Thomson Reuters Corporation

Good day, everyone, and welcome to the Q2 2022 earnings call hosted by Gary Bisbee, Head of Investor Relations. My name is Anika, and I'm your operator today. During the presentation, lines will remain listen-only. If you require assistance at any time, you just key star zero in your phone, and the coordinator will be happy to assist you. I would like to advise all parties that this conference is being recorded for replay purposes. And with that, I'd like to hand it over to Gary. Please, go ahead.

Thank you. Good morning, everyone, and thank you for joining us today for Thomson Reuters' second quarter 2022 earnings call. I'm joined today by our CEO, Steve Hasker, and our CFO, Mike Eastwood, each of whom will discuss our results and take your questions following their remarks. To enable us to get to as many questions as possible, we would appreciate it if you'd limit yourself to one question and one follow-up each when we open the phone lines. 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. We believe this provides the best basis to measure the underlying performance of the business. Today's presentation contains forward-looking statements and non-IFRS financial measures. Actual results may differ materially due to a number of risks and uncertainties 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. Let me now turn it over to Steve Hasker.

Thank you, Gary, and thanks to all of you for joining us today. Now on to our Q2 highlights. I'm pleased to report the momentum that has been building in our businesses continued in the second quarter, with healthy sales and revenue ahead of our expectations. Four of our five business segments again recorded organic revenue growth of 6% or greater, and total company organic revenues rose 7%. our big three business segments also grew 7% organically. We see internal and external drivers of our improving momentum. Solid execution and efforts to better prioritise investments toward our best opportunities have contributed. And we're starting to benefit from meaningful tailwinds driven by a step change in complexity of regulation and compliance in our legal, tax and risk-related markets. We believe these tailwinds are in the early innings and position us well to continue our recent momentum over the next few years. Due to the Q2 revenue strength and healthy book of business or annual contract value growth, we are raising our full year revenue outlook. We now expect to see total revenue rising by 6% and big three revenue by 7% up from our prior views of 5.5% and 6.5% respectively. We maintain our margin outlook as we continue to invest in our businesses and also absorb heightened inflationary pressures. Overall, the strong first half provides confidence that we're on the right path to achieve our 2022 and 2023 targets. While market concerns around slowing economic growth and inflation have increased, our business is well positioned. Our momentum through Q2 was strong and leading indicators remain healthy, and we're blessed with resilient business. 80% of our revenue is recurring and we operate in historically stable and growing in markets. We also benefit from our change program efforts, which will significantly boost our margins, cash flow and earnings in 2023. Our capital capacity and liquidity remain a key asset that we're focused on reinvesting to create shareholder value. We took an important step in early June with the announcement of a $2 billion share repurchase program. Through July 31, we've purchased $394 million of our shares, and we look to complete the program within 10 months. We also continue to assess inorganic opportunities and expect to have ample capacity for both buybacks and strategic M&A. As a reminder, our acquisition focus includes workflow software and automation in our legal and tax markets, risk, fraud, and compliance, and targeted international expansion. For example, in legal professionals, we see a sizable opportunity to play a critical role in the tech-driven transformation of the legal profession. We are uniquely positioned to provide customers with a smarter, seamless experience through the combination of our highly differentiated research content and expertise with workflow software, The AI-driven contract analysis capabilities we gained through the recent ThoughtTrace acquisition is a step in this direction and builds upon unique capabilities like practical law and high Q. We continue to assess both organic and inorganic opportunities to further expand our capabilities and integrate our leading content with workflow solutions that drive automation and better outcomes for our customers, particularly around legal documents and contract drafting. Now to the results for the quarter. Second quarter reported revenues grew 5% with organic revenues up 7%. Organic recurring revenue again grew 7% with organic transactional revenue up a robust 13% aided by the calendar shift and the return to in-person events at our Reuters events business. While we expect transactional revenue growth to moderate in the second half, we see recurring revenue momentum continuing. Adjusted EBITDA increased to $561 million, reflecting 200 basis points margin improvement to 34.7%. Excluding costs related to the change program, the adjusted EBITDA margin was 36.6%. This strong performance resulted in adjusted earnings per share of $0.60, up from $0.48 in the prior year period. Turning to the second quarter results by segment. the big three businesses achieved organic revenue growth of 7%, reflecting broad strength. Legal continued its recent momentum, delivering a fifth consecutive quarter of 6% organic growth. The legal market remains healthy across all key segments, small, mid, and large-sized US firms, government customers, and in key overseas markets. For example, Westlaw Edge adoption continues to drive revenue, and we continue to expect annual contract value penetration to approach 75% by year-end from 65% at the end of 2021. Second, practical law, which contributes to growth in both corporates and legal segments, continued a strong performance with a quarter of double-digit revenue growth. And third, our government business grew 8% organically, and we see acceleration as likely in the balance of the year. Turning to corporates, organic growth momentum continued, with revenue up 9%. Recurring revenue rose a robust 9%, and transactional revenue again exceeded our expectations in rising 8%. I will discuss our corporates business in more detail shortly. Tax and accounting had another strong quarter, with organic revenue growth of 9%. A Latin America business called Dominio grew nearly 30% in the quarter and remains a key growth driver. Reuters News organic revenues increased 12% in Q2. Growth occurred across all lines of Reuters business. Events in particular was a key driver. And finally, global print organic revenues declined 1%, which was better than expected due to higher third-party print revenues and timing benefits that we expect to normalize in the remainder of 2022. In summary, we're very pleased with