of home loans, which is part of the company's broader expansion into financial services, REA had over 150,000 self completed financial profiles by the end of January.
Traffic continued to expand this quarter with REA maintaining a sizable lead over the number 2 player in the market. We saw yet another strong quarter in book publishing with solid EBITDA growth at HarperCollins. There were vigorous sales from our Children's Backlist and for Bad Dad by the multi talented David Walliams in the UK. Meanwhile, the success of Rea Drummond's Pioneer Woman Cooks recipe book was yet another indicator of the power of America's Heartland audience. We're excited by the early success of A.
J. Finn's debut novel, The Woman in the Window, which came out in January, and the ongoing success of the subtle art of not giving an expletive. We continue to look for ways to leverage our unique titles and creativity. As announced during this past quarter, Amazon plans to license The Lord of the Rings rights for the creation of an original television series, underscoring the great value of our backlist. As JRR Tolkien himself wrote, Still around the corner, there may wait, a new road or secret gate.
The performance of the News and Information Services segment was relatively stable, with notable improvements in profit contribution from the U. K. And Australia. At Dow Jones, circulation revenue growth remained robust with a 10% increase year over year. We are nearing the short term goal of 3,000,000 total subscribers with 2,800,000 subscribers to Dow Jones consumer products in the quarter.
The Wall Street Journal experienced an approximate 12% increase in circulation revenues year over year. Meanwhile, our professional information business is muscular, powered by risk and compliance, which grew over 40% this quarter. Companies simply must invest in reducing risk and enhancing compliance, and Dow Jones has the necessary tools in both of these imperative areas. At the New York Post, digital ad growth was a robust 35% and represents 60% of total ad revenues for the quarter. This quarter, we launched News IQ, our premium digital advertising platform, which has authenticated audiences and the highest quality journalism and content in the U.
S. There is keen interest in leveraging our first party data and brand enhancing environments, which are in stark contrast to the tainted placements on so many digital platforms. The power of News IQ also comes from concentrated collaboration across many of our business units, which will intensify as we drive our advertising business in the U. S. And pursue longer term plans for global expansion.
At News UK, we saw modest ad growth for the first time since 2011, driven by emerging digital ad revenue growth at The Sun, where there were over 90,000,000 global average monthly uniques in the 2nd quarter. Importantly, we continue to see improved engagement in the U. K. Audience highlighted by higher page views and minutes per session according to comScore data. The increasingly popular Sunsavers program, which grew to more than 490,000 registrations as of this week, is expected to generate higher levels of engagement.
It is also allowing us to gather permissioned data on readers, traditionally difficult for a paper with strong newsstand sales. Meanwhile, The Times and Sunday Times continue to gain market share and digital subscribers grew 20% versus the prior year. At Wireless Group, we saw improvement in revenues at its stations as its stations extended their reach and listening hours. Wireless is now home to 2 of the U. K.
Fastest growing stations, led by Virgin Radio, which grew its reach by over 60% year over year based on the latest independent data and TalkSPORT 2, up about 40% in reach during the same period. It is worth noting that Unruly had its best quarter ever in terms of total revenue, led by particularly buoyant growth in the U. S. As announced last week, the astute and acute Norm Johnson is assuming the CEO role at Unruly and Co Founder, Sarah Wood, will become Chair of the Unruly Board and continue to exercise a positive influence. News Corp Australia remained the largest print and digital publisher with an audience of approximately 16,000,000 per month.
We saw an acceleration in digital advertising revenue growth, reflecting several changes in the sales structure that better aligned our teams with the evolving need of advertising. And we remain focused on cost management initiatives to improve operating efficiency, resulting in higher contribution to profitability. Susan, who has just returned from Australia, will shortly elaborate on these positive developments. The Australian continued to grow digital subscribers crossing the 100,000 mark for the first time. Significantly, more than 50% of its paid weekday volume is now digital.
On the proposed combination of Foxtel and FOX Sports, we received both ACCC and FIRB approvals and are in the process of finalizing what is a complex arrangement with Telstra. That focus has given us an opportunity to begin the reshaping of the 2 companies and the first step with the appointment of a new Foxtel CEO, the excellent Patrick Delaney. We would like to thank his predecessor, Peter Tonner, for his sterling contribution during the transitional period and to News Corp over many years. Once again, this strong quarter showcased the benefits of News Corp's digital strategy, the value of being disciplined on costs and the efficacy of ever increasing cooperation among our companies. Before I turn the platform over to Susan to expand on our results, one final word about taxes.
Passage of tax reform in the United States should be beneficial to our company and our people, our investors, and our customers. At the founding of the new news, we had strong confidence in the potential for U. S. Growth. We have invested significantly in U.
