Equity Research 22 August 2025 BIPS of Info AI Risk – Our Musings Today The AI fear today is clear – the companies that traffic in 'words' vs. 'numbers' are going to be impacted; and this is not just for the core businesses (e.g. Data vs. Research solutions), but also from a messaging standpoint (e.g. TRI is the rare Info name able to quantify GenAI-enabled ACV today). In other words, even those companies that are considered to have proprietary data should rethink their messaging strategy – reinforce the ho ...

Financial Data and Key Metrics Changes - Total company organic revenues rose 7% with the big three segments growing by 9% [5][9] - Adjusted EBITDA increased 5% to $678 million, reflecting a 70 basis point margin increase to 37.8% [9][29] - Adjusted EPS was $0.87 for the quarter versus $0.85 in the prior year period [29] Business Line Data and Key Metrics Changes - Legal organic revenue grew 8%, driven by Westlaw and co counsel [10][26] - Corporates organic revenue grew 9%, with key contributions from legal, tax, and risk portfolios [10][26] - Tax and accounting organic revenues grew 11%, driven by Latin American and US businesses [10][26] - Reuters News organic revenues rose 5%, with all major lines contributing [10][27] - Global print organic revenues declined 7% [10][27] Market Data and Key Metrics Changes - The percentage of annualized contract value from GenAI-enabled products increased to 22%, up from 20% last quarter [28] - The company expects organic revenue growth of 7% to 7.5% for the full year 2025 [31] Company Strategy and Development Direction - The company continues to invest heavily in innovation, particularly in AI capabilities [6][12] - A balanced capital allocation approach is maintained, with a focus on strategic M&A opportunities [8][80] - The company aims to leverage its capital capacity of $10 billion through 2027 for growth [8][80] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed the full year 2025 outlook for organic revenue, adjusted EBITDA margin, and free cash flow [5][31] - The company is optimistic about the adoption of AI technologies among clients, with a significant portion showing interest [105][110] Other Important Information - The company repaid a $1 billion maturing bond issue and remains well-capitalized with net leverage of only 0.5 times [8] - The company is committed to returning 75% of free cash flow to shareholders, with potential share buybacks discussed [81][82] Q&A Session Summary Question: Can you provide a sense of the percentage of workflow currently being automated? - Management indicated that automation is still relatively modest in legal but more significant in tax and accounting, with ongoing efforts to automate ancillary tasks [39][40] Question: How does the company view its competitive position in the market? - Management believes they are ahead of competitors in tax and accounting innovations and highlighted the unique capabilities of their deep research technology [48][51] Question: What is the company's approach to managing margins and expenses? - Management explained that margin performance was driven by good operating leverage and timing of expenses, with confidence in maintaining guidance despite seasonal factors [58][60] Question: How is the company thinking about excess capital and potential returns to shareholders? - Management emphasized strategic M&A as a top priority for capital deployment, with ongoing discussions about share buybacks and dividend growth [80][81] Question: What is the adoption rate of GenAI-enabled products across different segments? - Management noted that there is significant interest in AI offerings across client cohorts, with varying levels of adoption [105][110]

