Good day, everyone, and welcome to the Q3 2021 Earnings Call. My name is Sharon and I am your event manager. [Operator Instructions] I’d like to advise all parties this conference is being recorded for replay purposes. And now, I’d like to hand over to Frank Golden, Head of Investor Relations. Please proceed.

Thank you. Good morning, and thank you all for joining us today for our third quarter 2021 earnings call. I am joined today by our CEO, Steve Hasker; and our CFO, Mike Eastwood, each of whom will report our results and will take your questions following our presentation. To enable us to get to as many questions as possible, we would appreciate it if you would limit yourselves to one question each and one follow-up when we open 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. 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 financial measures. Actual results may differ materially due to a number of risks and uncertainties related to the COVID 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. Let me now turn it over to Steve Hasker.

Thank you, Frank, and thanks to all of you for joining us today. I am pleased to report the momentum we saw in the first half of the year continued in the third quarter. Our revenue and sales performance was strong, exceeded our expectations, and position us well for Q4 and 2022. We expect to close out the year on a strong footing and appreciate the efforts of our sales and our go to market teams. This strong performance demonstrates our markets remain healthy and growing and our products across legal, tax, corporate and risk forward compliance fit the needs of our customers. Our products enable to them to effectively equip their professionals to better serve their clients. We are also seeing improving customer engagement including 8,000 registrations for our annual legal tax and corporate synergy conferences around the world. These conferences are our premier events for professionals who want to understand the future of their professions, learn the livestreams and experience how tools and data-driven technology can transform their firms, organizations, agencies and roles. Our leadership team, including the President of our Corporates business, Sunil Pandita and the President of our Tax & Accounting Professionals business, Elizabeth Beastrom will be joining nearly 2,000 of our customers for the upcoming synergy conferences in November in Nashville. And as I mentioned last quarter, our customers continued to exhibit confidence in both an improving economic environment and in their own prospects. This potent ecosystem plays to our advantage and we will continue to capitalize on the opportunities we are seeing that drive growth and expand our positions. Now for the results. Our third quarter results reflected a standout performance. Four of our five business segments recorded organic revenue growth of 6%. That performance resulted in total company organic revenue growth of 5%…

Thank you, Steve, and thanks for joining us today. As a reminder, I will talk through revenue growth before currency and on an organic basis. Let me start by discussing the third quarter revenue performance of our Big 3 segments. Organic revenues and revenues at constant currency were both up 6% for the quarter. This marks the fifth consecutive quarter our Big 3 segments have grown at least 5%. Legal Professional’s total and organic revenues increased 6% in the third quarter. Recurring organic revenue grew 6% and transaction revenues increased 10% related to our Elite, FindLaw and Government businesses. Westlaw Edge added about 100 basis points to Legal’s organic growth rate. It’s maintaining a healthy premium and is expected to continue to contribute at a similar level going forward. Our Government business, which is reported within Legal and includes much of our risk, fraud and compliance businesses had a strong quarter with total revenue growth of 11% and organic growth of 10%. In our Corporate Segment, total and organic revenues increased 6% due to recurring organic revenue growth of 7% and Transactions’ organic revenue growth of 2%. Recurring revenue was driven by Practical Law, Indirect Tax and CLEAR, as well as our businesses in Latin America, and Asia and emerging markets. And finally, Tax & Accounting’s total and organic revenues grew 6% driven by 10% recurring organic revenue growth. Growth was driven by the Latin America businesses and Audit Solutions, which includes Confirmation. Transactions’ organic revenue declined 9% resulting from the year-over-year timing of individual tax filing deadlines. I will remind you last year, Paper returned revenues shifted from the second quarter to the third quarter. Normalizing for this timing, organic revenues for Tax & Accounting were up 11% in Q3. Moving to Reuters News, third quarter performance was strong…

Thank you, Mike and Steve. That concludes our formal remarks on our third quarter results and we’d like to open the call now for questions. So if we could have the first question operator, please?

[Operator Instructions] And our first question for today comes from the line of Drew McReynolds with RBC. Please proceed. You are live in the call.

Thanks very much and good morning. So my two questions. First, great to hear you are tracking to the upper end of your growth guidance for next year. So, thank you for that data point. Just wondering, in the current inflationary environment, could you just give us some context around how volume versus price dynamics are changing, if at all as we move to the end of this year and into next? And then, just as a follow-up, on the M&A environment, maybe Steve, as you can provide us just with an update on kind of where things stand on that front and how you are balancing that with the buyback? Thank you.

