Thomson Reuters Corporation

Good day, everyone, and welcome to the Thomson Reuters second quarter earnings conference call. Today's conference is being recorded, and all phone participants are in a listen-only mode, but later you will have the opportunity to ask questions. To get us started with opening remarks and introductions, I am pleased to turn the floor to Head of Investor Relations, Mr. Gary Bisbee. Please go ahead, sir.

Thank you, Jim. Good morning, everyone. Thank you for joining us today for our second quarter 2023 earnings call. I'm joined today by our CEO, Steve Hasker, and CFO, Mike Eastwood, each of whom will discuss our results and take your questions following their remarks. David Wong, our Chief Product Officer, is also available for the Q&A. 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 when we open the phone lines. Throughout today's presentation, when we compare performance period on period, we discuss revenue growth 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 to regulatory agencies. You may access these documents on our website or by contacting our Investor Relations Department. Let me now hand it over to Steve Hasker.

Thank you, Gary, and thanks to all of you for joining us today. I'll start by reviewing our Q2 highlights. Solid momentum continued in the second quarter, with revenue largely in line and margins ahead of our expectations, although the latter was driven primarily by expense timing. Total company organic revenues grew 5%, driven by 6% recurring revenue growth. The big three segments grew 7% organically. Amid an uncertain macro backdrop, we continue to see good momentum from many areas in our business. Westlaw Precision's strong start continues, with more than 2,000 sales to date, and it contributed to legal professionals' organic revenue growth returning to 6% in the quarter. The SurePrep acquisition is going extremely well. Our international businesses, again, all grew by better than 10%, and many of our key products remain double-digit growers, including Practical Law, Confirmation, and HiQ. These areas of strength are tempered somewhat by the impact of tighter customer discretionary budgets in a few pockets of our business. For example, the sales cycle lengthening we have mentioned in recent quarters has led to a modest slowdown in revenue growth at our corporate segment and growth in the events business and digital advertising revenue at Reuters News have softened. All in, we are largely maintaining our full year 2023 outlook. including for organic revenue growth, adjusted EBITDA margins, and free cash flow. Mike will discuss several tweaks to other guidance items in a few minutes. Looking forward, our confidence around the generative AI opportunity continues to strengthen. We made good progress against our build, partner, buy approach in the second quarter, with organic builds progressing and announcements of both an intelligent drafting solution with Microsoft, and our intention to acquire case text. Since discussing AI on our Q1 call, our conviction around our opportunity to leverage generative AI has strengthened. As a result, we're accelerating our investment in the short term as we work to leverage these exciting capabilities for the benefit of our professional markets. Our capital capacity and liquidity remain a key asset that we are focused on deploying to create shareholder value. and we made good progress on this during the second quarter. In addition to announcing our intention to acquire Casetext, we monetized an additional $1.6 billion of our LSEG stake in May, completed the sale of a majority stake in Elite, and executed the previously announced $2 billion return of capital and concurrent share consolidation, which reduced our share count by approximately 3.5%. We remain committed to a balanced capital allocation approach and continue to assess additional inorganic opportunities. Now to the results for the quarter. Second quarter organic revenues grew 5%. Organic recurring and transactional revenue both grew 6%, while print revenue declined modestly. Reported revenue grew 2%, with currency having little impact and net divestitures a 3% drag. Adjusted EBITDA increased 18% to $662 million, reflecting a 540 basis point margin improvement to 40%, benefiting in part from expense timing that will normalize in the second half. Mike will discuss this in more detail. Adjusted earnings per share grew 40%, from the prior year period to 84 cents. Turning to the second quarter results by segment, the big three businesses achieved organic revenue growth of 7%. Legal organic revenue growth returned to 6%, driven by continued Westlaw precision momentum and the elite divestiture. Demand for our key offerings remains healthy, led by Westlaw, Practical Law and HiQ. and customer interest in our AI-driven offerings and product roadmap remains very encouraging. We expect the 6% growth pace to continue in the second half of 2023. Corporates' organic revenue growth slowed sequentially to 7%, as the sales cycle lengthening we have mentioned in recent quarters has impacted our book of business growth. Recurring revenue grew 8%, while transactional revenue was slightly lower. Practical law confirmation clear and our Latin America business remain healthy drivers. We expect second half growth to approximate the Q2 level. Tax and accounting organic revenue rose 10%. With recurring revenue up 9% and transactional up 12%, our Latin America operations, confirmation and short prep each contribute meaningfully to growth. Reuters news organic revenues rose 1%, which was modestly below our expectations. In addition to a lower price increase than in 2022 on the news agreement with the data and analytics business of LSEG, Reuters events growth softened amid tighter corporate discretionary budgets and digital advertising revenue continued the recent weaker trend. We believe both are due to the uneven macro environment. and see subdued growth from Reuters as likely in the next few quarters. Lastly, global print organic revenues met our expectations, declining 4% year