S. Digital real estate and U. S. Book publishing, for example, and expect to reap even greater rewards, thanks to the tax reform program, which will make the country a better place to do business and create more opportunities for all Americans. And now over to Sue.
Thank you, Robert. Turning to the financials, we delivered another quarter of strong operating results. Fiscal 2018 second quarter total revenues were around $2,200,000,000 an increase of $64,000,000 or 3% compared to the prior year led by our Digital Real Estate Services segment. Reported total segment EBITDA was $329,000,000 up from $325,000,000 in the prior year. For the quarter, earnings per share were a loss of $0.14 compared to a loss of $0.50 in the prior year.
This quarter's results include a charge related to the remeasurement of deferred tax assets due to the lowering of the U. S. Corporate tax rate. I'll discuss in a few moments the expected impact from the U. S.
Tax reform going forward. You may recall the prior year period included a pre tax non cash impairment charge of $310,000,000 related to the Australian Publishing Division fixed assets and a $227,000,000 pre tax non cash write down related to the adjustment of the carrying value of the company's investment in Foxtel. Adjusted earnings per share, which excludes those items and the other items shown in the press release reconciliation table were $0.24 compared to $0.19 in the prior year. Turning now to the individual operating segments. In News and Information Services, revenues for the quarter were $1,300,000,000 relatively flat with the prior year.
The acquisition of Australian Regional Media or ARM and foreign exchange contributed $30,000,000 $33,000,000 respectively this quarter. Within segment revenues, advertising was down 6% and circulation and subscription revenues increased 6%. Within our core News businesses, Dow Jones revenues rose 1%, News UK grew by 7% and News Australia grew by 4%. These increases were offset by a 16% decline at News America Marketing as we flagged during the last earnings call. More revenue details will be provided in the 10 Q filing tomorrow.
Segment EBITDA this quarter was $140,000,000 down $2,000,000 versus the prior year as year over year improvement at News UK and News Australia were more than offset by weaknesses at News America Marketing and higher marketing costs at Dow Jones. A few highlights to mention from the segment. We saw digital subscription growth across our News businesses. At Dow Jones, circulation revenues grew 10%, the 3rd consecutive quarter of double digit growth, benefiting from 29 percentage points growth in WSJ digital only subscribers and higher subscription ARPU. Digital now accounts for over 50% of Dow Jones circulation revenue.
We also saw strong digital subscriber growth at The Times and The Sunday Times, up 20% from Q2 2017 and at News Australia, up 26%, including a contribution from ARM. At Dow Jones, we are also building on the renewed momentum at our Professional Information business, which posted 8 percentage points revenue growth, thanks to the continued strong performance from Risk and Compliance, as Robert mentioned. We posted the highest revenue level since the Q4 of fiscal 2014. Advertising continues to be mixed across the respective divisions. Within the businesses, we saw advertising growth in the U.
K. Of 9 percent or 2% in local currency, the first increase in 27 quarters driven by digital advertising growth from The Sun with a global audience that reached over 90,000,000 monthly unique users in the 2nd quarter, as well as moderating print advertising declines. While at News Australia, advertising revenues improved 3 percentage points, but still had an overall decline of 10% versus the prior year after excluding the impact of currency and acquisitions and divestitures, which was consistent with the previous quarter. And at Dow Jones, advertising was down mid teens, a slight acceleration on the trend from the Q1. The closure of the Wall Street Journal International print editions impacted Dow Jones advertising revenues by $6,000,000 or 4 percentage points for the quarter.
International expansion continues to be a strategic focus for Dow Jones and despite the print closure, our total Wall Street Journal International subscriber base still grew 28% versus the prior year. We continue to push very hard on our cost transformation program, notably in Australia, with savings expected to be well ahead of the Australian dollar $40,000,000 realized last year. The program extends across every area from overheads to advertising sales consolidation to newsprint and production and photography. This quarter, as Robert mentioned, News Australia's profitability improved and increased its contribution to segment EBITDA. With the integration of ARM, we continue to actively look at optimizing the broader Australian portfolio with a focus on profitable growth.
We had a similar story in the U. K, which also drove higher profitability this quarter. Finally, at News America Marketing, revenues were impacted by ongoing weakness in freestanding insert revenues, which had 2 fewer inserts versus the prior year and lower custom publishing as well as slightly lower revenues from in store products impacted by fewer new consumer product launches this year. Part of the decline was timing related and we should see a sequential improvement this coming quarter. Turning to our Book Publishing segment.
