Good day, and welcome everyone to the Thomson Reuters, First Quarter 2022, Earnings Call. My name is Matt, and I will be your Operator today. During the presentation, your lines will remain on listen-only. I'd like to advise all parties that this conference is being recorded. And with that, let me hand it over to Gary Bisbee, Head of Investor Relations. Please go ahead, sir.

Thank you, Matt. Good morning, everyone, and thank you for joining us today for our first quarter 2022, Earnings Call. I'm joined by our CEO, Steve Hasker, and our CFO, Michael Eastwood, each of whom will report our results and take your questions following their remarks. Today, we’ll have to get through as many questions as possible. We'd appreciate it if you'd limit yourself to one question and one follow-up when we open the phone lines later. 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 our 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 from time to time 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. Before I begin with a review of our Q1 results, I must recognize our Reuters news colleagues and express our great appreciation for the difficult but important work that they're doing on the ground in Ukraine to provide a source of unbiased and reliable news and video imagery. Their efforts, which come with significant personal risk, exemplify the best of our company purpose, which, as you know, is to inform the way forward in the principles of trust and transparency that all of us at Thomson Reuters aspire to achieve. Now on to our Q1 highlights. I'm pleased to report that the momentum that built throughout 2021 continued in the first quarter of 2022, with sales and revenue exceeding our expectations. Four of our five business segments again recorded organic revenue growth of 6% or greater and total company organic revenues grew by 7%. The Big Three business segments also grew by 7% organically. We have growing conviction that our businesses are benefiting from a significant prevailing tailwind driven by a step change in the complexity of regulation and compliance in our legal, tax, and risk-related markets. The resulting need for trusted, accurate, and actionable content and technology plays to our strengths. As to the accelerating trends of digitization and changing ways of work. When combined with our Change Program progress to date and an increased focus on innovation, these tailwinds position us well in our recent momentum. Due to the Q1 revenue strength and healthy book of business, our ACV growth, we are raising our full-year revenue outlook. We now see total revenue rising by 5.5% and Big Three revenue by 6.5%, up from our prior views of 5%, 6%, and 6.5% respectively. We maintained our margin outlook as we continue to invest in our businesses and customers' success and also absorb heightened inflation repercussions. Overall, the strong start to the year provides confidence that we're on the right path to achieve our 2022 and 2023 targets. Turning to our Change Program, we continue to make steady progress on key initiatives. As of March 31st, we've achieved annualized operating expense run rate savings of $305 million, and we're on a path to achieve $500 million per year by year-end. We remain in a strong position, with ample capital capacity. We continue to assess inorganic opportunities to strengthen our Big Three customer markets, and share repurchases remain another option based on the timing of these inorganic opportunities. After the results for the quarter, first quarter reported revenues grew by 6% with organic revenues up 7%. As Mike will explain in more detail, our revenue growth benefited by close to 1% from transactional revenue that is unlikely to recur at its level and to a lesser extent of timing. But even adjusting for these items, organic revenue grew at a healthy 6%, driven by organic recurring revenue growth of 7%. Its recurring revenue growth is an improvement from 6% in Q3 and Q4 of 2021. Adjusted EBITDA increased to $600 million, reflecting a 50 basis point margin improvement to 35.9%, excluding costs related to the Change Program. The adjusted EBITDA margin was 37.9%. This strong performance resulted in adjusted earnings per share of $0.66, up from $0.50 in the prior year period. By turning to first quarter results by segment, the Big Three businesses achieved organic revenue growth of 7%, reflecting broad strength. Legal continued its recent momentum, delivering a fourth consecutive quarter of 6% organic growth. The legal market remains healthy across all key segments. Small, mid, and large-sized US firms, Corporate General Counsel, government compliance, and key overseas markets are all performing well. For instance, Westlaw Edge adoption continues to drive revenue and we continue to expect annual contract value or ACV, and attrition to approach 75% by year-end from 65% at the end of 2021. Second, Practical Law, as reported in the legal segment, had a terrific quarter, growing in the mid-teens. We forecast growth to continue for the remainder of the year. Lastly, we also closed the acquisition of Fortress, which brings key talent and legal contract analysis technologies. We believe Fortress will accelerate our time-to-market with key capabilities in AI-based contract analysis, which we see as a powerful combination in our editorial content.