over year. So in summary, we're pleased with our results and the solid momentum in the business. Before I turn it over to Mike, I thought it would be worthwhile to recap the exciting progress we have made on the generative AI front during the second quarter. I'll also discuss TR Labs, our internal data science and innovation group that is playing a key role in our generative AI efforts. On our first quarter earnings call in May, we discussed the significant potential we see from incorporating generative AI across our product portfolio. We also reviewed our significant competitive advantages, including the depth of our proprietary content and legal and tax expertise. We made commitments to invest more than $100 million annually on AI technologies and to bring these capabilities to key franchises, including Westlaw Precision, by year end. We recently began to pilot our Ask Westlaw generative AI capability with select customers, and initial feedback is very encouraging. Later in May, we announced an intelligent drafting solution that will be offered through integration with Microsoft 365 Copilot. Legal professionals will be able to leverage Thomson Reuters content and AI solutions seamlessly when drafting documents in Microsoft Word through both a co-pilot plug-in and our office plug-in. And in June, we announced our intention to acquire Casetext, a leading provider of generative AI-powered tech solutions through its legal AI assistant offering co-counsel. We see a number of key benefits from this purchase, including it includes accelerating our generative AI roadmap, adding new capabilities, and helping us drive new value for the legal industry through the merging of insights and workflow tools. We remain confident that our build, partner, buy investment approach positions us to take a leadership role in bringing generative AI capabilities for the benefit of our markets. In fact, our conviction in the long-term opportunity and the competitive advantage we bring to bear is rising. We'll remain disciplined in our investment approach, but we won't hesitate to make high ROI investments to capture this evolving market opportunity. And now a few words on TR Labs. Last quarter, we discussed Thomson Reuters' rich history as a leader in leveraging new technologies, including machine learning and AI. That history stretches back more than 30 years to 1991, when an R&D group was formed within West Publishing. to accelerate the capabilities of online legal research. In the decades since then, technological advancements in processing power, data storage and network bandwidth have expanded the potential for AI and ML capabilities. Our labs group has been at the forefront, driving thought leadership, contributing to commercial success and being an engine for innovation for both internal and client-facing applications. Currently, we have approximately 300 AI and ML practitioners within Thomson Reuters, just under half of which are in our TR Labs group. One quarter of our labs workforce are PhDs and half hold a master's degree. We have labs teams based primarily in five global cities, Toronto, Minneapolis, St. Paul, London, Zug, and Bangalore. Our team is a good mix of long-tenured AI subject matter experts, with additions through a number of AI-driven acquisitions in recent years. This includes Joel Huron, who joined our company through the early 2022 acquisition of ThoughtTrace, a legal AI contract analysis provider. Joel was recently appointed the new head of TR Labs and brings significant AI experience as well as a startup mentality to our efforts. In addition to talent, TR Labs has a history of thought leadership. Labs is an active member of the entrepreneurial and research ecosystems, partnering with universities, businesses, and customers. We are a founding sponsor of the Vector Institute, Canada's premier AI think tank and research center. We have sponsored a number of key industry events related to technology and our professional markets, including a recent hackathon with Stanford University focused on generative AI and the law. Since 2020, our Labs group has been awarded 29 patents, bringing its total to date to more than 100. And the team regularly publishes well-received external research papers. While talent and thought leadership are important, contributing to commercial success is really the key. And from the early days, our labs group has made many contributions. You may remember this slide from our discussion last quarter of the legacy of AI at Thomson Reuters. What we didn't say last quarter was that our TR Labs group was key in delivering most of these advancements. A few examples. In 1992, based on statistical ranking, Westlaw is natural was launched, becoming the first natural language search engine of industrial scale. For perspective, this was several years before Google was founded. In the early 2000s, the team delivered a machine learning-based classification and recommendation engine called CARE. that has been used across the company to classify legal, tax, news, and finance documents to large taxonomy. Advances have continued through Westlaw Next in 2010, Westlaw Edge in 2018, and Westlaw Precision in 2022, which all brought successively more advanced machine learning and AI capabilities. Successes have included QuickCheck, Litigation Analytics, Keysight overruled in part, among others. Outside of Westlaw, Labs has played a key role in the launch of Checkpoint Edge, Practical Law Dynamic Search, and Legal Tracker. Looking forward, our Labs talent is an important asset that has been refocused heavily on our generative AI roadmap. Working with our AI governance and AI platform teams, our Labs talent is key to upskilling and enabling our broader engineering and product efforts to deliver compelling AI-driven capabilities for our customers in a responsible and ethical way. We are actively hiring to expand labs across our global footprint and have seen very strong applicant response and demand to our recent recruiting efforts. And now I'll turn it over to Mike to review our financial performance.