Ladies and gentlemen, thank you for standing by, and welcome to the Thomson Reuters Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions being given at that time. [Operator Instructions] As a reminder, today's conference is being recorded. And I would now like to turn the conference over to our host, Head of Investor Relations, Mr. Frank Golden. Please go ahead.

Good morning and thank you for joining us today for our second quarter earnings call. This morning, I'm joined by CEO, Steve Hasker; and our CFO, Mike Eastwood, each of whom will report our results and will take your questions following our presentation. So they will also discuss our outlook for the third quarter as well as the full year, which takes into account the continued uncertainty resulting from the ongoing global COVID-19 pandemic and its evolving impact on the economy in general and on Thompson Reuters in particular. That will enable us to get to as many questions as possible. We would appreciate it if you would limit yourselves to one question each and follow-up when we open up the phone lines. 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 as we believe this provides the best basis to measure the underlying performance of the business. Today's presentation contains forward-looking statements. Actual results may differ materially due to a number of risks and uncertainties related to the COVID-19 pandemic and other risks 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. I'd now like to turn the call over to our CEO, Steve Hasker. Steve?

Thank you, Frank, and thanks to all of you for joining us today. Let me begin by expressing my appreciation to our employees for their flexibility and fortitude and their ongoing support of our customers as they continue to be highly effective with the majority of them working from home. We've actually seen an improvement in productivity and customer satisfaction. And many of our customers tell me they simply couldn't function in this environment without us. In all of my conversations, they express deep gratitude. The pressures to adopt new digital ways of working have been profound for us all. Yet we've adapted at Thompson Reuters with great speed, embracing more change in these past four months that might usually take four years. I'm extremely proud of our team's performance. Let me now turn to our results for the second quarter and our outlook for the balance of the year. I'm very pleased to report that for the second quarter, we met or exceeded each of the revenue guidance metrics we provided in May. Our results reflect what I said last quarter. Thomson Reuters is very well positioned to navigate through the current environment for both an operational and financial perspective. Our business is resilient, and our focus is where it needs to be on our customers. Revenues on both a consolidated basis and for the Big 3 were at or above our outlook with few negative surprises. This performance reflects the visibility we have into our markets and our customers, and we achieved this performance despite the very challenging environment that we've all faced since March. Based on our first half performance and the second quarter in particular, we have increasing confidence as we look to the second half of the year and to 2021, more on this in…

Thank you, Steve, and thanks to all of you for joining us today. As a reminder, I will talk to revenue growth before currency and on an organic basis. Let me start by providing some color on the revenue performance of our Big three segment. Revenue growth for the Big three was up 3% for the quarter and increased 2% organically both within the ranges we provided in the first quarter. For the quarter, Legal Professionals revenues increased 3% and organic revenues were up 1%. Recurring organic revenue growth of 3% was partially offset by a 19% decline in transaction revenues, which I will discuss in more detail in a moment. Our Government business had another strong quarter with revenue growth of 11% and our global Legal businesses grew 3%. And despite COVID-19, Westlaw Edge again contributed over 100 basis points to organic growth and maintain a healthy premium. In our Corporate segment, revenues were up 6% including confirmation, which was acquired in July 2019 and organic revenues were up 5%, driven by our legal and tax solutions. And finally, Tax & Accounting revenues were down 4% in part due to divesting our government business in November 2019. On an organic basis, Tax & Accounting professionals revenues were flat for the quarter. This was due to a 300 basis point negative impact due to the delay in pay per return filings resulting from the extension of the U.S. federal tax filing deadline to July 15. This was timing related and we saw those revenues recorded in the first two weeks of July. We expect Tax & Accounting's revenues to rebound in the third and fourth quarter to 5% plus. Moving to Reuters News. Revenues were flat in the second quarter with organic revenues down 11% mainly due to the cancellation…

Thanks very much, Mike. That concludes our formal remarks and recap of the quarter. And now operator, we'd like to open the call for questions please.

[Operator Instructions] Our first question will come from the line of Drew McReynolds of RBC Capital Markets. Please go ahead.

Yes. Thanks very much. Good morning. Just a couple of housekeeping and then a bigger picture for you Steve. On the housekeeping maybe for you Mike. Can you quantify in the quarter the onetime positive impact here for Reuters News? And on the free cash flow guidance what's driving that $100 million increase? And then the bigger question here for Steve. Obviously, the business is tracking on a good trajectory. What known unknowns are still left out there related to COVID-19 that management team and the Board are still wary of as we go into the back half of the year? Thank you.

