Thomson Reuters Corporation

Good day, everyone, and welcome to the Thomson Reuters fourth 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, Melinda. Good morning, and thank you, everyone, for joining us today for our fourth quarter 2025 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 before currency, 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 and other supplementary financial measures, which are discussed on this special notes slide. Actual results may differ 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. Before I turn it over to Steve, let me provide two quick updates. First, we have tweaked the naming for two of our segments to better represent their current focus and operations. Tax and Accounting Professionals is now known as Tax Audit and Accounting Professionals, and Reuters News is now Reuters. The changes are in name only with no impact on the composition or measurement of their results. Second, please note that starting with our first quarter 2026 results, We will be making minor changes to where certain product revenue sits within the big three, reflecting how certain customers are managed. There is no impact on our consolidated results. For your convenience, we have posted to the investor relations section of our website a schedule that reflects our revised full year 23, 24, and 25 results and 2025 quarterly results in the manner we will begin reporting next quarter. Let me now turn it over to Steve Hasker.

Thank you, Gary, and thanks to all of you for joining us today. Let me begin by commenting on the AI competition concerns that have led to recent share price volatility. We have growing confidence in the value of our content and our expertise for delivering professional grade AI solutions. Our second quarter call in August, we discussed why Thomson Reuters is well positioned to win with agentic AI. We bring comprehensive proprietary content, deep domain expertise, and leading workflow software, which we combine with advanced reasoning models to complete complex, multi-step tasks. Our unique and high quality content grounds the AI outputs, and our deep subject matter expertise trains and fine tunes the AI. Professional grade results cannot be delivered without this content and expertise. On our third quarter call in November, we discussed the durable differentiation we believe exists with Westlaw, its unmatched breadth of proprietary, editorially enhanced legal content, together with sophisticated tools to verify the AI, deliver the comprehensive, accurate, and up-to-date outputs needed for high-stakes litigation. General purpose models cannot meet this standard. Since those discussions, our optimism around agentic opportunity has strengthened. The launch of the Wexler Advantage has gone extremely well, with early sales and customer feedback indicating we have created a new standard in legal research capabilities. And more importantly, we have proven that we can leverage agentic deep research capabilities to unleash our content and our expertise to clearly differentiate our AI solutions. We are working to bring these advanced agentic capabilities and the full power of Westlaw and practical law to co-counsel legal by mid-year and to our other legal tax and risk offerings in the future. We see legal AI workflows as a significant white space opportunity for TR and one that is largely incremental to our traditional research and know-how strongholds. We remain the clear leader in research and content, and we believe that we are a leader in the AI workflow market today. Looking forward, our strategy is clear. We will continue to aggressively innovate with a focus on leveraging our proprietary content and deep domain expertise, along with the latest AI capabilities to deliver highly specialized agentic workflows that we believe will be difficult for those without the same content or expertise to replicate. I'll now turn to the fourth quarter 2025 was a year of continued progress at Thomson Reuters, so let me start by reviewing some of our key accomplishments. First, we delivered another year of good financial results, meeting our key targets. Full-year organic revenue grew 7%, driven by 9% growth for the Big Three. Our adjusted EBITDA margin expanded by 100 basis points to 39.2%, meeting our outlook. And we delivered 1.95% $5 billion in free cash flow, slightly ahead of expectations. 2025 saw continued acceleration in our pace of innovation with several foundational product launches, including Westlaw Advantage, the Co-Counsel Legal Unified Solution, and Co-Counsel for Tax and Audit, to name a few. Initial customer feedback and sales activity across these offerings has been encouraging, and we're excited about our roadmaps for 2026, as we work to bring deep research and identity capabilities more deeply into our portfolio. Overall, commercial momentum across our AI-enabled offerings continues to build, highlighted by several luck Council wins, including Microsoft, an important validation of our strategy and the market shift toward trusted, domain-specific AI. We're also excited about initiatives we are driving to leverage AI internally to reimagine how we work, fostering a tech plus talent mindset to drive productivity and speed. As I will discuss in a moment, we have delivered several early successes, including in software engineering, customer service, content operations, and our general counsel's office. This progress provides confidence in the long-term opportunity to become a more productive and nimble organization. Our capital capacity and liquidity remain a key asset we are focused on deploying to create shareholder value. In 2025, we invested $850 million into M&A, including four strategic bolt-on acquisitions, bolstering key franchises and talent. We executed a $1 billion share repurchase program last fall, and this morning we have announced another 10% increase in our annual common stock dividend. We remain committed to a balanced capital allocation approach, and we continue to assess a number of inorganic opportunities. Our estimated $11 billion of capital capacity through 2028, we are positioned to be both aggressive and opportunistic. Looking forward, our conviction around the medium-term growth potential for Thomson Reuters remains strong. As Mike will discuss in more detail, we are reaffirming our 2026 outlook for organic revenue growth of 7.5% to 8%, including approximately 