Thomson Reuters Corporation

Good day, everyone, and welcome to the fourth quarter and full year 2022 earnings call hosted by Gary Bisbee, head of investor relations. My name is Ben, and I am your event manager. During the presentation, your lines will remain on listen only. If you require assistance at any time, please press star zero on your device, and the coordinator will be happy to assist you. I'd like to advise all parties that this conference is being recorded for replay purposes. And now allow me to hand it over to your host. Gary, the word is yours.

Thanks, Ben. Good morning, and thank you, everyone, for joining us today for our fourth quarter and full year 2022 earnings call. I'm joined today by our CEO, Steve Hasker, and our CFO, Mike Eastwood, who will discuss the 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 would 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 rate for 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 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. The 2022 was a year of great change and progress at Thomson Reuters. So let me start by reviewing some of our key accomplishments. First, we delivered another year of strong financial results, meeting or exceeding our key financial targets. The Q4, and the full year, organic revenue rose 6%, driven by a 7% recurring revenue. The big three segments also grew 7% organically. Despite unprecedented inflationary pressure and continued investments, our full year margins rose 410 basis points to 35.1%, and we achieved our free cash flow forecast of $1.3 billion. Due to our 2022 performance and continued solid book of business, our full year 2023 outlook for organic revenue and adjusted EBITDA margins are unchanged from our commentary last quarter. Mike will provide more details on our outlook later in the call. We successfully completed our change program at year end, delivering our financial targets and making significant progress in transforming Thomson Reuters into a more streamlined and scalable business. Importantly, change program progress provides a strong foundation for sustainable future growth. I will discuss these benefits in more detail in a minute. 2022 was also a year of progress from an innovation and product perspective. The highlight was the September launch of Westlaw Precision. Beyond Westlaw, 2022 successes range from a continued focus on product stability, performance and user experience improvements, to new offerings and capabilities added across our portfolio. We also added a number of new third-party product integrations. Our capital capacity and liquidity remain a key asset that we're focused on deploying to create shareholder value, and we made good progress on this during 2022. Through year end, we repurchased $1.3 billion on the $2 billion share buyback program we announced in June 2022. We plan to complete the program by early Q2. As Mike will review in more detail, after completing the buyback, we intend to execute a return of capital with a concurrent share consolidation of at least $2 billion, funded by proceeds from our sales of Belseg shares. We also made progress on M&A, having closed the $500 million acquisition of SurePrep on January 3. This follows three smaller tuck-ins during 2022. We continue to assess inorganic opportunities, and we are optimistic that we'll be able to execute additional strategic transactions in 2023, while simultaneously completing the $2 billion share buyback program and $2 billion return of capital. Lastly, Let me briefly comment on market conditions as we enter 2023. While we acknowledge a challenging and uncertain macroeconomic environment, we're blessed with a highly resilient business. 80% of our revenues are recurring and we operate in historically stable and growing end markets. We're closely monitoring our customer sales activity and continue to see the sales cycle lengthening in corporates but as we mentioned last quarter, though activity overall through early Q1 remains on track to deliver our 2023 targets. Regardless of how the macro unfolds, our focus will remain on leveraging our content, our technology and our service for the benefit of customers. Now for the results for the quarter. Fourth quarter reported revenues grew 3%, including a 2% drag from foreign currency and a 1% from recent divestitures. Organic revenue, which is a constant currency metric, rose 6%. Organic recurring revenue again grew 7%, with transactional revenue growing 5% in line with our expectations. Adjusted EBITDA increased to $633 million, reflecting a 950 basis point margin improvement to 35.9%. Excluding costs related to the change program, The adjusted EBITDA margin was 39.3%. Adjusted earnings per share rose 70% year over year to 73 cents. Turning to fourth quarter results by the segment, the big three businesses achieved organic revenue growth of 7%. Legal organic revenue growth moderated to 5% from 6% pace in recent quarters. The slight deceleration was driven by weaker performance in our elite and government businesses, which Mike will cover in more detail later. Apart from this, demand for our legal solutions remains very healthy across all key segments, and we expect a return to the 6% growth trend in the second half of 2023, driven by continued momentum in Westlaw, Practical Law, IQ, and other key offerings. Turning to corporates, organic revenue growth momentum continued, with revenue up 9%. Recurring revenue rose 11%, while transactional revenue softened as expected. Tax and accounting had another solid quarter, with organic revenue growth of 8%. Our Latin American business, led by Dominio, grew over 25% in the quarter and remains a key growth driver. Reuters News organic revenues increased 10% in Q4. Growth continued across all lines of business, especially at Reuters events. And finally, global print organic revenues were down 1%, again, better than expected, due to improved retention, better third-party print revenue, and timing benefits that we expect to normalise in the first quarter of 2023. In summary, we're pleased with our results and the solid momentum across our businesses. Full year reported revenues rose 4%, including a nearly 2% foreign exchange drag, and organic revenues grew 6%. Adjusted EBITDA increased 18% to $2.3 billion, driven by revenue growth and savings associated with the change program, resulting in a margin of 35.1%. Excluding change program costs, Adjusted EBITDA margin was 37.7%, 380 basis points higher than in 2021. Adjusted earnings per share for the year was $2.56 compared to $1.95 per share in the prior year. Let me finish on the financials for the full year by noting that we met or exceeded nearly all of our 