Drew, thanks for the questions and regards to the inflationary and the volume price dynamics, we are not currently seeing much change in regards to the pricing dynamics that we discussed on prior calls. They remain very consistent throughout 2021. Just as a reminder, a significant number of our customer contracts are under multi-year growth agreements with about 60% are in Legal, 40% are within Corporates and 10% within our Tax business there. So, something we are certainly keeping an eye on Drew. But no significant changes thus far on the price volume dynamics there. I echo Steve’s comments earlier. We are seeing very, very strong consistent performance for all of our sales and account management teams, which are driving the results.

Yes, Drew. Thanks, Steve. So, in answer to your M&A question, as we’ve mentioned on prior quarterly calls, we have a pretty robust pipeline we are constantly replenishing of opportunities really focused around our Big 3. And we’ve spent the last quarter doing as we did the previous quarters which is looking hard at a number of those targets. And it’s not the lack of trying that we haven’t done any meaningful deals in 2021. I would particularly call out Scott Nelson who leads a lot of our M&A related activities for his thankless and hard work. The reason we haven’t done it is we hold the bar very high. We want to make sure that Thomson Reuters is the advantaged owner of any assets that we buy and that the business we buy is complementary to rather than complicating of the Change Program and additive to the customer experience. As you know, prices have elevated. So that just keeps that bar even high and we are optimistic that as we continue to turn that – turn the crank on that pipeline, the deals will come into view that makes sense for us. But it will continue to be unapologetic we don’t do them. We are very, very focused on the call business to existing and new customers in the Change Program and M&A will be secondary to that.

Yes. Drew, I would just supplement in regards to your question on M&A activity. If you look at capital strategy overall, certainly, we are nearly complete for $1.2 billion of buyback. The question might be will we consider additional buybacks in 2022. It’s an option that we have also Doug mentioned, we discuss the annual dividend increase with our Board every January, I would anticipate an increase as we go into 2022. We had a 7% dividend increase for 2021. It wouldn’t surprise if we are in the 10% range, which is the midpoint from our value increasing model for 2022 and beyond which certainly reflects our confidence in the free cash flow generation.

That’s all great color. Thank you.

Thank you. And our next question comes from the line of Kevin McVeigh with Credit Suisse. Please proceed, Kevin. You are live in the call.

Great. Thanks so much and congratulations on the really, just exceptional outcome given the Change Program and everything. It just really underscores the execution. Hey, I guess, this is for either Steve or Mike, within the context of the VC fund and if I heard you right, Steve it sounds like the legal, you’ve got the highest growth in a decade. It feels like there is a little bit of a structural component to that. Can you help us understand how much maybe the retention improvement was associated with that as opposed to new product? And then, can you tie into any incremental comments on new product innovation and how we should think about that longer term growth within the context of the VC fund you just announced?

Yes. I’ll start, Kevin, and I am sure Michael add. Thanks for the word of congratulations. We are particularly appreciative of all of the hard work that our colleagues have put in this year and particularly in the third quarter. In terms of Legal, I think the thing that’s pleasing is that, that’s sort of uplift in performance and robust year-to-date. It’s not reflective of any one particular sub-segment in Legal or any one particular product or the price in favor of quantity or vice versa. I think it’s a pretty balanced diversified set of contributors. So, the sentiment is small though, as an example. It has really ticked up through the second and third quarters. So, the smallest of our Legal customers are an important part of that business are starting to be more optimistic. That level of activity that they are seeing amongst their clients. Mid law continues to perform and the largest law firms’ cost, particularly those with diversified corporate finance related practices are enjoying a good year. So, we are pretty optimistic about where that sits and we think we can continue to continue that performance as we sit. As it pertains to new product innovation, this is a major area of focus for us at Thomson Reuters. So, you will remember that pretty early on in the going last year after Mike and I took our roles, we do went out and we attracted David Wong as our new Chief Product Officer. David came from Facebook. We elevated Shawn Malhotra as our Head of Engineering and they are based with us in Toronto in our tech center. We also, under Christy Rob’s leadership have replenished and elevated some of the talent within our operations and technology function more broadly to make sure that we are building on a very, very solid foundation. The product that I talked about, which integrates Practical Law, the Contract Express, HighQ and Elite 3E is an example of that and we have more to come. You’ll see us I think be pretty modest in case of our cadence of product innovations through 2022 but with a very aggressive aspiration thereafter to become the leader in terms of product innovation in the segments that we serve. And so it’s a really important part of the focus that we are putting on the company and it is the primary focus. And then, the sort of the bolt-on M&A will be the secondary focus after that.