Thanks Drew. I'll start with the first two questions and then pass it to Steve. In regards to our free cash flow, Drew, we've been monitoring our collections really on a daily, weekly basis. And we've got the benefit now of three additional months of collection since we last spoke to you on May 5. As we look at the collections from April through July, each month increased by roughly $25 million, which was very helpful for us and with the benefit of the July collections that just closed, we had the strongest month in the last four for us. So looking at the collections experience Drew in the last four months plus our daily contacts with our customers and the forecast for Q3, Q4 we felt confident increasing that to $1 billion to $1.1 billion. And certainly, we'll continue to monitor that for the rest of this year eyes wide open with that. We'll continue to support our customers as we have been in regards to payment terms. Consistent with our May 5, message we're not opening up contracts for customers, but we are working with customers within reason in regards to the payment terms. So we're confident as we sit today Drew on the $1 billion to $1.1 billion of free cash flow. In regards to Reuters News in regards to the EBITDA, we had about $7 million worth of one-time nonrecurring items Drew that helped us in Q2.

And Drew, this is Steve. Thanks for the question. With regard to known and unknown. Look, I think we get a sense for the resiliency of our business through the Q2 results. And I think Mike and I and the team have confidence in our forecast for the rest of the year. There aren't a lot of known unknowns in that. The Big three in particular, we have great visibility into the sort of likely results and levels of activity. I think, if there is a known unknown, it's sort of how much momentum we can build into 2021. And we'll have more to say on that, when we next step together and report Q3 and have a look into 2021. But I would say that's the main known unknown with regards to the Big 3. And then of course print the question is what happens to the – any holds that are there in terms of shipments? And Reuters the question is, how much can we transition to digital and virtual environments in the Events business? But we've been conservative on both of those fronts, and we think we're in a reasonable position given the prevailing conditions.

Thanks, great. Thank you.

Thank you. We'll go next to the line of Aravinda Galappatthige with Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my questions. I wanted to focus a little bit on the progress with Westlaw Edge. You obviously provided an update on the penetration numbers. In terms of the competitive impact...

Aravinda could we interrupt – Aravinda could we interrupt and just ask you to get a little closer to your phone. It's a little hard to hear.

Will do. Can you hear me a little bit better?

That's a bit better yes. Thank you.

Okay. I just wanted to focus on Westlaw Edge. You provided obviously the penetration numbers and update on that. I wanted to get a sense of the competitive environment there. Have you seen any kind of response to that from the other players in terms of upgrades to their own products? And are you seeing sort of any kind of changeovers from your sort of lead competitors in terms of sort of market share gains et cetera. I wanted to get your thoughts on that? Thank you.

Sure Arvinda. I'll start and pass it to Steve. We're certainly aware of the latest competitive update that you're referring to. We remain keenly focused on Westlaw Edge. We think we have an incredibly strong product. We have an incredibly strong sales and account management organization that's working with our customers every day. Further evidence of the strength of Westlaw Edge is the performance in the month of July. Very pleased to share that our sales volume and premium continued in July very consistent with the first half of this year. So we remain quite optimistic that we'll achieve the 55% penetration by year-end still leaving significant runway for us Aravinda in 2021 for Westlaw Edge. I have great leadership there from Paul Fischer, Andy Martens, Mike Dahn in leading Westlaw Edge from a product development standpoint for us and we're continuing to invest in Westlaw Edge, but feeling really confident. Steve?

Yes. Look the only thing I'd add Aravinda is, as we sit here today we have a pretty significant lead and we're excited about furthering that lead by making the next set of site investments in and around Westlaw Edge.

Thank you.

We'll go next to the line of Kevin McVeigh of Credit Suisse. Please go ahead.

Great. Thank you. Hey, I know it's a little early, but any thoughts as to the framework for organic growth in 2021? And then just total overall obviously it sounds like there will be some catch-up on the tax side but just any thoughts as to how we think about that into 2021?

Yes. Kevin let me start with that in regards -- I think there was just one question in regards to 2021 organic growth. It was hard to hear there Frank did I get that correct?

Yes. We heard the beginning portion of the question Kevin, in terms of 2021 organic growth. We didn't hear the latter portion.

Just if there's a way to maybe think about that within the context of total revenue growth. And obviously it sounds like there'll be some catch-up on the print side hopefully into 2021 just any thoughts on organic growth would be helpful?