Financial Data and Key Metrics Changes - Total company organic revenues rose 7% with the big three segments growing by 9% [4][7] - Adjusted EBITDA increased 5% to $678 million, reflecting a 70 basis point margin increase to 37.8% [7][28] - Free cash flow for 2025 was $843 million, up 4% from the prior year period [29] Business Line Data and Key Metrics Changes - Legal organic revenue grew 8%, driven by Westlaw and co counsel [8][24] - Corporates organic revenue grew 9%, with key contributions from legal, tax, and risk portfolios [9][24] - Tax and accounting organic revenues grew 11%, driven by Latin American and US businesses [9][24] - Reuters News organic revenues rose 5%, with all major lines contributing [10][25] - Global print organic revenues declined 7% [10][25] Market Data and Key Metrics Changes - The percentage of annualized contract value from GenAI-enabled products increased to 22%, up from 20% [26] - The company expects organic revenue growth of 7% to 7.5% for the full year 2025 [30] Company Strategy and Development Direction - The company is focused on leveraging Agentic AI to enhance legal and tax/accounting portfolios [5][11] - There is a commitment to a balanced capital allocation approach, with $10 billion of capital capacity through 2027 [6][78] - The company aims to continue investing in innovation and strategic M&A opportunities [6][78] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed the full year 2025 outlook for organic revenue, adjusted EBITDA margin, and free cash flow [4][30] - The company remains confident in delivering its guidance for 2026, with organic revenue growth targets for the big three segments [31] Other Important Information - The company has introduced several new AI-powered products, including CoCounsel for Tax, Ready to Review, and Ready to Advise [15][16][18] - The integration of AI capabilities is seen as a key differentiator in the competitive landscape [48][50] Q&A Session Summary Question: Can you provide a sense of the percentage of workflow currently being automated? - Management indicated that automation is still relatively modest in legal but more advanced in tax and accounting, with significant time-consuming tasks being automated [36][38] Question: How does the company view its competitive position in the market? - Management believes they are ahead of competitors in tax and accounting innovations and highlighted the unique capabilities of their deep research technology [47][50] Question: What are the drivers behind the margin performance in the quarter? - Key factors included good operating leverage, timing of expenses, and revenue mix, with expectations for margin performance to normalize in the second half of the year [56][58] Question: How is the company thinking about excess capital and potential return of capital transactions? - The company prioritizes strategic M&A for capital deployment, with a commitment to return 75% of free cash flow, potentially including share buybacks [79][80] Question: What is the adoption rate of GenAI-enabled products across different segments? - The larger portion of GenAI-enabled products is currently in the legal segment, but growth is expected across all segments as new products are launched [110]

Core Insights - Thomson Reuters has launched agentic AI systems, starting with CoCounsel for tax, audit, and accounting professionals, which enhances workflow integration and accountability [1][2][5] - The agentic AI platform is designed to operate within existing professional workflows, breaking down complex tasks into manageable steps while ensuring human oversight [2][3][6] Company Developments - The agentic platform has been in development for over a year, accelerated by the acquisition of Materia, an AI copilot startup [3][11] - CoCounsel is the first agentic experience launched, automating tasks such as client file review and compliance checks, and integrating various resources into a single workspace [5][8] Technology and Features - Thomson Reuters is re-architecting its core product experiences to embed agentic capabilities, utilizing features from platforms like Checkpoint and Westlaw [4][10] - The new systems are tailored for high-stakes environments where accuracy and trust are critical, with a focus on integrating generative AI [4][6] Market Position - The launch of CoCounsel signifies a major advancement in professional-grade AI, with early customers reporting significant time savings in their workflows [7][8] - Thomson Reuters aims to redefine the capabilities of generative AI in professional settings, with plans for further developments in legal, risk, and compliance domains [10][12] Future Outlook - Upcoming applications include "Ready to Review," an agentic tax prep application that will further enhance the capabilities of AI in professional environments [9] - The company is committed to ongoing transformation and leadership in the agentic AI space, indicating a strong future direction for its technology offerings [11][12]

Company Overview - Thomson Reuters (TRI) shares increased by 5.3% to close at $170.06, following a period of 6% loss over the past four weeks, indicating notable trading volume [1] - The company has seen price growth due to strong uptake of its generative AI offerings, including Westlaw Precision and CoCounsel, along with growth in products like Practical Law, SurePrep, and Pagero [2] Financial Performance - Thomson Reuters is expected to report quarterly earnings of $1.05 per share, reflecting a year-over-year decline of 5.4%, while revenues are projected to be $1.92 billion, an increase of 1.9% from the previous year [2] - The consensus EPS estimate for the quarter has remained unchanged over the last 30 days, suggesting stability in earnings expectations [4] Market Trends - Trends in earnings estimate revisions are strongly correlated with near-term stock price movements, indicating that the recent price increase may not be sustainable without positive revisions [3] - The stock currently holds a Zacks Rank of 3 (Hold), suggesting a neutral outlook [4] Industry Comparison - Thomson Reuters is part of the Zacks Technology Services industry, where another company, Ibotta (IBTA), saw an 8.4% increase in its stock price, but has a Zacks Rank of 5 (Strong Sell) due to a significant decline in its EPS estimate [4][5]