Thomson Reuters Corporation

I would now like to turn the conference over to our host, Frank Golden, Head of Investor Relations. Please go ahead.

Good morning and thank you for joining us today for our fourth quarter and full year 2020 earnings call. This morning I'm joined by our CEO Steve Hasker and our CFO Mike Eastwood, each of whom will report our results and will take your questions following our presentation. They will also discuss the change program we announced this morning and our outlook for 2021 through 2023. To enable us to get to as many questions as possible, we'd appreciate it if you would limit yourselves to one question each and one follow-up when we open the phone lines later. Throughout today's presentation, when we compare performance period on period, we discuss revenue growth rates before currency. as well as on an organic basis, as we believe this provides the best basis to measure the underlying performance of the business. Today's presentation does contain forward-looking statements. Actual results may differ materially due to a number of risks and uncertainties related to the COVID-19 pandemic and other risks discussed in reports and filings that we provide from time to time to regulatory agencies. You may access these documents on our website or by contacting our investor relations department. Now I'll pass it over to Steve Hasker.

Thank you, Frank, and thanks to all of you for joining us today. I'll begin by stating that we're very pleased with our results for the fourth quarter and the full year. Our results met or exceeded our guidance targets for revenue growth, adjusted EBITDA margin, and free cash flow. Despite the enormous challenges in 2020 related to the pandemic, our performance reaffirmed the resilience of our markets and businesses. We adapted and supported our customers in their evolving ways of working, and I'm very proud and appreciative of how our people performed during this period. Now to our results. For the fourth quarter, revenues were up 2%, and adjusted EBITDA increased 33% to $525 million, reflecting a margin of 32.5%. For the full year, adjusted EBITDA margin was 33%, and includes having spent about 70 million in the fourth quarter on initiatives to better position us for 2021 and beyond. This strong performance resulted in adjusted earnings per share of 54 cents compared to 37 cents per share in the fourth quarter of last year. Turning to the segments, the big three businesses achieved organic revenue growth of 5% for the quarter. and 4% for the full year. A very good performance, particularly given the global economic environment. Legal had another good quarter and built on the third quarter's results with revenues up 5% before currency and organic revenues up 4%. Legal also recorded double digit recurring sales in the quarter and full year. Legal's recurring revenues, which are 93% of its total revenues, increased 5% organically, up from 4% in Q3. Westlaw Edge continues to drive strong sales growth and ended the quarter at a 52% ACV penetration. We expect to achieve a penetration rate of between 60% and 65% by year-end 2021. Edge has now been adopted by all US federal government courts and 42 US state court systems. Practical law ended the year nearing $400 million in revenue and grew nearly 10%. Our government business, which is managed within our legal segment, continues to see good momentum and grew 10% organically in the fourth quarter and nearly 10% for the full year. We forecast a strong performance again for 2021. Turning to the corporates business, organic revenues grew 3% for the fourth quarter, lower than expected due to an 11% decline in transaction revenues driven by lower software implementation services. Encouragingly, organic recurring revenues, which are 87% of corporates total revenues, grew 6%. For 2021, we expect stronger revenue growth as recurring revenue is expected to remain healthy and transaction revenues are expected to strengthen as implementations return. For the full year, corporate's total revenues grew 5.5% before currency, and organic revenues grew 4.5%. Tax and accounting's Q4 organic revenues ended strongly, posting growth of 8%. In Q4, we accelerated the release of some of our ultra-tax state tax software from January to December, more closely align with the traditional december release of our u.s federal software reuters news organic revenues were down three percent in q4 a better than expected performance and global print organic revenues declined 10 in line with our guidance we expect both reuters and print to improve their revenue performance in 2021 for the full year reported and organic revenues were both up one percent and revenues at constant currency were up 2%. Adjusted EBITDA increased 32% to nearly $2 billion, reflecting a margin of 33% for the year. The combination of organic revenue growth for the big three of 4%, coupled with the effective cost savings measures instituted in the first quarter, and not having incurred one-time costs as occurred in 2019, contributed to strong EBITDA margin improvement. This strong performance resulted in full year adjusted earnings per share of $1.85 versus $1.29 per share in 2019. And we're particularly pleased to report that free cash flow per share was $2.67, exceeding the target of $2.40 per share provided at our December 2018 investor day. Let me finish up on the financials by pointing out that we met or exceeded each of the financial guidance metrics we provided for 2020, which reflects the resilience of the business and visibility we have into our businesses and markets. With that, let me now turn to the change program we announced this morning. As I said last quarter, there's no doubt we have strong market positions, our customers love our content, and we're in a solid operating position as evidenced by our 2020 results, but it's imperative that we elevate our value proposition, enhance the customer experience we provide, and maximize our performance. Let me explain.