Thank you, Steve. As a reminder, I will talk to revenue growth before currency and on an organic basis. Let me start by discussing the first quarter revenue performance of our Big Three segments. Revenues rose 7% organically and at constant currency for the quarter. This marks the fourth consecutive quarter of the Big Three segments having grown at least 6%. Legal Professionals' total revenues increased 5%, and organic revenues increased 6%. Organic growth was driven by Practical Law, Fine Law, and our government RFC systems. Westlaw Edge continues to add about 100 basis points to Legal’s organic growth rate and is expected to continue contributing at a similar level going forward, supported by the planned release of Westlaw Edge 2.0 during the second half of this year. Overall, on a consolidated basis, total and organic revenues each increased 7%. Adjusted EBITDA for the Big Three segments was $584 million, up 11% from the prior-year period, with a margin of 42.9%, rising 190 basis points. Improvement was driven by Legal and Tax and Accounting due to higher revenues and Change Program savings. Total company adjusted EBITDA was $600 million, a 7% increase versus Q1, 2021. The first quarter's adjusted EBITDA margin was 35.8% or 37.9% on an underlying basis, excluding costs related to the Change Program.

Thanks, Steve and Mike. Matt, we're ready to begin the Q&A portion of the talk.

Thank you, Gary. The first question is from Vince Valentini from TD Securities. Please go ahead.

Yes, thanks very much. Great quarter. I'll leave it to others to ask about that. Just given the environment in the tech sector and multiples collapsing in a lot of spaces, I'm wondering if you can give us any update on acquisition targets. I assume this is potentially good news scenario for you guys to be cash-rich with a strong balance sheet and looking for strategic acquisitions that will bolster your growth. Is there any hope that these things are getting more imminent given what valuations we're seeing?

Thanks, Vince, and thanks for the question. Look, I think we’re closer for two reasons. One, we're now a quarter through the Change Program and building confidence in the capabilities we're developing. We think that the further we get along that journey, the more open advantages we'll have to acquire. And, secondary, as you say, there have been some pretty significant changes in public valuations and potentially towards the end of this year, private technology-related valuations. Both of those factors provide us with optimism that we'll be able to make one or more acquisitions that are additive to the customer experience that we provide.

I will just supplement that. As a reminder to everyone, the first tranche to the El Sachs date, the lockup expires too on 2023. As we've previously stated, it's our intent to monetize the first day, which is approximately one-third in Q1 of '23. The second item I would emphasize that, as Steve mentioned in his prepared remarks, depending on the cadence and sequencing of acquisitions, we still have the option of considering additional share buybacks comparable to what we did in 2021.

Could I just clarify one thing you said, Steve? That public valuations have come down and you're expecting private valuations could come down later this year. Does that imply while you haven't seen them come down yet?

Well, there's always a gap between the expectations of sellers, which tend to lag, and the expectations of buyers, which price in any declines pretty quickly. So we haven't seen any significant transactions that would indicate just yet that that correction has occurred, but we think it might.

Hi. Can you share some color in terms of the demand you're seeing from your customer base in legal and accounting as well? There's general concern about the state of the economy and things slowing with rising rates. I'm curious just what you've seen in the past in terms of your customers' demand in a slower economic environment.

Yeah, it’s Steve. We continue to observe strong demand for our solutions across all three major segments. This demand is primarily driven by the need to automate and streamline workflows and to access content that provides a competitive edge, enabling greater efficiency and effectiveness in their work. This trend has persisted, and so far, the current geopolitical and macroeconomic challenges have not led to any decline in demand across the three segments. It’s worth noting that 80% of our revenues are recurring, which strengthens our confidence for the remainder of this year and supports our decision to raise our revenue guidance. All the businesses you follow fall into the strong category largely due to that 80% recurring revenue.

