Thomson Reuters Corporation

Good day, everyone, and welcome to the Thomson Reuters Q4 2023 earnings call. Today's conference is being recorded. At this time, I'd like to turn the call over to Gary Bisbee. Please go ahead, sir.

Thank you, Jennifer. Good morning, and thank you, everyone, for joining us today for our fourth 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'd appreciate it if you would 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 turn it over to Steve Hasker.

Thank you, Gary, and thanks to all of you for joining us today. 2023 was a year of continued progress at Thomson Reuters, but let me start by reviewing some of our key accomplishments. Firstly, we delivered another year of good financial results, meeting or exceeding our key financial targets. Full year organic revenue grew 6%, with the fourth quarter growing at 7%. The big three segments also accelerated in Q4, growing 8% versus 7% for the full year. Despite lingering inflationary pressures and heavy investments, our full year adjusted EBITDA margin rose by 420 basis points to 39.3%. And we delivered $1.9 billion of free cash flow, slightly ahead of targets. Although the macroeconomic and geopolitical backdrop remains uncertain, we have many areas of strength in our portfolio. Westlaw Precision's strong performance continues, Our international businesses maintain their growth trajectory in the teens, and we have many other products delivering double-digit revenue growth, including Practical Law, Confirmation, SurePrep, and HiQ. 2023 saw significant and important progress from an innovation perspective. The clear highlight was our efforts around generative AI, culminating in the November launch of the AI-assisted research capability within Westlaw Precision. But the progress is far broader than just Westlaw. We have integrated our new colleagues from the August acquisition of Casetext, launched Co-Counsel Core to extend the reach of Casetext's legal AI assistant offering, and we are working to deliver against a robust product roadmap that includes several key launches in the next few months. Our capital capacity and liquidity remain a key asset that we are focused on deploying to create shareholder value. And we made strong progress on this during 2023. We monetized nearly $5.5 billion of our stake in LSEG and returned more than $3 billion to shareholders. Since the beginning of 2023, we have invested nearly $2.1 billion in six acquisitions, including our purchase of a majority stake in e-invoicing leader, Agero. These acquisitions bolster key franchises and improve the quality and growth prospects of our portfolio. Looking forward, our conviction around the medium term growth potential for Thomson Reuters is rising. As we stated last quarter, we're accelerating investment in 2024 to take advantage of our potential, particularly around our generative AI offerings and recent acquisitions. As Mike will discuss in more detail, we are guiding for organic revenue growth of approximately 6% in 2024, and we're focused on driving acceleration from that level in 2025 and beyond. To that point, we're also introducing a financial framework for 2025 and 2026, in which we see organic revenue growth of 6.5% to 8%. Now to the results for the quarter. Our fourth quarter organic revenues grew 7%, improving from 6% in recent quarters. Organic recurring and transactional revenue grew 7% and 16% respectively, while print revenue declined modestly as expected. Reported revenue grew 3%, with currency a slight drag and net divestitures having a 4% negative impact. Adjusted EBITDA increased 12% to $707 million. reflecting a 300 basis point margin improvement to 38.9%. The margin expansion was driven by change program expenses in the prior year and high margin contribution from Royce's transactional revenue. Adjusted earnings per share grew 31% from the prior year period to 98 cents. Turning to the fourth quarter results by segment, The big three businesses delivered 8% organic revenue growth, an all-time high, and up from 7% in recent quarters. Legal organic revenue growth improves to 7%, driven by continued Westlaw precision momentum. Demand for our key offerings remains healthy, led by Westlaw, practical law, case text, and strong performance in our international markets. Customer interest in our AI-driven offerings and product roadmap remains extremely strong, with several additional launches coming in the next few months. Corporate's organic revenue growth was 7%, in line with the growth last quarter. Both recurring and transactional revenues grew 7%. Practical law, indirect tax, clear, and our international regions remain key growth drivers. Tax and accounting organic revenues grew 10%, driven by recurring and transactional growth of 10% and 14% respectively. Our Latin America operations, UltraTax and ShorePrep, each contributed meaningfully to growth. Reuters News organic revenues rose a robust 9%, driven primarily by generative AI-related content licensing revenue that was largely transactional in nature. Sluggish digital advertising and events growth continued, I mean, uneven macro conditions and a change in the timing of events versus last year. 