2022 guidance metrics. The only exceptions were CAPEX, which was slightly higher due to inflationary pressures, and total revenue growth, which was impacted by the Q4 divestitures. Now we'll spend a few minutes discussing the completion of the change program and several growth updates. The end of 2022 brings to a close our change program, which was an extraordinary 24 months of effort and progress at Thomson Reuters. As a reminder, the change program had two overarching goals. First, transitioning from a holding company to an operating company, and second, from a content company to a content-driven technology company. We pursued these two goals through dozens of work streams. In total, we invested just shy of $600 million and have broadly delivered against our financial targets, with $540 million of run rate savings achieved of December 31st we highlight a number of key accomplishments on slide 11 while there remains work to do we are very proud of what we've accomplished and how we have transformed the business today we are a more focused and performance driven company with improved organic revenue growth and profitability and a stronger portfolio looking forward we believe the largest legacy of the change program will be the foundation that it provides for improved, sustainable growth. This includes a simpler product portfolio with more focused investment on our best opportunities, improved customer-facing capabilities, including digital and self-serve, reimagined customer platforms and user experience, and service enhancements. Modernized technology, including expanded APIs, our conversion to the cloud, improved cyber resilience, and reduced tech debt. And lastly, upgraded talent with a more flexible footprint, including scaled global capability centers and a truly world-class talent across the organization. The resulting more streamlined and scalable business, along with the success from our product and engineering organizations, provides us with confidence in our ability to organically innovate, which we believe positions us well to sustain our recent healthy organic revenue growth in the future. Building on that point, I'll mention a few factors that have contributed to our revenue acceleration in recent years. During our March 2021 Investor Day, we discussed the seven strategic growth priorities shown on slide 13. We continue to focus our investment on these key businesses, which grew 8% on a combined basis in 2022, up from 6.5% in 2021. Product and innovation remains an important focus. The launch of Westlaw Precision was a key 2022 highlight. and the good news there continues. To date, we have recorded more than 750 precision sales across all customer types, including to court systems in 14 states. We remain confident this momentum will continue in 2023. Aside from Westlaw, 2022 saw a number of key offerings and key enhancements across the portfolio, including expanded HiQ contract lifecycle management capabilities, and a new document intelligence offering in our legal portfolio, a new free trade agreement analyzer offering in our global trade management area, a new global beneficial ownership solution for Clear, and expanded features and capabilities across several products in our tax portfolio. Looking to 2023, we have a strong and focused product roadmap that we expect to deliver continued value for our customers and growth potential for Thomson Reuters. In addition to driving organic growth, we're focused on creating shareholder value through the deployment of what we estimate to be $11 billion of capital capacity between now and 2025. This leaves us in an enviable position to both fund strategic M&A and significant capital returns to shareholders. Mike will cover shareholder returns in his commentary, and I'll briefly discuss our approach to M&A. As we've stated in the past, we're not looking for transformational deals or to add a new operating segment. Instead, we are focused on acquiring high-quality assets that can strengthen our big three customer segments. We list several areas of interest on slide 15. We will remain disciplined in our approach and we will be patient in searching out assets that meet our criteria, including strategic, operational, and cultural fit, in addition to meeting our financial hurdles. While we consider a range of situations, our focus is on purchases that can replicate a tested and successful M&A playbook in which we acquire quality assets in our areas of expertise. We then integrate and invest behind the acquired assets and leverage our extensive distribution and large customer reach to grow these businesses over a multi-year period. This playbook has been executed many times in the past. and most recently with the 2019 acquisitions of Confirmation and HiQ. In both cases, revenue has doubled during our three plus years of ownership, and we continue to see strong potential for both assets. There are many earlier examples of this same playbook, including the 2013 acquisition of Practical Law, among others. So moving from strategy to execution, we're excited to have closed the acquisition of SurePrep on January 3 and we welcome the SurePrep team to Thomson Reuters. We see SurePrep as a great fit with the acquisition approach and criteria I just discussed and we're focused on executing our acquisition playbook to drive significant growth from this business over time. SurePrep is a best-in-class provider of tax workflow automation software and services. Its offerings streamline and automate first mile pain points for accountants, significantly reducing time and increasing efficiency of tax return workflows. We believe SurePrep's trained AI models are years ahead of the competition and its automated coverage of tax documents is industry leading. SurePrep is a compelling strategic fit with our tax and accounting business. In combination with our leading research and client software, SurePrep's document collection and data extraction technology allow us to offer truly end-to-end automated workflow solutions. I'll close my comments by noting that we're in a strong position with significant dry powder in what we believe is an increasingly buyer-friendly market. We're optimistic that we can complete other SurePrep-like acquisitions in the next 12 to 18 months that strengthen the proposition of our big three segments. In closing, I'll leave you with two key messages. First, our success in completing the change program positions us well to deliver improved, consistent growth in the future. And second, we are making progress in deploying our significant financial capacity and remain focused on doing so in a way that creates shareholder value. Mike, over to you.