Workflow
Thomson Reuters(TRI) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total company organic revenues grew by 5%, with recurring revenue growth at 6% [7][13] - Adjusted EBITDA increased by 18% to $662 million, reflecting a margin improvement of 540 basis points to 40% [13][43] - Adjusted earnings per share grew by 40% from the prior year to $0.84 [13][36] Business Line Data and Key Metrics Changes - The Big 3 segments achieved organic revenue growth of 7% [14][32] - Legal Professionals' organic revenue growth returned to 6%, driven by Westlaw Precision momentum [14][39] - Corporates segment organic revenue growth slowed to 7% due to lengthening sales cycles [15][33] - Tax & Accounting organic revenue rose by 10%, with recurring revenue up 9% and transactional revenue up 12% [16][40] - Reuters News organic revenues rose by 1%, slightly below expectations [16][34] Market Data and Key Metrics Changes - International businesses grew by over 10% [8] - Growth in events business and digital advertising revenue at Reuters News softened due to tighter customer discretionary budgets [9][17] Company Strategy and Development Direction - The company is focusing on leveraging generative AI, with plans to invest over $100 million annually in AI technologies [19][22] - The acquisition of Casetext is intended to enhance generative AI capabilities and drive new value in the legal industry [21][22] - The company maintains a balanced capital allocation approach, assessing additional inorganic opportunities [12][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining the full year 2023 outlook, including organic revenue growth and adjusted EBITDA margins [9][48] - The company anticipates second half growth to approximate Q2 levels, driven by continued momentum in key segments [51][52] - Management noted that the sales cycle lengthening has impacted growth in certain segments but remains optimistic about Legal and Tax & Accounting [61][62] Other Important Information - The company completed a $2 billion return of capital and share consolidation, reducing share count by approximately 3.5% [12] - Free cash flow for the first half was reported at $729 million, up from $428 million in the prior year [45] Q&A Session Summary Question: CapEx intensity and sales cycle changes - Management indicated that CapEx intensity is expected to align more closely with 2023 levels due to opportunities in AI investments [59] - Sales cycles in Legal and Tax & Accounting remain stable, while the Corporates segment has seen elongation [61][62] Question: Workflow opportunities with Casetext - The company views the drafting workflow as a new market opportunity, leveraging proprietary content and AI capabilities [69][70] Question: Sales environment amidst law firm layoffs - Management noted that while there are layoffs in the industry, the long-term trend is towards increased spending on technology [75] Question: Margin versus growth dynamics - The company plans to balance investments in growth with margin considerations, particularly in light of generative AI opportunities [98][100] Question: Retention and pricing strategies - Retention rates have improved slightly, and pricing is expected to be higher than in 2022, with generative AI expected to enhance both [139][140]