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. Full year organic revenues rose 6%. Reported revenue grew 3%, with currency a slight negative impact and net divestitures a 3% drag. Adjusted EBITDA increased 15% to $2.7 billion with a 39.3% margin, up 420 basis points year over year. Revenue growth and having changed program expenses in the prior year drove the margin gain. Adjusted earnings per share for the year was $3.51 compared to $2.62 per share in the prior year. And let me finish on the financials for the full year by noting we met or exceeded all of our 2023 guidance metrics. Now I'll spend a few minutes discussing 2023 product highlights and progress executing on our M&A strategy. Product and innovation remains an important focus, and in 2023 was a year of tremendous progress for our product and engineering organizations. The emergence of GPT-4, and advanced generative AI technologies ushered in significant change for our product organization, which had to reprioritize on the fly, reimagine customer experiences, and then quickly deliver TR quality product innovations. Our teams have moved with a speed and decisiveness never seen before at Thomson Reuters, and we're beginning to see tangible results from these efforts. The launch of the AI-assisted research capability within Westlaw Precision in November has gone well. Customer feedback remains positive and fourth quarter sales set records for the Westlaw franchise. We have also made good progress with case text, including the launch of Co-Counsel Core, a robust package of legal workflow tools offered through case text legal AI assistant. 2023 also featured a broad range of expanded features, new capabilities, and design enhancements across our portfolio, including several listed on this slide. Looking into 2024, we're excited about our product roadmap, which includes a series of important launches and capability enhancements. This includes adding generative AI capabilities to Practical Law and Check Point, and the launch of Practical Law Clause Finder, and also an intelligent drafting solution delivered through Microsoft Word. We also plan to bring Co-Counsel Core and Westlaw Gen AI capabilities to several key international markets and add a number of new skills to the Co-Counsel Legal AI Assistant. We look forward to highlighting a number of our product innovations at our upcoming Investor Day. 2023 was also an eventful year for Thomson Reuters from a capital allocation perspective. I'll leave the discussion of shareholder returns to Mike and focus here on our progress at putting capital to work through acquisitions. Since the beginning of 2023, we've invested nearly $2.1 billion in six acquisitions. Through these purchases, we've added important capabilities to each of the big three segments, complemented It completed two strategic tuck-ins at Reuters News and taken full control of Westlaw Japan after buying out our former joint venture partner. A few summary thoughts. PaceText added critical capabilities and talent to accelerate our Gen AI aspirations in legal professionals and over time, more broadly across the entire TR portfolio. SurePrep and Peguero have added leading-edge technology that complements our existing capabilities, and allow us for truly end-to-end workflow automation solutions for our tax and accounting and corporate markets, respectively. At Reuters, we've added a compelling media asset management technology for our agency business through Imogen and subscription professional content focused on the insurance industry, both aligned with the growth strategy of this business unit. These acquisitions deepen our focus on content-enabled technology, which is what we do best. They also continue efforts to execute the TR acquisition playbook. This entails acquiring high-quality businesses, integrating them into TR's product suite, investing behind their growth, and leveraging our extensive distribution and customer relationships to drive profitable, long-term growth. And while it remains early, integration efforts are off to a good start. Customer feedback has been strong, and we're retaining key talent at a very high rate. When we consider these acquisitions in total, we've added approximately $200 million of revenue, growing at strong double digits. This is slightly more than the revenue divested through the sale of a majority stake in Elite, which was not growing. As a result, our portfolio today is stronger, more strategically aligned with better growth prospects than it had 18 months ago. Let me provide a bit more discussion of the Peguero acquisition. Note that we went into significant detail about Peguero on an investor call on January 19th. So I'll just summarize a few points here. First, the e-invoicing opportunity is significant and we see strong growth continuing as planned implementation of digital tax regulations in more than 80 countries brings a wave of regulatory driven demand growth. Second, Peguero is a market leader with what we believe are differentiated solutions. In addition to offering a single global platform, which is unique in the market, the company's modern technology and robust compliance capabilities are market-leading in our view. Third, Peguero is a compelling product fit with Thomson Reuters. The combination of Peguero's e-invoicing compliance offerings with our one-source indirect tax solutions should yield significant benefits for our customers, including enhanced compliance capabilities better end-to-end workflow automation and global scale through a single trusted vendor. And fourth, Figueroa has an attractive financial model with strong long-term growth and profit potential. The company has a proven track record of double digit revenue growth and is highly profitable in its scaled markets. We see a pathway to robust overall profitability in the next few years as its investment markets scale up. And finally, Our current ownership of Figueroa is approximately 85%. Assuming we acquire 90% or higher ownership by the end of our tender offer period, we will look to undertake a squeeze-out process in order to take full ownership of the business. We'll consolidate Figueroa's financials as of January 17th, the day we achieve majority ownership of the company. Mike, over to you.