Kevin, let me just supplement, the entire portfolio of the Legal did really well in the third quarter. We’ve talked quite a bit about Westlaw Edge with the 100 basis points of impact for us and we’ll continue to drive additional penetration with Westlaw Edge as we go into 2022. We’ve already get the 60% this year, which was a goal of 60% to 65%. Practical Law, Elite, FindLaw, all did really well as did our regions in Asia and markets in Government. HighQ that we bought in July of 2019 did well. So really solid performance. I think you asked about retention, Kevin, for the legal business we are approaching 91%, which is a slight uptick versus 2020. So really good performance across the board for legal.

Good enough. Shawn, congrats again and really just fantastic outcome.

Yes. Thanks, Kevin.

Your next question comes from the line of Toni Kaplan from Morgan Stanley. Please proceed, Toni.

Thank you. I wanted to ask another question about the venture capital fund that you started. Are you viewing this as an M&A incubator? Or a way to keep sort of more on the ground with trends in the industry or is this really just an interesting investment avenue for you and way to sort of get innovation ideas?

Yes. Hi, Toni. I think it’s a little bit of all them, but I’d put more emphasis on opening and increasing our aperture to new innovations at the periphery of our core segments. I think that for me is the biggest area of focus. As I said in response to Kevin’s question, we’ve got a real emphasis on bringing an organic build up of new product innovations to serve our customers in our core markets. That’s a huge area of focus and we view this as supplementary. There is a fair amount of venture capital money going into, for example, legal workflow solutions and areas like risk, fraud and compliance. And we want to make sure that as a company and as a group, we are very much keeping abreast of those and aware of those and we can’t think of a better way than to put some capital to work to make sure that we are continually getting smarter as to what’s going on and benefiting from those innovations and allowing our customers to benefit from them. As to whether it leads to M&A down the track, I would certainly hope it does. But that’s probably not the primary focus.

Terrific. Wanted to ask also, last quarter, you had expected 3Q to come in at 5% to 5.5% for the Big 3, it came in at 6%. So that was a great result. I think you expected Tax & Accounting to be low-single-digit and that came in ahead. Was there anything in particular that drove this strength or were you trying to be conservative because of the difficult comp? Just anything on sort of where the real strong outperformance came from versus what you’ve been thinking last quarter? Thanks.

Yes. Toni, happy you start there. I really happen across the board. We just shared some comment with Kevin in regards to Legal. So, I’ll just focus on the Corporate segment now. We had really strong performance from Practical Law. Just remind that Practical Law comes in with the Legal Professionals and Corporates. The Indirect Tax business did well as it’s clear once again clear it’s split between the Government business and also Corporates. Within Tax & Accounting, we had really strong performance as Steve mentioned from our Latin American businesses, specifically Dominio, the tax business and within Elizabeth's business, Audit Solutions did really, really well. So we had really good momentum across the board, Toni, from all of the segments, including Print and Reuters side, on the Reuters Events, we haven't done any physical events thus far through Q3. We will have a physical event for Reuters in - in person in Q4. So really good momentum across the board, Toni and retention is slightly increasing across all of our segments. I mentioned Reuters earlier, but we are seeing a slight uptick also in Corporates and Tax & Accounting for retention.

Thank you.

Thank you, Toni. And our next question comes from the line of George Tong with Goldman Sachs. Please proceed, George.

Hi. Thanks. Good morning. With Westlaw Edge, ACV penetration reached 60% in the quarter, can you provide your updated thoughts on where you'd like to see penetration by year-end and longer term?

Yes. George, there are two components there. I would say by year end, we are looking at 63% to 65% for year-end 2021. Over the time horizon, we think penetration will reach around 75%. So additional runway as we go into – throughout 2022. And by the time we reach the max penetration, we will have released Westlaw Edge 2.0. It's what we're referring to it internally there. So George, we are very confident we'll be able to sustain the 100 basis points lift that we are seeing from Westlaw Edge in recent quarters. So we are very confident on Westlaw Edge and the next version.

Got it. That's helpful. You are seeing progress in all seven investment areas of the Change Program. Can you talk a bit about where in the Change Program you are seeing the most progress?

