Thomson Reuters Corporation

Please stand by. We're about to begin. Good day, everyone, and welcome to the Thomson Reuters third quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the call over to Gary Bisbee, head of investor relations. Please go ahead.

Thank you, Allie. Good morning, everybody, and thank you for joining us today for our third quarter 2023 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 line. 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. I'd like to highlight this quarter a slight change to our non-IFRS measures. Beginning with this quarter's results, we now add back to adjusted earnings the non-cash intangible amortization expense related to acquired software. Mike will discuss this change in more detail in a few minutes. To help with your models, note that we've posted a historical restatement, a revision, of the non-IFRS calculation to the IR website. 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. Let me start by saying that we are deeply saddened to learn that on Friday, October 13th, Reuters visual journalist Issam Abdullah was killed when a shell hit him while he was filming cross-border fire between Israel and Lebanon. Tayir al-Sadani and Maier Nazeh, who other Reuters journalists and colleagues from AFP and Al Jazeera, were also injured in the shelling. Issam was an experienced journalist. talented and passionate journalist, and his loss is deeply felt in our newsrooms and across Thomson Reuters. Our thoughts are with ESAM's friends and family, as well as our Reuters colleagues who continue to report in escalating conditions from Gaza. Reporting on world events with accuracy, integrity, independence and freedom from bias is core to what we stand for. and it is critically important for our journalists to be able to do so safely. Now we'll move to reviewing our Q3 highlights. Solid momentum continued in the third quarter with revenue largely in line and margins ahead of our expectations. As was the case in the second quarter, majority of the margin beat resulted from the timing of expenses which we expect to largely normalize in the fourth quarter. Mike will provide further explanation and context. Total company organic revenues grew 6%, driven by healthy recurring and transactional growth. The big three segments grew 7% organically. We continue to see good momentum from many areas in our portfolio. Westlaw Precision's strong start continues, with more than 3,000 sales to date. It is earning a large and rising premium that supports the upcoming launch of generative AI capabilities. Our international businesses continued their double-digit trajectory with 14% organic growth. And many of our key products remain double-digit growers, including Practical Law, Confirmation, SurePrep, and HiQ. These areas of strength are tempered somewhat by an uncertain macro backdrop and tighter customer discretionary budgets, particularly in our corporate segment. Sales cycles at corporates remained elongated and growth from digital advertising and the events business at Reuters News remain subdued. 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 opportunities continues to strengthen. We made good progress against our build, partner, buy approach in the third quarter, closing the case text acquisition, and continuing progress on our product roadmaps. Reaction to case text and our Gen AI pilots has been extremely encouraging. Customers are taking the acquisition, our commitment to heavy investment, and our product roadmaps as a clear sign of our intent to lead in the application of generative AI, and they have expressed their confidence and trust in our ability to do so. Due to our growing conviction in the generative AI opportunities, we're accelerating our investment in the short term, which we expect will pay off through stronger growth over the next few years. And lastly, 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 third quarter. We monetized an additional quarter $1.5 billion of our LSEG stake in September, completed the acquisition of Case Text in August, and have also completed two smaller bolt-on purchases. Today, we are launching a new $1 billion share repurchase program, and we plan to pay down a $600 million maturing debt issue later this month with cash on hand. We remain committed to a balanced capital allocation approach and continue to assess additional inorganic opportunities. Now to the results for the quarter. Third quarter organic revenues grew 6%, organic recurring and transactional revenue grew 7% and 9% respectively, and print revenue declined modestly as expected. Reported revenue grew 1% with currency having little impact and net divestitures a 5% drag. Adjusted EBITDA increased 18% to $632 million, reflecting a 560 basis point margin improvement to 39.6%. The margin expansion resulted in part from change program expenses in the prior year and expense timing that will largely normalize in the fourth quarter. Mike will discuss this in more detail. Adjusted earnings per share grew 41% from the prior year period to $0.82. Turning to the third quarter results by segment, the big three businesses achieved organic revenue growth of 7%. Legal organic revenue again grew 6%, driven by continued Westlaw precision momentum. 