9.5% for the big three. We expect healthy margin expansion and strong free cash flow, even as we continue to invest in innovating, serving our customers. Now to the results for the quarter. Fourth quarter organic revenues grew 7%. Organic recurring and transactional revenue grew 9% and 8% respectively, while print revenues declined 6% in line with expectations. Adjusted EBITDA increased 8% to $777 million, reflecting a 110 basis point margin increase to 38.7% due to healthy operating leverage and good cost discipline. Turning to the fourth quarter results by segment, the big three segments delivered 9% revenue growth. Legal organic revenue again grew 9% despite softer government growth. Continued momentum from Westfall and Co-Council were the key drivers. Corporates' organic revenue grew 9%, driven by offerings in our legal, tax, and risk portfolios, and the segment's international businesses. Tax, audit, and accounting organic revenues grew 11%, driven by UltraTax, a Latin American business, and Co-Council. Reuters organic revenues rose 5%, driven by growth in the agency business and our contract with LSEG. Lastly, global print organic revenues declined 6% year-on-year. In summary, we're pleased with our Q4 results. Full-year organic revenues grew 7%. Organic recurring and transactional revenue grew 9% and 4%, respectively, while print revenues declined 5%. Adjusted EBITDA increased 6% to $2.9 billion, yielding a margin of 39.2%. Adjusted earnings per share for the year was $3.92 compared with $3.77 per share in the prior year. Let me finish on the results for the full year by noting that we have met or exceeded all of our 2025 guidance metrics with the loan exception of interest expense. This was higher than our forecast due to the pace of our share repurchase program and declines in market interest rates, which led to lower interest income. As you know, we have talked a lot about AI from a product and an innovation perspective in recent years. I'd like to close my comments today by briefly discussing another important AI-driven initiative here at Thomson Reuters, namely leveraging the technology internally to reimagine how we work. Since 2023, we have invested heavily in AI tools and training. We created Open Arena, an internal AI platform providing all employees with access to leading AI models and capabilities, and we are leveraging multiple third-party AI applications. We have held several tier-wide AI-focused learning days, offered AI certification programs and taken steps to encourage and foster a culture of experimentation with a test and learn approach. This enabled our employees to not only build skills, but also test the impact created by the AI tools. Last year, having matured from experimentation to execution, we implemented a disciplined top-down approach to driving transformation at scale through AI-driven automation. Our AI initiatives are now purpose-based with specific business targets. and we have created three-year AI roadmaps for all segments and functions. We're leveraging key talent, process, and learnings from our successful execution of the change program to reimagine how we use technology, simplify complexity, optimize our footprint and commercial systems, and evolve our work with a tech plus talent mindset. We are pleased with our progress to date as we are seeing broad engagement and a growing number of successes. For example, More than 85% of our employees are active users of OpenArena and our other AI tools. We have more than 300 AI use cases in development across all areas of the company. Let me share four specific examples where AI is already driving measurable business impact at Thomson Reuters. Let's start with software development. Over 80% of our engineers actively use AI-powered tools. making AI a core part of our development lifecycle. This goes beyond cogeneration. AI is accelerating security remediation, modernizing legacy systems, automating quality assurance, and enabling predictive incident management. These capabilities have transformed how we build and deliver products, reducing lead times and improving quality at scale. Moving to customer support, by pairing third-party AI tools with internal development, we have automated knowledge search and content creation and added agent assist tap bots. These tools are accelerating routine work and improving outcomes for both our customer service agents and our customers. This includes having reduced call average handle time by 15% and boosted first call resolution by 10%. In content operations, we're leveraging proprietary AI tools to extend our differentiation and content advantage. Our content creation process requires deep legal expertise and proprietary technology. Over the past 18 months, we've developed specialized AI tools specifically engineered for legal content processing. These tools now automate complex tasks like document ingestion, classification, and citation conversion for judicial cases and legislative updates. These advancements improve our speed and quality of proprietary content we deliver. For example, we have accelerated U.S. content delivery to Westlaw by 25%, giving customers faster access to critical legal updates. And importantly, the increased automation also brings up resources that we are refocusing on driving further product enhancement and accelerated innovation. And finally, our general counsel's office continues to excel in leveraging Thomson Reuters AI-enabled legal tools. They were early adopters of CoCounsel and our other AI-enabled ,, which they leverage for contract review and drafting, legal research, and more. I'll provide one concrete example with CoCounsel tabular analysis. a recently launched feature that automates the review of up to 10,000 documents at a time. Following the close of an acquisition last year, the team used this capability to review thousands of customer comments, completing this complex task in hours rather than weeks and saving significant time and resources. It also allowed for a much quicker assessment of the ongoing obligations and risk profile of the acquired business. Mike will share some incremental commentary, but let me conclude by stating we have growing confidence that this reimagination of how we work will bring significant benefits to TR over the next few years, increasing our productivity, accelerating our decision-making, and improving our customer experiences.