Yes. George, good morning. Look, I think, as we laid out at Investor Day and beyond, we've got three components to the Change Program. The first is building a whole new set of capabilities in service of our customers, particularly in digital self-serve omni channel. We have introduced the sort of first versions of those capabilities to some of our marquee products here in the United States. And I would say that, that is on or a little bit ahead of track, but it's very modest in the context of the full product suite and all the geographies that we do business in. So I would say a good start, but much work to do. The second component of the Change Program of course, is the modernization of our operations and technology stack. We think that we can significantly enhance the customer experience by improving and making more contemporary to that tech stack. A big part of that, of course, is the migration of our revenues and our products to the cloud. We've set out an aspiration to get to, well above 90% in 2023. A percent of revenues in the cloud. We're currently at about 35%, which is slightly ahead of where we thought we'd be. So, we made good progress, but still a long way to go. And then the third is really optimizing and rightsizing our organization, our organization structure and design and our location strategy. And there, I think we've made really good headway in 2021, so far. So we've put the sort of people together. We are, I think, executing at or slightly ahead of the plan on that one. So I think the impact is pretty evenly spread across those three big levers. And I would say the Change Program is on track or slightly ahead of where I thought it would be at this point. Having said that, we have an awful lot of work to do through the back-end of this year and throughout 2022 to build the kind of capabilities and service of our customers and to make our colleagues' working lives easier and more productive. So good start, much to do.

And George, I would just add one additional milestone in regards to our customer experience. We refer to it internally as our customer success platform account experience. We've got 85,000 customers on it as of today and we're seeing a significant increase in the number of first-time log-ins and also the number of self-service transactions. So that speaks really well for our customer experience journey.

Got it. Very helpful. Thank you.

Thank you, George. Our next question comes from the line of Manav Patnaik from Barclays Bank. Please proceed, Manav. You are live in the call.

Thank you. I was just hoping you could address the pricing environment. And perhaps between the Big 3 segments. How much of that growth is coming from price versus volume?

Sure, Manav. I'll start with that. In regards to pricing, I mentioned earlier with Drew's question, the pricing that we are seeing in 2021 thus far is very consistent with what we've seen in the last couple of years. I talked about the – starting with Tax & Accounting Professionals, we see approximately 5% as a directional viewpoint there. Corporates is around 3% and Legal is 2%. As I mentioned earlier, it can fluctuate quarter-to-quarter and year-to-year given the number of multiyear contracts that we have across the segments, but pricing, pretty consistent thus far this year, Manav.

Okay. Got it. And just competitively, any changes there, and particularly on the Legal side, which I think has been the most competitive historically? Or has Westlaw Edge and some of the other innovations kind of widened that gap even more now?

So, a couple of comments, Manav, from me. I would say, first and foremost, we're very focused, as I said earlier on our own product innovation roadmap. We're happy with what Westlaw Edge has been able to do for our customers. We are happy with the ACV penetration that we've driven that to-date and where we can take it for the rest of the year and beyond. We are very focused on the next generations of that product and of others. Highly respectful of our competitors, but I don't think at the moment we're seeing anything notable in terms of changing level of competitive intensity.

Okay. Thank you.

Thank you, Manav. And our next question comes from the line of Andrew Steinerman with JPMorgan. Please proceed.

Hi. I just wanted to make sure I understood the fourth quarter implied guidance. Obviously, I heard your comments about continued momentum that builds in the year into fourth quarter. I think when you do the math, you get somewhere around 4.3% organic revenue growth to make that full year of 4.5% to 5% for the year, that's total company. Could you just go over that dynamic versus the 5% that you just reported? It just – it does seem like a touch of deceleration. And as you answer the question, maybe also touch on kind of recent trends in net sales to give us a sense of forward momentum?

Sure, Andrew. In regards to net sales, momentum has been good across the board. As a reminder, Q4 is our largest quota period. About 30% of our quota occurs in Q4 and that splits by month, about 30% October, 30% November, 40% December, which is one of the reasons why we are waiting until February to update our 2022, 2023 guidance at that point, we would have full visibility into the net sales and book of business there. In regards to Q4, Andrew, I think the momentum continues. Certainly, the year-over-year comps comes into play there to some degree given the COVID impact. But I think overall, we feel good about the momentum across the board for all of the segments as we head into Q4. But it is the highest quota period for us.

Got it. Thank you.

Thank you, Andrew. Our next question comes from the line of Aravinda Galappatthige with Canaccord Genuity. Please proceed.

Good morning. Thanks for taking my questions and congrats on the results so far. Two from me. The first, just to kind of follow up on the question around competitive reaction or competitive backdrop. Can you just generally comment about when you look at that element, are you sort of more concerned about sort of the incumbents, the larger players you've been sort of competing with? Or is it more the sort of the smallest software start-ups that may be coming up with sort of more maybe innovative workflow solutions? I mean can you maybe just talk about that landscape a little bit? And then secondly, for Mike, can you just remind us about the UK tax dispute, where things stand? I know that originally, we were expecting an outflow in Q3 on account of that. Thank you.