We posted a solid quarter despite facing a difficult prior year comparable quarter. Revenues for the quarter increased approximately 1% to $469,000,000 and segment EBITDA increased 7% to $80,000,000 Titles to highlight this quarter included Bad Dad by David Wellams in the UK and Pioneer Woman Cooks Come and Get It by Re Drummond, as well as strong performances from the Children's Backlist, including The Hate U Give by Angie Thomas and a few titles from Shel Silverstein, including The Giving Tree. Christian Publishing revenues were lower than the prior year due to the absence of sales from the release of The Magnolia Story, which was amongst our most successful titles last year. Prior year revenues also benefited from Settle for More and Hillbilly Elegy. Overall, the backlist contributed approximately 53% of revenues in the quarter, up from 49% last year.
Total digital revenues for the quarter grew 2% and represented 16% of consumer revenues, in line with the prior year due to the strength in downloadable audiobook. In the Digital Real Estate Services segment, revenues increased 21% to $292,000,000 Reported segment EBITDA was $119,000,000 versus $95,000,000 last year, up 25%. REA Group revenues grew 24% due to very strong residential debt revenue growth in Australia, including higher penetration for Premier All, the integration of the SmartLine acquisition and modest benefit from currency. In Australia, while total residential listings were marginally lower, listings grew in the key markets of Melbourne and Sydney. The results were also impacted by the sale of the European business last year.
Please refer to REA's earnings release and their conference call, which will commence shortly after this call for additional details. Move revenues rose 18% to $110,000,000 versus the prior year, driven by a very strong performance from connection for buyers, which is benefiting from strong lead growth from strong growth in lead volume as well as improving pricing optimization and inventory management. The prior year included $2,000,000 related to Tiger Lead, which was divested in November 2016. Average monthly unique users at realtor.com were over 50,000,000 for the quarter, rising mid teens compared to the prior year. In Cable Network Programming, revenues increased $16,000,000 or 15% to $120,000,000 compared to the prior year quarter, driven by the inclusion of Sky News, which added approximately $8,000,000 to revenues and higher affiliate fees from Foxtel.
Segment EBITDA in the quarter fell to $33,000,000 from $51,000,000 primarily due to the phasing of programming amortization related to the NRL contract, which led to approximately $22,000,000 of higher costs this quarter. We also incurred approximately $2,000,000 related to proposed combination of Foxtel Fox Sports, which was excluded from adjusted EBITDA. With respect to equity losses from affiliates, equity losses were $18,000,000 this quarter compared to losses of $238,000,000 last year, which included the write down related to the adjustment of the carrying value of the company's investment in Foxtel. Foxtel revenues for the 2nd quarter declined 1% to $598,000,000 and EBITDA decreased 19% due to planned increases in sports programming costs of $23,000,000 primarily related to the Australian Football League rights, partially offset by lower sales and marketing costs. On operating metrics, Foxtel's total closing subscribers were were approximately 2,800,000 as of December 31, 2017, which was lower than the prior year, primarily due to the shutdown of Presto.
In the 2nd quarter, cable and satellite churn was 14.5%, down from 15.6% and broadcast ARPU was down 2%. Regarding the pending transaction with FOX Sports, we were pleased with the Australian Competition and Consumer Commissions and the Foreign Investment Review Board's decisions to approve the combination of Foxconn and Fox Sports into a new company. As Robert has mentioned, commercial negotiations with Telstra are ongoing and the transaction remains on track to close subject to board approval in the first half of calendar twenty eighteen. On the impact of the company from the recently approved U. S.
Tax reform package, I would like to make a few points. The $174,000,000 charge in this quarter primarily reflects the remeasurement of our U. S. Deferred tax assets and liabilities at the lowest statutory federal rate of 21% from 35%. As we are on the June 30 fiscal year end, the impact of the lower corporate tax rate will be phased in resulting in a U.
S. Statutory federal tax rate of approximately 28% for the fiscal year ending June 30, 2018, and a 21% U. S. Statutory federal rate for fiscal years thereafter. Our effective tax rate should be modestly higher given our significant business operations in Australia, where the corporate tax rate remains at 30%.
Looking forward to the Q3, there are a few comments I would like to make. At News and Information Services, at this point, advertising trends appear broadly in line with the 2nd quarter, but visibility remains limited. At FOX Sports Australia, we expect to face higher costs in the Q3 due to the amortization of NRL rights throughout the year, similar to the impact in the Q2. We expect approximately A330,000,000 in higher costs for the Q3 compared to the prior year, with the full year costs expected to increase by AUD 30,000,000 to $40,000,000 as previously mentioned. In Book Publishing, overall trends remain favorable.
As Robert mentioned, we're very excited about A. J. Finn's The Woman in the Window, which is off to a great start. This quarter, we also have the release of Amy Krauss Rosenthal and her daughter Paris Rosenthal's Dear Girl, another bestseller in its early weeks. At Digital Real Estate Services, we expect continued strong revenue growth at REA, including incremental revenues from the expansion into the mortgage brokerage business.