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 extremely strong, including for co-counsel, which we acquired as part of case text. Corporates' organic revenue growth remained stable, with last quarter at 7%. Recurring revenue grew at 8%, while transactional revenue was slightly lower. Practical law, indirect tax, clear, and our international regions remain key growth drivers. Tax and accounting organic revenue growth rose 12%, with recurring revenue up 9% and transactional up 20%. Our Latin America operations, confirmation and short prep, each contributed meaningfully to growth. Reuters News organic revenues rose 3%, aided by the news agreement with data and analytics business of LSEG, and by timing in the events calendar. With more events in Q3, compared with the prior year. Digital advertising revenue improved slightly compared with recent quarters, though uneven macro trends remained a headwind. And lastly, global print organic revenues met our expectations, declining 4% year over year. In summary, we're pleased with our results and the solid momentum in the business. So before I turn it over to Mike, I'll provide a brief update on the case text acquisition and our generative AI product roadmap. We are very pleased to have closed the acquisition of Casetex on August 17th, and we're excited CEO Jake Heller and his team are now part of Thomson Reuters. Early integration is off to a very good start and collaboration amongst the teams is strong. For example, our product teams are working well together as we begin to execute against the joint product roadmap. Integration of the Casetex go-to-market sales team into our legal segment is underway. and we're moving quickly to take advantage of the high customer interest in our joint generative AI offerings. This includes work to accelerate our timelines for bringing Casetech's non-research co-counsel skills into several key overseas markets. While the product roadmap work remains in its early stages, we have agreed on several key principles that will guide our generative AI approach. First, we are taking a best of approach to bring generative AI to our legal research offerings that will result in a single legal research AI capability. This will leverage our extensive and proprietary Westlaw content and the best technology from Casetext and Thomson Reuters. Our teams are working well together and our early testing shows this best of breed approach is yielding superior results. Second, we plan to brand all generative AI capabilities within our legal portfolio under the Co-Counsel name. Industry reception to Co-Counsel has been very strong, and we see an opportunity to leverage a consistent identity across our growing portfolio of generative AI offerings. And third, we are working to embed and distribute the Co-Counsel AI Assistant across our legal offerings. Currently, while Co-Counsel has very compelling skills, They're only available through the case text website. We see a big opportunity to bring co-counsel's capabilities to the places attorneys work, including Westlaw, Practical Law, PyQ, and third-party applications like Microsoft Word and Teams. In addition to the branding and distribution, we see significant value for users from the AI assistant experience. Co-counsel will help to find the right skill for the problem the customer is trying to solve, which, when available across a range of applications, should provide meaningful workflow automation and user experience enhancements. And fourth, we will continue to aggressively invest to expand the skill that Co-Counsel offers outside of legal research. Its current seven non-research skills are an exciting opportunity for Thomson Reuters, and we have a compelling roadmap future new skills in development. Our focus is to preserve the pace of development and innovation that Casetex brings as we grow the roster of skills and capabilities offered through co-counsel. And lastly, we're building on a single technology platform. As part of our integration, we're building a common AI skills factory platform informed by Casetex technology that we believe will allow us to build future skills in a more scalable and faster way. So looking forward, our confidence in the generative AI opportunity continues to strengthen. Our teams have moved with a speed and decisiveness never seen before at Thomson Reuters. Customer feedback and reaction to the case text acquisition, the Microsoft Intelligent drafting announcement, and our early pilots have all been very positive. We're excited about our product roadmap, which includes multiple key launches over the next few months. First up is bringing generative AI capabilities into Westlaw Precision, which will be debuted at a November 15th launch event in New York City. The AI-assisted research tool in Westlaw Precision provides an enhanced search experience and quality legal research memo output that leverages Westlaw's leading content along with technology from both TR and case text. Customer pilots have gone very well, and excitement around this capability drove September to be the strongest month to date for precision upgrades. We expect to deliver a number of additional key product launches by January 2024, including Co-Counsel Core and Practical Law Answers. Co-Counsel Core is our new offering based on the non-research skills currently offered in Co-Counsel, and will be supplemented by additional skill launches in Q4 2023 and 2024. Practical Law Answers is our generative AI-driven conversational experience within Practical Law. We expect to bring the Westlaw AI-assisted research, co-counsel core and Practical Law Answers offerings to additional geographies including the UK, Canada and Australia in 2024. and we have a strong pipeline of additional launches and capability enhancements that we expect to deliver through 2024. I'd also note that while this discussion is focused on our legal offerings, our teams are also innovating with generative AI in our tax and corporates markets and will be sharing with customers a number of generative AI proof of concepts at our Synergy user conferences later this month. We look forward to updating you on our progress and the continued pipeline evolution over the next few quarters. And I'll now turn it over to Mike to review our financial performance.