Yes, Aravinda, thanks. It's Steve. I'll start and then, with the competitive question, and perhaps Mike can take the UK tax – the tax question. So, we are very focused on both. As I said, the primary focus is on our own product roadmap and just getting better and better at understanding and predicting, meeting, and exceeding our customers' needs. That's the primary focus. However, very, very respectful of the competitors in our core segments that have been with us for years and also the new and emerging, particularly sort of VC and private equity-funded software players. I wouldn't put – communicate to you it'd be greater emphasis on one than the other. We're respectful of both. We watch carefully what they do and the kinds of new innovations that they're driving. I think the picture probably varies a little bit as you move outside of the United States where there does seem to be a little bit more activity amongst the new start-ups and software-oriented players relative to sort of some of the larger incumbent players. But it's really a pretty consistent picture and quite balanced across both.

In regards to the UK tax dispute, we did make a payment in Q1 of 2021 and we made the second payment in Q3. So those payments for 2021 are behind us. The majority of those payments are reflected on our balance sheet as a long-term receivable. It was our intent and belief that we will recover those over the time horizon.

Thank you.

Thanks, Aravinda. And our next question comes from the line of Paul Steep with Scotiabank. Please proceed.

Morning. Steve, could you give us maybe a sense of where you'd see opportunity to broaden out the platform in the Big 3 verticals? And the second part that maybe ties to it is, give us a sense of where you're at on the product rationalization journey as a move towards more of a platform. We've noted that you've, obviously, given end-of-life notices on products like eDiscovery Point and others? And then just final one. Can you recap that cloud transition comment, as well? I think I heard you say 90%, up from 35%. Thanks.

Yes, sure. Thanks, Paul. So we see plentiful opportunities to expand within each of the Big 3. Just a couple of quick examples. I gave the example in my prepared remarks about the extension of HighQ and the integration of HighQ with Practical Law and Contract Express and Elite 3E. We are just scratching the surface in terms of our presence in legal workflow software and our ability to integrate that software with our flagship research products. I really think we're just scratching the surface and we're excited by what we see with HighQ and how we've been able to enhance and grow HighQ very significantly over the last year or two. So that looks like an acquisition that we made where we've been able to sort of really take it to a different place relative to where it was prior to Thomson Reuters' ownership. In Tax & Accounting, we're seeing very significant growth in audit on the back of the Confirmation acquisition. So that's, I think, one example in Tax & Accounting where we see some opportunity. I think the other area in Tax & Accounting is international. We are heavily US-focused on Tax & Accounting. I think that's an industry and a customer need that is truly global. And so we'd like to think that there is some lots of runway internationally. And then, in Corporates, this is our sort of, in a sense, our newest business unit. And we've sort of put the pieces in place under Sunil Pandita's leadership, and we're starting to see that pick up. So 4% for the first half and then 6% for the third quarter. So signs of good vibrancy in Corporates and there are many areas of opportunity there, including areas like indirect tax and global trade. The one that…

Thank you.

Operator, we’d like to take one final question please.

Thank you. Our last question comes from the line of Douglas Arthur with Huber. Please proceed, Douglas.

Yes. Thank you. Mike, you mentioned in, I guess, Slide 8, the benefit you got from the Events business even though it was still virtual coming back. And you've also called out a couple of some strong growth in some international markets. I am just wondering, when you look at the year-over-year growth, Q3, the COVID quarter still covered last year, is there any way to sort of normalize the organic growth for some of the COVID comps that you had a year ago or is that not relevant in the third quarter?

Let me break it down, Doug, in a few vectors there. In regards to the Reuters Events business, our revenue in 2021 is currently forecasted to double our revenue in 2020. So when you think about normalizing 2021 to 2020 with COVID, there are two key items that I would focus on. First one being the Reuters Events, as I just mentioned and the second one would be Global Print. Global Print was certainly impacted in 2020 given the number of office closures we had for our Print and, obviously, the physical shipments there. I am very pleased with the progress that Jennifer Prescott, Ryan Kessler had driven this year with the Print business. But those would be the two key items to focus on, Doug, from a normal – we call it normalization. Certainly, the transactional revenue comes into play, but the Reuters Events and Print would be the two larger ones. You asked about the international businesses. We refer to them as our regions within the company. Latin America, another quarter of 20% growth led by Adrian Fognini. And then Asia and emerging markets led by Jackie Rhodes, about 20% for Latin America and 10% for AEM, Doug.

Okay. Great. Thank you.

That will be our final question. We'd like to thank you all for joining us for our third quarter results. Please feel free to follow up with us. And we look forward to speaking to you in February when we report our Q4 results. Have a good day.

Thank you and that concludes your conference call for today. You may now disconnect. Thank you for joining and have a very good day. Thank you everyone.