Yes Kevin I'll share with you the way that we're thinking about it in its three to four big blocks. First of all I'll start with the net sales activity. As you know 80% of our revenue is driven by recurring. So the net sales performance that we have in Q3, Q4 will be a significant indicator for us as we prepare for our guidance in February with the Q4 earnings call. We have about 75% of our renewals completed thus far this year Kevin. We have about 75% of our price lifts already completed. So as we go into Q3, Q4 the volume component of net sales will be really important factor for us. July looks good. So that's the first area is net sales driving the recurring. As you mentioned print is a significant piece for us. And as our clients not just in the law firms but also the general counsel and government agencies return to the office that will influence the timing of the print shipments between 2020 and 2021. And then the Reuters Events that Steve referred to earlier we will be prepared in 2021 for in-person conferences. Likewise we'll be prepared for virtual conferences or hybrid or a combination of those. Then the last leg is the transactional revenue including the Reuters Events piece there that we have across the business which is about 10%. So those are the four key factors Kevin. And I think the one that I focus on the most is the net sales activity for the Big 3.

Super helpful. And then just any thoughts on my guess to just client behavior overall? I mean it sounds like clients are in a much better position in this cycle as opposed to last. But maybe just help us frame that a little bit in terms of how clients have been able to weather COVID environment as opposed to the GFC just within the context of the business environment overall?

Yes. So Kevin, this is Steve. I have the opportunity to speak with customers most days. And I think what we're seeing is a combination of two things. Firstly we're getting on with their work and serving their clients whether that's in the legal profession or a tax accounting profession the first and second. I think certainly there's a lot of activity from government agencies and transition from the new courts in various states -- virtual courts and so on and so forth. So the first thing is just a focus on their work and serving their clients and getting things moving in a very difficult and uncertain environment. I think the second is look everyone's looking at virus case counts and spikes in various states in various countries reemergence of the virus in some parts of the world with a degree of trepidation. So our business continues to perform as we expected. And we expect that to continue to happen. But it's not easy for our customers. And I think we sense that. Our reaction to that has been unequivocal and it's been to double and triple down on our customer service and our support. Hundreds and hundreds of our reps reach out unsolicited and offer support to our customers in various forms. And whether that's helping the court case management system and moving to virtual courts whether that's offering expertise and insights around various stimulus packages or whether it's just going the extra mile. And that I think holds us in good stead come what May as we head into the -- through the third quarter and the fourth into 2021, so we're not overconfident, Kevin, but so far, so good.

Appreciate that. Thank you very much.

Thank you. We'll go next to the line of Gary Bisbee of Bank of America. Please go ahead.

Hey, good morning, guys. Steve, so I guess the first question for you. You mentioned last quarter and again, a bit more detail this quarter, this concept of transitioning from more of a holding company structure to an operating company. What are the sort of key steps to that or advantages in that you see? And a lot of times when I've seen other companies pursue this type of thing, there's spending that happens first that delivers savings later. I guess as you think about the strategic priorities, is that something that could happen here? Thank you.

Yes. Thanks, Gary. So if I just take half a step back and provide a little bit of context, I think what Jim and Stephane faced was a very different, it was very different portfolio of assets to the one that Mike and I have. So specifically, you have the Financial & Risk segment. And now what's going to be -- that sort of took a lot of the oxygen in terms of time and energy and capital and so on and so forth. We don't have that business, so we're much more focused, and we're much more focused specifically on our Big 3 segments. And as we've had a chance in this virtual work environment to really peel back the onion and understand what we've gotten and so forth. What we found is that the business was understandably. And I think really correctly, manages the portfolio, target set business is able to sort of put their own products and tech stakes together, conduct their own customer service and support mechanisms in disparate ways. And I think we have a pretty big opportunity to look across the portfolio, look at that the activities that are really common, if not identical. And embed best-of-breed next-generation technologies is to fundamentally transform the customer experience. And that's the task ahead of us, and that's why we've asked Kirsty Roth to join us, the Chief Operations and Technology Officer. She had a lot of experience in doing that. We think it's a big opportunity. Quite what the financials look like, I don't know. We've obviously started that process and are a lot smarter today than we were three months ago and will be considerably smarter in three-months' time when we had a chance to come back to you and describe a little bit more about that.