And Heather, I’ll add two points in addition to Steve's point about 80% recurring growth. The key factor with that 80% recurring is that multiyear contracts—approximately 60% of our Legal revenues are under multiyear contracts, about 40% of our Corporate revenues, and 10% of Tax and Accounting is multiyear as a key point. The second point, we saw really strong Q1 net sales, and that's an early indicator of a strong April.

Thank you. And a follow-up question on the margin guide. You talked about inflation being one of the factors that led you to maintain this quarter for the full year. But I'm curious about your ability to take price against that; is it a timing issue? What’s going on there?

Certainly, Heather. In regards to the margin, I'll mention a few items. You touched on potential inflationary headwinds, but another key factor for us is the opportunity to make additional investments in our businesses to support customers. Our pricing in Q1 was fairly consistent with the prior year, increasing slightly. The strength of the revenue was really the underlying performance of the business. We expect a slight uptick in pricing compared to 2021, but not hugely significant.

Yes. Thanks very much. I have two follow-ups. Just following upon Vince's M&A question. First, thanks for the drill down on the legal, particularly Legal Solutions business. Very helpful. I think for those that have followed some of your M&A over the years, finding things like Practical Law are just amazing assets that generate that kind of growth year after year. I’m wondering if you've identified Practical Law-like assets out there, or are these more difficult to find in general?

Thanks, Drew. Great questions. Well, no two acquisitions are the same obviously, but what we're seeing amongst our law firm customers—particularly General Counsel offices, is a real need to invest in technology and workflow software. There are quite a few opportunities for us to build organically and buy inorganically in this space. The investment in contract analysis, for example, is enormously time-consuming and in high demand. The legal landscape gets more complicated in terms of rules and regulations, not less for corporations, big and small. Companies need reliable partners to help them handle that complexity, and we believe we are one of the few players who can do it effectively at scale.

Great. Thanks so much and congratulations on the Change Program. I'm wondering if you can give us a sense of retention across the enterprise. Can you talk about that and then maybe pricing expectations today versus when you started the Change Program?

Let me start with retention. Back in March of '21 at Investor Day, we estimated that we could improve overall retention for total TR by roughly 100 basis points. We’re at approximately 91% today, which is a slight uptick over the last 12 to 15 months. We remain optimistic about achieving that full 100 basis points lift. Our retention varies by customer size, with significantly higher retention for the large customers and lower retention for the smallest customers. On pricing, a slight uptick in our pricing in Q1 versus 2021, as I mentioned, varies by segment. Our pricing increases in 2021 were 5% for Tax and Accounting, 3% for Corporate, and 2.5% for Legal.

Just a question on your public cloud migration, can you give us an update there? Is it progressing on track, is it accelerating? Any color you can provide would be useful.

It's ahead of track. We got to about 33% by the end of last year, and now we're looking at being at about 50%. We expect to reach 90% or more by the back end of 2023, so we're very happy with the progress.

If I can just ask one more on Practical Law. Can you talk about the geography difference in terms of the traction you're gaining? Have you seen most of the pickup and adoption being in the U.S.?

We’ve done a great job at ramping up Practical Law significantly in the U.S., building on its UK foundation. It's a proof point for us because we can take an acquired asset that's perhaps constrained to a single market and bring it to other markets. We're doing something similar with High-IQ, a UK-focused workflow software offering.

Good morning. Thanks for taking my question. I wanted to ask you a little about SME exposure. How are you seeing the attraction in the SME space? Can you just remind us about the exposure you have to SME-level customers?

We have a strong presence amongst small law firms, small tax, and accounting. We have a modest but promising presence amongst small to medium enterprises in the corporate sector. We're not overly exposed to that segment should it take a hit in a more difficult economic climate.

Yes, thank you. Steve, a lot of your information services have lowered guidance for 2022. Given your business mix, are you seeing any softness in demand that you would track?

It's worth reminding that 80% of our revenues are recurring. We don’t see areas that look to be a problem. Our transactional revenue is essential services and software. We have confidence that these relationships will endure even through turbulence.

And there are no further questions in the queue.

Okay. Great. Well, thanks everyone for their time, and we're around for follow-ups as needed. Have a nice day.

Thank you so much, everyone. That marks the end of your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day.