these results and we're excited about the momentum it's building within our businesses. Now let me take a few minutes to discuss our corporate segment and our risk, fraud and compliance businesses and why we are confident in the growth prospects of both. As we did last quarter, I'd like to provide some incremental transparency around our portfolio with a brief discussion of our corporate segment and our risk, fraud and compliance or RFC businesses. Beginning with corporates, some brief background may be useful. The segment was formed in the fourth quarter of 2018 to better serve, innovate for, and penetrate corporate users for our key legal, tax, and RFC offerings. Corporates is the number one provider of both legal and tax solutions for corporations in the United States and serves all of the Fortune 100. Momentum has built nicely over the last year with corporate's organic revenue growth accelerating from 4% in the first half of 2021 to 6% in the second half and 8% in the first half of this year. For full year 2022, we are confident in achieving the 7% to 9% organic growth target we previously set for 2023. So what's driving this momentum? We see strong growth from a range of offerings across all three product areas. Key double-digit growers, which are circled in green on the slide, include indirect tax and confirmation from our tax portfolio, practical law and high Q from legal, and clear from RFC amongst others. In total, double-digit growers in our corporate's product portfolio comprise 39% of segment revenue and are growing at a mid-teens year-over-year rate. As we described last quarter for our legal professional segment, a healthy mix shift toward these more rapidly growing offerings is contributing to our corporate's momentum. Looking forward, we remain confident in the long-term growth potential for the segment, driven by our building momentum, a healthy product portfolio, and corporate demand for actionable insights and efficiency-driven workflow tools, combined with significant addressable market and widespread penetration opportunities. Building upon this corporate discussion, I'll expand on our risk, fraud, and compliance businesses. We have historically discussed RFC as part of our legal professionals government sub-segment, which also includes our legal offerings sold into government and court system customers. However, our RFC businesses are also an important driver for corporates, which generates a bit over 40% of our RFC revenue. We have several businesses that make up our RFC franchise, led by Clear, a leading public records solution. This is complemented by Thomson Reuters Special Services, or TRSS, and Pondera, TRSS provides a combination of information, technology, and security-cleared analysts to support government customers in mitigating global risk and improving public safety. Pondera provides a cloud solution that leverages advanced algorithms to help detect fraud in government entitlement programs. Both TRSS and Pondera leverage clear data, adding insight and decisioning capabilities that extend our value-add. Our RFC businesses have contributed nicely to growth, with total RFC revenue expanding by a 16% compound annual growth rate over the last five years, and clear growing by double digits in every year since it was acquired in 2008. There have been several key drivers of this growth, including an expanding number of use cases across government and corporate customers, enhanced functionality that has bolstered usage and pricing, and growth of access through APIs, which has also boosted our partnership efforts. Looking forward, we believe that our RFC businesses are well positioned to deliver revenue growth in the teams over the next few years. We also believe our current position is a strong platform from which to consider future M&A in the RFC space. Let me go a little bit deeper on Clear, which makes up approximately two-thirds of our RFC revenue. CLEAR is a leading public records database and analytics solution powered by proprietary technology and a highly unique data set. It brings billions of data points from public records and third-party databases together to deliver insights for investigative, compliance, risk mitigation, and forward prevention purposes. Historically, CLEAR has focused on building an aggregated data set that enables investigators to perform a single search across multiple sources to uncover connections and identify risk-related information, aided by customizable and easy-to-navigate dashboards. This enhanced due diligence use case remains an important revenue and growth driver today. In recent years, we've added decisioning tools and configurable analytics around identity verification and entity risk indicators and scoring. We've also added incremental content, including sanctions lists and business beneficial ownership data. These additions have resulted in a more robust offering that has expanded customer units pricing, and they are adding to our growth runway and our customers' success. We believe Clear is a market leader with several advantages, including robust identity resolution technology, comprehensive content, real-time data connections, strong data source transparency, and a compelling analytics-driven dashboard. Our clear product NPS scores for both government and corporate users are among the highest in the company, which speaks to the value customers see in this important offering. The graphic on slide 12 illustrates how CLEAR can help customers prevent, detect, and investigate risk and fraud by answering key questions about their potential customers or counterparties. These questions demonstrate the critical need for a deep understanding of entities, both people and companies, relevant for government and corporate customers across numerous use cases, ranging from criminal investigations to identifying human trafficking networks to KYC and AML compliance, as well as others. To bring our RFC efforts to life, let me close with a real-world example from our government business. During the initial pandemic period, unemployment insurance claims skyrocketed, and unfortunately, so did fraud-related activities. The state of California processed more claims than any other state and initially struggled to process claims while minimizing fraud. It turned to a combination of our solutions using Pondera's algorithms and AI in combination with CLEAR and the state's own data to identify and verify legitimate claims and highlight potential fraudulent claims. This solution helped the state work through a backlog of 9.7 million claims in a two-week period. while accelerating payments to qualified recipients and denying fraudulent claims. Since implementation, Thomson Reuters has been a key partner in California to stop $125 billion of fraudulent claims. We're proud of the work done by our risk, fraud and compliance teams, which help support safe communities, uphold the integrity of government entitlement programs and support robust compliance efforts. Now let me turn it over to Mike who will provide more detail on the second quarter results.