Great. And then the follow-up, if I could, you also mentioned, obviously, the COVID environment is accelerating digital strategies for a lot of businesses, and you're focused on helping clients weather the challenge and remote work and everything else. Are there new product opportunities in that, that are worth calling out, or are there products within the portfolio that are seeing growing traction and you see as a real opportunity to upgrade clients and help them be productive in this environment? Any color would be helpful.

Yes. I mean we're seeing new product opportunities in a couple of different places. The one that springs to mind is -- where the truth springs to mind in our government segment. So the capabilities that we acquired through Pondera in terms of core detection around entitlement programs, that's a growth area for us. Transition to virtual courts is a growth area for us, and I call out our government team for really leading in and supporting that process in a number of states. So that's just a couple of examples. We see the same in legal, particularly in sort of adoption of technologies and workflow tools. And in Tax & Accounting, there's real demand to automate non-value-added activities and allow our Tax & Accounting customers to focus on value-adding for their clients. And so we're looking at this environment, Gary, saying, there's more opportunity than there is anything else across our Big 3 segments. And we're excited about accelerating our efforts to pursue those opportunities.

Thank you.

Thank you. We'll go next to the line of George Tong of Goldman Sachs. Please go ahead.

Hi. Thanks for taking our question. This is Ryan on for George today. I guess I just had a question on how has the current environment impacting your ability to lean on pricing? I know you had mentioned that Westlaw Edge is still commanding a premium. But -- and have you paused price increases on contract renewals in any of the segments or offerings?

Ryan, our pricing is very consistent in 2020 thus far with 2019. Through June 30, we have completed overall about 75% of our pricing actions that we had anticipated at the beginning of this year. So very consistent thus far with last year. And Ryan, just as a reminder, our price increases occur when the contracts come up for renewal, so they happen throughout the year.

Okay. Great. And then to that point so for -- how have the renewal rates been performing in 2Q relative to your internal expectations? And then how do you see them evolving over the quarters ahead?

Yes. Overall for total TR renewal rates of approximately 90% thus far in 2020 consistent with 2019. Our internal forecast based on our pipeline reviews indicate, we'll see similar experience during the remainder of the year. We anticipate ending 2020 with flat renewals in this year versus 2019, composite weighted average of about 90%. And Ryan, we calculate that based on revenue dollars not customers.

Great. Thank you.

Thank you. Our next question will come from the line of Vince Valentini of TD Securities. Please go ahead.

Yeah. Thanks very much. Let's shift to the cost side and impressive results there and getting a lot of the $100 million of cost savings already. Can you just flush out a bit where those savings have come from so far? And how much of it is stuff like travel and entertainment that probably comes back at some point? And then an update on how you replace those cost savings in 2021 to stay at the $100 million level?

Sure. Vince. We completed $67 million of the $100 million through June 30. We're very confident in completing the remainder during Q3, Q4 possibly going forward with the $100 million. The -- our confidence level relates to the discretionary expenses. You mentioned travel entertainment, but it has also been consulting and advisory. And we also Vince have been very tightly managing our headcount. We are making selective hires in critical areas, areas such as go-to-market resources for Brian Peccarelli's segments AI machine learning digital are illustrative areas where we are doing some selective hiring. Vince, I am quite optimistic, as we go into 2021 we will sustain the $100 million of savings. As we go into next year, there could be a mix change. It could be a little bit more T&E next year than this year, but we'll be able to offset that in other areas. So very confident that's -- of sustaining that in 2021.

Thanks, Mike. And can you just clarify on your free cash flow slide there's a $32 million positive this quarter from the other category which was Refinitiv and pension stuff last year, but what would the $32 million be this year?

I believe we're just pulling out that slide Vince I think that was a nonrecurring item whereby we received some proceeds during Q2.

Thank you.

Thank you, Vince.

Thank you. And there are no further questions in queue at this time.

Okay. We -- so it's a late Q&A quarter. So we're happy to take that in August, let everybody get on with their holiday, if there are holidays any longer. But many of them, we'd like to thank you all for joining us today and please feel free to follow-up with myself or Megan, if you have any additional questions. Enjoy the rest of the summer. Bye-bye.

Thank you. And ladies and gentlemen, today's conference will be available for replay after 10:30 a.m. Eastern Time today running through Wednesday, August 12 at midnight. You may access the AT&T replay system by dialing 1866-207-1041 and entering the access code of 2097427. International participants may dial 402-970-0847. Those numbers again are 1866-207-1041 and 402-970-0847 with the access code of 2097427. That does conclude our conference for today. Thank you for your participation and for using the AT&T conferencing service. You may now disconnect.