However, as noted in its ASX announcement, REA expects to see higher cost growth in the Q3 and listings will be impacted by the timing of Easter, which will fall in the Q3. We also expect to see higher investment spending at Move to support new products and to drive higher engagement. With that, let me hand it over to the operator for Q and A.
Thank Our first question today comes from Incho Raykovitsky with Deutsche Bank.
Hi, Robert. Hi, Susan. My question is around Foxtel and FOX Sports. And I just wanted to get your perspective on the combined entities appetite to bid for cricket rights in Australia, given they're coming up for tender very shortly. And is there any change in strategy for the entity under Patrick Delaney as CEO, which, Robert, you've obviously spoken about?
Anshu, thanks. So look, for those of you who are not familiar with sport in Australia, cricket is, for many people, an interesting game. It's complicated. It has various forms, 5 day tests, 1 days, big bash, 20 over games. And clearly, it's a part of the Australian summer and Australian viewing in the summer that we are interested in.
But it will be frustrating over coming weeks to track the negotiations with cricket rights. But it's pretty fair to say that we aren't going to pay ridiculous prices for any rides anywhere in the world. But what we do have for any sport is the best possible platform for engagement, both through broadcast and digital. And also we have, as you just mentioned, Patrick Delaney, who has a background in Foxtel, did a marvelous job at FOX Sports and is now overseeing Tower, and he'll be very much involved in guiding us on what's the appropriate course of action with cricket. And no doubt focusing in particular on the upcoming selling season for the winter sports, which is the most crucial sales period for us and Foxtel and frankly Fox Sports in the year because we have in the autumn the launch of the AFL season Aussie Rules and NRL, which is rugby league, the 2 most watched sports in Australia.
Thank you, Ancho. Justin, we'll take our next question, please.
Thank you. That question will come from Craig Huber with Huber Research Partners.
Yes. Hi. Thanks for taking the question. Just what's the updated thoughts of you whether you have upwards of $2,000,000,000 of cash on your balance sheet? Just investors always wondering what the plan is for that, please?
Thanks.
Hi, Craig. Susan here. I think it's a good question and we've talked about this before. We continue to remain focused on investment with that cash and we would continue to look at opportunities that may arise. But we do remain flexible to having a look at any option that retains value for our shareholders.
Thank you, Craig. Justin, we'll take our next question, please.
Certainly. That question will come from Brian Han with Morningstar.
Thank you. In the News and Information segment, how much in cost reduction was spent in the 2nd quarter results? And also, how deep do you think the world is there before you start to impact on your product quality?
So I think the actual when you look at the numbers, it looks like the costs are relatively flat. But if you exclude M and A and currency, the costs are actually down 5% quarter on quarter, year on year. So I think we remain very pleased with the cost reduction work that those businesses are doing particularly in Australia and across the U. K. As far as focusing on whether it impacts on our product, we continue to look at back office overheads, corporate functions.
We look at platform consolidation, production and manufacturing, which we constantly can continue to find cost savings with as the business is rationalized. So I think we remain very comfortable that we're getting the balance right between cost reduction reinvestment in our digital properties and in fact our print properties going forward.
Thank you, Brian. Justin, we'll take our next question please.
Our next question will come from Eric Katz with Wells Fargo. Hi, thank you. You guys are seeing some nice growth in circulation and subscription revenue. But how should we think about the impact on advertising as more people migrate to digital? I assume that there's a different sort of economics around digital advertising versus print.
So any color would be helpful there. Thank you.
We're still in the midst of, obviously, a transition from print, print, which remains a strong platform. And we're seeing that with a new real estate magazine that we're launching in coming months, which is oversubscribed by advertisers. So don't discount print. But the digital market itself really is in the midst of upheaval, where you have both advertisers and ad agencies reviewing their role in the market. A great deal of concern about the sort of environments in which famous prestigious advertisers find themselves.
And I think what we are gradually going to see, and I think we have little doubt about this, is that there will be a migration to premium. And that's where we have a comparative advantage because our titles around the world are the leading titles in their markets. And to supplement that, we are creating News IQ, which is our own in house based advertising platform, taking advantage of the great inventory we have and the authenticated audiences we have and being able to offer advertisers an opportunity to project their image and their wares in a space that won't be detrimental to their image, but brand enhancing. Okay.
Thank you, Eric. Justin, we'll take our next question.
That does conclude the question and answer session. I'll now turn the conference back over to you for any additional or closing remarks.
Great. Thank you, Justin, and thank you for all participating. Have a great day.
Well, thank you. That does conclude today's conference. We do thank you for your participation today.